FERC Approves ISO-New England's Implementation Of Capacity Market Design Changes And MOPR Elimination

• Published date: 30 June 2022
• Law Firm: Foley Hoag LLP
• Author: Ms Carol Holahan

On Friday, May 27, 2022, the Federal Energy Regulatory Commission (FERC) issued an order approving ISO-New England's proposed tariff revisions, which phase out the ISO's minimum offer price rule (MOPR) by 2024. The tariff revisions institute an interim Transition Mechanism to organize ISO-New England's 2022 and 2023 capacity auctions, which will together allow 700 megawatts (MW) of state-sponsored renewable resources to participate without application of the MOPR. In 2024, the Transition Mechanism will be replaced by the MOPR Reforms, which will effectively abolish the MOPR for most capacity auction entrants and eliminate the practice of bid mitigation currently applied to state-sponsored resources in New England.

FERC's order responded to a March 31, 2022 filing by ISO-New England and the New England Power Pool Participants' Committee (NEPOOL) that jointly proposed modifications to the ISO's use of the MOPR in its forward capacity auctions. The filing framed the proposed modifications as setting the region's wholesale electricity markets on a middle path between two possible trajectories. ISO-New England argued that if (as under the current market design) New England states continue to supply renewable resources with revenue and those resources cannot rely on revenue from forward capacity auctions, the region may see an "overbuild" of capacity. On the other hand, if those resources are allowed to compete in capacity markets, market inefficiencies may proliferate and reliability of service may be less assured.

The capacity market modifications approved by FERC proceed in two stages. First, a Transition Mechanism intended to smooth the transition away from the current market design will organize the 2022 and 2023 capacity auctions. Then, beginning with the 2024 capacity auction, a new market...