ISO New England proposes capacity market changes, further 2-year delay for upcoming auction

The Federal Energy Regulatory Commission in January approved a 1-year delay to New England ISO’s Forward Capacity Auction 19. Now, the grid operator has asked for a further 2-year delay to develop a new approach to procuring resource commitments.

ISO New England on Thursday, February 8th, said it wants to shift from its annual Forward Capacity Market auction process that procures energy resource commitments three years in advance to a “prompt/seasonal” model that it says would better reflect changing demand and available resources.

The regional transmission organization is recommending the new approach begin with the 2028-2029 capacity commitment period, which will be covered by Forward Capacity Auction 19. That auction was originally scheduled for 2025, but the Federal Energy Regulatory Commission in January authorized a 1-year delay to allow for development of an improved capacity accreditation methodology.

Now, the New England grid operator wants FERC to approve a further 2-year delay that would see the first “prompt capacity auction” held in early 2028 for a commitment period beginning the same year.

A prompt capacity market “more accurately reflects demand and resource capabilities used to determine capacity awards, thereby producing more cost effective outcomes,” the ISO said in a presentation to the NEPOOL markets commitee earlier this month describing the changes. And it “better accommodates new resource development timelines … [and] reduces time between capacity sale and delivery, which may decrease risks (to both buyers and sellers).”

Benefits of a seasonal market include more accurate accounting “for seasonal differences in resources’ supply capabilities and forecast energy demand, thereby producing more cost effective capacity awards,” according to the presentation.

The ISO said it has been working with Analysis Group since August to understand the “considerations and tradeoffs” of the new market design. The Boston-based consulting firm recommended the ISO move ahead with the changes in a January report.

“Both a prompt market and a seasonal market offer many advantages to the current forward-annual capacity market that will make the market better suited to a system in which resource adequacy is achieved by the wide and changing mix of technologies and the reliability risks arise throughout the year in evolving patterns,” Analysis Group concluded.

ISO New England said its Markets Committee will vote in March on the additional delay to FCA 19, and its Participants Committee will vote in April.

Meanwhile, the ISO said it is continuing to develop a revised capacity accreditation methodology to better account for the region’s changing resource mix.

“While the ISO recommends developing a prompt and seasonal capacity market for [Capacity Commitment Period] 19 and beyond, it is continuing to develop and prepare to implement [Resource Capacity Accreditation] in a forward, annual construct with the auction delayed to 2026 while it awaits a FERC order on the further delay,” according to the February presentation.

The accreditation methodology must be updated “to capture the impact of the constrained natural gas delivery system” on winter energy needs, the ISO and the New England Power Pool’s Participants Committee told FERC last year.