Transcript Administrative pricing rules

FEBRUARY 27, 2014 | NEPOOL MARKETS COMMITTEE
System Sloped Demand Curve:
FCA9 conforming change items
Conforming market design changes needed
for FCA9 (to be filed April 1, 2014)
Matt Brewster
MARKET DEVELOPMENT
[email protected] | 413.540.4547
First set of conforming changes: items needed to
conduct FCA-9 with system sloped demand curve
Conforming change item
Slides
FCA Starting Price
#4
FCA Descending Clock Auction and Market Clearing Engine
#5
Administrative Pricing Rules
# 7-8
The last slide of this presentation describes the expected timeline
for addressing other conforming change items for the sloped
demand curve design
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FORWARD CAPACITY AUCTION
Conforming changes to FCA Starting Price, descending clock
auction (DCA), and market clearing engine (MCE)
FCA Starting Price set at the “cap” price on the
system sloped demand curve
• The FCA Starting Price will be set at the system sloped
demand curve “cap” price (III.13.2.4)
– With Brattle’s proposed curve cap is MIN (2x Net Cone, Gross CONE)
– Consistent with maximum price demand is willing pay (as represented
in the auction by the sloped demand curve)
– Applies for all capacity zones
– Represents future dollar value
• Eliminate use of De-List Bids at FCA Starting Price to withdraw
qualified capacity (“QC”)
– Today, de-list bids at the starting price are used to withdraw capacity
that cannot be provided through the commitment period
– ISO will replace use of these de-list bids by revising the FCA Qualified
Capacity for a resource prior to the auction
– Addresses FCA9 software development requirement
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Modifications to descending clock auction and
market clearing engine rules
• Descending Clock Auction (“DCA”)
– Amount of capacity purchased in the FCA will be established by the sloped
demand curve, rather than “100% of Net ICR” (§III.13.2.2)
– DCA round closing conditions will evaluate whether total supply is less
than the quantity of demand specified by the sloped demand curve during
the round, rather than “less than Net ICR” (§III.13.2.3.3)
• Market Clearing Engine (“MCE”)
– Remove Tie-Breaking Rules subsection (a). No longer applicable under the
current optimization objective function to maximize social surplus and not
needed with sloped demand curve
“Where the provisions…for clearing the Forward Capacity Auction…result in a
tie…the auctioneer shall apply the following rules…to determine clearing:
(a) The auctioneer shall clear the resources in such a manner as to maximize the
total amount of capacity procured.” (§III.13.2.7.7)
– Clean-up item for FCA9 software development
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ADMINISTRATIVE PRICING RULES
Conforming changes to system-wide and import-constrained
capacity zone administrative pricing rules
Administrative pricing rules: system-wide
• System-wide Inadequate Supply (§III.13.2.8.1.2)
– Remove in entirety
– System sloped demand curve mitigates against price spikes more
efficiently
• System-wide Insufficient Competition (§III.13.2.8.2)
– Remove in entirety
– System sloped demand curve mitigates against exercise of market
power more efficiently
January 24 Order requires ISO to file a sloped demand curve in order to
eliminate administrative pricing rules
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Administrative pricing rules: importconstrained capacity zones
• Not changing:
– Trigger conditions
– New capacity payment rate under Inadequate Supply or Insufficient
Competition
• Replace administrative rates with Net CONE:
– For Inadequate Supply and Insufficient Competition, Net CONE replaces
$7.025/kW-month
– For Capacity Carry Forward Rule, Net CONE replaces ORTP of a
combustion turbine
• Administrative rate for existing capacity in import zone will be at
least the price paid to existing in Rest-of-Pool capacity zone
– Rest-of-Pool price set by the system sloped demand curve more accurately
reflects the value of existing capacity system-wide
Tariff sections: Inadequate Supply (§III.13.2.8.1.1); Insufficient Competition
(§III.13.2.8.1.1); Capacity Carry-Forward Rule (§III.13.2.7.9)
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Summary and schedule
• Summary:
– Conforming changes for FCA9 include: rules related to conduct of the
FCA (starting price, auction rounds, clearing rules) and administrative
pricing rules
– After review, ISO identified no conforming changes are needed for
provisions related to Self-Supply FCA Resource Eligibility, Capacity
Rationing Rule, Treatment of Real-Time Emergency Generation
Resources, or Reporting and Price Finality
• Schedule:
– Detailed proposal for these conforming change items and the Tariff
redlines will be presented at the March 12-13 MC meeting
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Future steps on other conforming change items
• Conforming changes related to the calculation of Capacity
Requirements (§III.12) to establish the demand curve quantity
parameters will begin at the March 17th RC meeting
• Discussion of conforming changes for capacity zone sloped
demand curves are likely to start 1 to 2 months after the April
1st system demand curve filing
• Discussion of conforming changes to rules pertaining to postFCA functions of the FCM (e.g., reconfiguration auctions) are
likely to start after capacity zone sloped demand curve
changes
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