On January 8, 2016, the Commission approved proposed values submitted by ISO New England, Inc. (“ISO-NE”) to develop a demand curve for the tenth Forward Capacity Auction (“FCA 10”), which is scheduled to be held in February, 2016. One of the values—the Installed Capacity Requirement (“ICR”)—for the first time accounted for behind-the-meter solar resources, as a reduction in total load forecast. In its order accepting the proposed demand curve values for FCA 10, the Commission upheld ISO-NE’s inclusion of these distributed solar resources in the ICR.

In its November 10, 2015 filing, ISO-NE stated that the Commission, in its order accepting the ICR-related values for FCA 9, directed ISO-NE to explore the incorporation of distributed generation into ISO-NE’s ICR calculation in the stakeholder process, and to do so on a schedule that would allow those factors to be reflected in the ICR calculation for FCA 10. ISO-NE stated that the methodology used to calculate the ICR-related values for FCA 10 remained the same as the methodology used in previous years, but the underlying assumptions had been modified to include behind-the-meter solar resources that are (i) forecasted to be installed, or (ii) have been installed and are not yet reflected in historical loads. According to ISO-NE, the inclusion of these distributed solar resources reduced the total load forecast utilized in the ICR.

In its January 8, 2016 order, the Commission noted that challenges to ISO-NE’s November 10, 2015 filing were limited to the incorporation of distributed solar resources into the ICR, and addressed each of the protesters’ arguments in turn.

First, the Commission rejected arguments made by protestors that the use of a forward-looking estimate of the penetration of distributed solar resources is a “significant and material” change to ISO-NE’s current method of calculating the ICR, and therefore requires ISO-NE to submit revisions to its Transmission, Markets and Services Tariff (“Tariff”). The Commission noted that it had not previously required Tariff revisions each time ISO-NE revised the methodology used to calculate the ICR, and the existing Tariff provisions permitted ISO-NE to update its underlying calculation assumptions as necessary.

Second, the Commission rejected protesters’ argument that the incorporation of distributed solar resources into the load forecast necessarily undermines the process of price formation and prevents appropriate price signals. The Commission stated that while ISO-NE had previously based its forecasts on historical, observed changes in load, this did not prevent ISO-NE from adding distributed solar to its load forecast. The Commission also dismissed as irrelevant the argument that distributed solar resources should be subject to buyer-side price mitigation, stating that “ISO-NE has demonstrated that the [distributed solar resources] that it is adding to the load forecast do not participate in ISO-NE’s capacity markets; thus, the incorporation of those resources into the load forecast more accurately defines the state of the system and prevents ISO-NE from over-procuring capacity resources.”

Lastly, the Commission found that the stakeholder process conducted by ISO-NE in determining the changes to the ICR calculation was sufficient and, contrary to the assertions of certain protesters, “considered the operational and market consequences of [ISO-NE’s] change to its method of calculating the ICR.”

A copy of the Commission’s order may be found here.