AUGUST 7 -8, 2012|NEPOOL MARKETS COMMITTEE

Dave NaughtonSENIOR MARKET ANALYST, INTERNAL MARKET MONITOR

Adjustments to Proposed FCM Offer Review Trigger Prices

Recap – Calculation of Offer Review Trigger PricesPresented at the October 2011 Markets Committee Meetings

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OFFER REVIEW TRIGGER PRICESSUMMARY OF ASSUMPTIONS AND KEY CALCULATIONS

[1] [2] [1,3] [1,4] [5] [2]

Resource Type

Installed Capacity

(MW)

Qualified Capacity

(MW)

Offer Review Trigger Price

($/kW-month)Installed Cost

($/kW-yr)Discount

Rate Depreciation

Levelized Annual

Carrying Cost ($/kW-year)

Annual Capacity

Factor

1st Year Pre-Capacity

Operating Margin (%)

Fuel Cost ($/MMBtu)

Var O&M ($/MWh)

Fixed O&M + A&G

($/kW-year)

LMS100 CT 100 100 10.21$ 1,154.0$ 6.31% 15 yr MACRS 104.3$ 8% 6.2% 6.70$ 2.60$ 30.22$ LM6000 CT 50 50 11.90$ 1,306.0$ 6.31% 15 yr MACRS 117.9$ 8% 2.7% 6.70$ 3.20$ 28.60$ 2x1 F CCGT 560 560 12.60$ 1,375.7$ 6.31% 20 yr MACRS 126.8$ 50% 3.9% 6.55$ 2.60$ 18.25$ 2x1 501 G CCGT 710 710 10.93$ 1,296.9$ 6.31% 20 yr MACRS 120.1$ 60% 7.3% 6.62$ 2.75$ 16.49$ Biomass 50 50 23.71$ 4,010.0$ 6.31% 20 yr MACRS 365.1$ 90% 34.6% 2.40$ 6.50$ 131.10$ Offshore Wind 300 120 61.09$ 5,133.3$ 6.31% 5/15 yr MACRS/SL 1,149.3$ 40% 78.7% n/a n/a 65.83$ Onshore Wind 100 33 14.04$ 2,495.0$ 6.31% 5/15 yr MACRS/SL 677.5$ 33% 84.1% n/a n/a 40.50$

[6]Active Demand Response DR1 1.43$ Active Demand Response DR2 3.37$

[7]Energy Effi ciency 10 10 -$

[1] Values are per kW of Qualified Capacity[2] Values are per kW of Installed Capacity[3] After tax[4] PreCapacity Operating Margins are levelized[5] The natural gas price is the production weighted average price of the NE gas index for resources of comparable type operating in New England[5] Value is the estimated incremental capacity acqusition for the two pure plays in 2010[6] Values for Residential and Commercial/Industrial EE programs are less than zero

Adjustments to Offer Review Trigger Prices

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• Producer Price Index - Draft Tariff Language“Any Offer Review Trigger Price that has not been recalculated using updated data since the previous Forward Capacity Auction shall be adjusted at a rate equal to the year over year percentage change in the Producer Price Index for electric power generation as determined by the United States Bureau of Labor Statistics. These adjusted Offer Review Trigger Prices shall be maintained on the ISO’s website” Appendix A: III.A.21.1.2(a).

http://data.bls.gov/timeseries/PCU221110221110

Adjustments to Offer Review Trigger Prices

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• Initial and Subsequent Adjustments1. Prices to apply for FCA82. Beyond FCA8

1. Offer Review Trigger Prices for FCA8– Model assumptions were in 2011 $ terms– 2011 PPI Value = 140.8– Average 2012 YTD PPI Value = 120.2– Adjustment = (120.2/140.8)-1 = -14.7%

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual

2010 141.9 144.3 139.5 135.4 133.6 133.7 138.9 146.1 137.1 132.1 133.5 138.9 137.9

2011 144.3 144.5 137.1 138.2 140.4 147.9 150.8 155.6 146.5 130.4 127.2 127.2 140.8

2012 125.2 123.1 118.5 116.7 116.7 120.8

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2. Beyond FCA8• Mechanics of PPI adjustment - Inputs:

– Average of last 12 monthly index values available at time of publication (e.g. M-12 to M-1)

– Average of the preceding 12 monthly index values (e.g. M-24 to M-13)

– Previously published Offer Review Trigger Prices

• Offer Review Trigger Prices to be recalculated using updated data no later than 2015 for FCA 10

Adjustments to Offer Review Trigger Prices

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