On January 1, 2013, ISO New England became the central counterparty (CCP) to all transactions that flow into and out of the New England Control Area. (See Commission Letter Order dated September 4, 2012). As the CCP to transactions consummated through its markets, the ISO takes momentary title to all electricity purchased and sold through its markets. Thus, the ISO is the purchaser of all electricity sold through its markets and the seller of all electricity purchased through its markets. This change will impose certain state sales tax compliance obligations on the ISO. ISO New England now has an obligation to collect and remit sales tax on any sales it makes to customers that are not for resale or are otherwise exempted by statute.
Periodically, the ISO reports the cost of the electricity sold to the taxing authority in each of the states that require it (i.e., Maine, Massachusetts, Vermont, Connecticut, Rhode Island). In general, the cost of electricity sold for tax-reporting purposes is based on a customer’s purchases in the Day-Ahead and Real-Time Energy Markets (i.e., the wholesale volume and value of the electricity physically produced) within a New England state.
The volumes of wholesale energy produced are the summations, by state, of the real-time metered generation from generators registered in the ISO’s Settlement System and physically located within the six New England states.
The volumes of wholesale energy consumed are the summations, by state, of the real-time metered consumption at load assets registered in the ISO’s Settlement system and physically located within the six New England states.
The value of the wholesale electricity produced and consumed is calculated in the same manner as the wholesale market participants' Energy Market Settlement. In every hour, the ISO applies the appropriate day-ahead locational marginal price (LMP) to either the cleared generation offer (for generators) or cleared locational demand bids (for loads) to compute the day-ahead value of wholesale power.
Then, in every hour, the ISO applies the appropriate real-time LMP to either the metered generation deviation (for generators) or metered load obligation deviation (for loads) to compute the real-time value of wholesale power. The sum of the day-ahead and real-time deviation values is reported as the value of the wholesale power produced or consumed.
While participants conduct a wide range of transactions—some within the ISO’s systems and some outside—and many of these transactions do cause electricity to flow, the reporting approach is wholly based on the tangible nature of electricity.
The reporting points in the ISO’s reporting system are the generator asset node for injections and the load asset node for extractions. These locations are mapped to load zones, and each load zone, except for Massachusetts, corresponds to a state. The three load zones within Massachusetts (Southeast Massachusetts [SEMA], Western/Central Massachusetts [WCMA], and Northeast Massachusetts and Boston [NEMA]) are aggregated to the state-level report.
The short answer is that they are excluded [from the sales tax reporting]. Day-ahead instruments (virtual transactions and imports/exports) can affect day-ahead schedules, but only financially—they do not result in physical supply or demand.
In real-time, imports and exports create generation and load obligations at the border, but not at locations within New England, so they are excluded from reporting. While a real-time import represents supply, it may or may not be included in the portfolio of a customer with physical metered load and is therefore excluded from reporting. Real-time exports represent demand, and will, all else being equal, increase one or many generators’ metered generation. But this generation may or may not be in the portfolio of the exporter and is therefore excluded from reporting.
Demand response and ancillary services do not represent tangible, physical property, and are therefore excluded.
The ISO does report “settlement-only” generators. Because these generators do not offer in the Day-Ahead Energy Market, their volumes and values are based on real-time metered generation and real-time LMPs.
Because market participant end users are assumed to be the ultimate consumers of electricity bought at wholesale, these sales are subject to state sales tax unless the MPEU can demonstrate, to the satisfaction of the ISO, that its purchases are exempt from state sales tax. More specifically, the ISO does not charge a MPEU with applicable state sale tax on its electricity purchases through the ISO New England markets if the MPEU provides the ISO with state-specific information and documentation satisfactory to the ISO that such purchases are not subject to state sales taxation.
Resale certificates will be required to be submitted every three years. As always, it is the Market Participant's responsibility to send updated certificates should there be any changes to corporate status or relevant information such as Company name or address that would invalidate the certificate.
No, Market Participants are not required to submit resale certificates. However, if our query shows that energy was purchased by your company, ISO is obligated to collect and remit sales tax for any wholesale purchase where a properly executed resale certificate has not been submitted.
All new or updated resale certificates can be sent via:
Secured e-mail: billingdept@iso-ne.com
Mail: ISO New England Inc.
One Sullivan Road
Holyoke, MA 01040
Attn: Billing Department
