Transcript FCM Reforms - ISO New England

March 23rd Reliability
Committee
Alternatives to Import
Constrained Zonal
Demand Curves
Zonal Curve Alternative
 Problem:
 ISO’s proposed shift of zonal curve to “adjusted N-1” import limit
exposes zones to very low price premiums despite potentially large
shortfalls < TSA.
 If Rest of System clears low, prices are insufficient to incent new
entry, despite that reliability shortfall
 Even if secure dispatches can be found, shortfall, TSA could
severely limit transmission and generation outages, limit bilateral
transactions, increase congestion and reserve shortages, and
drive frequent MLCC2 and OP4 declarations exposing resources
in import-constrained zone to unjust pay-for-performance risk.
 Solution:
 Shift zonal curve to position where curve crosses TSA at 0.3 x Net
CONE
 This provides a more reasonable compromise between today’s
curve (TSA clears at the Auction Cap) and ISO’s latest proposal
(TSA clears at ROS + $0.80)
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Proposed Zonal Curve Modification
Proposed curve intersects
TSA at 0.3 x Net CONE
Proposal Mechanics
 Where TSA < LRA: No adjustment – use ISO’s
curves
 Where TSA > LRA: add a constraint:
 Adjust the modeled import limit so that at the TSA, the
zonal demand curve delivers a price = $0.3 x Net
CONE.
 If ISO’s curves naturally produce > $0.3 x Net CONE at
TSA anyway (e.g. TSA is only slightly > LRA), then no
adjustment is necessary.
 This should help incent new entry, when needed,
to avoid and minimize problems cited on Slide 1.
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New Slide
Indicative NEMA (Congestion Pricing) Demand Curve
Using FCA 9 Inputs
Capacity Quantities and Slopes at Selected Prices
Congestion Price
$1.00 $2.00 $5.00 $10.00
MW Quantity
3,411 3,296 3,130 2,984
Slope (per 100 MW)
-$0.59 -$1.19 -$2.60 -$4.39
Notes: LSR = 3,572 MW for NEMA in FCA 9.
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FCA 7 Illustration
 In FCA-7, ROS cleared at the $3.15 price floor, while the system was
3000 MWs long. (Note, if we were using the ISO’s proposed demand
curve this would have produced an approximate $0.50 ROS Price.)
 There was insufficient Existing capacity in NEMA (3033 MW) to meet
the TSA (3209 MW)
 Using ISO's curves for NEMA (slide 61 of their January Powerpoint),
the price premium in NEMA would have been about 40 cents.
 So the NEMA price would have been ~$3.55
 Footprint obviously would not have cleared, and 47 MW of New DR
probably would not have cleared as well. So we would have expected
the zone to be about 180 MW short of the TSA. If there were delists
below $3.55, then it would have cleared even shorter.
 The ISO created a special deferral rule, for reliability reasons, to
permit Footprint and potentially other resources, to defer their
CSO by a year after Footprint stated they would not be able to
secure financing for the project if they lost a year of their 5 year,
$15 per KW-month rate lock. The ISO fought to retain the
resource because without Footprint there would have been many
n-1-1 violations. Note, that without Footprint the ISO would have
met their N-1 reliability standard.
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 III.12.2.1.3
Marginal Reliability Impact Values for Import-Constrained
Capacity Zones.

 Prior to each Forward Capacity Auction, the ISO shall determine the Marginal
Reliability Impact of incremental capacity, at various capacity levels, for each
import-constrained Capacity Zone. For purposes of calculating these Marginal
Reliability Impact values, the ISO shall apply the same modeling assumptions
and methodology used to determine the Local Resource Adequacy
Requirement pursuant to Section III.12.2.1.1, except that the capacity transfer
capability between the Capacity Zone under study and the rest of the New
England Control Area determined pursuant to Section III.12.2.1.1(b) shall be
reduced by the greater of: (i) the Transmission Security Analysis Requirement
minus the Local Resource Adequacy Requirement; (ii) zero; and (iii) the
capacity transfer capability necessary to ensure that the Capacity Zone
Demand Curve specifies a price equal to 0.3 times Net CONE at the
Transmission Security Analysis Requirement.
