Washington, D.C. – November 25, 2015 – (RealEstateRama) — U.S. Senators Jack Reed and Sheldon Whitehouse and Congressmen Jim Langevin and David Cicilline called on the Federal Energy Regulatory Commission (FERC) to improve the methods for projecting electricity capacity and setting energy prices across New England. In a letter to FERC Chairman Norman C. Bay, the Rhode Island delegation said the operator of New England’s power grid insufficiently counts so-called distributed generation sources of energy, such as solar panels on consumers’ homes, when tallying the region’s future energy needs. Although FERC recently ordered the regional grid operator to begin including some of these renewable energy resources, it still ignores large portions of distributed generation across New England.
Each year, New England conducts an energy auction process that projects the region’s electricity capacity needs several years into the future. Neglecting these sources of renewable energy that are expected to be on the electricity grid, the lawmakers wrote, inflates the region’s projected capacity shortfall and drives up the amount of capacity the region needs to buy at auction, resulting in unnecessarily high prices for Rhode Islanders.
“We must work cooperatively with utilities and regulators to ensure Rhode Islanders have access to affordable energy. In assessing our energy capacity needs, we need to look at the full picture, so it’s important for FERC to examine the method by which electricity prices are currently calculated, and part of that is assessing the supply and demand of energy. Renewable energy sources should be taken into account as part of that calculation, and if they are not, it is important to understand why and what the implications are for consumers and electricity markets,” said Reed.
“Simply ignoring large amounts of renewable generation is a mistake that costs New England ratepayers,” said Whitehouse. “I’m glad FERC has begun to push for some distributed generation in these auctions, but it’s time to give renewable energy producers full credit for the electricity that they are putting into the New England grid.”
“Rhode Island is facing a potential shortfall in energy capacity in the coming years, meaning that we may be unable to meet demand, and costs could continue to climb. Holding the line on energy costs, which are already too high, is critical for Rhode Island families. I urge FERC to work with the Congressional delegation and our partners to address these concerns and outline a better path forward that will ensure an affordable and sufficient energy supply for the state and the region, including the use of renewables and other emerging technologies,” said Langevin, Energy Task Force Chair of the Sustainable Energy and Environment Coalition.
“Whenever FERC overlooks renewable sources of energy in their capacity projections, Rhode Islanders are left holding the bill,” said Cicilline. “Although I’m pleased we’ve made some progress, it’s critical that FERC start counting the full amount of renewable energy on our electricity grid in order to bring down exorbitant energy costs in Rhode Island.”
The full text of the letter follows.
November 24, 2015
The Honorable Norman C. Bay
Federal Energy Regulatory Commission
888 First Street NE
Washington, DC 20426
Dear Chairman Bay:
The Rhode Island delegation has written to you before highlighting that reliable and affordable electricity in Rhode Island is one of our top priorities. With the closure of Pilgrim Nuclear plant in Massachusetts slated for 2019, the New England (NE) region is about to lose another 680 MW of capacity. We are concerned that the clearing cost of capacity in our region will continue to grow and the current capacity shortfall will worsen for the Southeast Massachusetts and Rhode Island (SEMA/RI) zone.
We previously highlighted that market capacity prices in FCA-9 increased to $4 billion in 2018-19, compared to $1.19 billion in 2015-16 and $1.06 billion in 2016-17. And while FCA-9 secured sufficient capacity region-wide for 2018-19, it fell 238 MW short for the SEMA-RI zone. To help address these concerns, we ask you to explore whether ISO should more fully include the results of its own Distributed Generation (DG) Forecast Working Group in its installed capacity requirement (ICR) calculation. We believe that a better accounting of DG could address some of the capacity concerns and relieve upward pressure on prices in the SEMA/RI zone.
Although ISO does include Behind-the-Meter Not Embedded in Load (BTMNEL) solar energy in its ICR calculation, it has decided not to include Settlement Only Generators (SOG). ISO’s forecast predicts that these excluded DG resources will total 43 MW in 2019 (net summary capacity) in the Rhode Island, meaning that ISO is excluding nearly 87% of available DG in RI. For the greater New England region, ISO’s forecast predicts 263.8 MW of excluded DG capacity making up 42% of available DG. We are also concerned about why so much more DG is excluded in Rhode Island compared to New England as a whole.
We understand that ISO’s reasoning for not including these DG resources in its ICR calculation is that these resources do not participate in the Forward Capacity Auction (FCA) and do not acquire a Capacity Supply Obligation (CSO). However, that is true for the BTMNEL resources that the ISO does count in its ICR calculation. We seek comment from FERC on why there is not consistent treatment for DG resources like SOGs and BTMNEL in the FCAs.
We believe that ignoring these SOG resources could result in unnecessarily high prices for Rhode Islanders and send inaccurate market signals on the value of DG resources in the Forward Capacity Market. And that does not explain the disparity of how DG is counted for Rhode Island as compared to the rest of the region, simply because of differences in the state regulatory treatment and physical interconnection of such resources in Rhode Island when compared with neighboring states.
The proper inclusion of DG could also help make up the capacity shortfall in the SEMA/RI zone that is expected in FCA-10. On January 2, 2015, FERC ordered the ISO to more properly account for renewable DG resources in New England. As such, we would like to know whether FERC agrees with ISOs decision to continue to exclude DG in ISO’s ICR calculation.
Thank you for your review of this matter and we look forward to your prompt response. We hope as you work to finalize the ISO-NE submitted filing for FCA-10 that you take our concerns into consideration.
Jack Reed, United States Senator
Sheldon Whitehouse, United States Senator
James R. Langevin, Member of Congress
David N. Cicilline, Member of Congress