Energy Choice
                            

Matters

Over Objection of Retail Suppliers, FERC Grants Complaint To Immediately Reduce Capacity Market Clawback (Peak Energy Rent) In New England

RESA Had Said Such Immediate PER Modification Would Harm Retail Suppliers, Negatively Impact Fixed Price Agreements

January 19, 2017

Email This Story
Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

FERC granted in part a complaint filed by generators and found that ISO New England's Peak Energy Rent (PER) mechanism, which is a form of capacity market revenue clawback paid to load, is no longer just and reasonable. FERC ordered immediate changes to the PER strike price

The PER Adjustment approximates the additional revenues that a hypothetical proxy peaking unit would earn in the real-time energy market during the highest-priced hours reflecting scarcity, and, based on a strike price, deducts calculated averaged and scaled PER values from capacity payments to capacity suppliers, providing a rebate to load serving entities

FERC previously ordered that the PER Adjustment shall be terminated effective June 1, 2019

However, generators, citing the introduction of increased Reserve Constraint Penalty Factors and FERC's reason in terminating the PER effective June 1, 2019, sought to terminate the PER effective September 30, 2016 (with refunds as appropriate), impacting part of the Forward Capacity Auction (FCA 7) delivery year and all of the FCA 8 delivery year.

"[M]odifying the PER Adjustment will in an unjust and unreasonable fashion upset the reasonable expectations of both capacity suppliers and Load Serving Entities ('LSEs') in the PER Adjustment and its phase-out for FCA-10," RESA had previously said.

"LSEs like RESA Members receive the rebate portion of the PER Adjustment and would be adversely affected by elimination of the PER Adjustment effective September 30, 2016," RESA had previously said

"LSEs, such as RESA members, include the [PER] credits, which ... are known, and use the credits to reduce the overall rates paid for services. LSEs, such as RESA members, often offer fixed price contracts to customers, which can be either customers purchasing services as part of a state retail access program or customers served via the local utility provider of last resort solicitations. The PER credits to load are relied upon in pricing the services in these often long-term arrangements. Thus, in either case, a sudden change in or elimination of the credit will have devastating effects on LSEs with these fixed price contracts serving customers or POLR load pursuant to utility solicitations," RESA had previously said

RESA had previously noted that the PER rebate is set using an average on a rolling 12-month basis

Accordingly, "[t]he harm to LSEs such as RESA members with fixed price contracts is substantial in the short-term because some of the PER that has already been incurred and due to be paid back to load over the next 12 months by tariff would not, if the Complaint is granted, be credited to LSE’s as expected," RESA had previously said

RESA had previously noted that, "NEPGA has never supported the PER mechanism and has sought many times to eliminate it," calling NEPGA's complaint a collateral attack on prior FERC orders

RESA had previously described conclusions that FCA capacity clearing prices were not sufficient to compensate for any additional losses resulting from higher Reserve Constraint Penalty Factors as "speculative". RESA had argued all participants in applicable FCAs knew they were at risk to pay a PER Adjustment, and that risk should have been included in their offers.

FERC dismissed RESA's concerns, stating, "We find that NEPGA has shown that, for the period at issue in NEPGA’s complaint (September 30, 2016 – May 31, 2018), the PER mechanism has become unjust and unreasonable as a result of the interaction between the PER mechanism and the higher Reserve Constraint Penalty Factors."

FERC ordered ISO-NE to revise the method by which it calculates the PER strike price, and set calculation of the correct strike price for hearing and settlement judge procedures

FERC stated, "Although the parties seem to dispute the impact of a September 30, 2016 refund effective date, we note that the question that we are placing before the ALJ concerns how the PER Strike Price is calculated pursuant to ISO-NE Tariff section III.13.7.2.7.1.1.1, and not the monthly application of the PER Adjustment for settlement purposes as governed by ISO-NE Tariff section III.13.7.2.7.1.1.2. Accordingly, any changes to the calculation of the PER Strike Price under ISO-NE Tariff section III.13.7.2.7.1.1.1 would be prospective only from September 30, 2016, as required by FPA section 206, and would not impact the application of any PER Adjustment occurring before September 30, 2016."

Docket No. EL16-120

ADVERTISEMENT
NEW Jobs on RetailEnergyJobs.com:
• NEW! -- Analysts, Sales and Marketing - Retail Electric Supplier -- Houston
• NEW! -- Market Director -- Retail Energy
• NEW! -- Energy Business Development Professional
• NEW! -- Managers, Sales and Marketing - Retail Electric Supplier -- Houston
• NEW! -- Directors: Telemarketing or Broker Channel Management - Retail Electric Supplier -- Houston
• NEW! -- Director, Wholesale & Retail Electricity Operations
• NEW! -- Director, Finance & Operations
• NEW! -- Sales Support Specialist -- -- Retail Supplier
• NEW! -- Sales Associate -- Retail Energy
• NEW! -- Energy Sales Rep
• NEW! -- Channel Sales Manager -- Retail Supplier
• NEW! -- Sales/Pricing Support Coordinator
• NEW! -- Marketing Coordinator
• NEW! -- Channel Partner Manager -- Retail Supplier
• NEW! -- Retail Energy Sales