Capacity Demand Curve in ISO-NE: Results from Stakeholder Demand Curve Submissions

1. Capacity Demand Curve in ISO-NE: Results from Stakeholder Demand Curve Submissions ISO New England Samuel A. Newell Kathleen Spees Mike DeLucia Ben Housman February 27, 2014

2. Table of Contents

3. Stakeholder Demand Curve Specifications

4. Stakeholder Demand Curves

5. Stakeholder Demand CurvesPerformance Summary The curves we received generally perform better than the candidate curve in one dimension but show tradeoffs in other dimensions

6. Summary Table of Results

7. How Would an Error in the Administrative Estimate of Net CONE Affect Demand Curves’ Performance? • Having an accurate administrative Net CONE estimate is crucial to good performance, but performance degrades more quickly with some curves than with others • Curves with price caps on the low end at 1.5x Net CONE show the most substantial performance degradation and lowest realized reliability outcomes(i.e. NESCOE, NU, and MA DPU curves) Performance if Administrative Net CONE is Too Low True Net CONE = $8.3/kW-m (33% Higher than $6.2/kW-m Administrative Estimate) * The cap of the Mass. DPU curve is defined as a function of Gross CONE. This example assumes that the administrative estimate of Gross CONE is 33% lower than the true value.

8. How Would an Error in the Administrative Estimate of Net CONE Affect Demand Curves’ Performance? • If the estimate of Net CONE were higher than the true value, the demand curve would attract more supply than needed to meet reliability objectives, and customer costs would increase • All curves exceed reliability objectives in this example, but steeper curves (candidate, NESCOE, and National Grid) are less susceptible to the over-procurement problem Performance if Administrative Net CONE is Too High True Net CONE = $8.3/kW-m (Administrative Estimate is 33% Higher at $11.1/kW-m) * The cap of the Mass. DPU curve is defined as a function of Gross CONE. This example assumes that the administrative estimate of Gross CONE is 33% higher than the true value.

9. NESCOE Submitted Curve Curve Parameters Reduced Price Volatility Falls Short of Reliability Objectives

10. National Grid Submitted Curve (tuned to achieve 1-in 10 LOLE) Curve Parameters Bimodal Pricing Slightly Increased Price Volatility

11. Northeast Utilities Submitted Curve Curve Parameters Reduced Price Volatility Falls Slightly Short of Reliability Objectives

12. Mass. Attorney General’s Office Submitted Curve Curve Parameters Reduced Price Volatility Falls Slightly Short of Reliability Objectives

13. Mass DPU Submitted Curve Curve Parameters (Cap at 1x Gross CONE) Reduced Price Volatility Falls Short of Reliability Objectives

14. Mass DPU Submitted Curve (tuned to 1-in-10) Curve Parameters (Cap at 1x Gross CONE) Cap at 1x Gross CONE Reduced Price Volatility

15. NRG Submitted Curve with Cap at 2x Net CONE Curve Parameters Note: NRG requested a demand curve that achieves a Freq. Below NICR of less than or equal to 10%, a Freq. Below Min. Acceptable of no more than 1%, and an Average LOLE less than 0.100. Improved Reliability Overprocurement

16. NRG Submitted Curve with Cap at 1.5x Net CONE Curve Parameters Note: NRG requested a demand curve that achieves a Freq. Below NICR of less than or equal to 10%, a Freq. Below Min. Acceptable of no more than 1%, and an Average LOLE less than 0.100. Improved Reliability Overprocurement

17. NextEra Simulation Results - Summary Table