ISO New England responds to critics of winter reliability program

ISO New England told the Federal Energy Regulatory Commission in an Aug. 6 filing that it is taking the needed steps to ensure winter electric supply reliability in its region.

“In the last few years, the ISO and stakeholders have been working on solutions to a number of strategic risks, including, most urgently, risks related to New England’s increased reliance on gas-fueled generation and resource performance during periods of stressed system conditions,” the filing said. “While this work was underway, operations during winter 2012-13 led the ISO to conclude that additional action would be required to maintain reliability in winter 2013-14.”

Working with stakeholders, the ISO quantified the need and developed an objective for the project. The stated objective was to develop a solution that obtained the incremental energy needed if colder than normal weather occurs, in time for the winter, with minimal market distortions.

After a stakeholder process, the ISO proposed, and stakeholders voted to support, a program that consists of four components: a new demand response program, an oil inventory service, incentives for dual fuel units, and market monitoring changes (together called the “Winter Reliability Program”).

“Unfortunately, following the closure of the bid submittal window, the ISO has received bids that only total 1.415 million MWh (against a target of 2.4 million MWh) at a price of approximately $60.66 million,” the filing said. “Since receiving these bids, ISO-NE has been assessing them and discussing with bidders the background for the bids. It appears that stakeholders may have bid conservatively due to apprehension regarding penalties and regulatory timing, in particular. Accordingly, ISO-NE is assessing changes to the program to reduce risk (and correspondingly reduce bid-in risk premiums), thereby encouraging the submission of additional MWh.”

Presuming that it is able to develop an appropriate solution, the ISO said it plans to make a filing by the end of the week of Aug. 5 to amend the Winter Reliability Program under the “exigent circumstances” provisions of the Participants Agreement. The ISO will then reopen bidding for a brief period, and will ask the commission to issue an order on both the revised rules and the selected bids on an expedited basis, which will hopefully address some of the timing concerns.

In the meantime, the ISO said the Aug. 6 answer is intended to give the commission sufficient time to address the stated concerns, all of which will remain relevant in the revised design. Accordingly, the ISO in the Aug. 6 filing responded to the comments and protests regarding the Winter Reliability Program that appropriately relate to the “four corners” of the program.

Specifically, the ISO addressed comments on the topics of the criteria for and cost of resource selection, cost allocation, impact on the markets, the “as bid” compensation structure, and the limitations on participation.

“Significantly, none of the stakeholders filing comments and protests indicated that the Winter Reliability Program is unnecessary,” the ISO added. “Likewise, the ISO continues to believe that a variant of the program is necessary given the upcoming challenges for winter operations. Therefore, the ISO asks the Commission to grant leave to accept this Answer and to reject the protests discussed herein.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.