New England's wholesale electricity grid experienced a capacity deficiency on December 24, 2022, according to grid operator ISO New England, Inc., but the system operator says its operating procedures successfully balanced supply and demand on the regional power system during evening peak hours, when unexpected generator outages and reductions and lower-than-expected imports led to a shortfall in operating reserves.
According to ISO-NE:
ISO New England did not call for controlled power outages on Christmas Eve, but did declare a capacity deficiency, meaning the region’s supply of electricity was insufficient to meet required operating reserves in addition to satisfying consumer demand, at 4:30 p.m. This action was taken after approximately 2,150 megawatts (MW) of resources scheduled to contribute power during the evening peak became unavailable. The outages and reductions coincided with net imports being approximately 100 MW less than had been expected based on that day’s Morning Report.
While the capacity deficiency was ongoing, at 4:40 PM, ISO-NE declared a "capacity scarcity condition" under its Forward Capacity Market’s Pay-for-Performance rules. This condition remained in effect until 6:05 p.m. Under the Pay-for-Performance rules, any resource that failed to meet its capacity supply obligation is penalized at a rate of $3,500 per megawatt-hour (MWh) for failing to meet its obligation, while resources that over-performed will receive $3,500/MWh of additional revenue. In total, ISO-NE has estimated penalties for the December 24 event to be approximately $39 million. In addition, any energy resources that cleared in the Day-Ahead Energy Market but failed to provide electricity in real-time are charged the real-time price for the missing energy; Real-Time Energy Market prices averaged approximately $484/MWh over the course of the day, peaking over $2,200/MWh during the 5 p.m. hour while the capacity scarcity condition was ongoing.
On January 12, 2023, ISO-NE provided an update on the December 24, 2022, capacity deficiency, "to help correct any confusion, misinformation, and misunderstanding resulting from various news stories and social media posts." According to that update, the incident was "mainly about timing". After noting that it entered the December 24 operating day with sufficient resource commitments to meet demand and required operating reserves, with a surplus of over 950 megawatts of fast-start resources, ISO-NE explains what happened next:
As the day went on, some generators in the region experienced unanticipated issues that caused them to go offline or reduce their output. These outages were caused by cold temperatures or mechanical problems, and not due to inadequate fuel supplies. Expected imported electricity from Canada was also reduced due to transmission system issues and unexpectedly high consumer demand in Québec. Despite these issues, New England was still expected to meet demand and operating reserves over the evening peak as of 3 p.m.
Around 4 p.m., additional unanticipated outages led to a capacity deficiency in the region. This meant that the 950 MW surplus was depleted and supply was insufficient to meet both demand and required operating reserves. In response, ISO New England system operators implemented procedures for dealing with capacity deficiencies. This included calling upon any resource that could respond quickly enough to be online for the evening peak, which usually falls between 5 and 6 p.m. during the winter months. The ISO dispatched all remaining offline resources that were available to provide electricity or operating reserves during this period.
In its update, ISO-NE described pricing and customer impacts from the incident:
Prices in the Real-Time Energy Market averaged more than $2,000 per megawatt-hour (MWh) during the 2.5-hour capacity deficiency. While high, these prices are unlikely to affect most consumers given how retail rates are set in the region. Though practices vary by state and utility coverage area, the rates paid by most retail customers are set for months-long periods and not subject to volatility within the wholesale marketplace.
Almost all of New England’s wholesale electricity is bought and sold in the Day-Ahead Energy Market, where prices were unaffected by the capacity deficiency. Average day-ahead prices during that time were roughly $285/MWh.
As ISO-NE noted in its January 4 report, other regions of North America were challenged by extreme weather around the long holiday weekend, prompting varied responses outside New England including controlled power outages.
