Dive Brief:

• Five New England states are calling for changes to the region's wholesale electricity market design, transmission planning process and the governance of its grid operator, ISO New England (ISO-NE).
• In a "vision statement" released by the New England States Committee on Electricity (NESCOE) on Friday, the states call for a "regionally-based market framework" that meets their decarbonization mandates, maintains resource adequacy at the lowest cost and establishes mechanisms to accommodate existing and future long-term contracts for clean energy resources.
• The current system "has actively hindered our efforts to decarbonize the grid," Connecticut Gov. Ned Lamont, D, said in a joint statement with the governors of Maine, Massachusetts, Rhode Island and Vermont. New Hampshire was the only NESCOE member to not join.

Dive Insight:

NESCOE's call for reform of the ISO-NE market is the latest example of how some states are pushing back on federally-regulated markets they say ignore renewable energy and decarbonization goals.

The region's wholesale markets "fail to sufficiently value the legally-required clean energy investments made by the ratepayers they serve," according to the NESCOE vision statement.

Some states say their preferred resource mix and renewables goals are being undermined in regional markets overseen by the Federal Energy Regulatory Commission. They say the commission's rulings have negated the impact of their support for green energy in favor of keeping fossil fuel generators competitive.

Last year, FERC issued an order expanding the Minimum Offer Price Rule in PJM Interconnection's regional capacity market, effectively raising the floor price for state-subsidized resources. That led some states, including New Jersey and Maryland, to consider exiting the market. A similar decision regarding the New York ISO has led to talk of a state-managed capacity market.

The New England states warned of similar problems.

"Absent fundamental changes," NESCOE said, "the result of the existing market structure will be that some states' ratepayers will continue to overpay for electricity, constrained by a wholesale market not aligned with a rapidly transitioning resource mix and consumer investments in clean energy and decarbonization."

A modernized market structure will need to allow for state resource preferences, integrate distribution-level resources effectively and efficiently, allow interested buyers and sellers to participate, and "provide for an appropriate level of state involvement in market design and implementation."

The states are also calling for changes to how the region's transmission system is planned to "unlock" onshore wind resources located far from demand, integrate significant levels of new offshore wind and hydro resources, and facilitate widespread adoption of distributed energy resources.

NESCOE wants to see a regional effort that provides a "high-level transmission system plan to meet the needs of states' energy transition, with participation and input by state officials."

The group also wants to see changes at ISO-NE. The grid operator and its board should "convene a collaborative process with states and stakeholders to identify potential changes to its mission statement and governance structure that improve transparency and foster improved alignment with a rapidly-evolving 21st century clean energy grid," NESCOE said.

ISO-NE said it received the governors’ statement and looks forward to "engaging with the states and our stakeholders on these issues."

"ISO New England, the New England states, and market participants have a long history of working together to tackle the challenges facing the power system, and we expect that to continue," the grid operator said in an emailed statement. "We appreciate the New England Governors sharing their regional vision to achieve a shared clean energy future and reaching out to ISO New England to help them achieve their goals."

"With a strategic, multi-state approach we can have a greater impact on both climate change mitigation and energy affordability," Vermont Gov. Phil Scott, R, said in a statement.

National Grid, which delivers energy in New York, Massachusetts and Rhode Island, said it supports NESCOE's efforts. The utility said it welcomed the governors' "push for more holistic, thoughtful energy planning as we prepare the network for deep decarbonization."

"The transformation to net zero won't be easy, it will require significant collaboration with policymakers and industry partners every step of the way," National Grid said in a statement.

Update: This story has been updated to include comment by ISO New England.