If you follow electricity costs in New England, you may have seen reports that ISO-NE ancillary service costs ran significantly above forecast in 2024 and 2025 — by some estimates, nearly $921 million more than anticipated across the region. For commercial electricity buyers and energy brokers who work in this market, understanding what ancillary services are, why they spiked, and how they show up in your electricity costs is essential.

What Are Ancillary Services?

ISO-NE runs markets not just for energy (the actual electricity you use) and capacity (the right for electricity to be available), but for a set of real-time grid services that keep the power system stable and balanced. These are called ancillary services, and they include:

• Regulation: Frequency regulation: Resources that rapidly adjust their output to keep the grid’s frequency at exactly 60 Hz, compensating for sudden supply-demand imbalances.
• Reserves: Operating reserves: Generation that is synchronized to the grid and can respond within 10-30 minutes if a major resource unexpectedly goes offline.
• Voltage control: Reactive power and voltage support: Resources that maintain voltage stability across the transmission system, particularly in local areas where grid stress is highest.

These services are procured through separate ISO-NE markets and are paid for by load — meaning the cost is allocated to electricity customers in the region, including commercial and industrial buyers.

Why Did Costs Spike in 2024-2025?

The $921 million cost overrun relative to forecast reflected several converging factors. Capacity margins in the ISO-NE footprint tightened during peak periods, requiring ISO-NE to commit more expensive out-of-merit resources to maintain system stability. Thermal generation retirements reduced the pool of resources available to provide reserves and regulation cheaply. And ISO-NE’s reserve margin requirements were tightened in response to grid reliability concerns, requiring more resource commitment during stress periods.

The result was that ancillary service prices in the day-ahead and real-time markets ran substantially higher than the cost assumptions built into retail supply contracts and utility default service rates during the same period. That gap between forecast and actual costs was borne by load.

How Do Ancillary Service Costs Show Up on Your Bill?

For most commercial electricity customers in Massachusetts and Rhode Island, ancillary service costs are embedded in one of two ways. If you’re on utility default service, the utility procures supply through auctions that implicitly include ancillary service costs — you don’t see a line item, but the cost is in your default service rate. If you’re on a competitive supply contract, the contract may either include ancillary services in the fixed supply rate (in which case the supplier absorbed the 2024-2025 spike) or may include a passthrough provision that allocates actual ISO-NE ancillary costs to you.

When reviewing competitive supply contracts, ask your supplier or broker specifically: are ancillary services included in the fixed rate, or are they a passthrough? The answer affects your actual cost certainty under the contract.

What’s ISO-NE Doing About It?

ISO-NE has been developing a Day-Ahead Ancillary Services (DAAS) market reform, designed to improve the efficiency and cost transparency of ancillary service procurement. The reform is intended to allow better forward scheduling of ancillary services, reducing the need for expensive real-time procurement during stress events. FERC review and stakeholder processes for DAAS are ongoing as of early 2026.

What Commercial Buyers Should Do

In the near term, the most actionable step is to review your competitive supply contract for ancillary service treatment. If you have a contract with a passthrough clause that was in effect during 2024-2025, you should be able to see the ancillary service cost component in your supplier’s billing statements. For your next contract, ask your broker to clarify whether ancillary services are included or passthroughed — and price both options.

Contact Gridwealth Electric: Gridwealth Electric provides transparent contract structures and market education to our broker partners and commercial customers. Contact us at tford@gridwealth.com.