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Exelon plant retirement a jab at ISO-NE rules

05 Apr 2018 21:16 (+01:00 GMT)
Exelon plant retirement a jab at ISO-NE rules

Houston, 5 April (Argus) — Electric grid operator ISO-New England said Exelon's plans to shut four units at its oil and natural gas-fired 2,000MW Mystic generating station in Boston, Massachusetts, in 2022 would pose an "unacceptable fuel security risk" to the region during the winter months.

But Exelon said the ISO's market rules and the US Federal Energy Regulatory Commission's (FERC) inaction on the matter have forced its hand.

ISO-New England said it plans to ask FERC to waive requirements of its tariff in order to allow it to retain two Mystic units and maintain fuel security on its system.

"The ISO believes it has limited options and needs to take this initial action in response to the Exelon retirement," ISO New England chief operating officer Vamsi Chadelavada said in a memo this week.

The ISO recently made rule changes to its forward capacity auction, a market structure that provides steady income for electric power plants, in order to better accommodate renewable energy. The capacity payments can be a boon for utilities during times of low demand, such as the shoulder seasons and parts of summer when weather can be mild in New England.

Exelon had attempted to remove two Mystic units from the 2021-22 forward capacity market, which would mean it would not be required to run the plant, but ISO-New England rejected that attempt because of the grid's reliability issues.

The grid operator's rule changes apply to the 2022-23 capacity auction scheduled for February 2019. A new second round of the auction would not be subject to strict rules applied to the first round, allowing new renewable generation to enter the auction.

Several generators logged complaints against the changes with FERC saying it discriminated against existing suppliers. Exelon filed with FERC in January saying the new rules inappropriately limit the transfer of capacity from retiring units to new units, reduce market liquidity and produce inefficient bids by supply resources.

Exelon late last week announced it would have to shut the Mystic plant "absent any regulatory reforms to properly value reliability and regional fuel security."

"The ISO-New England market fails to properly reflect the reliability and fuel security benefits that these power plants provide to the region," Exelon Power president Ron DeGregorio said in a news release.

Mystic cannot recover its operating costs, including the cost of securing fuel, the release said. But if the ISO makes changes to its market rules that are timely filed and approved by FERC, "Exelon Generation may reconsider the retirement of the Mystic units."

Exelon also announced it would purchase Engie North America's Everett LNG import terminal, which is the only fuel supply source to Mystic units 8 and 9, in order to meet its existing capacity supply obligations to the ISO through 2022.

Those two units operate at 1600MW in the winter months, and their loss would create significant additional reliability concerns for the grid, the ISO said this week.