ISO New England Files to Implement Sloped Demand Curve for Capacity Market, Net CONE Equals $11/kW

ISO New England has filed at FERC to implement a system-wide sloped demand curve in its capacity market for Forward Capacity Auction 9 to be held in February 2015, for the 2018-19 delivery year.

The demand curve changes filed by ISO-NE do not provide for the use of sloped demand curves in FCA 9 at the zonal level. "There is simply not sufficient time for the ISO to conduct the work that is required to implement sloped demand curves at the zonal level for FCA 9," the ISO said.

The ISO does intend to work with stakeholders to complete all of the work that is required to fully implement sloped demand curves at the zonal level for FCA 10, for the 2019-20 delivery year.

The ISO said that the changes include several elements. "First, the changes define the shape of the system-wide sloped demand curve in which the key points are defined by the estimated cost of entry for a new capacity resource (referred to as CONE in the rules) and well-established system planning design criteria that are used to ensure resource adequacy. Second, the changes extend the period during which a Market Participant may 'lock-in' the capacity price for a new resource from five to seven years. Third, the changes establish a limited exemption from the buyer-side capacity market mitigation rules for certain renewable resources that are built to advance state environmental policy objectives (the 'renewables exemption'). Finally, the changes eliminate, at the system-wide level, the administrative pricing rules that were necessary in certain market conditions under the vertical demand curve construct."

Notably, the cost of new entry values proposed by ISO-NE are $14.04/kW-month for CONE and $11.08/kW-month for Net CONE.

"Estimating the total cost to build and expected revenues of a combined cycle gas turbine in New England involves numerous variables," the ISO conceded.