Transcript agenda item #7 - ISO New England

SEPTEMBER 13, 2016 |MARKETS COMMITTEE
Net Cost of New Entry and
Capacity Zone Modeling
Deborah Cooke
413.540-4488 | [email protected]
ISO-NE PUBLIC
1
Project Title: Net CONE and Capacity Zone
Modeling
WMPP ID:
100
Proposed Effective Date: N/A
• The April 28, 2014, Order accepting the Capacity Zones
modeling process encouraged ISO New England and
stakeholders to consider the impact of entry costs in
determining capacity zones
– Specifically, to consider if entry cost differences between zones should
be a factor
• Previously discussed at the October 2014 Markets Committee
• Plan to address as discussed herein with Cost of New Entry
(CONE) and Offer Review Trigger Price project filing
ISO-NE PUBLIC
2
Background: Capacity Zones Modeling project
established criteria for modeling zones
• Capacity Zone Modeling project in 2013 established the
objective criteria and process for creation of Capacity Zones
– Project undertaken in response to FERC Compliance Order (May 31,
2013)
– Filed rule changes accepted by FERC on April 28, 2014
– Applied since to define the Capacity Zones for FCA 9, 10, and 11
• The 2014 FERC Order encouraged ISO New England and
stakeholders to consider, as part of ongoing Forward Capacity
Market improvements, if entry cost differences should be a
factor in retaining or eliminating previously-defined capacity
zones (ER12-953-004, par. 43)
ISO-NE PUBLIC
3
ISO Recommendation: Net CONE should not be
employed to model Capacity Zones
• Current process uses transfer capability, submitted
retirements and rejected de-list bids, and existing capacity
and proposed capacity data to determine whether or not to
model a constrained Capacity Zone
• Process identifies areas with a potential need for additional
supply, based on low potential zonal capacity levels, and then
models the zone in the Forward Capacity Auction (FCA) to
establish proper Marginal Reliability Impact (MRI) based zonal
price signals
• MRI-based zonal demand curves make determining Capacity
Zones based on Net CONE unnecessary (next slide)
ISO-NE PUBLIC
4
Objective criteria trigger the modeling of Capacity
Zones: Import Constrained Zones
Existing Zonal Capacity Quantity
Capacity
Zone
Modeled
Illustrative import zone demand curve assuming ROS price of $8
ISO-NE PUBLIC
Capacity
Zone Not
Modeled
For Import Constrained
Zones, if existing
capacity is less than the
threshold trigger
quantity, the zone is
automatically modeled
– Threshold trigger
quantity equals
Transmission
Security Assessment
requirement plus
qualified capacity of
the largest
generator in the
zone (see Zone
Modeling for FCA11)
5
Net CONE is unnecessary as a zonal modeling criteria
under the new MRI-based zonal demand curves
Existing Zonal Capacity Quantity
Capacity
Zone
Modeled
Capacity
Zone Not
Modeled
When the zone is not
modeled based on the
current objective
criteria process:
– At any zonal Net
CONE value, the
zone would not
price separate from
the ROS (if modeled)
Illustrative import zone demand curve assuming ROS price of $8
ISO-NE PUBLIC
6
Objective criteria trigger the modeling of Capacity
Zones: Export Constrained Zones
• In export-constrained zones, Capacity Zones are modeled
when the Maximum Capacity Limit is less than the sum of
existing qualified capacity and proposed new capacity
• If the objective criteria do not trigger modeling of a zone,
sufficient transfer capability and zonal supply exists so that
the MRI-based zonal demand curve would be unlikely to price
separate from the Rest of System (ROS) if the zone were
modeled
ISO-NE PUBLIC
7
Conclusion: Net CONE should not be a factor in
modeling Capacity Zones
• MRI-based zonal demand curves make determining Capacity
Zones based on Net CONE unnecessary
• The current process identifies areas with a potential need for
additional supply and then models the zone in the FCA to
establish proper MRI-based zonal price signals
ISO-NE PUBLIC
8
Stakeholder Schedule
Stakeholder Committee and Date
Scheduled Project Milestone
Markets Committee
September 13, 2016
Overview and background
Markets Committee
October 2016
Discussion and follow-up on questions
ISO-NE PUBLIC
9
ISO-NE PUBLIC
10
Acronyms Used in this Presentation
• CONE = Cost of New Entry
• FCA = Forward Capacity Auction
• FERC = Federal Energy Regulatory Commission
• MRI = Marginal Reliability Impact
• ROS = Rest of System
ISO-NE PUBLIC
11