Dive Brief:

• In a blow to renewable energy advocates, ISO New England (ISO-NE) intends to keep its "minimum offer price rule" (MOPR) through 2024 instead of eliminating it before the grid operator's capacity auction next year as originally expected.
• With the grid operator's support, 70% of a key ISO-NE stakeholder committee – the New England Power Pool's (NEPOOL) Participants Committee – on Feb. 3 backed a "transition" proposal, which was floated by Dynegy, Calpine and Nautilus Power. ISO-NE plans to file the proposal at the Federal Energy Regulatory Commission in the "coming weeks" for approval.
• "The big question is whether the current FERC will look kindly at a two-auction delay to MOPR reform despite it being regionally developed and mostly supported," José Rotger, Customized Energy Solutions (CES) director of market intelligence – New England, said Tuesday in an email.

Dive Insight:

After at least a decade of controversy, Northeastern grid operators have been moving to ease their MOPRs — rules designed to prevent a market participant from offering artificially low bids to suppress capacity prices.

The PJM Interconnection's "focused" MOPR took effect in September and the New York Independent System Operator in January proposed eliminating its MOPR-like buyer-side mitigation rules.

Opponents of strict MOPRs, like most New England states, contend they undermine state clean energy policies by blocking state-supported emissions-free resources from winning capacity bids.

Even so, New England states, except for New Hampshire, didn't oppose the transition proposal offered by the generating companies, according to a statement released Tuesday by the New England States Committee on Electricity (NESCOE), which represents the region's governors.

"NESCOE recognized ISO New England's support of a transition proposal as ISO New England's preferred way to reform the MOPR to mitigate the potential for short-term reliability impacts," the organization said.

NESCOE said it would "fiercely oppose" attempts to extend the deadline for MOPR reform beyond 2025.

At a Jan. 11 meeting, 74% of NEPOOL's Markets Committee supported an ISO-NE proposal to eliminate the MOPR before the grid operator's next annual capacity auction in February 2023.

However, in an about face, ISO-NE decided to "wholly support" the proposal to delay eliminating the MOPR until 2025, according to a Jan. 26 memo to the NEPOOL Participants Committee from Vamsi Chadalavada, ISO-NE executive vice president and chief operating officer. The memo was included in an agenda package for the meeting.

The approved plan would exempt 700 MW of capacity rating value of state-backed resources from the MOPR over the next two capacity auctions. The 700-MW exemption would equal about 1,750 MW of offshore wind nameplate capacity, according to CES's Rotger. The exemption is likely big enough to accommodate renewable resources seeking to enter the capacity market until the MOPR is fully eliminated, according to ISO-NE.

A transition approach will reduce the risk there will be a wave of renewable resources winning capacity bids, which could threaten grid reliability by forcing power plants to retire, Chadalavada said in the memo. It will also give ISO-NE time to improve its wholesale market pricing mechanisms to help keep the grid reliable as intermittent wind and solar replaces fossil-fuel generation, according to Chadalavada.

It appears the ISO-NE board pushed the grid operator's management to support a transition approach after the markets committee vote, "but those internal deliberations remain opaque," Rotger said.

"It is not the first time that ISO-NE has used its reliability trump card in market design, and it will not be the last," Rotger said. "Nevertheless, stakeholders on all sides are disappointed it took so long for these reliability concerns to be fully aired."

Extending the MOPR will make it harder for New England states to meet their climate goals, according to Phelps Turner, a senior attorney for Conservation Law Foundation Maine.

"The MOPR continues to create an unlevel playing field for renewable resources in the region and prevents them from fully and fairly participating in the capacity market, which can be an important source of revenue for these resources," Turner said.

The 700-MW exemption could provide a "modest benefit," but doesn't offset the overall harm caused by keeping the MOPR, according to Turner. Winning a capacity bid can be crucial to financing projects, Turner noted.

The American Council on Renewable Energy echoed Turner's concerns in a statement Monday.

Delaying the entry of renewable energy into the market means New England consumers will have to pay for more expensive fossil-fueled power, which is subject to price spikes, Turner said.

Rotger, however, contends capacity payments are a small part of what drives renewable development in New England.

"Renewable energy development is largely, if not fully, driven by state and federal government incentives and policies, such as [tax credits,] state portfolio standards, solar PV and net metering incentives, and state-mandated purchased power contracts for offshore wind and Québec hydro," Rotger said.

Providing capacity market revenue for more renewables would likely spur development, but the delay won't slow existing and planned development, Rotger said.

Rotger and Turner agreed it is unclear how FERC will respond to a proposal from ISO-NE.

The plan's endorsement by NEPOOL's Participants Committee came about two weeks after FERC Chairman Richard Glick and Commissioner Allison Clements said ISO-NE's MOPR appears to be unjust and unreasonable.

"The MOPR appears to act as a barrier to competition, insulating incumbent generators from having to compete with certain new resources that may be able to provide capacity at lower cost," the federal regulators said. "Such overbroad barriers are the antithesis of market competition."

ISO-NE "must move expeditiously" to revise its MOPR, they said.