Dive Brief:

• Environmentalists and state consumer officials in New England have challenged higher payments proposed by ISO-New England to generators for stocking fuel for the winter. Advocates and officials cite the impact on consumers of rising costs for liquefied natural gas.
• ISO-NE told the Federal Energy Regulatory Commission that failing to increase the rate ahead of winter could “diminish the program’s ability to cover market participants’ costs to secure fuel supply” and limit incentives for inventoried energy and improve winter reliability.
• New Englanders face higher gas prices and ISO-NE’s Inventoried Energy Program, IEP, must pay more for gas and oil generators to make fuel available during the winter “when energy security is most likely to be stressed,” the grid operator said in an April 7 filing with FERC. It’s seeking higher rates effective June 6 for this winter and next.

Dive Insight:

The grid operator said cost estimates for the program for this winter and next could range between $274 million and $812 million, though the “upper bound estimates overstate” likely actual program expenses, it said. That compares with a cost estimated in 2019 of nearly $300 million.

Energy costs have soared following Russia’s invasion of Ukraine last year as European nations, looking to limit natural gas exports from Russia, emerge as an outsized competitor to New England for LNG.

The Sierra Club said in a statement Monday ISO-NE “seeks to dramatically increase the cost of this program without showing that it would improve reliability.” Casey Roberts, a senior attorney at Sierra Club, said the IEP makes the market less competitive. “It’s really a vulnerable position for the region to be in,” she said in an interview Monday.

In a protest with FERC, the Sierra Club, Union of Concerned Scientists and Conservation Law Foundation said ISO-NE’s rate request “shows the risks to consumers of a system that relies on imports of a volatile commodity fuel for electricity generation.”

The Massachusetts attorney general, Connecticut Office of Consumer Counsel, New Hampshire Office of the Consumer Advocate and Maine Office of the Public Advocate protested ISO-NE’s application.

The grid operator has failed to provide “substantial evidence” demonstrating that consumers will likely receive benefits “roughly commensurate” with potential costs and a redesign of the IEP could result in a windfall to oil resources, the agencies said in a filing Friday.

Dan Dolan, president of the New England Power Generators Association, said the IEP “creates more operational certainty” and also gives ISO-NE more certainty as a market operator.

“Generators are more forward looking at the market in firming up fuel supplies,” he said in an interview Monday. “There’s a certain amount of cost recovery that does not exist absent this program.”

A federal appeals court last June partly struck down FERC’s approval of a plan to pay New England power plant owners an incentive to have three-days worth of on-site fuel during two upcoming winters. The U.S. Court of Appeals for the District of Columbia Circuit rejected allowing an estimated $40 million a year in “windfall payments” to coal, hydroelectric, biomass and nuclear generators as part of ISO-NE’s IEP.

The court said the incentive wouldn’t affect their behavior. Payments to other types of generators, such as gas-fired power plants or oil-burning units, can go forward under the ruling. 

The Sierra Club and Union of Concerned Scientists, municipal utilities, the New Hampshire Office of the Consumer Advocate, New Hampshire Public Utilities Commission and the Massachusetts attorney general challenged FERC’s decision that led to the federal court ruling.