By Simon Pritchard, Managing Director of Analytics
As regular readers of the Competitive Energy Services Insider Newsletter may recall from past years, the March-April newsletters typically feature an update on the latest New England Forward Capacity Auction (FCA). The FCA is the process by which the New England regional grid operator, ISO New England (ISO-NE), procures enough electricity generation capacity to meet projected grid loads three years into the future. For some generation resources with high operating costs that limit their ability to run outside of only peak periods where high wholesale electricity prices make them cost competitive, the Forward Capacity Market and Auction offer an added revenue source to help keep them operational, paying for them to be available for those limited circumstances where they may be needed to meet demand. ISO-NE's capacity costs owed to generators, as established by the FCA process, are currently collected from all electricity consumers in the region based on their relative contribution to the hour of system-wide peak electricity demand, which in New England has historically occurred on very hot, summer afternoons. Individual consumers’ electricity demand during the peak hour is known as an electricity account’s “capacity tag” and CES assists our customers with understanding and managing their capacity tags and related capacity costs. Each year the FCA has occurred in early to mid-February; last year’s FCA18 procured capacity to meet projected load from June 2027-May 2028.However, fastidious followers of the Forward Capacity Market may be aware of the changes previewed in last year’s CES Insight’s blog titled “ISO-NE's Upcoming Forward Capacity Auction Reforms | Competitive Energy Services,”: no FCA will occur this year.
ISO-NE proposed and received acceptance of a delay to FCA19 from the Federal Energy Regulatory Commission (FERC), first by one year to 2026, then by an additional two years all the way to February 2028, just a few months before the relevant capacity period is set to begin in June 2028. This three-year delay allows ISO-NE time to properly develop and implement reforms to the structure of the Forward Capacity Market to improve economic efficiency and support the clean energy transition. ISO-NE’s reforms are focused on three major components. First is the shift from an FCA three years ahead to a prompt auction, taking place shortly before the start of the relevant capacity period. This shift would allow ISO-NE to improve supply and demand projections and procure a more accurate volume of generation capacity. Second is a change to the capacity commitment period from an annual structure to a seasonal structure, to reflect different system reliability needs in winter and summer, and to account for different generation profiles across different seasons. Third, resource capacity accreditation reforms will change how generation technologies are evaluated in the Forward Capacity Market, reflecting the marginal reliability impacts of different technologies.
Under the current schedule, ISO-NE is expected to file the first phase of these reforms for the prompt auction in the fourth quarter of 2025. As these reforms take shape, CES will provide further updates to help customers understand the potential impacts of these changes.
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