Internal Market Monitoring Unit Review of the Forward Capacity Market Auction Results and Design Elements
Prepared for the ISO New England Inc. Market Monitoring Unit
The Forward Capacity Market (FCM) is a locational capacity market intended to attract and retain the resources required to ensure resource adequacy. Forward Capacity Auctions (FCAs) procure installed capacity to meet the region’s resource adequacy requirements, known as the Installed Capacity Requirement (ICR), for one-year capacity commitment periods. FCAs also procure the capacity required for each capacity zone that has a locational capacity need identified before the auction. The ISO has conducted two FCAs to date, for the commitment periods of 2010/2011 and 2011/2012.
This report provides the ISO Internal Market Monitoring Unit’s (INTMMU’s) initial assessment of the Forward Capacity Market, as required by Market Rule 1, Section 13.8.4. The INTMMU assessed the performance of the FCM by analyzing the results of the first two FCAs in light of the market’s main objective of ensuring that New England has sufficient resources to meet its electricity needs reliably and at a reasonable cost. In the opinion of the INTMMU, prices in the FCA should be set competitively and at a level that enables the region to procure sufficient capacity to meet its needs, or as close as practicable to that level, so consumers do not pay more than necessary for capacity.
