A P R I L 3 0 , 2 0 1 3 | J O I N T M A R K E T A N D R E L I A B I L I T Y C O M M I T T E E

Christopher Parent4 1 3 . 5 4 0 . 4 5 9 9 | C P A R E N T @ I S O - N E . C O M

Evaluation of participant proposals for the upcoming winter 2013-14All data included should be considered preliminary

Winter 2013-14 Market Solution: Assessment Update

Participants identified market solutions for Winter 2013-14

• Proposals included;– Shift allocation of costs from real-time load to deviations– Establishing administrative pricing rules to increase real-time prices

when "non-priced" dispatch actions are implemented

• The ISO does not believe these items directly address the specific problem that was identified for the upcoming winter – These also may not be feasible from a stakeholder/regulatory process

or implementation perspective, which is one of the criteria for adopting a proposal

ISO is not recommending to change charge allocations away from Real-Time Load Obligation

• More load clearing in the day-ahead market does not ensure that resources will have adequate fuel to operate under sustained peak winter requirements and constrained gas transportation conditions– Resources may still be required to operate in real-time above DAM cleared

values

• Total cost for these charges is generally less than charges for 1st Contingency NCPC costs (which are already allocated to deviations) – Having the higher 1st Contingency NCPC costs allocated to deviations does not

seem to have created the desired behavior change for stronger performance; why would lower cost charges allocated to deviations create a stronger incentive?

• High-level analysis shows very little relationship between the amount of load cleared in the Day-Ahead Market relative to Real-Time and NCPC Deviations

ISO is not recommending the creation of new administrative pricing rules

• It is unclear if real-time administrative pricing would provide the required level of confidence that system capability will be sufficient and secure enough to meet reliability needs under sustained peak winter requirements and constrained gas transportation conditions

• Complexities in defining how and when administrative prices would be triggered and at what level these prices would be set make the ability to complete the stakeholder and regulatory process in time for the upcoming winter unlikely– There is a high potential for unintended consequences with

administrative pricing rules, which would need to be evaluated closely to ensure that outcomes are consistent with stated objectives

SUPPORTING ANALYSIS: DEVIATION COST ALLOCATION

All data included is preliminary

1st Contingency NCPC Costs are much larger in aggregate than other Costs allocated to Load

1st Contingency NCPC Costs allocated to deviations does not seem to influence behavior in the DAM

2nd Contingency NCPC charge rate if allocated to NCPC deviations is highly variable

• Charge rates varies greatly when using Load Zone NCPC deviations – Ranges from zero to above $4,000 per MW of deviation (which can be

even higher when moving to a “short” deviation approach) – Average charge rate per MW of deviation (on days when costs are

incurred) is much higher than current rate to real-time load obligation– Highest charge rates do not necessarily align with days with highest

charges as volume of deviations can effect the charge rate significantly

• Low correlation between LSCPR NCPC Cost and the % of RT Load cleared in DA– Costs showing up both when RT load is above and below DA cleared load– Many days (70%) have no LSCPR Cost regardless of how load clears in the

DA

LSCPR Charge Rate using Load Zone NCPC Deviations

LSCPR Charge Rate using Load Zone NCPC Deviations

Regulation and Real-Time Reserve charge rate if allocated to NCPC deviations are relatively small

• Per deviation charge rate is relatively low for both the regulation market and real-time reserves– This is consistent with overall cost of these markets is relatively low

• Low correlation between costs and % RT Load cleared in DA– Costs showing up both when RT Load is above and below DA cleared– Many days (30%) have no real-time reserve cost regardless of how

load clears in the DA

Regulation Charge Rate using NCPC Deviations

RT Reserve Charge Rate using NCPC Deviations