New England grid approved to revive winter program

OREANDA-NEWS. The Federal Energy Regulatory Commission (FERC) will allow the operator of New England's electric grid to renew a generating fuel subsidy program used to support grid reliability for the past two winters.

The FERC decision, made in a rehearing request on 17 April, walks away from a previous order that would have opened the program to all resources participating in the market. The latest decision comes after the grid operator committed to expanding the winter program to cover more types of generating resources, including coal, nuclear, biomass and pumped hydro. The winter reliability program had been limited to generators that could stockpile fuel oil or LNG ahead of winter.

The decision will be a relief to the Independent System Operator of New England, which feared FERC's earlier order would block its most effective tool for getting generators to stockpile enough fuel to stay operational during the frequent constraints to the region's pipeline network. The program paid \\$18/bl for oil and LNG left unburned by the end of winter and reduced the risk to generators of stockpiling backup fuel.

But generator owners complained the out-of-market payments were unfair to other generating resources that provided the same winter reliability benefits. FERC earlier this year in response to those complaints told the grid operator that it could only use a market-based solution for future winters, meaning any resource participating in the market could qualify for compensation.

In an effort to save its program, New England's grid operator told FERC that it would expand the program to compensate all resources that could stockpile fuel. The grid operator said a market-based solution would be far more costly and with no guarantees it would work, the only tool it had was to hope generators would stockpile fuel if energy prices were allowed to rise in winter.

FERC in its order agreed with the grid operator that an expanded version of the winter reliability program could produce better results than any of the market-based solutions under consideration by the grid operator. The grid operator under the order will have to offer a detailed explanation if it decides to exclude certain fuel types.

FERC member Tony Clark in a concurring statement said he was frustrated that the grid operator was unable to get a market-based solution through its stakeholder process.

The grid's winter reliability program is only supposed to last for three more winters, until the start of its "pay-for-performance" capacity market changes in 2018 that will impose penalties for non-performance.

The New England grid operator in the past month outlined parameters of an expanded winter fuel subsidy program. It expects 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. All units will be compensated based on the amount of fuel-oil equivalent left unburned at winter's end, at a rate yet to be determined.