ISO-NE Proposes Inventoried Energy Program For Winters, Costs Would Be Allocated To Retail Suppliers, Load

ISO New England has filed at FERC for approval to implement an inventoried energy program for the winters of 2023-2024 and 2024-2025

The ISO said that the program will provide incremental compensation to resources that maintain inventoried energy during cold periods when winter energy security is most stressed

The ISO said that its proposal, "fulfills a commitment that the ISO made in 2018 to identify an interim solution that could complement efforts currently underway to develop a long-term, market-based solution to the region’s energy security challenges."

As proposed by the ISO, inventoried energy program costs will be allocated on a regional basis to Real-Time Load Obligation. "This is consistent with how costs were allocated under the earlier winter reliability programs and with the retention of resources for fuel security," the ISO said

"[C]osts associated with the inventoried energy program shall be allocated on a regional basis to Real-Time Load Obligation, excluding Real-Time Load Obligation associated with Storage DARDs and Real-Time Load Obligation associated with Coordinated External Transactions. Costs associated with base payments shall be allocated across all days of the months of December, January, and February; costs associated with spot payments shall be allocated to the relevant Inventoried Energy Day," the ISO said

"The total costs associated with the forward sale of inventoried energy will be evenly distributed across each day in the December through February delivery period. The spot settlement could result in a net charge to load if the total inventoried energy maintained for the Inventoried Energy Day exceeds the quantity sold forward, or a net credit to load if the total inventoried energy maintained for the Inventoried Energy Day falls below the quantity sold forward. In either case, this charge or credit is assigned to Real-Time Load Obligation on the Inventoried Energy Day," the ISO said

The interim program employs a two-settlement structure to determine program settlements. Participation in the inventoried energy program is voluntary, and a Market Participant may elect to participate in both the forward and spot components of the program, or only in the spot component of the program. A Market Participant electing to participate in both the forward and spot components is paid the forward rate for each MWh of inventoried energy that is sold forward. The spot rate is then applied to deviations between the MWh of inventoried energy maintained for each trigger condition (called an “Inventoried Energy Day”) and the MWh of inventoried energy sold forward

The forward rate represents the payment that a Market Participant receives for each MWh of inventoried energy sold forward. In exchange for this compensation, the Market Participant takes on a financial obligation to maintain its elected amount of inventoried energy for each Inventoried Energy Day during the program delivery period (December through February). The program specifies a fixed forward rate of $82.49 for the entire delivery period for each MWh sold forward

The spot rate represents the payment rate that is applied to deviations between the inventoried energy maintained by a participant for each trigger condition, and that sold forward. For example, a resource that does not sell any inventoried energy forward will get paid the spot rate for each MWh of inventoried energy maintained each time the trigger conditions are met. This spot rate is set at $8.25 per MWh for each trigger condition in the delivery period, and it is derived from the forward rate

The ISO includes in its estimates lower and upper bounds for the cost of the program. The estimated lower bound is approximately $102 million per year (with an estimated 1.2 million MWh of inventoried energy sold) and the estimated upper bound is approximately $148 million per year (with an estimated 1.8 million MWh of inventoried energy sold)