Dive Brief:

• The Federal Energy Regulatory Commission on Monday declined to act on a last-minute request from owners of an offshore wind farm to delay the capacity market auction run by ISO-New England, which was held that day.

• Vineyard Wind on Monday asked FERC to stay the grid operator's capacity auction because it was not allowed to enter the auction as a "renewable technology resource (RTR)" — a status that would allow it to bid at lower prices. The wind farm owners asked FERC last month to waive ISO-NE market rules to provide it RTR status.

• Democrat Commissioners Cheryl LaFleur and Richard Glick criticized FERC's failure to act, saying it "introduced significant uncertainty into this auction." Chairman Neil Chatterjee responded on Twitter Tuesday, writing it is "highly inappropriate" to "discuss the Commission's internal deliberations."

​Dive Insight:

The controversy over Vineyard Wind illustrates continuing uncertainty over how market operators should handle resources that receive policy support from state governments, like offshore wind.

Last year, FERC approved a two-part capacity auction proposal from ISO-NE intended to limit the impact of state subsidies and mandates, which generators say depress market prices for other power plants.

Under the Competitive Auctions with Sponsored Policy Resources (CASPR) plan, resources with RTR status can secure capacity obligations from power plants that are set to retire, allowing them to participate fully in the market. RTR resources are also exempt from the ISO's Minimum Offer Price Rule, allowing them to bid in at lower prices.

Vineyard Wind, an 800 MW facility planned off the coast of Massachusetts, intended to participate as an RTR resource, but was prohibited by a provision in ISO-NE's tariff that limited RTR status to resources within the physical borders of a New England state. On Dec. 14, it asked FERC to waive those conditions and allow it to gain RTR status.

ISO-NE subsequently told FERC it did "not oppose," Vineyard Wind's request, and asked that FERC make a determination by Jan. 29 so changes could be in effect for the Feb. 4 auction, which allocates capacity for the years 2022-2023.

FERC acted on Jan. 29, issuing an order to implement many of the CASPR changes, but did not address Vineyard Wind's request for a waiver on the RTR rules. That sparked a dissent from Glick, who argued that ISO-NE's separate efforts to retain a large Exelon gas plant in Boston for fuel security purposes demonstrated a bias toward fossil fuel resources.

"[I]n the various proceedings involving Exelon's Mystic facility, the ISO (supported by a majority of the Commission) has exhibited what can fairly be described as a preference for retaining traditional generation resources rather than exploring other approaches that might more effectively address the ISO's fuel security concerns," he wrote. "That preference is at odds with the several New England states that have made clear that their resource mix must evolve toward an increasingly low-carbon portfolio."

In response to the Jan. 29 order, Vineyard Wind filed an emergency request on Feb. 4 to delay the auction scheduled to begin the same day, saying it would suffer "irreparable harm" if it were excluded.

"The success of the Vineyard Wind project is predicated on its ability to offer its capacity into the ISO-NE market," it wrote. "RTR status is an important component of making such an offer, as that status, as approved by the Commission, places the offeror in a favorable auction position."

Massachusetts Gov. Charlie Baker took up Vineyard Wind's cause on Monday, calling the facility "highly cost effective" in a letter to FERC requesting an auction delay. Baker in 2016 signed the state's 1600 MW offshore wind mandate, and last August Massachusetts electric utilities filed contracts with Vineyard Wind to deliver power at unexpectedly low prices. 

FERC, however, declined to act, and ISO-NE held the market auction without the RTR waiver for Vineyard Wind. In a statement to Bloomberg Monday, an ISO-NE spokesperson said a delay "would be unfair to the hundreds of other market participants."

FERC's partisan balance currently sits at 2-2 after the death of Republican Commissioner Kevin McIntyre last month. That vacancy has allowed Democrats to deadlock some commission votes, but in this case, a clear majority was required to delay the capacity auction. 

"We recognize that the Commission can move forward only when it has a majority of votes for a particular action," Democrats LaFleur and Glick wrote Monday night. "Nevertheless, by failing to act, the Commission has introduced significant uncertainty into this auction. All parties, including New England's states, consumers, and auction participants, deserve better."

In the past, Chatterjee and the FERC Democrats have publicly sparred over natural gas issues at Commission meetings, revealing a similar partisan divide to the one on display in the Vineyard Wind case. But on Tuesday afternoon, the chairman tweeted a statement at the two Democrats criticizing their joint statement. 

Please see my response to @RichGlickFERC & @CLaFleurFERC’s joint statement on Vineyard Wind pic.twitter.com/cBGE1004Jy

— Neil Chatterjee (@FERChatterjee) February 5, 2019

How offshore wind is treated in future capacity market auctions could affect other policy initiatives at ISO-NE, including its efforts to value generator fuel security. Last month, the grid operator released a report on how offshore wind can contribute to fuel security in the region by allowing generators to burn less of their onsite fuel supplies during periods when gas pipelines are oversubscribed. The ISO must file fuel security reforms by June.