New England's deregulated electricity market has not provided incentives for new investment in badly-needed capacity. This policy brief describes a settlement accepted by the Federal Energy Regulatory Commission on June 15, 2006 to address this problem by creating a forward capacity market for electricity in the region. It also discusses the region's prior, failed attempts to create a locational installed capacity market (LICAP) that set the stage for the settlement.

This policy brief complements the Center's 2006 Research Report, The Challenge of Energy Policy in New England.