On November 19, 2020, FERC upheld its March 2018 order addressing ISO New England, Inc.’s (“ISO-NE”) Competitive Auctions with Sponsored Policy Resources (“CASPR”) proposal to integrate certain state-supported resources into its capacity market (see March 20, 2018 edition of the WER). FERC’s November 19 order upheld its prior conclusion that the CASPR program is a just and reasonable modification to ISO-NE’s Forward Capacity Market (“FCM”) design that appropriately balances consumer as well as supplier interests. In a separate dissenting opinion, Commissioner Richard Glick concluded that the CASPR program has not shown to be an effective means of accommodating state public policies in the FCM.
As part of the FCM, ISO-NE holds an annual Forward Capacity Auction (“FCA”) in which capacity suppliers compete to provide capacity to the region for the relevant delivery year, three years in the future. Suppliers that receive a capacity supply obligation in an FCA commit to, and receive payment for, providing capacity for that one-year period associated with that FCA.
CASPR is a market-based mechanism to accommodate the entry of certain state-supported resources into the FCM over time. CASPR seeks to achieve this goal by running the annual FCA in two stages: a primary auction and a second, substitution auction. In the primary auction, ISO-NE applies a Minimum Offer Price Rule (“MOPR”) to limit bids from subsidized generators, and the resulting clearing price determines the price that ISO-NE load will pay for capacity. In the substitution auction, resources that clear the first auction can transfer their capacity supply obligations to new, state-subsidized resources and permanently retire in exchange for a “buy-out” payment. New subsidized resources that clear the secondary auction are not subject to the MOPR in future auctions.
Requests for rehearing of the March 2018 order were filed by a group of clean energy advocates, and a group of consumer-owned utility systems, as well as by NextEra Energy Resources, LLC, NRG Power Marketing LLC, and Public Citizen. FERC’s November 19 order, however, continued to find that the CASPR program results in just and reasonable capacity market prices while attracting future investment sufficient to maintain resource adequacy in the ISO-NE footprint. FERC concluded that the CASPR program recognized the New England states’ preference for supporting renewable resources while providing a mechanism to incorporate them into the FCM as older, traditional resources retire. FERC also rejected requests to modify CASPR by adding an annual 200 MW backstop renewables exemption, finding that such a mechanism would potentially undermine CASPR’s market-based approach.
In a separate dissenting opinion, Commissioner Glick stated his conclusion that the CASPR program is “not up to the task of accommodating New England states’ efforts to decarbonize their electricity sector and address the threat of climate change.” Commissioner Glick pointed out that only a few dozen megawatts of state-sponsored capacity have cleared through the substitution auction in the first two FCAs featuring CASPR. Commissioner Glick also addressed what he articulated as problems with the capacity market construct as a whole, stating that “the days when the procurement of a single, undifferentiated ‘capacity’ product could serve as an effective guide for efficient resource entry and exit are over,” and that FERC should instead be “accelerating efforts to more efficiently procure the resources and services needed to reliably operate a clean energy grid.”
FERC’s November 19 order is available here.