New England electric fuel security reform filings delayed

Federal electricity regulators have given New England's regional grid operator more time to develop proposed new mechanisms to enhance long-term fuel security, after states and market participants asked for an extension to allow continued stakeholder discussions. At stake are what could be significant reforms to the region's electricity markets, including new opportunities for generators to earn revenue for providing fuel security, as well as the prospect of significant new costs for consumers.

ISO New England Inc. is the regional transmission organization and independent system operator for the electric grid serving nearly all of New England. In this role, it develops and administers markets for electric energy, capacity, and other products. ISO-NE also engages in regional system planning, and manages proposals to retire or close power plants that provide capacity to the region.

In 2018, the owner of the Mystic Generating Station, the largest power station in Massachusetts by nameplate capacity, proposed to retire its units in 2022. But after a study of the remaining electric system, ISO-NE determined that the retirement of Mystic's units 8 and 9 would present "unacceptable fuel security risks" that could lead to rolling blackouts as soon as the winters of 2022 through 2024. In response, ISO-NE asked the Federal Energy Regulatory Commission for waivers to allow the grid operator to retain the Mystic units to meet fuel security needs.

Some stakeholders disagreed that the Mystic units' retirement posed a reliability risk; others argued the costs of retaining them would outweigh any benefits. While the Commission denied ISO-NE's waiver request, it ultimately approved a short-term cost-of-service agreement under which regional ratepayers will pay to keep the Mystic units online. But the Commission also made a preliminary finding that ISO-NE's tariff may be unjust and unreasonable, and directed ISO-NE to file proposed tariff revisions creating a long-term fuel security mechanism by July 1, 2019. At the grid operator's request, the Commission later extended that deadline to November 15, 2019, to allow more time for proposal development and stakeholder discussion.

In the meantime, this spring ISO-NE filed a proposed short-term "inventoried energy program" from December 1 through the end of February during winters 2023/2024 and 2024/2025 as "a bridge to a long-term, market-based solution that more comprehensively addresses the region’s energy security risks" -- but Commission staff identified that filing as "deficient" and requested additional information, which prompted ISO-NE to provide additional information. In the absence of a Commission quorum willing to vote, those revisions became effective by operation of law on August 6, 2019, although parties have sought rehearing regarding the Commission's failure to act.

But even more time may be necessary. On July 31, 2019, the New England States Committee on Electricity (NESCOE) filed a motion requesting an additional six-month extension of time to allow ISO-NE and the region to work through issues related to ISO-NE’s proposed long-term fuel security mechanism. Representing the governors of the six New England states, NESCOE said granting its request would "enable a more complete and holistic filing in response to the directives in the July 2018 Order, allow ISO-NE to address core consumer protection elements that are fundamental to state support, and remove barriers to achieving a greater degree of regional coalescence around a proposal." Several commenters supported the motion.

Ultimately, the Commission granted an extension of time up to and including April 15, 2020 for ISO-NE to file its long-term fuel security mechanism. While New England will soon be forced to address the issue of fuel security for its electric generating portfolio, these short-term and long-term market changes proposed by the grid operator are on hold for now.