October 8, 2013 | NEPOOL markets committee

1. October 8, 2013 | NEPOOL markets committee ISO New England - market development Posture Credit Design Changes from the September 10, 2013 Markets Committee Presentation NCPC Payments – Generator Posturing Jon Lowell

2. Preface This document is a complete summary of the proposed NCPC design for credits related to out-of-merit operation, as of October 8, 2013. Changes to the design from what was presented at the July 10, 2013 meeting , and the date the change was presented, are indicated as: • “New Slide” • “Updated Slide” Minor changes to text are shown in red. Deleted text is shown in light orange with a wavy underline. New Slide – mm/dd/yy Updated – mm/dd/yy

3. Updated – 10/08/13 Posturing for Limited Energy Resources • Since the same “fuel” is used in the actual dispatch and the best alternative proxy dispatch, the cost is the same for both, except… • A postured resource may have energy left unused at the end of the day • The cost of replacing the unused energy the next day is avoided • The Posturing Credit values the energy remaining in storage at the end of the day at the estimated avoided cost to replace the energy the next day: • For Pump Storage Resources, replacement cost = DALMP for HE3-5 • For other LEG Resources (storage hydro, gas units with LEG), value of unused energy = 0

4. Updated – 10/08/13 Posturing for Limited Energy Resources • Posture Credit for a Limited Energy Resource: = Max[0, Best Alternative Margin – Actual Margin] = Max[0, (Energy RevenueBA + Remaining Energy MWhValueBA) – (Energy RevenueACTUAL+ Remaining Energy MWhValueACTUAL)] • Energy RevenueBA = Best Alternative Energyh x RTLMPh • Best Alternative Energyh represents the hourly use of available energy that maximizes potential Real-Time revenue • Energy RevenueACTUAL = Actual Energyh x RTLMPh • Evaluated from start of posturing through the end of the Operating Day • Available energy for shared fuel resources divided equally amongst units based on unit’s Max Daily Energy (as redeclared by the Lead Participant) and actual generation and pumping prior to posture order. • For non-Fast Start resources, available energy is dispatched in contiguous hours (no shutdown & restart)

5. New Slide – 10/08/13 Posturing – Available Energy • For units sharing a common fuel supply, when: Actual Generation - Actual Pumping > Est. Available Energy this implies the available energy was reallocated between units during the remainder of the day • The ISO will adjust the original estimates as necessary to create feasible operating outcomes for the resources sharing the fuel source.

6. New Slide – 10/08/13 Posturing – Pumping after Posture Order • Pumping after being postured will impact the additional energy in storage at end-of-day • This “extra pumping energy” will be valued at replacement cost • Economic (or self-scheduled) pumping should not make the participant financially worse off by lessening the posture credit • To achieve this outcome, any “extra pumping energy” is included in the “best alternative” end-of-day storage • It is not included in the “best alternative” energy dispatch • Including the “extra pumping energy” in both the actual and best alternative sides of the credit calculation allows it to cancel out without impacting the posture credit.