Saying that the loss of Exelon Generation power plant units in Massachusetts “presents unacceptable fuel security risks,” ISO New England recently asked the Federal Energy Regulatory Commission for a waiver of certain provisions of its Transmission, Markets and Services Tariff in order to retain the units.
Exelon Generation in late March said that it had filed with ISO-NE to retire generating units at its Mystic Generating Station, although the company said it may reconsider the retirement decision if market rule changes are implemented in the region.
Exelon Generation filed with ISO-NE to retire Mystic Generating Station’s Units 7, 8, 9, and the Jet unit on June 1, 2022. “Absent any regulatory reforms to properly value reliability and regional fuel security, these units will not participate in the Forward Capacity Auction scheduled for February 2019,” Exelon Generation said.
Mystic Generating Station is a 2,000-megawatt natural gas- and oil-fueled power plant. Mystic Units 7, 8 and 9 are the operating units at the plant. Units 1-6 are decommissioned. The Jet unit is an 8-MW oil fueled peaking unit which is run during periods of high demand.
“The ISO submits this petition reluctantly, because it hesitates to turn to out-of-market arrangements of any kind,” the grid operator told FERC in its May 1 filing. “However, the ISO has concluded that, in this instance, its responsibility to ensure the reliability of the New England electric grid is paramount.”
It said that retirement of Mystic 8 & 9 in 2022 “presents unacceptable risks that the system will have inadequate supplies of electricity to serve all customers during the coldest days of New England’s winters.”
Retaining Mystic 8 & 9 is necessary to prevent that risk from coming to fruition, the grid operator said, “and the ISO’s proposed waivers of its tariff are limited to those needed to address Exelon’s unwillingness to take on further capacity commitments for Mystic 8 & 9 at this time without certainty regarding its compensation.”
ISO-NE noted that the Everett Marine Terminal -- commonly known as “Distrigas,” for the facility’s original owner -- is adjacent to the Mystic units. Distrigas is a liquefied natural gas import terminal, and the sole source of fuel for Mystic Station Units 8 and 9.
In addition, Distrigas has firm capacity to deliver up to 435 million cubic feet per day of natural gas into two New England interstate pipelines and a local gas distribution utility. Exelon is in the process of acquiring Distrigas from its current owner, ENGIE North America Inc.
“Exelon’s planned retirements come at a time when the ISO and New England stakeholders are grappling with a growing threat to the reliable operation of the New England electric system,” ISO-NE said.
“This threat is posed by the region’s increasing reliance on natural gas-fired generation despite essentially static regional natural gas pipeline capacity. The problem is most critical during the winter months, when the region’s pipelines are most constrained.”
The ISO said its Operational Fuel-Security Analysis of January 2018, which focused on potential future scenarios, provided greater clarity on the consequences the region may face if it does not resolve this issue.
In this context, the ISO became particularly concerned about Exelon’s planned retirement of Mystic 8 & 9, two combined cycle generators that do not rely on pipeline gas. Mystic 8 & 9 have a combined winter seasonal capacity rating of just over 1,700 MW.
After Exelon’s announcement, the ISO studied the retirements of Mystic 8 & 9, and determined that the loss of those units presents unacceptable fuel security risks, it noted.
Specifically, the ISO’s analyses establish that retirement of Mystic 8 & 9 would cause the ISO to deplete 10-minute operating reserves (a violation of mandatory reliability criteria) “on numerous occasions and, further, to instigate load shedding—rolling blackouts—during the New England winters of 2022-2023 and 2023-2024,” ISO-NE said.
“Compounding these issues, the retirement of Mystic 8 & 9 not only would deprive the New England electric system of those units’ 1,700 MW of winter generating capacity with on-site fuel, it also would mean the loss of the Distrigas facility’s biggest customer — substantially diminishing Distrigas’s financial viability. Should Distrigas also retire, the region’s risks of reserve depletion and load shedding would increase, as would the length and severity of such events.”
ISO-NE said that given the results of its studies, the ISO determined that it is essential to retain the services of Mystic 8 & 9 beyond their planned retirement dates. While the tariff permits the ISO to retain retiring resources to resolve local transmission security issues, it does not contemplate retention to address reliability risks related to fuel security.
“The ISO therefore seeks the Commission’s approval of waivers of the tariff to the extent necessary to retain Mystic 8 & 9 to ensure the fuel security necessary for reliable operation of the New England electric grid.”
The grid operator noted that it was filing the waiver request because Exelon has stated that, if Exelon does not timely obtain the Commission’s approval of a satisfactory cost-of-service rate for Mystic 8 & 9, it will elect -- as the tariff permits -- not to participate in the next Forward Capacity Auction to be held in February 2019 for the performance period starting in June 2022, and will retire Mystic 8 & 9 unconditionally.
Accordingly, the ISO requested that the Commission approve the waivers proposed in the petition by no later than July 2, 2018, to conform to the tariff’s prescribed schedule for market participants to commit to participation in the February 2019 Forward Capacity Auction.
ISO-NE said that it expected Exelon Generation to file its cost of service agreement for the Commission’s review and approval under section 205 of the Federal Power Act soon after the filing of the ISO’s petition.
“As part of that filing, Exelon will ask the Commission to approve Exelon’s proposed cost of service for Mystic 8 & 9 as the basis for establishing a rate to be effective for Mystic 8 & 9 during the 2022-2023 and 2023-2024 capacity commitment periods,” the grid operator said.
Exelon’s required two-year term for the cost of service agreement will ensure the availability of Mystic 8 & 9 until the ISO and its stakeholders develop, and market participants have an opportunity to make any investments needed to implement, a market-based fuel security solution for the region, ISO-NE told FERC.
The grid operator said it takes these steps “only as a last resort to ensure reliable electric service in New England during the 2022-2024 Capacity Commitment Periods. The ISO remains committed to ensuring the efficiency, fairness, and efficacy of the wholesale electricity markets it administers. It is entering into a cost of service agreement with Exelon for Mystic 8 & 9 and submitting this petition because, in the ISO’s best judgment, both are essential at this juncture to meeting the ISO’s overriding obligation to maintain the reliability of the New England electric system.”
ISO-NE said it wants a FERC decision in the proceeding by July 2, 2018 because Exelon and other participants must decide no later than July 6, 2018 whether to participate in the February 2019 Forward Capacity Auction.
