In 2019, an Independent Systems Operator (“ISO”) sought to update its Cost of New Entry (”CONE”) value and Offer Review Trigger Prices (“ORTPs“) to set the auction parameters in the Forward Capacity Market (“FCM“). The CONE value represents an estimate of the total and net costs of developing the most economic type of new capacity resource in the ISO’s region. The ORTP values are estimates of the entry costs for all resource types that would reasonably be expected to participate in the FCM and are used to screen offers from new resources that may require further review per the ISO’s buyer-side market power mitigation provisions.
Concentric worked closely with the ISO and stakeholders over eighteen months to review the methodology and calculation of the CONE and ORTP values for gas-fired resources as well as solar, onshore and offshore wind, battery, demand response, and energy efficiency resources. This work involved the analysis and preparation of: i) capital cost information, including installed cost, fixed and variable operating and maintenance costs; ii) financial parameters, including the cost of debt, cost of equity, and risk premium; iii) energy and ancillary services offer price assumptions and modeling of energy and ancillary services revenues; and iv) a financial model designed to calculate the levelized annual cost required to ensure the recovery on and of investment costs. This work involved presenting at eight stakeholder meetings in front of over 80 of the ISO’s market participants to discuss and debate assumptions, calculations, and conclusions. The final analysis and report were filed with and approved by the Federal Energy Regulatory Commission in 2021.