Entergy Nuclear Power Marketing LLC told the Federal Energy Regulatory Commission that ISO New England shouldn’t be allowed to enact the same kind of price-depressing market mechanism that is forcing the shut down this month of the Vermont Yankee nuclear plant.
Entergy on Dec. 16 filed remarks at FERC in support of a Nov. 26 complaint by Exelon Corp. and Calpine Corp. against ISO New England. The complainants request that the commission find that bidding provisions of the ISO-NE Transmission, Markets and Services Tariff (the “ISO-NE Tariff”), which require that a new entrant electing to “lock in” the clearing price from its first Forward Capacity Auction (FCA) under the new entry pricing provision of the ISO-NE Tariff (the “New Entry Pricing Rule”), submit effectively zero-price offers into FCAs for subsequent Capacity Commitment Periods of the lock-in period, are unjust, unreasonable, and unduly discriminatory.
ENPM said it generally supports the complaint and the relief requested. “The New Entry Pricing Rule, combined with the zero-price offer requirement, will artificially suppress capacity prices and undermine the effectiveness of the FCA,” it said. “A reasonable price floor for all new entry in the six years after a resource enters would ameliorate these concerns about price suppression. Thus, ENPM respectfully requests that the Commission grant relief in accordance with these comments.”
Entergy added: “Concerns about the detrimental effects of price suppression in ISO-NE markets are far from speculative. This month, Entergy Wholesale Commodities will retire the 605 MW Vermont Yankee Nuclear Power Station due in significant part to ISO-NE market design flaws that result in artificially low energy and capacity prices. As a result of this premature retirement and the retirement of other firm fuel resources in New England, ISO-NE expressed concerns that it will have difficulty meeting reliability requirements this winter.
“To address these concerns, ISO-NE renewed its program to make out-of-market payments primarily to generators for firming their oil or natural gas procurement. Thus, ISO-NE will incur additional uplift costs to ensure reliability this winter. ISO-NE will pass these higher costs, which were more than $93 million in December 2013 and January 2014, along to customers. This is an actual example of how market rules, such as the New Entry Pricing Rule, that suppress prices can increase customers’ cost and raise reliability concerns.
“ENPM concurs with the Complainants that the Commission should address the unjust and unreasonable effects of the zero-price offer requirement. Setting a reasonable price floor for all new entry in the six years after a resource enters, rather than effectively locking in a price-taker offer for the locked-in period, would addressthe impact on existing entry and the artificial price suppression resulting from the FCM rules. As the Complaint describes, PJM Interconnection, L.L.C. employs such an approach in its capacity markets. ENPM recognizes that the Complainants have proposed multiple potential avenues of relief, and ENPM supports the Commission taking action to address the price suppressive effects of the unjust and unreasonable zero-offer bidding rule.”
The Electric Power Supply Association and the New England Power Generators Association said in their own Dec. 16 comments opposing the ISO-NE program: “EPSA and NEPGA agree with Complainants that the ISO-NE rules requiring that price-locked capacity offer into the auction at a price of zero artificially suppress clearing prices, resulting in undue discrimination against capacity resources that do not get to take advantage of a multi-year price-lock. This undue discrimination and price suppression compromises the intent behind and design of the Forward Capacity Market (‘FCM’) in ISO-NE. The rules as written and implemented currently skew the price signals in favor of new capacity that can enjoy a price-lock and, ultimately, may encourage otherwise economic existing capacity resources to exit the market prematurely. In addition to pushing existing resources to leave the market, such rules will discourage new entry into the markets because, once the seven-year price-lock expires, such resources will be subject to the same rules which result in suppressed prices as for all other existing resources.”
Other groups rush to the support of the ISO New England plan
On the other hand, the New England States Committee on Electricity (NESCOE) said in a Dec. 16 brief in support of ISO-NE: “The Commission should reject Complainants’ last minute attempt to invalidate one aspect of ISO-NE’s market rules, which is an integral part of a package of interrelated reforms to ISO NE’s Forward Capacity Market (‘FCM’) that stakeholders considered holistically and the Commission approved earlier this year. Six months later, and just two months before the Ninth Forward Capacity Auction (‘FCA 9’) is scheduled to run, Complainants now ask that the Commission selectively revise ISO-NE’s new entry pricing rule in a manner that would unreasonably increase costs to consumers in New England and undermine the stakeholder process. Complainants’ grievance about ISO-NE’s new entry pricing rule is not new. In its May 2014 order, the Commission explicitly rejected these very same arguments raised by Exelon and others, including the New England Power Generators Association (‘NEPGA’), and this issue is the subject of pending rehearing requests submitted by Exelon and others.”
Other supporters of ISO-NE are Connecticut Municipal Electric Energy Cooperative, Massachusetts Municipal Wholesale Electric Co. and New Hampshire Electric Cooperative, who said in their own Dec. 16 brief: “The ISO-NE tariff allows new capacity resources to lock in, for up to seven years, the price of the first FCA auction in which they clear. New resources are treated as existing resources after the initial auction in which they clear (and regardless of whether they elect the lock-in option). The tariff provides that existing resources are entered into future auctions automatically, and remain in those auctions at any price unless the resource submits and the ISO accepts a de-list bid. But resources that previously elected a multi-year capacity supply obligation and locked-in FCA prices cannot de-list during theauctions for those periods, so they necessarily participate as price takers.
“Complainants claim that this zero-price offer requirement ‘will significantly suppress [FCM] clearing prices’ and ‘discriminates against existing suppliers’ who rely on the ‘suppress[ed]’ clearing prices without any lock-in. They argue that the Commission must remedy this alleged (and undue) discrimination either by reducing the new entrants’ compensation (i.e., eliminating the clearing price lock-in) or by increasing existing generators’ compensation. The Commission should deny the complaint because the complainants have shown neither (1) that ISO-NE’s existing tariff is unjust, unreasonable, or unduly discriminatory, or (2) that complainants’ proposed remedies would satisfy the statutory standards.”
ISO New England says this effort is too late in the auction process
Said ISO New England in its Dec. 16 response: “Complainants assert that the zero-price offer requirement causes ‘unjust, unreasonable and unduly discriminatory price suppression’ that the Commission must remedy. As discussed in detail in this answer, the Commission should reject the Complaint for numerous reasons.”
- “First, the issue raised in the Complaint is presented in two other proceedings that are pending before the Commission, and thus the Complaint is duplicative of those proceedings. In those cases, parties (including Exelon itself and a trade association to which both Exelon and Calpine belong, the New England Power Generators Association (‘NEPGA’)) have raised the exact issue presented here, and Complainants attempt to distinguish those other cases is entirely unpersuasive. Moreover, Complainants have failed to explain, as Rule 206(b)(6) of the Commission’s Rules of Practice and Procedure requires, why timely resolution cannot be achieved in those other proceedings. Indeed, the instant Complaint appears to be little more than an impermissible, out-of-time supplement to the rehearing requests that Exelon and NEPGA have filed in those other proceedings.”
- “Second, Complainants have failed to meet the requirement of section 206 of the Federal Power Act to demonstrate that the existing rules are unjust and unreasonable. Complainants suggest that the zero-price offer requirement must be unjust and unreasonable because, they assert, the Commission has conceded its price-suppressing effects. In fact, the Commission made no such concession.”
- “Third, Complainants’ assertions about the price effects of the zero-price offer requirement are simply incorrect. Again, lower prices are not synonymous with economically inefficient suppressed prices.”
- “Fourth, the remedies that Complainants propose are not appropriate and are cause for great concern. Complainants first urge the Commission to direct the ISO to adopt the same approach taken in PJM. However, Complainants appear to misunderstand the PJM approach, which in fact also provides for the equivalent of zero-priced offers from locked-in resources. Complainants’ alternative remedies are worse, and – far from remedying any perceived problems – would themselves cause significant economic harms.
- “Finally, if despite the foregoing, the Commission were to grant Complainants’ requested relief, it would be impossible to implement for the upcoming ninth Forward Capacity Auction. Complainants request an order from the Commission on or before January 23, 2015, less than two weeks prior to the start of the Forward Capacity Auction. Implementing any such changes would require changes to the Tariff, changes to internal ISO processes, and most importantly, changes to the Forward Capacity Auction software.”