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Independent regulatory commissions

RENEW Northeast, Inc. Supports Reforms to ISO-NE's Pay-for-Performance Cost Allocation Rules

Strategic Insights

— 1 min read

RENEW Northeast, Inc. has submitted an answer to the Federal Energy Regulatory Commission, supporting reforms to the Pay-for-Performance (PFP) cost allocation rules of ISO New England (ISO-NE). The proposed reforms aim to eliminate the practice of reallocating under-collections to all Capacity Supply Obligation (CSO) holders, while allocating bonus payment rates to over-performing resources without reduction. This practice is seen as unfair and inconsistent with the purpose of PFP, which is meant to create incentives for resources to deliver their full capacity.

Key Takeaways:

  • RENEW Northeast, Inc. supports NEPGA's proposed reforms to ISO-NE's PFP cost allocation rules, which aim to eliminate the practice of reallocating under-collections to all CSO holders.
  • The current practice penalizes resources that fully meet their CSO obligation by absorbing part of the under-collection, even though they delivered their obligation in full.
  • Resources without a CSO face no exposure to shortfalls but may receive full performance credits if they over-perform.
  • RENEW proposes allocating the credits owed to over-performing resources at the level of charges actually collected on a pro rata basis among all over-performers, regardless of whether they hold a CSO.
  • This approach ensures that the system remains revenue-neutral and that CSO over-performers are not paid at a rate less than non-CSO over-performers.
  • The incentive to participate both in the capacity market and perform in the operating period remains high, even if there may be a reduction in the bonus allocation to over-performing resources in rare events.
  • The proposed reforms align with the treatment of PJM, where payments to over-performers are limited to the funds collected from under-performers.

Statistics:

  • The.document does not provide specific statistics on the number of under-collections or shortfall cases.
  • RENEW notes that the incentive to participate in the capacity market and perform in the operating period remains high, even if there may be a reduction in the bonus allocation to over-performing resources in rare events.

Sources:

  • UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION New England Power Generators Association ) ) Complainant, ) ) v. ) Docket No. EL25-106-000 ) ISO New England Inc. ) ) Respondent. ) ANSWER OF RENEW NORTHEAST, INC.
  • UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION ) New England Power Generators Association ) ) Complainant, ) ) v. ) Docket No. EL25-106-000 ) ISO New England Inc. ) ) Respondent. ) CERTIFICATE OF SERVICE

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