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Auction For Quick-Start Capability

Agenda Item #2a 10/30/01 MC Mtg. Auction For Quick-Start Capability. Mario DePillis 10/30/01 NEPOOL Markets Committee. Outline. Basics: offers, requirements, fulfilling requirements. Resolving outstanding issues. Open for discussion. Basics: Physical Method. High Operating Limit.

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Auction For Quick-Start Capability

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  1. Agenda Item #2a 10/30/01 MC Mtg. Auction For Quick-Start Capability Mario DePillis 10/30/01 NEPOOL Markets Committee

  2. Outline • Basics: offers, requirements, fulfilling requirements. • Resolving outstanding issues. • Open for discussion.

  3. Basics: Physical Method High Operating Limit Maximum Capability Block Scheduled Spinning Reserve Normal Energy Dispatch Range New HOL Low Energy Block Low Operating Limit

  4. Basics: Financial Method High Operating Limit Maximum Capability Block Qualifying Blocks Normal Energy Dispatch Range Bid Price Floor Low Energy Block Low Operating Limit

  5. Basics: Reserving Capability • Physical vs. Financial • Physical reservation segregates resources, increases costs. • Physical reservation would require new vendor software for both commitment and dispatch.

  6. Basics: The Initial Offer • Portfolio offers (MW, $/MW). • 3 month supply period. • No resources identified. • Load can enter offer. • Offers of self-supply in MW. • Section 3

  7. Basics: The Product • The product: QS Capability. • 10 or 30 minute off-line reserve capability. Section 10. • Financially reserved capability. Section 9. • Qualifying blocks. Section 9. • No penalty or payment reduction if called for energy.

  8. Basics: Relation to Energy and TMSR • No penalty for energy provision. Section 10. • Still eligible to set ECP. • MW of QS Capability paid reduced by MW of TMSR designation. Section 8.1. • No additional penalty for TMSR designation.

  9. Basics: Meeting Individual Supply Requirement • Measured over all Settlement Resources. Section 7 and 8. • Excess QS 10 Cap substituted for QS 30 Cap to meet requirement. Section 7.

  10. Basics: Evaluation and Auction Prices • 10 Minute Resources may meet 30 minute auction purchase requirement. Section 3.3. • Explicit price cascading. Section 3.6.

  11. Basics: Self-Supply • Principles: • Same timing as central supply. • Same requirements on bids, delivery as central supply. • Same penalties for non-delivery. • Implementation: • Easiest implementation is $0/MW bid. • Other suggestions? • Section 3.4

  12. Basics: FEQSR Units • “Financial Equivalent Quick-Start Resource” • Required to have zero energy uplift for the day. • Energy uplift measured net of AGC and Transmission. • Section 9.2.2.

  13. Basics: Bilateral Trades • Essential for short-term adjustments. • Scheduled outage? Buy QS Capability bilaterally. • Lost auction? Sell QS Capability bilaterally. • No load? Accept QS Capability Obligations.

  14. Basics: Bilateral Trades • Two types of trades: obligations and resources. • System contracts transfer obligations. • Unit Contracts transfer resources. • Section 8.1 and forthcoming revised 12.A-5, 12.A-6.

  15. Basics: Obligations • Charges based on obligations, Section 12: • The Participant's allocated share of TMNSR (TMOR) hourly requirement. • System contracts transfer obligations. • Old system contracts now for QS Cap Obligations. • System dispatchable contracts carried as exchange of obligation.

  16. Energy Bid Limits • Upper limit at Min[Energy Bid Cap, $1000] • Lower limit: • 12,200 CT as benchmark off-line unit. • Adjust for forward gas prices, delivered. • Adjust for O&M. • Current estimate is slightly above $60.

  17. Limit on Start-Up and No-Load • Would not apply to FEQSR units. • Assures that unit is not misrepresenting flexible characteristics, Section 9.1. • May not be necessary with user financed audit, Section 11.2.

  18. Penalties • Participant concern over illiquid bilateral market, lack of liquid spot market. • Need for accurate voluntary reporting of capability and unit characteristics. • Two types of failure: • Failure to supply capability—low penalty. • Failure to supply energy per unit characteristics —high penalty.

  19. Penalties • Decision to allow $1,000/MWH energy bids =>Some unit characteristics never observed. • 1 “user financed” audit per auction period. • Seller incorporates cost into auction offer. • How to identify in portfolio delivery? • How to address MCC blocks with low ramp rates?

  20. Replacement Reserves • % TMOR in replacement reserve. • Average MW when units were committed for surplus. • Study to be done on old unit commitment runs.

  21. Limits On Forward Purchases • Forecasting Office doing study. • Procedure: • Select case with units committed for surplus. • Decommit units committed for surplus and measure change in cost. • Calculation will be monthly average cost, $/MW-Month. • Possible alternative is ICAP deficiency charge.

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