On April 8, 2016, the Federal Energy Regulatory Commission (“FERC”), on voluntary remand from the United States Court of Appeals for the District of Columbia Circuit (“DC Circuit”), reaffirmed its approval of an exemption of up to 200 MW of renewable resources from ISO New England Inc’s (“ISO-NE”) minimum offer pricing rule (“MOPR”) in ISO-NE’s Forward Capacity Market (“FCM”). Barring further legal challenges, the renewables exemption will remain effective as of June 1, 2014.

The 200 MW per year renewables exemption to ISO-NE’s MOPR was proposed jointly by ISO-NE and the New England Power Pool Participants Committee (“NEPOOL”), in an April 1, 2014 Federal Power Act (“FPA”) Section 205 filing. According to ISO-NE, the renewables exemption is intended to accommodate state public policy choices in favor of developing renewable resources. The renewables exemption was part of a more comprehensive proposal to establish a system-wide downward-sloping demand curve that would result in capacity prices gradually decreasing as supply gets closer to meeting capacity requirements.

In May 2014, FERC approved the downward-sloping demand curve and the renewables exemption over the objections of multiple opponents who argued that the renewables exemption would have price suppressive effects in the FCM. In its approval order, FERC noted that “while exemptions in general can lower prices, the exemption proposed here is coupled with a sloped demand curve that will limit the impact of price suppression as compared to the existing vertical demand curve.” FERC further noted that the exemption is tied to load growth – citing the annual 200 MW limit on exemptions.

Subsidiaries of NextEra Energy Inc., NRG Energy Inc. and Public Service Enterprise Group Inc. subsequently challenged FERC’s approval of the renewables exemption in the D.C. Circuit – arguing that FERC’s orders failed to adequately address their concerns about artificial price suppression. After reviewing opening briefs filed in the appeal, FERC in November 2015 told the court that the issues raised could be “ most appropriately and efficiently addressed” through further commission proceedings following a voluntary remand of the case, and the court agreed.

On voluntary remand, FERC found that “though some price impact could occur from the renewables exemption, the demand curve changes filing, including the renewables exemption, is consistent with the purpose of the FCM — namely, ensuring that price signals are sufficient to incent existing resources to stay in the capacity market, and new resources to enter, so that ISO-NE meets its reliability requirements at least cost.” In support of its findings FERC relied on the sloped demand curve and load growth in ISO-NE to mitigate potential price suppression caused by the renewables exemption.

The order is available here.