Letter to Norman Bay, Chairman of the Federal Energy Regulatory Commission - Concern for Clearing Costs Associated with Affordable Electricity

Letter

Dear Chairman Bay:

The Rhode Island delegation has written to you before highlighting that reliable and affordable electricity in Rhode Island is one of our top priorities. With the closure of Pilgrim Nuclear plant in Massachusetts slated for 2019, the New England (NE) region is about to lose another 680 MW of capacity. We are concerned that the clearing cost of capacity in our region will continue to grow and the current capacity shortfall will worsen for the Southeast Massachusetts and Rhode Island (SEMA/RI) zone.

We previously highlighted that market capacity prices in FCA-9 increased to $4 billion in 2018-19, compared to $1.19 billion in 2015-16 and $1.06 billion in 2016-17. And while FCA-9 secured sufficient capacity region-wide for 2018-19, it fell 238 MW short for the SEMA-RI zone. To help address these concerns, we ask you to explore whether ISO should more fully include the results of its own Distributed Generation (DG) Forecast Working Group in its installed capacity requirement (ICR) calculation. We believe that a better accounting of DG could address some of the capacity concerns and relieve upward pressure on prices in the SEMA/RI zone.

Although ISO does include Behind-the-Meter Not Embedded in Load (BTMNEL) solar energy in its ICR calculation, it has decided not to include Settlement Only Generators (SOG). ISO's forecast predicts that these excluded DG resources will total 43 MW in 2019 (net summary capacity) in the Rhode Island, meaning that ISO is excluding nearly 87% of available DG in RI. For the greater New England region, ISO's forecast predicts 263.8 MW of excluded DG capacity making up 42% of available DG. We are also concerned about why so much more DG is excluded in Rhode Island compared to New England as a whole.

We understand that ISO's reasoning for not including these DG resources in its ICR calculation is that these resources do not participate in the Forward Capacity Auction (FCA) and do not acquire a Capacity Supply Obligation (CSO). However, that is true for the BTMNEL resources that the ISO does count in its ICR calculation. We seek comment from FERC on why there is not consistent treatment for DG resources like SOGs and BTMNEL in the FCAs.

We believe that ignoring these SOG resources could result in unnecessarily high prices for Rhode Islanders and send inaccurate market signals on the value of DG resources in the Forward Capacity Market. And that does not explain the disparity of how DG is counted for Rhode Island as compared to the rest of the region, simply because of differences in the state regulatory treatment and physical interconnection of such resources in Rhode Island when compared with neighboring states.

The proper inclusion of DG could also help make up the capacity shortfall in the SEMA/RI zone that is expected in FCA-10. On January 2, 2015, FERC ordered the ISO to more properly account for renewable DG resources in New England. As such, we would like to know whether FERC agrees with ISOs decision to continue to exclude DG in ISO's ICR calculation.

Thank you for your review of this matter and we look forward to your prompt response. We hope as you work to finalize the ISO-NE submitted filing for FCA-10 that you take our concerns into consideration.