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ISO New England Load Response Update

ISO New England Load Response Update. Craig Kazin ISO New England Inc. Massachusetts Electricity Restructuring Roundtable March 23, 2001. 2001 Summer Capacity Situation.

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ISO New England Load Response Update

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  1. ISO New EnglandLoad Response Update Craig Kazin ISO New England Inc. Massachusetts Electricity Restructuring Roundtable March 23, 2001

  2. 2001 Summer Capacity Situation • ISO New England forecasts adequate generating capacity to meet summer 2001 projected peak load and operating reserve requirements • NEPOOL Reference Forecast Peak Load is 23,650 MW • Projected net generating capacity is about 27,100 MW at summer peak

  3. Need for Market-Based Initiative • Although there is adequate generating capacity for this summer, the need to provide incentives to reduce consumption remains. • Growing consumption causing spikes in demand • Air quality a continuing challenge • Possible Winter 2003 natural gas pipeline capacity problems • Developed the Load Response initiative, voluntary effort to promote conservation through price incentives • Initiative focuses on large industrial and commercial users

  4. Objectives • Reduce energy demand by 300-600 MW • Equivalent to 50,000-100,000 homes • Enhance system reliability during peak periods • Make New England’s energy market more robust by giving large users more control over their energy use and costs • Save money for participants: Minimum $30 million annually • Help control wholesale market price fluctuations • Cut air pollution by reducing use of older, less efficient plants • 280 tons nitrogen oxide (NOx) • 200 tons sulfuric oxide (SOx) • 230 Ktons carbon dioxide (CO2)

  5. How the Pilot Program Works • NEPOOL members to enter into agreements with large users, subject to state regulatory policy, no matter who their current supplier is • Users would be equipped with Web-based software enabling them to monitor the hourly price of electricity; users can reduce their consumption if the price rises • Users are compensated for the energy they do not use; paid by the NEPOOL member that provides their service • Energy savings will enable ISO New England to reduce the reserve capacity it currently requires (about 3,500 MW), producing cost savings

  6. Reliability Component Details • Enrolling entity receives daily compensation for availability based on Thirty-Minute Operating Reserve (TMOR) prices • If called, enrolling entity will receive compensation based on Energy Clearing Price (ECP) for actual reduction in load • Consumer compensated based on contract with enrolling entity • Reduces overall burden on the generating system

  7. Market Component Details • Consumer chooses when to reduce load based on forecast/actual ECPs • Enrolling entity receives compensation based on ECP for the hours in which reduction occurs • Consumer is compensated based on contract with enrolling entity • Reduced demand will restrain the overall market’s prices

  8. Funding for Compensation • Payments occur outside of Market Settlement System for simplicity now, and with future CMS changes • Total of payments made will be assessed to NEPOOL participants based on electrical load share

  9. Other Details of the Program • No adjustments to asset meter reads • No reallocation of load • No calculation of lost revenues necessary • No other payments • Supplier(s) either avoid purchase at ECP or get credit for sale at ECP

  10. Winter Pilot Program • Six NEPOOL participants • 14 enrolled customers • Anticipate initial test in late March • Customer response times < 30 minutes • Customer load reduction measured • Communications systems • Pilot program will determine system’s technical capability

  11. Full-Scale Program This Summer • Reliability component approved by NEPOOL on February 1 • Market component approved by NEPOOL March 2 • NEPOOL filed March 19 • FERC has 60 days to review proposal • Planned June 1 start

  12. Future Enhancements • Commitment to review program after summer season • Identify types of interruptions • Identify frequency of interruptions • Analyze air quality impacts • Solicit comments from all participants • Discuss options for increasing participation in program

  13. Conclusions • Load Response program an effective and cost-efficient way to promote voluntary energy conservation • Potentially a national model for demand-side steps • Harbinger of further demand-side participation

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