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ISO NEW ENGLAND. G 200. G 200. L 200. L 200. 1. Nodal/ Zonal Pricing Technical Background. Mark Karl ISO New England 10/2/2003. ISO NEW ENGLAND. G 200. G 200. L 200. L 200. 2. Settlement Modeling. Used for calculation and assignment of load to Participants Accounts for all load

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G 200

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  1. ISONEW ENGLAND G200 G200 L200 L200 1 Nodal/ Zonal PricingTechnical Background Mark Karl ISO New England 10/2/2003

  2. ISONEW ENGLAND G200 G200 L200 L200 2 Settlement Modeling • Used for calculation and assignment of load to Participants • Accounts for all load • Puts electric system (EMS) model data in a framework to assign payment responsibility • Resources receive nodal LMP • Load Pays Zonal Price (Load weighted LMP) • Allows for reconciliation of differences between EMS data and revenue-quality retail data

  3. ISONEW ENGLAND G200 G200 L200 L200 3 Meter Domains • Tool used to group electric system Nodes for settlement and reporting purposes • Meter Domains used to determine if all load was assigned. • Geographically bounded and associated with a “Host Utility” • Metering Domains must be encapsulated in one Load Zone (Pricing Zone) • This was the “driver” for splitting NGRID and NSTAR territories into multiple domains.

  4. ISONEW ENGLAND G200 G200 L200 L200 4 Linkage of Wholesale to Retail • Metering domains do not cross pricing zone boundaries. • All load in the domain pays the same zonal price. • Retail customers are mapped to “Load Assets”. • Load assets are logical customer groupings which are the wholesale representation of retail load. • Load responsibility tracked at the Load Asset level • Load Assets currently valid throughout a metering domain.

  5. ISONEW ENGLAND G200 G200 L200 L200 5 Nodal Pricing Implementation Choices and Issues

  6. ISONEW ENGLAND G200 G200 L200 L200 6 Nodal Pricing Implementation • Implement more/ Smaller Zones • Not a “Nodal Pricing” solution but similar impact. • Split zones which experience intra-zonal congestion. • NGRID and NSTAR have already been through this process. • Delivers most of the benefit of nodal pricing at minimal cost and with minimal contracting disruption. • Maintains a robust zonal pricing system for those wanting that type of price stability. • Maintains existing Load Asset accounting and contract system.

  7. ISONEW ENGLAND G200 G200 L200 L200 7 Nodal Pricing Implementation • “Special Circumstances” Nodal – Some Customers may Qualify • All the load at a node chooses Nodal. • Includes Load Assets representing only load at that particular Node. • Requires OP18 Compliant Metering – Interval metering is not sufficient since ISO requires real-time data. • The Node is removed from the Zonal Price Calculation. • Node must share in cost of zonal “unmetered load”

  8. ISONEW ENGLAND G200 G200 L200 L200 8 Nodal Pricing Implementation • “Special Circumstances” Nodal Alternate approach: • Requires customer install OP18 metering – Interval metering is not sufficient. • ISO splits the Node • Previous single node becomes an aggregated Node made up of two new pricing Nodes. • One pricing Node counts toward zonal price, the other does not. • Load opting for Nodal price becomes a meter reader. • ISO requires node weighting to allow zonal price to be calculated in real-time. • Weighting could be fixed or dynamic • Nodal Load shares in cost of “unmetered load”

  9. ISONEW ENGLAND G200 G200 L200 L200 9 Nodal Pricing Implementation • Full Nodal – All customers in NEPOOL move to nodal pricing on a given date. • No choice regarding nodal versus zonal pricing • Option to Balance load at the node or use Node estimation approach. (very different costs) • Allows calculation of a zonal price in real time, but zonal price not used in settlement. • Requires new node-associated Load Assets. • Requires retail load mapping to nodes as well as to Load Assets.

  10. ISONEW ENGLAND G200 G200 L200 L200 10 Nodal Pricing Implementation • Nodal Choice – customers at each node may chose nodal or zonal price. • Zonal price is a residual calculation of load weighted average of that portion of load opting for zonal price. • Almost impossible to calculate a real-time zonal price. • Actual vs Estimated node weights. • Real-time calculation using actual weights would require extensive telemetry. • Requires balancing of load at each node. • Requires reconfiguration of Load Assets and may require a nodal/ zonal specific Load Assets

  11. ISONEW ENGLAND G200 G200 L200 L200 11 Development of Pricing Zones

  12. ISONEW ENGLAND G200 G200 L200 L200 12 Development of Pricing Zones • ISO-NE currently operates with eight pricing zones for load • Market Rule 1 requires periodic review and revisiting of zones • Goal is to draw zones with relatively little intra-zonal congestion • The zone should reflect a rough “average” price with little cross subsidization within the zone

  13. ISONEW ENGLAND G200 G200 L200 L200 13 Development of Pricing Zones • A number of initiatives are under way that require development and use of zones: • Current processes include 14 RTEP sub-areas and 8 Energy Market load zones • Projects underway that will require development of zones include Locational ICAP and Locational co-optimized reserves. • RTEP sub-areas currently do not exactly match the load zones • Zonal differences already create confusion in the marketplace • Development of zones for additional projects could create further confusion

  14. NH-4002 MAINE-4001 SMD Regions VERMONT-4003 NEMASSBOST-4008 WCMASS-4007 CONNECTICUT-4004 SEMASS-4006 RI-4005

  15. ISONEW ENGLAND G200 G200 L200 L200 15 Development of Pricing Zones • To facilitate liquidity and avoid confusion it is desirable that the “market” zones be coincident • Energy Pricing Zones • Locational ICAP Zones • Locational Co-optimized Reserves • The market zones are drawn for compatible purposes • RTEP is required to focus on physical/ local issues and may always require more granularity in zone definitions

  16. ISONEW ENGLAND G200 G200 L200 L200 16 Development of Pricing Zones • Given that RTEP Zones and market zones are likely to be non-coincident an approach is required to link the two. • A workable approach would be to apply a transfer layer to translate requirements from RTEP to the market • Given a requirement for the VT/NH RETP zone, the requirement could be allocated to the two market zones • The allocation would be consistent for all the market requirements (Pricing, LICAP, Reserves) • Allows RTEP Zones to change while providing market stability – How Often can/should market zones change?

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