ISO New England Forward Capacity Market

Client: Vermont Public Service Board

Challenge:

ISO New England, which oversees New England’s bulk electric power system and wholesale electricity markets, recently established a Forward Capacity Market (FCM) that will pay suppliers to ensure sufficient capacity is available to meet future peak loads.Under the FCM, ISO New England projects the needs of the power system three years in advance and then holds an annual auction to purchase the resources necessary to satisfy the future regional requirements. This market is unique in that it allows energy efficiency and other demand resources to compete directly with generators. Participating in the FCM requires a considerable and complex bid, financial assurance, and associated claim activities. For efficiency portfolio administrators, participation raises policy questions regarding ownership of capacity credits, appropriate disposition of revenues, increasing emphasis on peak savings, and whether traditionally short-term budget cycles should change to enable the longer-term planning necessary to bid resources several years into the future.

Solution:

In December 2006, after soliciting and considering input from stakeholders, the Public Service Board of Vermont issued an order directing VEIC to participate in the FCM on behalf of the State. VEIC was also authorized by the PSB to become a NEPOOL member, to participate in negotiations of final rules for the FCM, to support Vermont’s efforts to secure resource parity for demand resources in the FCM, and to develop the necessary information for participating in the FCM auctions.

Results:

VEIC was one of the few efficiency program administrators to participate in workshops and negotiations with ISO-NE to delineate the rules and procedures for Demand Resources to participate in the FCM. Our team continues to support and refine the market processes and mechanics necessary to ensure that efficiency resources are treated in a way that benefits ratepayers. We have designed, and are implementing, extensive Measurement and Verification procedures for use by Efficiency Vermont to assure ISO, and other market stakeholders, that our savings are reliable and accurate. VEIC has participated on behalf of Vermont’s ratepayers in three successful auctions and continues to develop forecasts, materials, and related market processes. We continue to coordinate with and advise other market participants as well, including participation in regional and national forums to help develop future wholesale markets.

Related Documents:

Energy Efficiency as a Resource in the ISO New England Forward Capacity Market (PDF)
Authors: Cheryl Jenkins, Chris Neme, and Shawn Enterline, Proceedings of the ECEEE 2009 Summer Study