FERC Approves Extension of Price Floor in Capacity Auction

FERC has approved the extension of the price floor in the ISO New England Forward Capacity Auction (FCA), and adopted a modification to the price floor (ER12-953).

Specifically, FERC approved extending the price floor such that it will be in place for FCA 7, to be held in April 2013 for the 2016-2017 delivery year.

While the Commission previously stated that the price floor should be eliminated, it conditioned the elimination on the coincident implementation of a revised buyer-market power methodology, which has not yet been implemented.

FERC said while revised buyer-side market power mitigation has not yet been implemented in New England, "the Commission's most recent FCM order largely accomplished the objective of mitigating all OOM [out of market] resources going forward, by ruling that all OOM resources, beginning in FCA 6, would be treated as 'new' once the minimum offer rules are in effect," FERC said.

"Thus, potential OOM resources beginning in FCA 6 are likely to be deterred from entering the market because they are on notice that they will be subject to the offer floor (and thus, will not likely clear the auctions) once the MOPR goes into effect. Moreover, the proposal before us to extend the price floor at a reduced level is an interim step that enjoys broad stakeholder support pending the implementation of this revised methodology," FERC said.

Furthermore, FERC accepted a reduced price floor of $3.15/kW-month.

Previously, the price floor had been "below 0.6 times [cost of new entry] (CONE)" which would have equaled $3.60/kW-month under current market rules absent the change in price floor mechanism.

FERC also accepted a joint proposal from ISO-NE and NEPOOL Participants Committee to implement modeling of four zones for FCA 7.