Utility Seeks Approval of 'Contingency' Default Service Plan in Cases Where Bidding Hindered by 'Significant Market Event'

National Grid has sought approval from the Massachusetts DPU for approval of a proposed contingency plan for procurement of basic service in the event that a Request For Proposals soliciting bids for basic service is: (1) negatively impacted by a significant market event or (2) receives less than two bids for a transaction.

National Grid requested authority to implement this Contingency Plan effective immediately upon the Department’s approval.

At least three New England utilities -- Nstar, WMECO and United Illuminating -- have recently departed from their standard default full requirements service procurements for large customers, with Nstar/WMECO specifically citing a lack of bids as prompting the need for an alternative (in the Nstar/WMECO case, reliance on the day-ahead ISO-NE market)

Under National Grid's proposal, if the RFP is affected by a "market event", National Grid proposes to develop alternative plans to successfully complete the competitive solicitation as follows:

a. If it is a short-term event (e.g., hurricane causing price spikes), postpone the final bid date;

b. If it is a long-term event (e.g., the recent uncertainty due to the allocation of costs for the ISO-NE Winter Reliability Program), alter the product or terms of the transactions to improve pricing or bidder participation;

In cases where National Grid receives less than two bids, National Grid proposes to issue a new RFP.

However, if the new RFP for the transaction continues to have fewer than two bidders, National Grid proposes to procure the basic service requirements through the ISO-NE spot market, if the transaction is for the "immediate" rate period (meaning one which begins within six weeks of when final bids are due).

Under this process, National Grid proposes:

a. If the transaction is three months in duration, National Grid will procure the requirements for the entire period through the ISO-NE spot market; and

b. If the transaction is six months in duration, National Grid will procure the requirements for the first three-month period through the ISO-NE spot market. National Grid will include the transaction’s remaining three months in the next quarterly RFP. If that transaction does not receive at least two bids in the next RFP, National Grid will continue to procure the requirements through the ISO-NE spot market; and

c. If the transaction is six months in duration and does not start in the immediate rate period, National Grid will solicit bids for the transaction in the next quarterly competitive solicitation. If subsequent RFPs continue to receive less than two bids for the transaction, National Grid will then purchase the requirements through the ISO-NE spot market when the transaction is needed for the immediate rate period; and

d. National Grid will set retail rates for the immediate rate period using estimated wholesale market prices as a proxy for spot market purchases.

As part of the plan, National Grid requested approval of proposed revisions to its tariff for basic service, M.D.P.U. No. 1161, to revise the manner by which Basic Service rates would be determined to reflect an estimate of the wholesale market value for electricity for any supply of basic service ultimately purchased through the ISO-NE spot market.

D.P.U. 14-BSF-D2