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Winter energy security update: Interim compensation program for inventoried energy filed with FERC

On March 25, 2019, ISO New England filed with the Federal Energy Regulatory Commission (FERC) to implement a short-term program that will recognize the value of resources that can store fuel for use when winter energy security is most stressed. The short-term program, which would run during winters 2023/2024 and 2024/2025, is designed to be a bridge to a long-term, market-based solution that more comprehensively addresses the region’s energy security risks.

The interim program will provide compensation for generators to maintain greater stores of energy or fuels than they would otherwise keep on hand, thereby improving the region’s winter energy security. These financial incentives should also lower the possibility that these needed resources will pursue retirement before the market-based approach is implemented.

For each winter it is in effect, the program will run from December 1 through the end of February. Generators fueled by oil, coal, nuclear, biomass, and refuse are eligible to participate. Batteries may participate, as can some hydro generators fueled by water in a pond or reservoir that they control. Certain demand-response resources may also participate, as can natural-gas-fired generators with firm contracts for delivery of natural gas. The program is designed to ensure that all providers of inventoried energy are compensated similarly.

The ISO continues working with stakeholders to develop the long-term, market based solution. The ISO is aiming to file a long-term proposal at FERC by October 15, 2019, and is targeting an implementation date of June 1, 2024—the beginning of the capacity commitment period for FCA 15, which will be held in February 2021.

About winter energy shortfalls

Half of the region’s generating capacity uses natural gas, but natural gas delivery constraints in winter caused by high demand for this fuel from both the heating and electric power sectors can prevent these resources from operating as needed during extreme cold weather. The oil, coal, and nuclear power plants that can meet demand during cold winter days when the availability of gas generation is limited, are rapidly retiring because their fuel and environmental-mitigation costs make them too expensive to effectively compete against newer, faster natural-gas-fired generators that have low fuel costs during most of the year.