Summer Peak Energy Pricing in

1

• Summer Peak Energy Pricing in
• New England The ISO-NE Response
• Robert Ethier
• Manager, Market Monitoring Mitigation
• ISO New England Inc.
• January 18, 2002

2
Patton Report

• Recommendations
• 1. Implement SMD as soon as possible.
• Provide option to self-schedule resources after
  the commitment process once the multi-settlement
  process under SMD is implemented
• 2. Reserve Market Changes
• - Include real-time replacement reserves in
  reserve markets
• - Include L.O.C. payments for reserves
• 3. Modify ECP eligibility rules for peaking units
  and units committed during reserve shortages
• 4. Seek improvements in transaction rules and
  procedures with NYISO and ISO-NE
• 5. Seek improvements in congestion management
  procedures

3
Reserve Market Changes

• ISO New England Proposal
• Include replacement reserves in TMOR Market
• Implement reserve price cascading TMSR gt TMNSR gt
  TMOR
• Include opportunity cost payments for all reserve
  markets (currently just TMSR)
• Cap availability bids for reserves at 2.52 (same
  as NY)

4
Modify ECP Eligibility Rules

• ISO-NE Proposal
• Evaluate units at LOL for Eligibility to set RTMP
  during non-shortage system conditions
• Applies to Fast Start Resources only
• Min Run, Min Down lt 1 Hour
• Qualifies for TMNSR and TMOR
• Start Time lt 30 Minutes
• Basic Criteria - If energy at LOL cannot be
  replaced with on-line energy, or unit is required
  to meet 10-minute spin requirement, then eligible
  to set RTMP
• Units that cannot be replaced will have flag set
  making eligible to set RTMP
• Process evaluates all eligible units every five
  minutes

5
Modify ECP Eligibility Rules

• ISO-NE Proposal
• External Dispatchable Transactions
• Same criteria as Units - If replacement energy is
  not available, or unit is required for reserves,
  transaction is eligible to set RTMP
• Applies to non-shortage conditions
• Analysis is performed at same time as units

6
Modify ECP Eligibility Rules

• ISO-NE Proposal
• During Reserve Shortages (short of 30-minute
  operating reserves)
• Any Fast Start Units Committed will set price
• Externals will set clearing price

7
Seek Improvements in Transaction Rules

• ISO New England Proposal
• Modify the Unit Commitment rule governing
  transactions to increase the number of Short
  Notice External Transactions (SNT)
• SNT Definition
• Either a System Contract for the purchase or sale
  of Energy 1 or a System Contract for the sale of
  Energy 2
• and submitted to the ISO after the Daily Trading
  Deadline has passed for the Scheduled Dispatch
  Period in which the transaction is to begin

8
Seek Improvements in Transaction Rules

• ISO-NE Proposal
• Increase the number of SNTs that flow in a
  direction consistent with economics of NYISO and
  ISO-NE dispatch
• SNTs cannot be withdrawn
• SNTs will be supported by Unit Commitment
• Issues
• Single settlement SNTs may be used to manipulate
  market prices
• Develop Arbitrage Screen to protect against
  market power
• Out-Service
• Rationing of available Out-Service under Tariff
• Elimination of Out-Service charge for hourly SNTs

9
Seek Improvements in Transaction Rules

• Arbitrage Screen
• SNTs from high price to low price area subject to
  arbitrage screen
• If the difference in posted prices between NYISO
  and ISO-NE exceeds the price in the buyers
  control area by X transactions by participant
  can be limited in the future.
• Design would limit use of uneconomic transactions
  to raise prices in NEPOOL