NEPOOL PARTICIPANTS COMMITTEE
JUN 21-23, 2016 MEETING, AGENDA ITEM #1
SUMMARY OF NEPOOL SECTOR SUBMISSIONS
FOR JUNE 21 SECTOR BREAKOUT MEETINGS
This document summarizes what five of six NEPOOL Sectors intend to cover in their Sector
breakout meetings at the NEPOOL summer meeting in New Hampshire on Tuesday, June 21.
While each of the Sectors have prepared individual, confidential submissions that are more
detailed, the NEPOOL Officers agreed that a broadly circulated summary might be useful to
underscore the extent of the commonalties expressed among the Sectors on the topic of
integrating public policy into competitive wholesale markets.
Detailed materials were prepared by the End User Sector, Publicly Owned Entity Sector,
Generation/Long Supplier Sector, Short Supplier Sector and the Alternative Resources (A/R)
Sector. As detailed in their submissions, all of the Sectors generally agree that the region should
be considering how state policies could be achieved through the markets. There also appears to
be broad recognition that the current markets were not designed with today’s carbon-reducing
and renewable energy public policy goals in mind. In this regard, the following passage from a
speech by Joel Gordon, as NEPOOL’s Chairman, presented at the NECPUC symposium
reflected the following observation:
Our region now faces great challenges as we consider solutions to achieve
evolving state policy to decarbonize our industry over time, and to do so in a way
that is compatible with competitive markets. But the markets that the region has
developed through NEPOOL’s robust stakeholder process were not designed nor
intended to achieve that objective.
To the contrary, the markets were designed to be as fuel neutral as possible, and
to find the most economically efficient set of resources to meet the reliability
objectives of the region. They have not been designed to transition the fleet to low
carbon resources. But State policy objectives are changing to encourage this
transition, and so too must our markets.
While there appears to be uniform recognition among the Sectors that the region should consider
changes to the markets, each of the Sectors agree that there needs to be better definition to the
objectives for those changes and have different approaches to identify desired changes.
The Publicly Owned Entity Sector suggests the need for expanding the objectives of ISO-NE to
potentially include objectives of (1) fuel diversity, (2) retail prices that are more in line with
other regions of the country, and (3) satisfying government-established environmental goals.
They identify two alternative paths for consideration. The first would modify current market
design, including potential reforms for differentiated capacity market products (e.g., tranches),
use of a “Texas style” operating reserve demand curve structure, and energy price formation
rules that more accurately reflect the price for carbon. A second alternative would implement a
coordinated planning process for the region and would, in the first instance, shift the
responsibility for resource procurement to load-serving entities outside the ISO-NE administered
market, with the ISO-NE market used to meet the residual needs of the load-serving entities.
They acknowledge changes of this magnitude would likely require greater definition and
attention and could take time to define and implement. They would also be open to a
combination of approaches to achieve desired objectives for the region.
NEPOOL PARTICIPANTS COMMITTEE
JUN 21-23, 2016 MEETING, AGENDA ITEM #1
Perhaps at the other end of the spectrum is the A/R Sector who expressed concern with
wholesale restructuring, which they believe would require a long and highly contested process.
The A/R Sector instead supports incremental changes that improve the ability for A/R to gain
access and compete in the current markets and would prefer that the region pause on broader
changes until some experience is gained with the recent substantial changes to the market,
including FCM pay-for-performance and improved energy price formation changes. They
applaud the ISO-NE efforts to capture more currently and accurately energy efficiency and
distributed energy resources and they advocate for incremental changes that will (1) improve the
interconnection process to reduce backlogs, (2) continue to improve energy price formation, and
(3) enhance competition in the capacity markets. These proposed incremental enhancements are
largely consistent with key NEPOOL business priorities identified for 2016-17.
The End User Sector supports the need to modify the markets and offered some process
suggestions to support that effort by review of the results of the ongoing scenario analysis study
in order to provide better understanding on the interaction between markets and evolving state
policy objectives. Other items identified by the End User Sector to consider in developing
potential solutions were to better understand (1) how public policy is reflected today in ISO-NE
forecasts and planning models, (2) how the increasing transmission costs are impacting the
market and might be mitigated, and (3) the level of interactions and coordination among the
States and ISO-NE with the FERC on policy/market issues.
The Generation and Supplier Sectors also acknowledged the need to explore potential solutions
and changes to achieve state public policy that are compatible with New England’s competitive
markets. Their summaries expressed appreciation for recent changes to the markets, which they
suggest will improve the chances to achieve public policy objectives through the markets, but
expressed concern with how certain of the out-of-market initiatives to advance public policy
objectives can undermine the competitive markets. The summaries identify those concerning
changes and urge ISO-NE to more actively educate and articulate the interaction between public
policy initiatives and the markets. They urge a regional commitment to look first to achieve
public policy objectives through the market rather than adjusting the market to accommodate
state policies. They committed to work within the NEPOOL process with State officials and
ISO-NE to find solutions to the challenges presented.
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