FERC recently ruled on proposed revisions submitted by ISO New England (ISO-NE) and the New England Power Pool Participants Committee (Filing Parties) in February 2010 (Rules Changes Filing) to its continually evolving and controversial Forward Capacity Market (FCM) pursuant to which resources compete in an annual Forward Capacity Auction (FCA) on a three-year-forward basis.
While developed in a stakeholder process, the proposed revisions were opposed by the entire generation sector. The proposed revisions include:
- Changes to the existing Alternative Capacity Price Rule
- Increased transparency in the review of offers below 0.75 times the Cost of New Entry parameter (CONE)
- Extension of the floor price Compensation when a resource's prorationing election is rejected for reliability reasons
- Decoupling the FCA starting price from CONE
- Revisions to the determination of CONE
- Clarification regarding the obligations of resources that do not have capacity supply obligations
- Revisions to the calculation of zonal requirements
- Improved modeling of capacity zones
Both the New England Power Generators Association and PSEG Energy Resources & Trade LLC filed complaints contesting certain aspects of the proposed revisions in the Rules Changes Filing.
In its April 23, 2010 Order, FERC found certain aspects of the Rules Changes Filing to be just and reasonable, but also stated that the remainder of the filing may be unduly discriminatory or preferential, not just and reasonable or otherwise unlawful. FERC accepted the Rules Changes Filing to allow market rules to be in place for the August 2010 FCA. FERC, however, required the Filing Parties and parties protesting the revisions to make further arguments regarding the challenged aspects of the Rules Changes Filing in a paper hearing, by submitting their briefs to FERC. This proceeding consolidates the two complaint proceedings as well. The issues that FERC will consider in the paper hearing are:
- Issues relating to the Alternative Price Rule (APR), including triggering conditions for the APR, treatment of the out-of-market resources that create capacity surpluses for multiple years, and appropriate price adjustment under APR
- Modeling of Capacity Zones, particularly, whether such zones should always be modeled, whether pivotal supplier test is necessary, and whether revisions to the current mitigation rules would be necessary in order to model all zones
- Whether the value of CONE should be reset