September 10, 2013 | Markets Committee

1. September 10, 2013 | Markets Committee Complete summary of NCPC Redesign for Offer Flexibility conforming changes to other NCPC credit types. Including design changes since prior presentations. NCPC Payments: other credits Matt Brewster MARKET DEVELOPMENTMBREWSTER@ISO-NE.COM | 413.540.4547

2. Revised presentation guide This document is a revised presentation of the NCPC Payments design overview for credit types other than out-of-merit generation Changes to these materials (originally presented August 9, 2013) are indicated as: A new slide An updated slide Updated text is shown in red font Deleted text is shown in light orange with wavy underlinefont Some slides from the prior presentation have been deleted New Slide Updated

3. ISO proposes to modify some other types of NCPC Credit for Offer Flexibility

4. Day-Ahead External Node NCPC is not being modified • No proposed changes to this NCPC compensation • External Transactions, Decrement Bids and Increment Offers that are cleared out of rate in the day-ahead market at external nodes are eligible for NCPC for the difference between the LMP and the transaction price each hour

5. Synchronous Condenser NCPC is not being modified • No proposed changes to this NCPC compensation • Resources committed to operate as a synchronous condenser receive NCPC credit for the hourly price to condense each hour and the condensing start-up fee (if applicable) submitted with their Supply Offer

6. Minor changes are proposed to the Real-Time External Transactions NCPC • Hourly evaluation rather than over transaction duration • Priced transactions with an associated day-ahead cleared schedule will be: • Evaluated based on the real-time scheduled quantity exceeding the day-ahead scheduled quantity • Evaluated based on the total real-time scheduled quantity for transactions re-cleared in real-time using a revised offer price

7. Real-Time External Transaction NCPC credit • Priced external transactions that are cleared out of rate in the real-time market are eligible for NCPC for the difference between the LMP and the offer price each hour • Priced import transaction hourly credit: Scheduled Quantity x (Transaction Price – Real-Time LMP) • Priced export transactions hourly credit: Scheduled Quantity x (Real-Time LMP – Transaction Price)

8. Updated 9/10/13 Minor changes are proposed to the Real-Time DARD Pump NCPC • Hourly evaluation rather than over entire day • DARD Pump with day-ahead cleared demand will be evaluated based on total real-time consumption rather than deviations exceeding the day-ahead demand • Consumption in excess of ISO dispatch instruction will not be considered • Bid cost determined with greater of demand bid at time of ISO posture order or submitted each hour

9. Updated 9/10/13 Real-Time DARD Pump NCPC credit • DARD Pumps are eligible only when an ISO posturing order causes the resource to consume out of rate • The greater of hourly demand bids at the time of the posturing order or submitted for each hour determines the bid price for NCPC compensation • DARD Pump hourly credit: MIN (DDP, Metered OutputConsumption) x (Real-Time LMP – Bid Price)

10. Updated 9/10/13 Cancelled Start NCPC compensation is unchanged, but proposal modifies eligibility requirements • Starts scheduled in the day-ahead market are eligible • Day-ahead schedule compensation for Start-Up fees will not ensure willingness to incur cost RTare no longer compensated through DA NCPC so their eligibility is now necessary • Resources that are cancelled more than two hours after the scheduled synchronization time are not eligible • Resources that self-schedule a start within lesser of (i) their Minimum Down Time or (ii) 10 hours after being cancelled are not eligible • Applies when self-schedule is requested after the cancellation order • Requirement that resources have a Notification Time not longer than 24 hours remains (no change)

11. Cancelled Start NCPC credit • Each cancelled pool-scheduled commitment is compensated when the ISO cancels a start after Notification Time begins • If cancelled ahead of the Notification Time there is no credit • Start-Up fee and Notification Time are based upon the offer information used by ISO to make the commitment decision • Cancelled Start credit: Start-Up fee x percentage of Notification Time completed

12. Cancelled Start NCPC examples  Cancelled Start credit = $4,000 (= $6k * 1/1.5) • Cancelled Start credit = $0 (cancelled prior to Notification Time)

13. Updated 9/10/13 Cancelled Start NCPC examples (continued) • Cancelled Start credit = $6,000 (if cancelled after 2 hour limit no credit) • Cancelled Start credit = $0 (self-scheduled start within lesser of Min Down time and 10 hrs)

14. New Slide 9/10/13 Generator Posturing NCPC Credits proposal is being re-evaluated • ISO proposal discussed at the August Markets Committee meeting is being re-evaluated to better address opportunity cost for generators the ISO manually operates outside markets • The generator posturing NCPC proposal will be discussed at the September 24 MC meeting • Only generator resources that are postured by the ISO are eligible for Posturing NCPC credit

15. Updated 9/10/13 Hourly Shortfall NCPC is being modified to accommodate re-offers • A lost opportunity cost calculation will be used rather than the current approach which evaluates the difference between the day-ahead and real-time LMPs • Allows resources that have re-offered in RT to be includedEliminates the exclusion of resources that re-offer in real-time • ISO will not propose an hourly shortfall credit for non-dispatchable resources ISO is also evaluating applying the existing hourly shortfall calculation to non-dispatchable resources

16. New Slide 9/10/13 Hourly Shortfall NCPC modifications (continued) • Estimated Economic Dispatch for energy will be determined using resource’s physical parameters (e.g., EcoMax, Available Energy) and Supply Offer and the real-time LMPs • Non-Fast Start generator Supply Offer price parameters will be based on greater of (DA offer, offer when decommitted, offer each hour) • Start-up fee (when applicable) and No Load fee will be included in estimated cost calculations • Actual reserve credits and estimated reserve credits will be included in the revenue calculations • Fast Start generators will be evaluated hourly and non-Fast Start generators over period of decommitment

17. Updated 9/10/13 Hourly Shortfall NCPC credit (continued) • Resources that clearedare pool-scheduled in the Day-Ahead Market, are offline and available, are not postured, but are decommitted or not economically dispatched by the ISO in real-time are eligible for this compensation • Resources will be evaluated for hourly shortfall credit during hours of the DA schedule • Fast Start generator credit will be determined by individual hour • Non-Fast Start generator credit will be determined over the contiguous hours of the decommitted DA schedule • Hourly Shortfall NCPC is calculated using the same approach as postured, non-limited energy generator resource

18. New Slide 9/10/13 Hourly Shortfall NCPC credit (continued) • Hourly Shortfall NCPC credit is calculated as: MAX(0, Estimated Margin – Actual Margin) • Estimated Margin is the difference between Estimated Revenue and Estimated Offered Cost where: Estimated Revenue = Real-Time LMP x Economic Dispatch Point + Estimated RT Reserve Credits Estimated Offered Cost = Start-Up + No Load + Energy Cost @ Economic Dispatch Point • Actual Margin is the resource’s RT reserve credits for TMSR, TMNSR and TMOR

19. New Slide 9/10/13 Hourly Shortfall NCPC credit example(Fast Startgenerator) • NCPC credit is: MAX[0, Estimated Margin – Actual Margin] each hour • Estimated margin = Estimated Revenue – Estimated Cost • Actual margin = Actual Revenue • Fast Start credit is determined for each hour offline

20. New Slide 9/10/13 Hourly Shortfall NCPC credit example (non-Fast Startgenerator) • NCPC credit is: MAX[0, Sum(Estimated Margin) – Sum(Actual Margin)] • Estimated margin = Estimated Revenue – Estimated Cost • Actual margin = Actual Revenue • Summation is over contiguous hours decommitted

21. Minimum Generation Emergency credit is replaced by RT Dispatch NCPC • RT Dispatch NCPC credit replaces need for a special credit during Minimum Generation Emergency • Compensates out of rate energy dispatch during normal system operation and Min Gen • Hourly No Load fee compensated by RT Commitment NCPC • During Min Gen the RT Dispatch NCPC cost will be allocated to Real-Time Generation Obligation (III.F.3.1)

22. New Slide 9/10/13 Cost allocation for these NCPC credit types