Staff Reserve Margin Strawman

1
Staff Reserve Margin Strawman

• Concepts we would like to see
• Minimize Games
• Make It Fair
• Reduce Risk
• Keep It Simple

2
Minimize Games

• 3-Year Forward is a Game Waiting to Happen
• Why would a generator announce that he is going
  to build a unit 3 years in advance of commercial
  operation when he can wait and possibly get paid
  (via the reserve margin auction) for something he
  was going to do anyway?

3
Make It Fair

• True-up mechanism necessary to maintain fairness
• True-up mechanism creates unnecessary settlement
  challenges

4
Reduce Risks

• Use 2-Year Look Ahead, Not 3-Year
• Shorter forecast period reduces risk of forecast
  error
• Less likely to procure unneeded resources

5
Keep It Simple

• Pay only for summer (June September)
  availability
• Avoids the need to do an LOLP study to determine
  monthly payment structure
• Consistent with historical planning criteria
• Eliminate penalty concept
• Not necessary in market-driven process
  (contractual performance)
• Creates administrative burden