Markey, Kennedy Call for More Consumer Protections in Capacity Auctions
Continuing their call for reforms to New England’s energy capacity markets, Representative Joe Kennedy III (D-MA-04) and Senator Edward J. Markey (D-MA) jointly sent a letter on behalf of the New England congressional delegation on March 14 – urging Gordon van Welie, CEO of ISO-New England (ISO-NE) and Norman Bay, chairman of the Federal Energy Regulatory Commission (FERC) to consider stronger protections for consumers in future auctions.
Among the signatories of the letter were U.S. Senator Elizabeth Warren (D-MA), as well as Senator and presidential candidate Bernie Sanders (I-VT), and eight regional representatives.
Specifically citing the results of last month’s Forward Capacity Auction (FCA10) and two ISO-NE filings late last year, the lawmakers again expressed their frustration that the current structure and policies do not provide “electric reliability at just and reasonable rates for consumers.”
ISO-NE is the regional transmission organization (RTO) that serves Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont.
Specifically, the letter identified “massive price increases” as a pressing issue, noting that, “The recent FCA10 cleared capacity region-wide at approximately $3 billion. While these clearing prices were the result of a ‘competitive auction,’ according to ISO-NE, the results are roughly equal to [those of] FCA8 – an auction that triggered administrative pricing rules, due to lack of competition. They are also triple the current capacity payments derived from the auctions prior to FCA8.
“While it is true, “Kennedy and Markey said, “that prices in FCA10 decreased 25 percent, FCA9 was a record $4 billion. ISO-NE’s characterization that FCA10 was a successful, competitive auction that resulted in lower prices from the previous year is troubling, given [that] the overall cost to ratepayers still far exceeds the first seven auctions.
“We are unconvinced,” the authors stated, “that charging ratepayers billions of dollars a year in advance to secure future generation requirements meets the just and reasonable standard.”
“In addition,” they alleged, “two December filings by ISO-NE with FERC indicate the Forward Capacity Market could have resulted in massive price increases for ratepayers, due to inaccurate or incomplete accounting of renewable resources and transmission system upgrades, and the potential ability for sophisticated actors to exercise market power.”
“Problems with the markets intended to secure future electricity generation in New England can have major impacts on consumers,” commented Senator Markey, with reference to the letter. “Recent filings by ISO-New England are the smoking guns confirming that there are potentially serious issues with how these markets are functioning, and it is consumers who will pay the price. New England already has some of the highest electricity rates in the nation. The current system appears to be flawed, and we need to ensure that electric ratepayers are protected from ballooning costs in the coming years.”
“A system that fails to take consumer impact into account is simply a system that doesn’t work,” said Representative Kennedy. “With our region’s energy bills already the highest in the continental United States and set to increase due to previous capacity auctions, stakeholders and regulators must come together to reform these markets in a way that protects ratepayers and incents future generation. The results of FCA10 and both ISO-NE filings demonstrate flaws in the current system and our delegation will continue to call on regulators to address these concerns.”
Both Congressman Kennedy and Senator Markey have introduced the Fair Ratepayer, Accountability, Transparency and Efficiency Standards (RATES) Act, which would ensure that consumers can always have a mechanism to appeal energy rate changes filed with FERC. On March 14, the Fair RATES Act passed the House of Representatives unanimously and now awaits a vote in the Senate. The lawmakers also recently wrote a letter to President Barack Obama – highlighting the vacancy at FERC that limits the commission’s ability to rule whether rates are just and reasonable.
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