RI DELEGATION CALLS ON FERC TO ACCOUNT FOR CLIMATE POLICIES IN NEW ENGLAND ENERGY PRICING

Reed, Whitehouse, Langevin and Cicilline call for regulator to factor in benefits of low-carbon energy when determining energy market rules

Washington, D.C. – Senators Jack Reed and Sheldon Whitehouse and Congressmen Jim Langevin and David Cicilline sent a letter today to Federal Energy Regulatory Commission (FERC) Chairman Norman C. Bay applauding regulators’ openness to integrating New England states’ climate policies into the region’s energy markets and suggesting several ways to incorporate the benefits of carbon-free energy into New England’s process for securing reliable, affordable electricity. FERC oversees ISO New England Inc. (ISO-NE), the region’s electricity grid operator.

“It is critical that a strategy be developed to integrate state climate and energy policies into ISO-NE market rules. We understand that discussions on this topic are beginning to take place in New England and we applaud these efforts. As these discussions move forward, FERC and ISO-NE should also consider how the effects of carbon pollution can be integrated into the FCM and energy market pricing schemes,” the Rhode Island delegation wrote.

ISO-NE is responsible for ensuring that electric generation meets the region’s consumers’ electric power needs. To achieve this goal, it conducts auctions to supply New England’s forward capacity markets (FCM), in which generation companies bid to provide sufficient quantities of electric power to the grid in future years. Currently, ISO-NE rules do not substantially integrate state climate policies—like northeastern states’ Regional Greenhouse Gas Initiative (RGGI)—that aim to reduce states’ dependence on carbon-intensive fuels and speed transition to renewables. Nor do ISO-NE rules account for the true, long-term benefits of carbon-free fuels through policies like higher rates for renewables.

The Honorable Norman C. Bay

Chairman

Federal Energy Regulatory Commission

888 First Street NE

Washington, DC 20426

Dear Chairman Bay:

We write to follow-up on prior letters regarding energy pricing in the New England energy market.

Previously we shared with you our concerns about the need to improve the methods for projecting electricity capacity and setting energy prices in our region. We were pleased that the Commission has directed ISO-NE to fully explore the incorporation of distributed generation (DG) in its installed capacity requirement (ICR) calculations. We appreciate your commitment to ensuring the stakeholder process remains transparent. Our main priority continues to be meeting the energy needs for Rhode Island in a safe, efficient, cost effective, and environmentally friendly way.

We now write to you over concerns that the existing energy markets are not properly pricing carbon-free energy appropriately in comparison to other resources in the New England region. This issue affects not only current energy pricing frameworks, but also the forward capacity markets (FCM), which ultimately decide the future makeup of our energy fuel mix and the role renewables will play.

It is critical that a strategy be developed to integrate state climate and energy policies into ISO-NE market rules. We understand that discussions on this topic are beginning to take place in New England and we applaud these efforts. As these discussions move forward, FERC and ISO-NE should also consider how the effects of carbon pollution can be integrated into the FCM and energy market pricing schemes. Specifically, we suggest that FERC and ISO-NE focus on the following:

Improved algorithms for environmental dispatch that appropriately value the benefits of carbon free generation;
Improved metrics in the forward capacity auctions that value the benefits of carbon-free generation, including higher rates for renewables or longer Capacity Supply Obligation (CSOs) contracts; and
Energy market price formulations that include shadow carbon pricing.
New England is making considerable progress implementing renewable portfolio standards, renewable energy standards, and the Regional Greenhouse Gas Initiative. These reforms will be an enduring aspect of the region’s energy strategy. FERC and ISO-NE should work together to ensure that ISO market rules complement our state policies and regional agreements. This will ensure that our energy markets support our region’s environmental goals, the President’s Climate Action Plan, and the United States’ international commitments to reduce greenhouse gas emissions.

We thank you for your attention to this matter, and we look forward to your response.

Sincerely,

___________________________________ ____________________________________

Jack Reed Sheldon Whitehouse

United States Senator United States Senator

____________________________________ ____________________________________

James R. Langevin David N. Cicilline

Member of Congress Member of Congress

Cc: President and CEO of ISO New England Gordon van Welie

COO of ISO New England Vamsi Chadalavada

FERC Commissioner Cheryl LaFleur

FERC Commissioner Tony Clark

FERC Commissioner Colette Honorable