After a pile-on of pleadings, a hearing, months of settlement talks, most parties have agreed on a settlement regarding ISO-New England's controversial locational installed capacity model (LICAP). While
Development of capacity markets has led to tension between regions and market participants based on perceptions of capacity gluts or shortages, prices being too low or high, the level of the reserve margin to be procured, the creation of distinct capacity regions, and other issues. [See No Consensus on Securing Long-term Generation Adequacy.] There appears to be a growing awareness that capacity development and procurement must take into account the deliverability of energy from a capacity resource. This in turn would provide for higher capacity payments to generators in constrained areas.
The current settlement agreement has yet to be filed at FERC. Its outlines include dropping LICAP in place of a forward procurement market that would be implemented through competitive auctions. During a transitional period of several years, generators would receive capacity payments to help cover their costs. Overall, this plan is to cost consumers less, but some state officials remain unhappy, particularly those in
Meanwhile, on the federal front, a FERC judge who shepherded the settlement has scheduled meetings with the parties to try to resolve these differences before ISO-NE files a revised capacity plan at FERC. [FERC Docket ER03-563]