Massachusetts 83E Round II: The ISC Saga Continues

As discussed in Part I in our 83E Round II Series, the Massachusetts Department of Energy Resources (DOER) and the electric distribution companies (EDCs) have released the Draft Request for Proposals (RFP) for the second round of Section 83E mid-duration energy storage procurements, introducing several significant structural and policy changes relative to Round I. Relative to Round I, the solicitation significantly expands interconnection requirements, operational disclosure obligations, safety planning standards, and environmental justice and workforce development expectations.

While the first part in this series covered the proposed Indexed Storage Credit (ISC) mechanism for energy services, Part II of our series is a deeper dive focused on the procurement mechanics of the Draft RFP, including 1) proposed contract structures, 2) evaluation methodology, 3) interconnection standards, 4) safety requirements, and 5) the overall solicitation schedule proposed by DOER and the electric distribution companies. We also highlight an emerging and substantial disagreement between DOER and the EDCs regarding the viability of an ISC structure, and the impact this disagreement could have on the Round 2 procurement writ large.

Procurement Details

Contract Structures: The Draft RFP proposed two alternative contract structures: an environmental attributes-only framework and an energy services framework. We describe these in more detail below.

Environmental Attribute-Only Contracts Framework: Under this framework, and consistent with the Round I process, projects bidding long-term contracts (LTKs) for environmental attributes must propose fixed $/CPEC pricing structures. Prices may either:

Remain constant over the contract term
Include a one-time step-down reflecting the reduction in the Clean Peak Energy Standard (CPS) Alternative Compliance Payment (ACP) after 2032
Escalate or decline according to a predefined schedule

As also included in Round I, the procurement continues to prohibit inflation-adjusted pricing structures. The Draft RFP would cap annual CPEC prices at 97.75% of the applicable ACP established under the CPS regulations. Transmission-connected projects eligible under the CPS may submit bids under either of the contract structures outlined above. Distribution-connected projects, however, would only be eligible to submit Environmental Attribute LTK proposals.

Indexed Storage Credit/Energy Services Contracts Framework: Under this framework, bidders would propose a Storage Strike Price in $/MWh. Payments would be determined by the difference between that strike price and the Reference Energy Arbitrage Price (REAP), which estimates achievable ISO-NE day-ahead market revenues.The structure resembles a contract-for-differences framework tied to wholesale energy market outcomes. DOER appears to view the structure as satisfying the statutory “Energy Services” requirement because compensation is directly linked to storage operation and wholesale market participation rather than solely to the production of Environmental Attributes.

The Draft RFP states that projects which are CPS eligible and contracted under the Energy Services framework would agree to transfer the associated CPECs to the buyers. The Draft RFP proposes different REAP calculation methodologies depending on the project’s storage duration and whether the project qualifies under the CPS.

There are three scenarios described in Appendix I of the Draft RFP to calculate the REAP:

Non-CPS Eligible Projects: For a 4-hour duration resource, the Daily REAP is determined by pairing the Top 4 priced hours with the Bottom 4 priced hours, which is divided by the Round-Trip Efficiency (RTE) and finding the difference between the pairs for each day. The number of top and bottom hours used in the calculation is dictated by the duration of the resource. This Daily REAP is averaged over the number of days in settlement period. If the REAP is negative, for a pair of hours no value is included in the summation for that pair of hours.
Less than/equal to 4-hour duration CPS eligible projects: Similarly to the above, the REAP is determined by pairing hours until the duration is met, but for CPS eligible projects the pair of hours is determined by the CPS discharging hours and the Bottom Priced CPS Charging Hours over the RTE. Under the proposed ISC construct, CPECs would effectively be bundled into the broader Energy Services compensation framework rather than compensated through a separate standalone CPEC payment.
Greater than or equal to 4-hour duration CPS-Eligible Projects: These alternative combines both methodologies mentioned above. For the first four pair of hours the REAP is calculated as described in the CPS eligible projects, for the rest of the duration a top-bottom hour approach is included in the summation (excluding hours already included in the first 4 pair of hours). As the solicitation is for mid-duration storage, the maximum number of pairs is 10.

The settlement for a monthly period is calculated as:

Evaluation Process: The solicitation would utilize a three-stage evaluation framework similar to Round I.

Stage One: Eligibility/Threshold Requirements: Projects must demonstrate:

Technical and logistical viability;
Site control;
Financial capability;
Interconnection progress (demonstration of valid Interconnection Request for Capacity Network Resource Interconnection Service, or commitment to submit such an Interconnection Request in the Fall 2026 Cluster Entry Window);
Safety planning;
Environmental justice commitments;
Diversity, equity, and inclusion plans; and
Credible schedules for financing, permitting, and construction.

All bidders must submit a non-refundable bid fee equal to $500/MW based on proposed Full Rated Capacity. Round I only permitted transmission-connected projects sized between 40 MW and 1,000 MW. The Round II Draft RFP materially alters eligibility by allowing Distribution Projects larger than 1 MW and by reducing the maximum eligible Transmission Project size from 1,000 MW to 700 MW. The Draft RFP also introduces several new eligibility requirements specific to Distribution Projects, including participation in utility Wholesale Distribution Access Tariffs, if eligible, and future Operational Parameters for Energy Storage Systems (OPESS) tariffs pending before the DPU. Due to the inclusion of distribution-scale projects, the Round II Draft RFP significantly expands interconnection and deliverability requirements relative to Round I, particularly for distribution-connected resources. While Round I focused almost exclusively on transmission-level CCIS-equivalent interconnection obligations, Round II retains those requirements but additionally introduces eCNRC requirements for Distribution Projects and explicitly references distribution-level interconnection applications, OPESS tariffs, and FERC Wholesale Distribution Tariffs.

Stage Two: Quantitative and Qualitative Evaluation: Stage Two scoring will allocate up to 75 points to quantitative criteria, and up to 25 points to qualitative criteria. This represents a shift from the Round I Draft RFP, which contemplated an 80/20 weighting between quantitative and qualitative criteria.

Quantitative evaluation will assess:

Contract costs and benefits;
Avoided CPEC prices considering impacts on CPEC supply and demand dynamics;
Potential impacts on capacity and ancillary services markets;
Energy arbitrage value; and
Other indirect impacts on supply and demand dynamics which affect ratepayers.

Qualitative evaluation criteria include:

Environmental justice and low-income community benefits;
Economic development and workforce diversity;
Interconnection and project readiness;
Reliability and resiliency benefits;
Safety planning and stakeholder engagement;
Siting and permitting progress; and
Contract risk allocation.

Notably, the Evaluation Team indicated that it intends to place significant weight on interconnection progress and executed Interconnection Service Agreements for Distribution Projects. While the overall three-stage evaluation structure remains largely unchanged from Round I, the Round II Draft RFP significantly expands the scope of qualitative evaluation factors and operational disclosure requirements. Round II places materially greater emphasis on safety planning, environmental justice commitments, workforce diversity, operational transparency, and interconnection readiness than Round I.

The Draft RFP also signals increased scrutiny of executed interconnection agreements and queue-position risk analyses, particularly for Distribution Projects. Several procedural allowances for Distribution Projects appear for the first time in Round II. Unlike Round I, the Draft RFP allows Distribution Projects to submit portfolio-style bid packages with shared bidder response materials and permits contingency relationships among Distribution Project proposals within the solicitation.

Stage Three: Final Selection: In Stage Three, the Evaluation Team may exercise discretion beyond numerical scoring to evaluate:

Portfolio diversity;
Geographic concentration;
Grid resiliency and transmission/distribution system needs;
Ratepayer bill impacts;
Project viability risks; and
Contributions toward Commonwealth policy objectives, including GWSA targets and economic development.

Safety, Environmental Justice, and DEI Requirements: The Draft RFP substantially expands the role of safety, environmental justice, and workforce diversity requirements compared to prior Massachusetts clean energy procurements.

Bidders must submit detailed safety plans addressing:

Fire protection;
Hazard mitigation;
Emergency response procedures;
Explosion control;
Safety training;
Underwriters Laboratories (UL) certifications; and
Prior safety incidents involving proposed technologies.

Projects must also demonstrate meaningful benefits to environmental justice populations, low-income ratepayers, and transitioning fossil fuel communities. Examples cited in the Draft RFP include:

Reducing energy burdens;
Providing direct funding or rate relief;
Supporting workforce development;
Creating economic opportunities in disadvantaged communities; and
Conducting targeted stakeholder outreach.

Selected projects will be required to execute a Memorandum of Understanding (MOU) with DOER memorializing economic development, environmental justice, and diversity commitments.

Additional RFP Details: While each project will still be evaluated individually, bidders may make Distribution Projects contingent upon other projects within the same solicitation. The Draft RFP also places increased emphasis on interconnection readiness and system upgrade transparency. Transmission projects must demonstrate a path toward Capacity Capability Interconnection Standard (CCIS)-equivalent interconnection and provide supporting studies approximating ISO-NE analyses. Distribution Projects must similarly demonstrate a path toward equivalent Capacity Network Resource Capability (eCNRC, a measure of capacity deliverability). The Evaluation Team also strongly encourages bidders without a Qualification Determination Notification from ISO-NE to provide scenario analyses showing how changes in the queue could impact interconnection costs. Our understanding is that this provision is intended to allow the evaluator to understand the potential range of interconnection cost outcomes for the project.

The solicitation also introduces significant operational and safety-related disclosure requirements. Bidders must provide detailed operational schedules for charging and discharging cycles, anticipated Environmental Attribute and/or Energy Services delivery schedules, and augmentation assumptions over the life of the project. In addition, projects must submit extensive safety documentation, including fire protection plans, hazard mitigation analyses, emergency response plans, and information regarding prior thermal or fire events involving the proposed technology platform.

Although Round I included qualitative evaluation criteria related to environmental justice and economic development, the Round II Draft RFP substantially expands the level of required documentation and specificity. Round II requires significantly more detailed safety disclosures, including fire protection planning, hazard mitigation, emergency response protocols, UL certifications, and prior incident reporting related to the proposed technology platform.

Schedule

The Drafting Parties proposed the procurement schedule in the table below.

Event	Anticipated Date
Issue RFP	July 31, 2026
Bidders Conference	August 13, 2026
Deadline for Submission of Questions	August 20, 2026
Due Date for Submission of Confidential and Public Proposals	September 10, 2026
Selection of Projects/Commence Negotiations	January 27, 2027
Execute Long Term Contracts and MOU (Memorandum of Understanding) with DOER	April 28, 2028
Submit Long Term Contracts for DPU Approval	May 26, 2027

DOER/EDC Disagreements Regarding Potential ISC Structure

The CPMO Team also notes that recent filings before the Massachusetts Department of Public Utilities (DPU) Docket 26-75 indicate substantial differences of opinion between DOER and the EDCs regarding the details of a potential Indexed Storage Credit (ISC) mechanism.

Specifically, on May 21, 2026, the EDCs filed a Letter, and an attached Memorandum written by Eversource, which explain in detail the EDC’s reasoning for opposing the proposed ISC. The DPU has now filed a Notice of Filing and Request for Comments on this issue – public comments are due on or before 5 pm on Friday, June 5, 2026.

Substance of the Disagreement: In the filings, the EDCs recommend moving forward with a narrower procurement for environmental attributes while seeking legislative changes to clearly authorize ISC-style storage contracts. Specifically, the EDCs disagree with DOER that the proposed Indexed Storage Credit can clearly be treated as an “energy service” under the statute. The distribution companies’ core concern are that an ISC structure:

Could pay storage resources for market participation and grid-charging behavior that is not necessarily tied to delivering clean energy, reducing clean-energy costs, or improving clean-energy reliability; and
Creates a much more complex contracting structure compared to the Round I Environmental Attribute-only contracts, and opens the door to non-CPS eligible projects to participate in Round II.

In response to DOER’s claims that if the procurement evaluation can demonstrate benefits related to the delivery of clean energy, the EDCs argue that while DOER’s modeling may show expected system benefits, such a finding would not give the EDCs sufficient legal certainty to prove compliance over the life of the contracts (or the certainty that a future DPU could disallow cost recovery). As a result, the EDCs are concerned that DOER’s approach would leave utilities bearing significant legal and regulatory risk.

Analysis: Section 83E explicitly suggests procurements shall consider inclusion of environmental attributes, energy services, or a combination of both.Given this, the CPMO team’s view is that, although the EDCs have identified a cogent potential risk, it is unlikely that the DPU would reject an ISC structure outright as inconsistent with Section 83E. Given the Healey Administration’s and EEA’s strong emphasis on affordability (and relatedly, reduction of financing and other procurement costs/risks), we believe the more likely outcome is approval of an ISC, but potentially with guardrails to address the EDCs’ statutory concerns. Such guardrails could include limits on how much capacity can come from existing standalone systems without a clear connection to facilitating clean energy or CPS-eligible projects.

Nevertheless, it is also possible (though, in our view, less likely) that the DPU could view an attribute-only procurement as a safe near-term resolution to the dispute, especially given expectations that the General Court will pass legislation in Fall 2026 giving DOER broader clean energy procurement authority that would reduce or eliminate the statutory contracting risk the EDCs would otherwise bear under the current structure, so long as that authority could potentially remain open to existing resources.

Conclusion

Relative to Round I, the Round II Draft RFP reflects a broader and more sophisticated procurement framework for mid-duration energy storage in Massachusetts. The proposal expands eligibility pathways, increases interconnection, operational, and safety requirements, and places greater emphasis on environmental justice, workforce diversity, and project readiness. It also reflects DOER’s effort to balance multiple objectives, including reducing financing costs, improving system reliability, supporting environmental justice communities, and maintaining flexibility as storage technologies and market structures evolve. However, in light of the EDCs’ objections, the Draft RFP remains subject to at least some potential change prior to DPU approval.

The CPMO team will continue monitoring developments in Massachusetts’ Section 83E storage procurements, including DPU guidance, DOER filings, stakeholder comments, project eligibility requirements, contract design, treatment of existing storage resources, and the proposed Indexed Storage Credit framework. Key developments and potential outcomes will be covered in our next June Market Outlook Briefing.

To learn more about CPMO subscription offerings and Massachusetts Clean Peak and storage market analysis, please contact Bob Grace, Jim Kennerly, or Madeline Frierson.

Contact