On January 9, 2017, FERC approved ISO New England Inc.'s ("ISO-NE") proposed revisions to its Transmission, Markets and Services Tariff ("Tariff") to change the source of natural gas prices used in calculating the daily energy market offer threshold for Import Capacity Resources, the Peak Energy Rent Strike Price, and the Forward Reserve Threshold Price under ISO-NE's Tariff. In doing so, FERC found that ISO-NE's proposal to calculate these thresholds using the Intercontinental Exchange's ("ICE") AGT-CG (Non-G) hub instead of ICE's AGT-CG hub was just and reasonable because it changes the natural gas price index from one that is rarely liquid to one that is reliably liquid and satisfies FERC's requirements for using price indices in tariffs.
On November 10, 2016, ISO-NE and the New England Power Pool Participants Committee jointly filed tariff revisions to change the source of natural gas prices used in calculating the daily energy market offer threshold for Import Capacity Resources, the Peak Energy Rent Strike Price, and the Forward Reserve Threshold Price under ISO-NE's Tariff. In the filing, ISO-NE explained that it previously calculated these values daily using ICE's AGT-CG price index, which is based on prices at Algonquin Gas Transmission, LLC's ("Algonquin") Citygates hub. According to ISO-NE, trading at the AGT-CG location declined in 2016 and failed to form a daily price index value on most of the days from April through September of 2016. ISO-NE asserted that, as a result of this decline, the AGT-CG index is no longer adequate to calculate the Tariff's thresholds due to the lack of liquidity and that the AGT-CG index may no longer satisfy the activity levels FERC requires for price indices used in tariffs. Instead, ISO-NE proposed to use ICE's new natural gas trading hub for New England, the AGT-CG (Non-G) hub. In doing so, ISO-NE stated that most of the trading on the Algonquin pipeline had shifted to the AGT-CG (Non-G) hub and that the AGT-CG (Non-G) hub complies with FERC's availability and liquidity thresholds for price indices.
In its order, FERC determined that ISO-NE's proposed amendment is just and reasonable because it changes the natural gas price index used for the three Tariff mechanisms from one that is rarely liquid to one that is reliably liquid and satisfies FERC's minimum activity thresholds for price indices used in tariffs. FERC also explained that, because ISO-NE's proposal is just and reasonable, FERC did not need to entertain alternative proposals. Thus, FERC accepted ISO-NE's proposed Tariff revisions as requested, effective January 10, 2017.
A copy of the order is available here.
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