NESCOE Annual Report 2018 features market tensions

An organization representing the interests of the six New England states on electricity matters has issued its 2018 annual report, highlighting increasing tension between the region's wholesale competitive markets and a growing number of "out of market" mechanisms adopted to satisfy emerging state and regional needs. Through the report, the New England States Committee on Electricity (NESCOE) calls for regional discussion of possible market reforms to integrate state policies while protecting consumers from increased costs.

NESCOE is a not-for-profit entity organized under various state and federal laws. NESCOE is governed by a board of managers appointed by the Governors of the six New England States, and seeks to advance "the New England states’ common interest in the provision of electricity to consumers at the lowest possible price over the long-term, consistent with maintaining reliable service and environmental quality."

On April 2, 2019, NESCOE released its 2018 annual report. The report notes that for over 20 years, "New England has generally relied on competitive wholesale markets to select resources to serve electricity consumers at the lowest cost without regard to resource type or fuel source." As described by the report, the wholesale markets operated by ISO New England Inc. were "designed to provide reliable system operations, attract investment, drive down wholesale prices, and increase generation fleet efficiency—all for the ultimate benefit of consumers."

But "in more recent years, ISO New England and some states have also turned to different means to satisfy evolving needs, including 'energy security' and state energy and environmental law compliance," according to NESCOE's report. As examples of these "non-wholesale market alternatives," NESCOE cites extraordinary measures taken by ISO-NE to retain the Mystic generating units outside Boston through a cost-of-service agreement, further ISO-NE energy security initiatives, as well as state and utility procurements of substantial volumes of renewable energy through long-term contracting.

NESCOE notes fundamental challenges to integrating state policy with the wholesale markets, including "complex jurisdictional questions, ensuring that consumers pay the cost of their own state’s laws and not others’, and achieving state law compliance at the lowest possible cost to consumers." In light of the region's increasing reliance on out-of-market solutions, NESCOE calls for "a rethink of what we are asking markets to do now and a fresh look at whether and what elements of the decades’ old wholesale market objectives stand up to current circumstances and law."