delisting · 2018-01-19 · (or forever if it is a permanent/retirement delist bid) • if an...

ISO-NE PUBLIC

Disclaimer for Customer Training: ISO New England (ISO) provides training to enhance participant and stakeholder understanding. Not all issues and requirements are addressed by the training. Consult the effective Transmission, Markets and Services Tariff and the relevant Market Manuals, Operating Procedures and Planning Procedures for detailed information. In case of a discrepancy between training provided by ISO and the Tariff or Procedures, the meaning of the Tariff and Procedures shall govern.

ISO-NE PUBLIC

Forward Capacity Market (FCM 101)

Northampton, MA

Resource Adequacy – Technical Studies

Abimael Santana

Market Monitoring and Compliance

Matthew Fioretti

Delisting

October 23-26, 2017

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http://www.iso-ne.com/regulatory/tariff/index.html

http://www.iso-ne.com/regulatory/tariff/index.html

http://www.iso-ne.com/rules_proceds/isone_mnls/index.html

http://www.iso-ne.com/rules_proceds/operating/index.html

http://www.iso-ne.com/rules_proceds/isone_plan/index.html

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• Recognize the various types of delist bids available in the Forward Capacity Market (FCM)

• State the submittal requirements for the various delist bid types

• List the requirements for submitting a supporting cost workbook to the Internal Market Monitor (IMM)

Objectives

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Topics

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• Definitions and Types

• Deadlines

• Retirement Delist Bids and Reliability Reviews

• Cost Review of Delist Bids

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Definitions and Types

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What is a Delist Bid?

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• Delisted capacity opts out of FCM for entire commitment period (or forever if it is a permanent/retirement delist bid)

• If an existing capacity resource does not submit a static, export, administrative export, or permanent/retirement delist bid in FCA qualification process, resource is entered into FCA

Existing capacity that wants to leave or not participate in Forward Capacity Auction

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Delist Bids Submitted at Qualification

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Due by Existing Capacity Retirement Deadline

Priced Retirement Model for FCA #12 was published to ISO website in early 2017

Permanent Retirement

Option to permanently remove capacity from the capacity market for the entire capacity commitment period

(Cost justification required)

Option to permanently remove capacity from all markets for the entire capacity commitment period


MR III.13.1.2.3.1.

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Delist Bids Submitted at Qualification

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Due by Existing Capacity Qualification Deadline

Cost workbook for FCA #12 was published to ISO website in early 2017

Export Administrative Export Option to remove capacity from capacity market to export capacity for entire capacity commitment period


Option to remove capacity from capacity market if an export delist bid has been entered and has cleared in a prior FCA

Static (General) Static (Ambient Air) Option to remove capacity from capacity market at or above the dynamic delist bid threshold price during a single capacity commitment period


Option to remove capacity from capacity market for up to the megawatt amount that may not be physically available due to the difference between summer qualified capacity at 90 degrees and expected rating of resource at 100 degrees

MR III.13.1.2.3.1.

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Delist Bid Submitted During Auction

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Dynamic Delist Bid

Option to remove capacity from capacity market at prices below dynamic delist bid threshold during a single capacity commitment period

MR1. Section III.13.2.3.2 (d)

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Time and Price Thresholds

Delist Bids Submittal Characteristics

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*The price threshold associated with 2021-2022 Capacity Commitment Period

All delist bids are subject to a reliability review in accordance with MR1, Section III.13.2.5.2.5 and Planning Procedure 10 (PP-10) – Section 7

Delist Bid Category Internal Market Monitor (IMM)

Approval Price Threshold Time of Submission

Permanent and Retirement Bids at or above $0.00/kW-month

At Existing Capacity Retirement Deadline

Static Bids at or above $5.50*/kW-month

At Existing Capacity Qualification Deadline

Export (including Administrative)

Bids at or above $5.50*/kW-month

At Existing Capacity Qualification Deadline

Dynamic No market monitor review required During auction cycle

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Deadlines

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Delist Bid Submittal Deadlines At existing capacity retirement deadline • Permanent and retirement delist bids

must be submitted via Forward Capacity Tracking System (FCTS) Must include cost justification

At existing capacity qualification deadline • Static, export, and administrative export

delist bids must be submitted via FCTS Must include cost justification

No later than three business days after ISO issues qualification determination notifications (QDN) • Name of each lead market participant

submitting delist bids as well as number and type of delist bids are published

No later than seven days after ISO issues qualification determination notifications • Static delist bids may: Lower price of any price-quantity pair Withdraw any price-quantity pair

During auction • Dynamic delist bids submitted via

auction software No cost justification

After auction • No later than 15 calendar days after the

auction is conducted, ISO posts delist bid information to the ISO website

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Retirement Delist Bids and Reliability Reviews

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Retirement Delist Bids

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• Specify a price at or below which resource would retire all or part of its capacity from all New England markets

• Subject to IMM review

• Submitted: ‒ As part of existing capacity retirement package ‒ For commercial capacity ‒ Using FCTS

• May not be withdrawn once submitted

MR III.13.1.2.3.1.5.

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Reliability Reviews

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The ISO shall review each Retirement De-List Bid, Permanent De-List Bid, Static De-List Bid, Export Bid, Administrative Export De-List Bid, and Dynamic De-List Bid entered into the Forward Capacity Auction to determine whether the capacity associated with that de-list bid is needed for reliability reasons (…). The capacity shall be deemed needed for reliability reasons if the absence of the capacity would result in the violation of any NERC or NPCC criteria or ISO New England System Rules. De-list bids shall only be rejected pursuant to this Section III.13.2.5.2.5 for the sole purpose of addressing a local reliability issue, and shall not be rejected solely on the basis that acceptance of the de-list bid may result in the procurement of less capacity than the Installed Capacity Requirement (net of HQICCs) or the Local Sourcing Requirement for a Capacity Zone.

MR1. Section III.13.2.5.2.5

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Reliability Reviews, continued

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For all denied delist bids: • Resource that has a delist bid rejected for reliability reasons shall

be compensated and given a capacity supply obligation for the relevant capacity commitment period

• If reliability need is met through a reconfiguration auction or other means, resource shall be delisted or retired as of the first day of subsequent capacity commitment period

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Questions

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Cost Review of Delist Bids

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Associate Market Analyst Market Compliance Internal Market Monitoring

Matthew Fioretti

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• Reproduce delist bid formulation under existing rules

• List requirements for submitting a cost workbook to the Internal Market Monitor including the common costs allocation process

• Identify submittal deadlines for the various delist bid types

Objectives

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Topics

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• Mitigation in FCM

• Retirement and Permanent Delist Bid

• Delist Bid Formulation

• Concepts and High-level Examples ‒ Resource Belonging to a Station with Common Costs

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Mitigation in FCM

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Constraining the ability of sellers and buyers with the incentive and ability to exercise market power is critical to ensuring that centralized capacity markets achieve resource adequacy at just and reasonable rates.

(Centralized Capacity Market Design Elements, Commission Staff Report, AD13-7-000, August 23, 2013)

FERC view on capacity market mitigation

Link to Report

https://www.ferc.gov/CalendarFiles/20130826142258-Staff%20Paper.pdf

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Why is Mitigation Necessary in the Capacity Market?

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• Two types of market power mitigation in capacity market ‒ Seller-side market power mitigation for existing resources ‒ Buyer-side market power mitigation for new resources

• Objective is to strike a reasonable balance between under and over mitigation of resources while ensuring the market operates competitively

• IMM has responsibility to ensure FCM is sending appropriate investment signals

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Considerations for Existing Resources

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Seller-Side Power Market Power Mitigation

IMM goal is to restrict resources from leaving market at a cost higher than their going forward costs

• IMM reviews delist bids to verify: ‒ Consistent with resource going forward and opportunity costs ‒ CPP and risk calculations are sound methodologies and reasonable

• IMM only reviews delist bids above a certain threshold ‒ Static and exports reviewed if above dynamic delist threshold

‒ Permanent and retirements reviewed if greater than 20MWs

IMM review

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Considerations for Existing Resources, continued

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Only resources belonging to pivotal supplier are subject to mitigation • Pivotal supplier test:

‒ Calculation performed in January (before start of FCA) to identify if supplier controls enough capacity in the market such that it can unilaterally exercise market power and profitably set price at a non-competitive level

• Conducted at system and zonal level • Results made available seven days before auction

‒ Not at Qualification Determination Notification (QDN)

Seller-Side Market Power Mitigation

Suppliers with delist bids will not know if they are pivotal as part of the QDN, meaning they will not know what price will be used in FCA if an IMM determined bid price has been established

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Delist Bid • Mechanism by which an existing capacity

resource may seek a price-based exit from FCA • Represents lowest price at which resource would

be willing to accept a CSO

How does a participant support this cost? • Representing avoidable costs; in other words,

incremental costs to taking on a CSO • Net Going Forward Costs, Opportunity Costs,

CPP Cost and Risk


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Market Power Concern Sellers of capacity may have ability and incentive to increase prices above competitive levels through economic withholding

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Seller-Side Market Power

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How a Participant Can Benefit from Withholding Capacity

Turbine-A 300 MWHydro-B 200 MWNuclear -C 1,700 MWTotal MW 2,200 MW

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$0

$2

$4

$6

$8

$10

$12

$14

$/kW

-mon

th

Supply and Demand Curves - Forward Capacity Auction Hydro- B cost of talking on a CSO is $8.50/kw-month

Supply Curve FCA Demand Curve

200MW $8.00

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FCA Outcome For Participant: Hydro-B will not obtain a CSO Participants total portfolio will be 2,000 MWs


FCA clearing price $8kw-month 2,000 MW x $8kw-month = $192 Million

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FCA outcome for market: Participant withheld 200 MWs of capacity from the market Increasing the clearing price and cost of the 2,000 MWs


• Market Power was exercised • Market was uncompetitive • Social welfare was not maximized

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$0

$2

$4

$6

$8

$10

$12

$14

$/kW

-mon

th

Supply and Demand Curves - Forward Capacity Auction Hydro-B cost of talking on a CSO is $4.50/kw-month

Supply Curve FCA Demand Curve

200MW

$7.00

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FCA outcome for participant: Hydro-B will obtain a CSO for 200 MWs Participants total portfolio will be 2,200 MWs

FCA clearing price $7kw-month 2,200 MW x $7kw-month = $184 Million

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FCA outcome for market: Hydro-B was priced at its going forward costs Purchased 2,200 MWs at a competitive level

• No market power was exercised • Market was competitive • Social welfare was maximized

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2,000 MW x $8kw-month = $192 Million vs.

2,200 MW x $7kw-month = $184 Million

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Market Power Concern Participant can financially benefit from withholding capacity by misrepresenting their true costs for taking on a CSO

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Questions

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Delist Bid Formulation 1. Retirement and Permanent 2. Static

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Retirement and Permanent Bid Formulation

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Overview

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• Retirement and permanent delist bids represent prices at which resource (or portions thereof) will exit FCM

• Review thresholds: ‒ IMM review applies to retirement or permanent delist bids for resources

greater than 20 MW ‒ Initial submission of retirement or permanent delist bids below dynamic

delist bid threshold will not be reviewed • Reviews will occur in subsequent years primarily to determine if resource should

continue to remain on retirement track

• If IMM rejects participant submitted price, participant may select: ‒ Conditional treatment ‒ Unconditional treatment and retire anyway

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How do I determine my bid price?

Important factors to consider: • Analysis should include forecasted capacity clearing price in years 2-5 • Participants may submit more than five years worth of data • Risk (of all types) is represented as an adder to Weighted Average Cost of Capital

(WACC) and must be supported by detailed analysis

Determine resource remaining economic life (Section III.13.1.2.3.2.1.2.C)

Using remaining economic life, determine year one bid price to upcoming FCA (Section III.13.1.2.3.2.1.2.B)

Step 1

Step 2

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Disclaimer

Examples are intended solely for use in explaining how market participants should complete retirement workbook

Following examples use simplifying assumptions regarding prices, revenues, costs, capital investments, and risk calculation that may not be reflective of real-world scenarios

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Example ‒ Determining Bid Price

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• 500 MW oil-fired resource

• Market participant’s expectation of future capacity clearing prices for periods after upcoming FCA

• 15% WACC (including risk adder)

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Bid Calculation

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Columns Label/Formula 2021-2022 2022-2023 2023-2024 2024-2025 2025-2026

Revenues:Energy Revenues A 43,800,000$ 43,800,000$ 43,800,000$ 43,800,000$ 43,800,000$

Clearing Price ($/kw-month) 12.86$ 8.00$ 8.00$ 8.00$ 6.50$ Resulting Revenues B 103,758,000$ 48,000,000$ 48,000,000$ 48,000,000$ 39,000,000$

Total Revenue A+B=C 147,558,000$ 91,800,000$ 91,800,000$ 91,800,000$ 82,800,000$

Total Operating Expenses D 100,000,000$ 100,000,000$ 100,000,000$ 100,000,000$ 100,000,000$

Operating Income C-D=E 47,558,000$ (8,200,000)$ (8,200,000)$ (8,200,000)$ (17,200,000)$ Income Taxes (40%) F 19,023,200$ (3,280,000)$ (3,280,000)$ (3,280,000)$ (6,880,000)$ Net Income E-F=G 28,534,800$ (4,920,000)$ (4,920,000)$ (4,920,000)$ (10,320,000)$ Capital Expenditures H 5,000,000$ 15,000,000$ Net Cash Flow G-H=I 28,534,800$ (9,920,000)$ (19,920,000)$ (4,920,000)$ (10,320,000)$ Cumulative Net Cash Flow J(sum by year) 28,534,800$ 18,614,800$ (1,305,200)$ (6,225,200)$ (16,545,200)$

Net Present Value of Cumulative Cash Flow K 26,244,976$ 27,891,898$ 11,171,058$ (6,752,708)$ (21,139,838)$ Remaining Economic Life

Commitment Period

Determine resource remaining economic life

3 year remaining economic life

Step 1

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Bid Calculation

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Step 2 Using remaining economic life, determine year one bid price to upcoming FCA

Columns Label/Formula 2021-2022 2022-2023 2023-2024 2024-2025 2025-2026

Revenues:Energy Revenues A 43,800,000$ 43,800,000$ 43,800,000$ 43,800,000$ 43,800,000$

Clearing Price ($/kw-month) 7.545$ 8.00$ 8.00$ 8.00$ 6.50$ Resulting Revenues B 85,588,052$ 48,000,000$ 48,000,000$ 48,000,000$ 39,000,000$

Total Revenue A+B=C 129,388,052$ 91,800,000$ 91,800,000$ 91,800,000$ 82,800,000$

Total Operating Expenses D 100,000,000$ 100,000,000$ 100,000,000$ 100,000,000$ 100,000,000$

Operating Income C-D=E 29,388,052$ (8,200,000)$ (8,200,000)$ (8,200,000)$ (17,200,000)$ Income Taxes (40%) F 11,755,221$ (3,280,000)$ (3,280,000)$ (3,280,000)$ (6,880,000)$ Net Income E-F=G 17,632,831$ (4,920,000)$ (4,920,000)$ (4,920,000)$ (10,320,000)$ Capital Expenditures H 5,000,000$ 15,000,000$ Net Cash Flow G-H=I 17,632,831$ (9,920,000)$ (19,920,000)$ (4,920,000)$ (10,320,000)$ Cumulative Net Cash Flow J(sum by year) 17,632,831$ 7,712,831$ (12,207,169)$ (17,127,169)$ (27,447,169)$

Net Present Value of Cumulative Cash Flow K 13,138,494$ 10,614,929.88$ 0$ (35,647,193)$ (59,514,296)$ Remaining Economic Life

Commitment Period

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Review

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Participants are required to provide: • Support for forecasted capacity prices • Supporting documentation for revenue and cost assumptions • Detailed descriptions and support for capital expenditures • Documentation and support for WACC inputs and risk adder

Step 1

Step 2

Remaining economic life of three years Retirement delist bid of $7.545

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What do I do with my bid price?

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• Retirement delist bid submission window ‒ Window opens March 9 and closes March 23, 2018 ‒ IMM suggests consultation in advance of submission ‒ Email: [email protected]

• Bid price, retirement delist model, affidavit, and supporting information entered into FCTS

mailto:[email protected]

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Submitting Retirement and Permanent Delist Bids

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• Enter Bid Segments • Upload a Cost Workbook

and Affidavit • Upload Other Supporting

Documentation • Click Submit

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• IMM review period lasts 90 days

• During review, IMM will consult with participants to understand their assumptions and methodologies

• At conclusion of review, IMM will issue a retirement determination notification (RDN) ‒ Result of IMM review (accept or deny participant’s submission) ‒ IMM determined economic life and price pursuant to the Tariff ‒ IMM will apply a mitigation threshold of 10%

What happens after I submit my bid price?

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Post RDN Options

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IMM RDN Determination on Price Participant Action

Accepted None

Denied Conditional Treatment

OR Unconditional Treatment

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Auction Outcomes

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IMM RDN Determination

Participant Action Auction Outcome Capacity Supply

Obligation

Accepted None

Clearing price above IMM/FERC price Yes

Clearing price below IMM/FERC price No

Denied

Conditional

Clearing price above participant price Yes

Clearing price below participant price No

Unconditional Resource retired No

Reliability Review result is not considered above

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Post Auction – What’s Next

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• If resource obtains a capacity supply obligation, must submit a revised retirement model for next FCA

• Participant may request that resource be removed from retirement track but revised analysis must be submitted

• If participant wishes to remove resource from retirement track, IMM will evaluate after consultation

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Static Delist Bid Formulation

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Static Delist Bid Formulation

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Where: • NGFC is the net going forward costs • GFC is the going forward cost, including opportunity cost • IMR is the infra-marginal rent • InfIndex is the four year expected inflation rate as published by the

Cleveland Federal Reserve Bank • RP is the risk premium • CPP is the expected capacity performance payments • CQsummer is the summer qualified capacity

[GFC – IMR] x InfIndex + RP + CPP (CQsummer, kW) x (12, months) NGFC =

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What are Going Forward Costs (GFC)?

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• Costs reduced or avoided by not having CSO ‒ Incremental costs of maintaining a constant condition of being ready to respond to

commitment and dispatch orders (labor, maintenance, incremental capital costs, etc.) ‒ GFC may be different if resource is active versus inactive in energy markets

• Do not include variable production or financing costs for sunk capital costs (e.g., $ per start, $/hour or $/MWh production costs, return on equity, and cost of debt)


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IMR

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NGFC = [GFC – IMR] x InfIndex + RP + CPP

(CQsummer, kW) x (12, month)

• Infra-marginal rent (IMR)

• Energy and ancillary service revenues less variable production costs

• Accounts for portion of total avoided costs recovered through energy and ancillary service markets (if resource is inactive)

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Going Forward Costs

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Inactive in the Energy and Ancillary Service Markets

• Participant has a negative outlook on market conditions during CCP • GFC estimate includes all costs avoided from not participating in capacity and

energy and ancillary services markets • Infra-marginal rents (IMR) are deducted from GFC estimate to account for

portion of total avoided costs otherwise recovered through energy and ancillary services markets

Question: Do you expect resource to participate in energy and ancillary services markets during capacity commitment period (CCP)?

Answer: No – resource will be inactive


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Going Forward Costs

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Active in the Energy and Ancillary Service Market

• Participant has a positive outlook of market conditions during CCP • GFC estimate includes all costs avoided if resource were not participating in

capacity market only • That is, costs incurred due to decision to remain in energy and ancillary services

markets are excluded • IMR is set to zero

Question: Do you expect resource to participate in energy and ancillary services markets during capacity commitment period (CCP)?

Answer: Yes – resource will be active


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Going Forward Costs High Level Example

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NGFC = [GFC – IMR] x InfIndex + RP + CPP (CQsummer, kW) x (12, months)

Participating in energy and ancillary services markets?

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Going Forward Costs Election to Participate in ISO New England Markets

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Estimated 70% of total avoidable costs (cost savings) are due to

decision to not participate in capacity market

Remaining 30% will be incurred

due to the decision to remain active

IMR is foregone due to decision to remain active

in energy and ancillary service markets

NGFC = [GFC – IMR] x InfIndex + RP + CPP (CQsummer, kW) x (12, months)

Participating in energy and ancillary service markets?

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Inflation Index

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• Per Market Rule, most recent reported four-year expected inflation number published by Federal Reserve Bank of Cleveland at beginning of qualification period will be used ‒ IMM specifies this in cost workbook

• InfIndex = (1+i)4


(CQsummer, kW) x (12, months)

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Risk Premium (RP)

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• Any risks quantified and analytically supported and not already calculated in bid

• Per MR1 Section III.13.1.2.3.2.1.4, risk of a catastrophic event or risk of greater then expected reserve deficiency hours may be included in risk premium value

• Participants are encouraged to submit an affidavit from a Corporate Risk Officer attesting to risk premium accuracy

• For an approved methodology, see attachment B to qualification determination notification (QDN) at end of FERC Information Filing dated November 4, 2014



http://www.iso-ne.com/static-assets/documents/2014/11/er15-___-000_11-3_14_fca_9_info_filing_public_version.pdf

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Risk Premium (RP), continued

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Market participant used ISO approved methodology and determined risk premium is $500,000 (value will be used later)



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Capacity Performance Payments (CPP) – Inputs

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Performance payment rate (PPR) Currently $3,500/MWh

Balancing ratio (Br) Expected average balancing ratio

Availability (A) Expected average performance per unit of CSO during capacity scarcity condition hour

Capacity scarcity condition hours (H)

Number of expected capacity scarcity condition hours during capacity commitment period

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Capacity Performance Payments (CPP)

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Expected performance payments based on capacity balancing ratio, number of hours of reserve deficiency, and resource’s performance during deficiency

CPP = -CSO x PPR x H x (A-Br)


Br x H x PPR Common value component and/or cost of financial obligation

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CSO (MW) 200

PPR $3,500

H 11.3

A 0.60

Br 0.85

CPP $1,977,500

Capacity Performance Payments (CPP), continued

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In cost workbook, a negative CPP is a gain for resource; numbers below are as they appear in workbook

CPP = -CSO x PPR x H x (A-Br)


$1,977,500 = 200 MW x $3,500 x 11.3 x (0.60 – 0.85) CPP CSO (MW) PPR H A Br

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Pay for Performance – “H” Expectation

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• Requires a resource to have an expectation of short-term and long-term cleared capacity

• Short-term expectations may impact offer materially

Source: Operating Reserve Deficiency Information

https://www.iso-ne.com/static-assets/documents/2016/12/iso_memo_operating_reserve_deficiency_dec_19_2016.pdf

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Summary − NGFC

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Convert $13,277,500 into ($/kW-month): $13,277,500 / 200 MW / 12,000 = $5.53

200

No Inactive

15,000,000$

5,000,000$

8%

10,800,000$

500,000$

1,977,500$

13,277,500$

5.53$

Risk Premium

CPP

NGFC

NGFC Bid ($/kW-month)

Old Clunker Power- Qualified Capacity (MW)

Participanting in E&AS Markets?

GFC

IMR

Inflation Index

[GFC-IMR] x Infindex

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Preparing a Delist Bid

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Data Provided by IMM or ISO

*Please email your request to [email protected]

Data provided by IMM upon request (from mid April)* ISO revenues ($) Including day-ahead and real-time energy, NCPC, regulation, real-time reserves, and forward reserves

EFORd

Inflation adjustment (%) Four-year inflation rate as published by the Cleveland Federal Reserve Bank




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Preparing a Delist Bid for FCA #12: IMM Guidelines

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Options for using historical values for FCA #12 are the three most recent capacity commitment periods (CCP16/17, CCP15/16, and CP14/15)

CCP16/17 Avg. 2 of (CCP16/17, CCP15/16, CCP14/15)

*Adjustment allowed for future market

conditions in CCP21/22

GFC (non-production costs) Yes

IMR ISO revenues Production costs

Yes Yes

EFORd Yes

*Adjustments to costs must be based on known and measurable conditions, and supported by appropriate documentation

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Questions

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Resource Belonging to a Station with Common Costs Concepts and High-level Examples

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Station and Asset-Specific Going Forward Costs

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• What are station going forward common costs? ‒ Station is one or more existing generating capacity resources consisting of

one or more assets located within a common property boundary ‒ Costs associated with a station avoided only by clearing of static delist bids

of all existing generating capacity resources at the station ‒ Intent is to capture common costs of resources within a station with

operational and commercial dependencies

• What are asset-specific going forward costs? ‒ Avoidable costs that can be allocated to an individual resource

MR 1. Section III.13.1.2.3.1.6

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Resources at a Station with Common Costs

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Tariff outlines five steps • Most expensive resources are delisted first • Full cost recovery is ensured, and • Ensure a monotonically non-increasing set of bids

Total Station Cost = $250,000 $6.94/kw-month

Example Station

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Total Station Cost = $250,000

Station Common Cost = $40,000

$6.94/kw-month


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Step 1: Calculated the Net Risk Adjusted Asset Specific Going Forward Costs (NRAGFC)

NRAGFC = $150,000

NRAGFC= $60,000

$6.25/kw-month

$5.00/kw-month

Example Station

NRAGFC

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Step 2: Order assets from highest NRAGFC to lowest; this is the preferred delist order


NRAGFC = $150,000

NRAGFC= $60,000

$6.25/kw-month

$5.00/kw-month

$6.94/kw-month

Example Station

Delist Order

First

Second

NRAGFC

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$6.94/kw-month


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Step 3: Calculate residual costs for each asset; this is the remaining costs at station as each assets is delisted

NRAGFC = $150,000

NRAGFC= $60,000

$6.25/kw-month

$5.00/kw-month

Example Station

Residual Costs

$6.94/kw-month

($150,000 + $60,000 + $40,000) / 3MWs = $6.94/kw-month

($60,000 + $40,000) / 1MWs = $8.33/kw-month

$8.33/kw-month

NRAGFC

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84

Step 3: Calculate residual costs for each asset; this is remaining costs at station as each assets is delisted

$6.25/kw-month

$5.00/kw-month

Example Station

Residual Costs

$6.94/kw-month

$8.33/kw-month

NRAGFC

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$8.33/kw-month

$6.94/kw-month


85

Step 4: Calculate composite costs for each asset (the max, of NRAGFC, and residual costs) Example Station

Composite Costs

$6.94/kw-month

$8.33/kw-month

$6.25/kw-month

$5.00/kw-month

Residual Costs NRAGFC


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$8.33/kw-month

$6.94/kw-month


86

Step 5: Adjusts the set of composite costs to ensure a monotonically non-increasing set of bids Example Station

Composite Costs

$6.94/kw-month

$8.33/kw-month

$6.25/kw-month

$5.00/kw-month


Is unit B’s composite cost greater than the composite cost of asset with lowest composite ($8.33 > $6.94)

And is unit B’s average asset-specific going forward costs less than its composite costs ($5.00 < $8.33)

ISO-NE PUBLIC

$8.33/kw-month

$6.94/kw-month


87

Example Station

Composite Costs

$6.94/kw-month $6.25/kw-month

$5.00/kw-month


$6.94/kw-month

Set asset B composite cost to that of asset with lowest composite cost (A)

Step 5: Adjusts the set of composite costs to ensure a monotonically non-increasing set of bids

ISO-NE PUBLIC

$8.33/kw-month

$6.94/kw-month


88

Step 5: Adjusts the set of composite costs to ensure a monotonically non-increasing set of bids Example Station

Composite Costs

$6.94/kw-month $6.25/kw-month

$5.00/kw-month


$6.94/kw-month

Per the Tariff, Resource with lowest composite cost , and resource with the adjusted composite cost will be considered a single non-rationable bid for use in FCA, as they have same price

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Resources at a Station with Common Costs Methodology – Step 1

89

$4.0

$4.2

$4.4

$4.6

$4.8

$5.0

$5.2

C. Moore C. Senor C. Good C. Worthy C. Saw

Average Resource-Specific ($/kW-mo.)

Step 1 Step 1 Step 1 Step 1 Step 1

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91

Methodology – Steps 2 through 5

$4.0

$4.2

$4.4

$4.6

$4.8

$5.0

$5.2

C. Good C. Senor C. Saw C. Worthy C. Moore

Average Resource-Specific ($/kW-mo.)

$4.0

$4.2

$4.4

$4.6

$4.8

$5.0

$5.2

C. Good C. Senor C. Saw C. Worthy C. Moore

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IMM FCM Contact Details

92

E-mail Market Monitoring FCA Participant Communications:

[email protected]





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ISO-NE PUBLIC

Questions

93

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ISO-NE PUBLIC

Evaluations

94

ISO-NE PUBLIC

ISO-NE INTERNAL USE ISO-NE PUBLIC

Appendix

95

ISO-NE PUBLIC

ISO-NE INTERNAL USE ISO-NE PUBLIC

Timeline Submitting FCM Delist Information to Internal Market Monitor

96

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Delist Bid Submittal Deadlines

97

IMM Step Timeline

Review Delist Bids June - September

Issue QDN September 29

Publish results of Pivotal Supplier

Test

Seven days before FCA

Market Participant Step Timeline

Submit Delist Bid Existing Capacity

Qualification Deadline

Delist Bid Finalization

Window

Seven days following

issuance of QDN

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Overview of General Timeline

98

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

June IMM initial

screening of submissions

February IMM posts latest

cost workbooks on ISO website

Early July Clarifying

questions issued to participants

June to early Sept Consultation with participants

(email/meetings)

May IMM emails historical

ISO revenue, H, Br., and inflation data to

participant upon request

Early June Existing Capacity

Qualification Deadline Submission of static delist

bids and export bids

End of September IMM issues qualification

determination notifications for delist bids

After QDN static delist bids

finalization period 7 days

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IMM Delist Bid Review Process

99

Submission at existing capacity qualification deadline requires: • Completed workbook • Supporting documentation • Affidavit(s) attesting to accuracy of submission

Consultation: • IMM will email any follow-up clarifying questions to participant • Open invitation for participant to meet with IMM staff to present

and discuss delist submission during June • Sufficient documentation and information must be included with the delist bid

to allow the IMM to make a determination

MR 1. Section III.13.1.2.3.2.1.1

Please email [email protected]


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IMM Delist Bid Review Process Objective

100

Determine whether delist bid is consistent with resource net going forward (NGFC), risk premium and opportunity costs through evaluation of: • Going forward components • Revenue and production costs • Risk premium • Capacity performance payments

ISO-NE PUBLIC

IMM Delist Bid Review Process

101

Accepted or Denied

*Recall the options that denied delist bids have in finalization window and impact the pivotal supplier test will have on what actually goes to auction

Accepted Delist Bid Bid is consistent with net going forward costs (NGFC) as submitted and removed from auction at accepted delist bid (subject to a reliability review)

*Denied Delist Bid Bid is NOT consistent with NGFC as submitted and an alternately determined bid at which resource can leave the auction (subject to a reliability review) will be submitted by IMM based on information initially submitted and subsequently provided in consultation with participant

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Qualification Determination Notification (QDN)

102

• QDN provides a written notification of ISO’s determination ‒ If IMM determination results in denying delist bid, an explanation of deficient

components of the bid is included in QDN

• No later than 90 days prior to first day of auction, ISO will make an informational filing with the Commission ‒ Details of IMM’s determinations regarding offers or bids submitted during

qualification process are filed as a confidential attachment

• QDN for IMM’s review of delist bids can be found via FCTS, in tab labeled Delist Bid Details ‒ Existing resource lead participants notified of their delist bid status

(Accepted/Denied)

Reliability determination is required and final results of determination are performed during auction

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Location of IMM’s Determination of Delist Bids

103

IMM QDN De-List Bid QDN Test PDF Attachment.pdf

Static

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Static Delist Finalization

104

Indicates static delist finalization is not complete

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Static Delist Finalization, continued

MR 1. Section III.13.1.2.3.2.1.1.2 & III.13.8.1

105

Actions required if static delist bid is accepted: • No later than seven days after the issuance of the QDN, participant

has option to make one of the following elections in FCTS

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106

Actions required if static delist bid is denied: • No later than seven days after the issuance of the QDN, participant

has option to make one of the following elections in FCTS


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107

Actions required if static delist bid is denied: • If no action is taken, then participant can challenge IMM’s

determination contained in QDN and as part of informational filing

• Participant must file with the Commission no later than 15 days after ISO’s submission of informational filing to the Commission


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FCA #11 – Pivotal Supplier Test

108

• Calculation performed prior to start of FCA to identify if a supplier controls enough capacity in the market such that it can unilaterally exercise market power and profitably set price at a noncompetitive level

• Conducted at the system level and for all import-constrained capacity zones

• Results made available seven days before the auction (not at QDN)

Suppliers with delist bids will no longer know if they are pivotal as part of QDN; they will not know what price will be used in FCA if an

IMM determined bid price has been established

ISO-NE PUBLIC

Rights and Obligations of Delisted Resources

109

Participation in energy market is voluntary • Day-Ahead Energy Market

‒ May submit offers into the Day-Ahead Energy Market

• Real-Time Energy Market ‒ If delisted generating capacity resource or portion thereof (1) did not submit

an offer into the Day-Ahead Energy Market or (2) was offered into the Day-Ahead Energy Market but did not clear, then in order to participate in the Real-Time Energy Market the resource must self-schedule and be subject to all the associated requirements

‒ ISO may request that a fully or partially delisted generating capacity resource provide energy for reliability purposes in the Real-Time Energy Market • However, the resource shall not be obligated to provide energy and shall not be

subject to any performance or availability penalties for failure to provide energy

MR 1. Section III.13.6.2

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Going Forward Costs Election to Participate in ISO New England Markets

110

Election is made in FCTS

Select YES or NO

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Common Cost Example Reference

111

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Example: Resources at a Station with Common Costs

112

Three MW station consisting of two resources: • Gen A = 2 MW and Gen B = 1 MW • Total avoidable costs of the station is $250k (i.e., avoided costs if

entire station is delisted)

Consider two scenarios: Scenario 1 Scenario 2

• If Gen A is delisted, the cost of operating Gen B only is $100k

• Therefore, the asset-specific cost for Gen A = $150k ($250k minus $100k)

• If Gen B is delisted, the cost of operating Gen A only is $190k

• Therefore the asset-specific cost for Gen B = $60k ($250k minus $190k)

Avoidable station common cost is $40k ($250k - $150k - $60k) = $40k

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113

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Resources at a Station with Common Costs Methodology

114

Step 1: Calculate average asset-specific going forward costs of each asset at the station $6.25/kW-month for Gen A and $5.00/kW-month for Gen B

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Resources at a Station with Common Costs, continued Methodology

115 MR 1. Section III.13.1.2.3.1.6

Step 2: Order the assets from highest average asset-specific going forward costs to lowest average asset-specific going forward costs; this is the preferred delist order given that the asset-specific NRAGFC of Gen A is higher than Gen B, Gen A should delist first, then Gen B

ISO-NE PUBLIC

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Resources at a Station with Common Costs, continued Methodology

116 MR 1. Section III.13.1.2.3.1.6

Step 3: Calculate and assign to each asset a station cost that is equal to average cost of assets remaining at the station, including station going forward common costs, assuming the successive delisting of each individual asset in preferred delist order • Assuming no resources are delisted, both Gen A and B require cost recovery of $250,000, or

an average of $6.94/kW-month (on the basis of 3 MW remaining) • If Gen A were delisted, asset-specific costs associated with Gen A of $150,000 are avoided

and Gen B requires cost recovery of remaining (residual) costs of $100,000 or $8.33/kW-month (on the basis of only 1 MW remaining)

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Resources at a Station with Common Costs, continued

117

Step 4: Calculate a set of composite costs equal to maximum of net risk adjusted GFC and average residual cost associated with each asset calculated in Step 1 and Step 3 • For Gen A, the composite cost is max[$6.25, $6.94] = $6.94/kW-month • For Gen B, the composite cost is max[$5.00, $8.33] = $8.33/kW-month

Methodology

MR 1. Section III. 13.1.2.3.1.6.3 (iv)

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Resources at a Station with Common Costs, continued

118

Step 5: Adjust set of composite costs to ensure a monotonically non-increasing set of bids as follows: Any asset with a composite cost greater than the composite cost of the asset with lowest composite cost and average asset-specific going forward costs that are less than its composite costs will have its composite cost set equal to that of the asset with lowest composite cost

Methodology

MR 1. Section III. 13.1.2.3.1.6.3 (iv)

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Methodology, continued

Table 4: Step 5

Successive delisting of Resources Resource de-listed

Delisted Capacity

(MW)

Residual Capacity

(MW)

Residual Costs

($)

Avg Residual

Costs

($/kW-mo)

Composite Costs

($/kW-mo)

De-List Bid

($/kW-mo)

No Resource De-listed 0 3 $250,000

Gen A De-Listed 2 1 $100,000 $6.94 $6.94 $6.94

Gen B De-Listed 1 0 $40,000 $8.33 $8.33 $6.94

Lowest Composite

Cost

Composite Cost of Gen B set equal to lowest

Composite Cost

Note: In this example, Gen A and Gen B would be considered a non-rationable bid in the auction

MR 1. Section III. 13.1.2.3.1.6.3 (iv)

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Non-Rationable Bid Scenarios Reference

120

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121

FCA clears below the delist bid of resources but ISO retains one of the resources at the station for reliability.

How is the level of compensation determined?

In this scenario: The non-rationable rule in the prior section does not apply.

For example, in this case a single resource can be retained for reliability. If Gen B is retained for reliability it will be paid its asset-specific cost of $5.00/kW-month plus the station common costs of $40,000.

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122

Decision is made to withdraw a delist bid for a resource (Gen B) during seven-day finalization window. Station common costs of $40,000 would then no longer be avoidable.

In this scenario: The delist bid for the remaining resource would be set equal to its asset-specific cost. For example, the Gen A delist bid would be $6.25/kW-month. For a station comprised of more than two resources, if more than one resource were to remain at the same delist bid price, the non-rationable rule would not apply.

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123

In this scenario: • If the non-rationable rule applies and delist bids of all resources are reduced

by the same amount, then both resources together would continue to be non-rationable. For example, delist bids for both Gen A and B are reduced by $1/kW-month.

• If delist bids of both resources are reduced by different amounts the non-rationable rule does not apply.

• If any resources are retained for reliability, the level of compensation continues to be calculated on the basis of the asset-specific costs and station common costs as noted in the IMM’s QDN.

Based on new information, a decision is made to reduce a resource delist bid during seven day finalization window How will the delist bid be treated?

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124

• In this scenario,

IMM approved delist bids for station resources are different; decision is made to reduce bids during finalization window so all resource delist bids are equal. Does this mean that the resources combined will be non-rationable?

No; in order for non-rationable rule to apply, the five steps reviewed in the Resource Belonging to a Station with Common Costs section must be completed and hold true in the IMM’s assessment of delist bids.

delisting · 2018-01-19 · (or forever if it is a permanent/retirement delist bid) • if an...

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