For the second year in a row, ISO New England has implemented a Winter Reliability Program (WRP). The intent of the Winter Reliability Program is to mitigate winter system operation challenges and ensure the stability of the grid during the winter months. These challenges are due to the region’s increased dependence on natural gas to generate electricity and the concern of resource availability during periods of stressed system conditions. This problem is currently being addressed by regional stakeholders as well as ISO New England, in order to find a longer term, market-based solution established through the Strategic
The 2014-2015 Winter Reliability Program is similar to last year’s program. It also includes the partial elimination of higher-cost fuel requirements, permanent rules related to dual-fuel generator audits, as well as a demand response component. However, this year’s program differs in at least one important respect. This year the ISO did not set a target for incremental energy, unlike last year, when the program included a set target for incremental energy and used an as-bid design. Generators purchased their fuel after submitting bids showing how much electricity they would produce.
The ISO has made several long-term changes to the region’s wholesale electricity markets that will improve incentives for generators to firm up their fuel supply and improve their overall performance. However, those changes will not go into effect until 2018. ISO New England has been directed by FERC to work with stakeholders in order to establish an appropriate solution for winters prior to 2018. Discussions began in November and the ISO plans to file a proposal with the Commission in the upcoming months.
WHAT THIS MEANS FOR YOU
- The program incentivized resource participation by offsetting some of the carrying costs for unused oil or LNG contracts at the end of the season.
- Given the level of resource participation, the maximum cost of the oil component of the program is about $68.7 million. Natural-gas-fired generators that contract for LNG will receive an end-of-season payment to offset the risk of unused contract volumes. The maximum cost of the LNG portion of the program is $1.5 million.
- The cost of the DR component of the program is $75,600.
- In total, these components of the program could cost up to $70.28 million.. It is not uncommon for competitive supply agreements contain provisions that allow increased costs due to regulatory and/or ISONE programs or even specifically the Winter Reliability program to be passed through to their customers on their monthly bill.