NE Delegation Calls for Re-examination of ISO-NE Capacity Market Rules

In This Issue:

• Capacity Markets: New England members trade letters with FERC, APPA releases study showing little generation is built for capacity...
• Energy Policy: FERC Reduces ROE, New rules issued for small hydro, NERC issues reliability report, QER wraps up first installment of meetings...

Sixteen New England Members of Congress, led by Sen. Ed Markey (D-MA) and Rep. Joe Kennedy III (D-MA), sent an Oct. 14 letter to Federal Energy Regulatory Commission (FERC) Chair Cheryl LaFleur, urging the Commission to reconsider whether  the ISO-New England’s (ISO-NE) eighth Forward Capacity Market auction (FCA8) produced "just and reasonable" rates under the Federal Power Act.  

The controversy stems from the unexpected shutdown of the recently-purchased 1,500 MW Brayton Point Power station, which some have alleged was strategically shuttered to drive up the cost of capacity and direct more auction revenue to its owners’ remaining plants. The ISO-NE market monitor alerted FERC to the possibility of market manipulation in the auction, but, on a split 2-2 vote by FERC, the auction prices were permitted to stand.  

To highlight what they consider a systemic problem, the Members of Congress asked FERC for "a fundamental re-examination of capacity market rules and to consider alternatives that are less costly to ratepayers, drive investment, and produce competitive price outcomes."   

Sen. Jeanne Shaheen (D-NH) sent a separate letter on Sept. 29 that said, "As businesses and consumers in New Hampshire begin to plan for another winter, I write to reiterate the need for [FERC] to remain vigilant and ensure that energy markets are functioning properly."  The letter went on to say, "During peak demand in New England, high energy prices, especially for natural gas, can put a severe strain on New Hampshire businesses and consumers, and we must take great care to ensure that energy markets operate without influence of speculation or market manipulation."    

In an Oct. 15 response letter to Shaheen , FERC Commissioner Tony Clark expressed concern over rising energy costs, potential market manipulation, and "deeply flawed" electric markets in New England.      

In Commissioner Clark’s response to Sen. Shaheen, he said he shared her concern about high energy costs, as well as New England’s "lack of adequate infrastructure to support the rapid changes in the regions resource mix."  But his letter went on to say "that there is a deeper flaw in the existing electricity regulatory regimes in place throughout the Northeastern United States." 

He noted that in the ISO-NE region there are both restructured and vertically integrated states and that the combination of the two "is unworkable and unsustainable."  Clark said either a deregulated, market-based approach or a vertically-integrated utility regulatory model are both workable, but a hybrid of the two is "unsustainable."   

"The one regulatory model that does not appear to be working well," Clark said, "is one in which a market is created to procure resources for unbundled utilities, but then the pricing signals in the market are undermined by policies designed to select energy resource mixes through legislative or regulatory planning."

To read the complete legislative update including the following topics, click the links below: