Having a seat at the table to discuss issues impacting wholesale electricity markets does little good when ISO New England maintains unilateral authority to propose market reforms over sovereign states' objections, New England state utility regulators told the Federal Energy Regulatory Commission on May 25.
“At this point, we can talk all we want together, but if ISO-NE chooses not to listen to us and go forward, it just turns into a fight before all of you at FERC,” Maine Public Utilities Commission Chairman Philip Bartlett said at FERC's second technical conference aimed at modernizing the wholesale electricity markets. The May 25 forum homed in on ISO-NE's markets.
A key message relayed by the state regulators was that the states, as sovereign entities, should not be relegated to the same standing as stakeholders in ISO-NE. Further, they contended there should be a greater impetus or even a legal basis to obligate ISO-NE to work harder to find compromises with the states, rather than rely on its unilateral authority to make Federal Power Act Section 205 filings with FERC to overcome disagreements.
The New England states “don't think with a hive mind; we are six individual states, and when we collectively get together through a [New England States Committee on Electricity] statement or through a position, there's a lot of behind-the-scenes work that happens to get us there,” Massachusetts Department of Public Utilities Chairman Matthew Nelson said. “It's critical that opposition from a NESCOE majority means something to what we're trying to achieve. We do not want to bring problems to FERC's doorsteps.”
Vermont Department of Public Service Commissioner June Tierney acknowledged that at times unpopular decisions have to be made and the ability to act unilaterally may be warranted.
“So if the ISO needs to act unilaterally or feels it needs to act unilaterally, there ought to be a readout of how they reached that decision, why specifically they rejected the states' arguments or the states' proposals,” Tierney said. “And then there ought to be a rebuttable presumption at FERC for any of these 205 filings that hold that if ISO-NE is making such a filing and there's been an objection raised by the states, especially a collective objection, then they need to rebut that before their filing can proceed.”
No band-aid fixes
The state regulators' remarks come as ISO-NE and its stakeholders are grappling with doing away with the minimum offer price rule, or MOPR, a market mechanism favored by FERC when it was helmed by the GOP. The MOPR relies on administratively set — and artificially high, according to critics — price floors, and provides the premise for ISO-NE's competitive auctions for sponsored policy resources rules approved by a split FERC in 2018.
“I want to reiterate that we clearly recognize the need to facilitate the entry of state-sponsored resources in the capacity market by eliminating the [MOPR],” ISO-NE President and CEO Gordon van Welie said. He added that New England's approach to doing so would take into consideration the region's fuel security issues, risks to merchant generators and the clean energy transition.
The grid operator, van Welie said, intends to submit a filing to FERC “early next year to eliminate the MOPR and to reflect that change in the capacity market parameters,” with further market improvement filings to follow “in the next few years.”
Connecticut Department of Energy and Environmental Protection Commissioner Katie Dykes supported moving beyond the MOPR but cautioned against “another band-aid fix to the capacity market that just boosts capacity payments to prevent the resources we critically need for reliability from retiring.”
Rather, the region needs “comprehensive changes to the capacity market” and “enhancements to ancillary services and energy markets,” Dykes said. Yet, she insisted that for any accomplishments or progress to be made on those fronts, there first needed to be “fundamental changes to [ISO-NE's] governance.”
Checks and balances
Van Welie suggested that FERC could provide the sort of checks and balances he believed the states were calling for by ensuring that states' perspectives were given appropriate weight as filings are reviewed for acceptance.
Changing ISO-NE's governance with regards to Section 205 filing rights and other reforms would require opening the grid operator's tariff, “which will take us years,” van Welie said in opposition to that idea.
New Hampshire Public Utilities Commission Commissioner Kathryn Bailey countered that “it's been 20 years since we did that, … and it's not unreasonable to look at it again.”
ISO-NE Vice President of External Affairs Anne George and New England Power Pool Chairman Dave Cavanaugh pointed to states' ability to participate in the NEPOOL process, offer proposals and meet with ISO-NE board members, as examples of engagement already underway and through which the states can get their voices heard.
But Tierney shot back: “I just want to underscore that seats at the table, participating in the NEPOOL process where everyone is a stakeholder equally loved is not the same as listening to sovereign states telling you that a market needs to serve its people.”
Tierney added that “the NEPOOL process, while I respect it, … is not a substitute for there being a compromise between the states and ISO, and a check on ISO-NE for unilateralism. …It should matter when the six states who are to be served regionally are telling you something doesn't work for them. That's not the same as stakeholders in NEPOOL telling you that.”
Despite their gripes with the current governance model, the state regulators appeared in agreement that they did not want to abandon ISO-NE, take back resource adequacy or form a New England version of the Electric Reliability Council of Texas, as suggested by FERC Commissioner Mark Christie.
Jasmin Melvin is a reporter for S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.