Electricity Markets

ISO-NE proposes interim fuel security rules

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ISO New England is proposing interim rules to keep power plants facing retirement operating longer to maintain fuel security needed for grid reliability.

The rules proposed Aug. 31 at the Federal Energy Regulatory Commission grew out of Exelon Generation's decision to retire its Mystic power plant in Charlestown, Massachusetts, on June 1, 2022.

ISO-NE studies found that the natural gas-fired power plant’s retirement could lead to wintertime blackouts.

In response, ISO-NE asked for a waiver from its reliability must-run rules, which don’t cover retention of resources due to fuel security concerns. FERC rejected the request in July, saying a waiver wasn’t the appropriate way to address the issue.

In a 3-2 decision, FERC gave ISO-NE 60 days to either submit interim tariff changes to allow cost-based compensation for plants needed to maintain fuel security or show why its current tariff is just and reasonable.

ISO-NE's fuel security proposal would apply to the grid operator’s next three forward capacity auctions, which cover the commitment periods of 2022 through 2025. ISO-NE expects to replace the interim provisions with a permanent market-based solution that the grid operator expects to file with FERC by July 1.

Under its proposed interim rules, ISO-NE will study the effects planned power plant retirements would have on its system using generally the same methodology it used to examine the Mystic power plant and in its “operational fuel security analysis” that was conducted in January, according to the proposal.

However, partly based on stakeholder comments, ISO-NE plans to change the methodology in ways that would result in assuming more energy will be available for the grid than it assumed when it studied the Mystic plant, according to the proposal.

The changes relate to natural gas supply and demand assumptions as well as assumptions about the availability of resources for dispatch.

After examining 18 liquefied natural gas supply scenarios, ISO-NE would see if a power plant’s retirement reaches a threshold, or “trigger,” that signals an unacceptable level of regional system reliability, according to the proposal.

The trigger criteria have two components, either of which will lead ISO-NE to keep operating a power plant seeking to retire, the grid operator said.

The triggers are the depletion of 10-minute reserves below 700 megawatts in any hour in the absence of a contingency in more than one LNG supply scenario or the use of load shedding in any hour under emergency procedures in any scenario.

ISO-NE intends to allocate the costs of keeping a power plant operating across its footprint based on a market participants real-time load obligation like the grid operator did for its now expired winter reliability program.

In contrast, the New England Power Pool wants FERC to order ISO-NE to allocate costs based on regional network load, according to the grid operator.

In its capacity auctions, ISO-NE plans to treat power plants that are being kept in service for fuel security reasons as "price takers” where the resource offers its capacity into the auction at a zero price, and is be paid the capacity clearing price.

In its proposal, ISO-NE rejected two possible approaches offered by FERC, saying they were unworkable under the tight deadlines set by the commission and could lead to excess procurement of capacity and create a price for the marginal resource that would exceed its benefit.

FERC had suggested power plants like Mystic not participate in capacity auctions or that they be required to bid at what the grid operator's market monitor deems to be a competitive price.

ISO-NE acknowledged the price taker treatment and the alternatives proposed by FERC fail to pay generators that provide both resource adequacy and fuel security "in a uniform and transparent manner" and the grid operator would try to address the problem after the next capacity auction is held in February.