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ISO-NE capacity market prices soar in Boston area

From the February 14, 2013 issue of Public Power Daily

Originally published February 14, 2013

By Robert Varela
Editorial Director
In its first capacity market auction with four zones, ISO New England saw prices for the greater Boston/Northeast Massachusetts zone brush the auction ceiling price of $15/kW-month, even as the other three zones hit the auction floor price of $3.15/kW-month, with surplus capacity. In 2012, capacity accounted for about 19 percent of the total cost of wholesale electricity, the ISO said. The auction was for capacity to meet expected demand in 2016-2017, as forecast by ISO-NE. Last year’s auction price (for 2015-2016) was $3.43/kW-month, the floor price set by the ISO.

"The market worked as designed to bring new resources where they are needed, which includes both new generation and energy-efficiency measures as a part of the mix," said ISO New England President and CEO Gordon van Welie. The high price for the Boston area "is indicative of the cost of developing new resources in this zone," he said. Consumers in this area will see reliability benefits for years to come when these new resources are developed as proposed, but without these additions, grid reliability in the North Shore and Greater Boston area would be in question."

The ISO said it divided the region into four zones "to elicit capacity price signals that reflect resource needs in specific areas of the region more precisely."

The prices in the other three zones—Connecticut, Maine and "Rest of Pool"—will be prorated because the auctions in those zones ended with surplus capacity. The prorated price will be set at $2.83/kW-month in Connecticut and at $2.74/kW-month in the other two zones, the ISO said. 

In the Boston area, all new resources will be paid $14.99/kW-month in 2016-2017, while the 3,033 MW of existing resources in the zone will be paid $6.66/kW-month in 2016–2017. The capacity market formula "for compensating resources in zones with insufficient competition grew out of the settlement agreement as a way to balance the interests of those paying for capacity and those providing capacity," the ISO said.

Systemwide, 36,220 MW of capacity cleared the auction, well above the 32,968 MW minimum needed, according to ISO-NE.


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