On January 9, 2020, FERC rejected Constellation Mystic Power, LLC’s (“Mystic”) proposed amendment to its cost-of-service agreement (“Mystic Agreement”) with ISO New England Inc. (“ISO-NE”) that would have provided Mystic the option to unilaterally retire Mystic Generating Station units 8 and 9 (“Mystic Generators”). FERC found that giving Mystic the option to retire the Mystic Generators early would pose an unacceptable risk to reliability. Commissioner Glick concurred in part and dissented in part.
On March 23, 2018, Mystic submitted Retirement De-List Bids for the Mystic Generators, indicating that, unless it obtained cost-of-service compensation for such generators, it would retire the units prior to Forward Capacity Auction 13, which was conducted in February 2019 for the June 1, 2022 to May 31, 2023 Capacity Commitment Period. ISO-NE found that the retirement of the Mystic Generators would present an unacceptable fuel security risk, and so entered into the Mystic Agreement with Mystic, pursuant to which the Mystic Generators would remain in operation to provide capacity until May 31, 2024 with ISO-NE providing cost-of-service compensation. FERC accepted the Mystic Agreement, subject to the outcome of proceedings regarding interim provisions of the ISO-NE Transmission, Markets and Services Tariff addressing retention of resources for fuel security, to become effective June 1, 2022.
On March 1, 2019, Mystic proposed an amendment to the Mystic Agreement (“Amendment”) that would allow (i) ISO-NE to terminate the Mystic Agreement on May 31, 2023 if ISO-NE determines that the Mystic Generators are not needed for fuel security purposes and (ii) Mystic to terminate the Mystic Agreement on May 31, 2023 if it provided written notice to ISO-NE no later than January 10, 2020.
FERC found the proposed Amendment to be unjust and unreasonable as ISO-NE’s modeling showed the need to retain the Mystic Generators for a two-year period and therefore allowing the Mystic Generators to retire early would pose an unacceptable risk to reliability. FERC disagreed with Mystic’s argument that the Amendment was necessary due to the uncertainty surrounding key components of the cost-of-service compensation that Mystic would receive under the Mystic Agreement, which have yet to be finalized. FERC stated that Mystic previously had the option to retire the units, but instead chose to enter into the Mystic Agreement and receive cost-of-service treatment. According to FERC, while some of the components of the Mystic Agreement have not been finalized, the compensation uncertainty faced by Mystic has not changed substantially from the time of the execution of the Mystic Agreement.
Commissioner Glick concurred in part and dissented in part, stating that while he agreed with the majority’s conclusion that the Amendment should be rejected, he did not agree with their reasoning. Commissioner Glick instead contended that the Amendment should be rejected since a unilateral termination provision in the Mystic Agreement would give Mystic excessive bargaining power and would allow Mystic to threaten to leave the Mystic Agreement in exchange for additional concessions from ISO-NE. Commissioner Glick added that, given that customers must already pay Mystic’s full cost-of-service, he did not see how adding a “heads I win, tails you lose” provision to the agreement would be a just and reasonable result.
A copy of the order is available here.