OREANDA-NEWS. The operator of New England's power grid is offering to include coal, nuclear and biomass units in its winter fuel subsidy program for the next three winters, expanding it beyond the current focus on oil and LNG.

The grid's winter reliability program for the past two winters has subsidized generators that stockpile fuel oil or LNG. But the Federal Energy Regulatory Commission has ordered the grid operator to develop a market-based approach for future winters, meaning that a program should select participants from a wider fuel mix.

The grid as a result is offering to expand the program but maintain its basic premise of compensating generators for unused fuel at the end of the winter season, as a means of encouraging stockpiling ahead of winter, according to a presentation by Independent System Operator analyst Andrew Gillespie. The plan was released ahead of a two-day meeting of the grid's markets committee in Westborough, Massachusetts, that starts today.

The new version of the program will be open to all resources that are able to provide on-site fuel storage: nuclear, coal, biomass, fuel oil, LNG and pumped hydro storage. The grid operator will add a maximum inventory limit in addition to specifying a minimum. Resources will receive compensation based on an upper limit of maximum allowed storage capacity and on the quantity of resources that are eligible.

The grid operator expects that 20.9GW of capacity will be eligible for the expanded subsidy program, including 10.8GW of oil and dual-fuel capacity; 4GW of nuclear capacity; 2GW of coal; 1.1GW of biomass and 2.9GW of pumped hydro storage.

The subsidy rate will be derived from the equivalent of fuel oil carrying cost, which for the past two winters was set at \$18/bl. The compensation rate is yet to be determined for the new program.

The grid operator hopes to finalize the design of the program and propose a tariff change by mid-April. The operator in a parallel process plans to propose an increase in reserve penalty factors that boost payments for adding reserves, as an alternative method for encouraging stockpiles.

The New England grid asked federal energy regulators for a rehearing of its January order, and hopes that the revised winter program will prove acceptable. The grid operator will introduce the reserve penalty factors proposal if the federal agency rejects the expanded fuel subsidy plan.

The grid operator wants to only renew the program for three more winters, until its "pay-for-performance" capacity market redesign takes effect in 2018 and provides incentives for resources to stockpile backup fuel.