On April 23, 2010, FERC accepted a filing by ISO New England Inc. (“ISO-NE”) and the New England Power Pool Participants Committee (“NEPOOL”) to revise market rules for the ISO-NE Forward Capacity Market (“FCM”).  The Commission set several contested issues for paper hearing, but allowed ISO-NE to implement all of the proposed changes for the upcoming auction in August.

On February 22, 2010, ISO-NE and NEPOOL filed proposed changes to the FCM market design, including revising an alternative price rule (“APR”) meant to protect against uncompetitive auction results, decoupling auction starting prices from cost of new entry (“CONE”), revising the determination of CONE, and improving capacity zone modeling.  Power marketers and generators protested the filing, arguing that the proposed changes do not implement necessary fixes and that ISO-NE is deferring additional revisions for too long a period.

FERC found some of the proposed changes just and reasonable and accepted them effective on the date of the order. These include:

  • decoupling the auction starting price from CONE;
  • revising rules that govern the review of offers below 75% of CONE;
  • a plan to develop requirements for import constrained capacity zones based on local resource adequacy and a transmission security analysis;
  • clarification of the obligations of resources without a capacity supply obligation; and
  • compensation for when a resource’s election for pro-rationing is rejected due to reliability reasons.

In addition to approving the above-referenced tariff provisions, FERC determined that the certain proposed tariff revisions required additional support and thus ordered a paper hearing on the following contested issues:

  • triggering conditions, if any, for the APR;
  • treatment of out of market resources that create capacity surpluses for multiple years;
  • appropriate price adjustment under APR;
  • whether zones should always be modeled;
  • whether all de-list bids should be considered in the modeling of zones;
  • whether a pivotal supplier test is necessary;
  • whether revisions to the current mitigation rules would be necessary in order to model all zones; and
  • whether the value of CONE should be reset.

Both ISO-NE and protesting parties must file briefs by July 1 to support their positions on the contested issues, with responses due September 1. 

A full copy of the Commission’s order can be found at www.ferc.gov under ER10-787-000.