ISO New England – A well-balanced ISO

In our last publication on the ISO New England (ISO-NE) market, we discussed the Forward Capacity Market (FCM) and the Resource Capacity Accreditation (RCA) project, which identifies a generation resource’s availability, not just in the summer period but all throughout the year.  

Between the RCA project and many other transmission-related system improvement projects, the ISO-NE has created a balanced grid when you look at energy and capacity costs across the various zones.

After analyzing the day-ahead locational marginal pricing (LMP) settlements for the past five years, the congestion between the seven zones (excluding Vermont since it is the only regulated state) showed very little separation in wholesale energy prices. The spread between the highest- priced zone to the lowest-priced zone over a five-year period (2020-2024) was about $1.56/MWh annually, with the single highest spread slightly over $2.00/MWh (2022) and the single lowest spread slightly over $1.00/MWh (2020).

The data suggests a well-balanced grid with little congestion between the seven zones, which can be seen in the chart below under the section labeled “Day ahead spot market settlements.”

But let’s look at the forward wholesale electricity market to see where energy prices are expected to be from 2025 through 2030.

The wholesale Forward Market Curve prices for electricity show a ~$15-25/MWh increase in electricity prices over the day-ahead spot market settlements price, except for the volatility experienced in 2022. This suggests expected tightening between the supply and demand for energy starting this year and into the future. Despite the anticipated increase in energy prices over the next few years, the transmission of energy to each zone remains balanced, as no significant congestion is evident.

On an annual basis, the spread between the highest-priced zone to the lowest-priced zone over a six-year period (2025-2030) was about $2.17/MWh, with the single highest spread ~$3.10/MWh (2025) and the single lowest spread ~$1.75/MWh (2027). 

Shifting focus from energy prices to capacity prices, there’s a much clearer picture of a well-balanced grid. In reviewing the FCM Annual Auction Prices for Capacity Planning Year (CPY) 2019/2020 to 2027/2028, capacity prices cleared the same across all zones, except for CPY 2024/2024 and 2025/2026.  

Only in CPY 2024/2025 was there a noticeable price difference in the cleared prices across zones, with RI, NEMA, and SEMA clearing at much higher prices. The CPY prices after 2024/2025, however, cleared much closer before again becoming uniform for the next two CPY auctions. 

While the cost of electricity may not be the lowest in the country, the ISO has at least managed to efficiently and effectively move power across the grid to all areas of New England in a way that no one zone experiences significantly higher or lower prices than another.

End users can also budget and manage electricity spend given that the ISO-NE provides market participants with three years of visibility on the cost of capacity.

With a forward wholesale market and a forward capacity market, market participants can manage the commodity and non-commodity portions of their electricity spend, making the ISO-NE market a little more unique than others, at least for now.