On November 19, 2018, FERC accepted ISO New England Inc.’s (“ISO-NE”) request to terminate the capacity supply obligation (“CSO”) of the Clear River Unit 1 natural gas-fired generator (“Clear River”) for the 2021–2022 Capacity Commitment Period. In doing so, FERC found that ISO-NE had the right under its Tariff to terminate Clear River’s CSO because Clear River’s project sponsor, Invenergy Energy Management LLC (“Invenergy”), had covered Clear River’s CSO for two consecutive Capacity Commitment Periods. In the same order, FERC denied Invenergy’s request for waiver of certain provisions of ISO-NE’s Tariff related to the termination of Clear River’s CSO.

To ensure resource adequacy, ISO-NE holds a forward capacity auction (“FCA”) annually, three years in advance of the relevant capacity delivery year (the Capacity Commitment Period). Resources compete in the FCA to obtain a commitment to supply capacity (a CSO) in exchange for a market-priced capacity payment. Under the ISO-NE Tariff, a resource that is planned or under construction, i.e., not yet commercially operational, may qualify to offer capacity into an FCA if certain criteria are met. If a resource with a CSO has not achieved commercial operation by the start of the Capacity Commitment Period, it must cover its obligation for the period in which the resource will not be operational, either by purchasing replacement capacity or by entering into one or more CSO bilateral transactions.

ISO-NE may seek to terminate a resource’s CSO if one or more of several conditions are satisfied, two of which are applicable in this case: (1) if a resource covers a CSO for two Capacity Commitment Periods, or (2) if the date by which a resource will have achieved commercial operation is more than two years after the beginning of the Capacity Commitment Period for which the resource first received a CSO. In its filing, ISO-NE argued that both of those conditions under its Tariff had been met because (1) Invenergy had covered Clear River’s CSO for the 2019–2020 and 2020–2021 Capacity Commitment Periods and (2) Clear River will not achieve commercial operation until two years beyond the 2019–2020 period.

In its order, FERC found that ISO-NE had the right to seek termination of Clear River’s CSO for 2021–2022 under its Tariff because Invenergy did not dispute that it covered Clear River’s CSO for the 2019–2020 and 2020–2021 Capacity Commitment Periods. Because FERC found this first condition for termination had been met, it did not opine on the issue of whether Clear River will achieve commercial operation more than two years after the beginning of the 2019–2020 Capacity Commitment Period. Accordingly, FERC accepted ISO-NE’s request to terminate Clear River’s CSO for the 2021–2022 Capacity Commitment Period as just and reasonable.

In addition to protesting ISO-NE’s termination filing, Invenergy also requested waiver of any requirement in the ISO-NE Tariff that would require immediate forfeiture of Clear River’s financial assurance or prohibit Clear River from participating in FCA 13, to be held in February 2019. FERC, however, denied Invenergy’s waiver request because it found that the waiver would result in undesirable consequences for both system planning, because it could skew the results of interconnection studies and transmission planning studies, and FCA market pricing, because it risks misrepresenting capacity availability for the associated delivery years.

A copy of FERC’s order is available here.