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Order ISO-NE to withdraw parts of proposed minimum offer price rule, APPA, NEPPA and NRECA tell FERC

From the January 7, 2013 issue of Public Power Daily

Originally published January 7, 2013

By Robert Varela
Editorial Director

The Federal Energy Regulatory Commission should order ISO New England to withdraw its proposed tariff provisions dealing with self-supply under its capacity market, APPA, the Northeast Public Power Association and the National Rural Electric Cooperative Association said. The commission should institute settlement discussions to develop alternate tariff changes that "fully restore the ability of legitimate self-supply to be pursued in satisfaction of load-serving entities' capacity obligation," they said in a joint Dec. 28 filing. ISO-NE then should be directed to file a new proposal to reflect the accommodation of self-supply, they said.

The ISO’s proposal "is yet another step in the devolution of ISO-NE’s [Forward Capacity Market] for the region's publicly owned and cooperative electric utilities," APPA and the others said. "What was originally envisioned as a residual capacity market that would allow vertically integrated not-for-profit public power and cooperative electric utilities to choose whether to procure their capacity resources through the residual market or to self-supply them, as they saw fit in the best interests of their retail customers, is now being converted into a mandatory administrative construct from which these utilities will have to purchase their capacity, even if they desire to self-supply their own capacity for sound policy and business reasons."

Implementing the ISO’s proposed rule "would not be in the best interests of the consumers served by these utilities because, among other things, it creates a barrier to the types of long-term agreements and investment in new resources that capacity constructs like [the Forward Capacity Market] are intended to encourage," APPA and the others said.

FERC "has apparently concluded (without substantial evidence of any such intent on their part) that public power and cooperative electric utilities have both the motive and opportunity to exercise buyer-side market power, and therefore must be prevented in advance from doing so—in other words, they are indeed ‘automatically suspect,’" the associations said. "This is all being done in the name of propping up capacity market structures that have produced almost continuous litigation since their inception, and which seem to satisfy neither generator nor load-side interests (albeit for different reasons)."

"There has to be a better way to support needed new capacity in New England, and to do so without fundamentally undermining the longstanding business model of the not-for-profit public power and cooperative electric utilities that collectively serve approximately 2 million New England retail electric customers," APPA and the others said.


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