Over the past two winters, ISO-NE has implemented a program to ensure adequate energy supplies in the region even on the coldest days of the year.  The so-called Winter Reliability Program (WRP) successfully kept the lights on and gas flowing during the Polar Vortex of 2014 and the coldest weather of winter 2015 as well.  The program differed in its design in the two years, though the central theme was to subsidize on-site fuel inventory at power plants (oil and LNG can be stored on-site while natural gas cannot).

When FERC approved the 2014/15 WRP on September 9^th, 2014, it stipulated that ISO-NE redesign the program again, this time including market forces (rather than top-down administrative implementation) in any years to follow 2015.[1]  However, given the natural gas pipeline capacity bottleneck in New England that will not be addressed even in part until November 2016, ISO-NE has few feasible options.  Just two options are easy to identify:

1)    ISO-NE convinces FERC to allow the current WRP to continue for 2015/16 while it works on a new format for future implementation.

2)    ISO-NE designs and implements an auction in the style of the capacity market for guaranteed power plant performance and demand response.

In both cases, it would be possible for ISO-NE to move the charge for the WRP to the distribution side of the bill.  In that case, any inclusion of WRP charges in a supplier contract would expose the buyer to paying twice for the program.

The uncertainty surrounding the redesign of the WRP is likely forcing suppliers to price in a significant risk premium on this portion of their contract rates.  This creates the possibility of overpaying even if the charge remains on the supplier side of your bill.  However, resolution on the matter from ISO-NE and FERC is not expected to come before the end of the advantageous pricing window occurring now, lasting at least through the spring.  To avoid the risk of overpaying for the WRP, and still capitalize on lower energy prices, it is possible to pass-through this charge, and be billed during the winter for the actual costs of the program.