ISO-NE PUBLIC

JUNE 4, 2018 | WASHINGTON, DC

Gordon van Welie

PRESIDENT & CEO

2018 EIA Energy Conference: 

Electric System Reliability and Operations

Managing the Fuel-Security 

Risk During the Power System’s 

Rapid Transformation
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KEY MESSAGES

• The New England power system is changing rapidly

– Shifting away from resources with on-site fuels (coal, oil, nuclear) toward resources with just-in-time 

fuel (natural gas) and that are weather dependent (wind and solar)

• We need to ensure reliability through the transition and firm up the delivery of energy 

during the winter

• The ISO’s operational analysis and experience show the region trending in a negative 

direction with regard to fuel-security risk

• The New England experience offers lessons learned for other regions that undergo a 

similar transition

– Market rules will need to incent fuel security – Operational awareness of fuel availability will become critical

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Price Volatility Becomes More Acute as Infrastructure 

Constraints Become More Severe

Electric Energy $/MWh

Fuel $/MMBtu

$0

$5

$10

$15

$20

$25

$30

$0

$20

$40

$60

$80

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Wholesale Electricity at New England Hub (Real-Time LMP) Natural Gas

Hurricanes hit 

the Gulf 

Before the 

Recession and 

Marcellus Shale gas 

boom

Winter 

2012/2013

Winter 

2013/2014

Winter 

2014/2015

Winter 

2017/2018
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Recent Cold Weather Period Reinforces Findings in 

Operational Fuel-Security Analysis (OFSA)

• During the recent cold weather period 

(from December 26 to January 8), gas and 

oil fuel price inversion led to oil being in 

economic merit and base loaded, leading 

to rapid depletion of the region’s oil supply

• Fuel delivery logistics became a concern

– Heating customers get priority for oil and gas – Storms can delay trucked oil and LNG tankers – Truck drivers face restrictions on driving time

• With oil being base loaded, emissions

limitations became a concern for several

oil-fired generators
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Underlying natural gas data furnished by: 

Cold Weather Period Prices for Natural Gas and Wholesale Electricity

Frigid Cold Drove Up Regional Demand for Natural Gas

This led to spikes in natural gas prices, which then led to spikes in wholesale electricity 

prices; with natural gas at a premium, oil generation became economic
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Generators’ Oil Inventories Declined Rapidly

Several large oil units were left with only enough fuel for a few more days, forcing the 

ISO to posture (hold back) units to conserve this fuel

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Note: This chart is the ISO’s best approximation of usable oil, discounting unit outages, reductions, or emissions.

68% Percentage of Maximum 

Available Fuel Oil

19%
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FINDING A PATH FORWARD TO ADDRESS FUEL 

SECURITY

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Key Observations:

• New England is trending toward a riskier fuel-security profile – based on our 

historical experiences and the forward-looking results from the OFSA

• The operational risk manifests itself as a lack of firm energy during cold weather

• The region is likely to remain exposed to winter energy constraints for the 

foreseeable future – and the region will become more dependent on large 

volumes of LNG

• Coordinating the timing of exit and entry of resources will be very challenging – state-sponsored renewable resources will reduce energy market revenues over 

time, causing increases in capacity market revenues and gradual retirements of 

existing resources

• Premature loss of existing non-pipeline-gas units will greatly exacerbate 

operational risks – Exelon’s plans to retire Mystic units in 2022 accelerates 

discussions on fuel security
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The ISO, States and Industry All Have Roles to Play

• The ISO’s objective is to manage reliability by procuring services 

through the market

• We need to firm up the delivery of energy during the winter 

months, and ensure that the market design uniformly values all 

resources that provide such a service

• The winter energy constraints can be mitigated by investment in 

additional energy infrastructure and/or providing operating 

flexibility for existing resources. 

• New England’s state policies and regulations are key drivers in 

positioning the region in the long term
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ISO New England Is Working on Three Tracks 

to Address Fuel-Security Challenges

• Immediate: Requested a tariff waiver (from FERC) to ensure fuel security

by retaining two generators in the Boston area (Mystic 8 & 9); the owner, 

Exelon, has requested cost-of-service compensation

• Short-term: Working with stakeholders, develop changes to the tariff to 

make fuel security a reason resources can be retained for reliability

– File changes by end of 2018 so they are in place before the March 2019 

retirement de-list bid deadline for FCA #14

• Long-term: Working with stakeholders, develop a market-based solution

to ensure sufficient firm energy to maintain reliability in winter

– Needed resources and infrastructure will be compensated through the 

market, rather than reliability contracts
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What Can EIA Do? Help Improve Situational Awareness with 

Additional Visibility into Fuel Supply

• The ISO has undertaken a number of important operational and market 

improvements to strengthen reliability

– New situational awareness and forecasting tools; improved communication with pipeline 

operators; winter reliability programs to boost fuel inventories; energy-market changes to 

strengthen resource performance; and performance incentives in the capacity market

• Future improvements to assist operators could include providing 

additional information and insight into:

– Liquefied natural gas (LNG) supply, including forward-looking information on deliveries of LNG – Better information on generators’ fuel supply arrangements/contracts, specifically with LNG 

providers – Insight into how much natural gas is available for power generation (rather than calculating 

gas availability from scheduled gas, estimated demand from natural gas utilities, and pipeline 

capacity data)

• Market efficiency (market participant bids/offers) can be improved 

through better transparency on fuel availability and pricing
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For More Information... • Subscribe to the ISO Newswire – ISO Newswire is your source for regular news about 

ISO New England and the wholesale electricity 

industry within the six-state region 

• Log on to ISO Express – ISO Express provides real-time data on New 

England’s wholesale electricity markets and power 

system operations

• Follow the ISO on Twitter – @isonewengland • Download the ISO to Go App – ISO to Go is a free mobile application that puts real

- time wholesale electricity pricing and power grid 

information in the palm of your hand

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