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Order 719 Compliance

Order 719 Compliance. NEPOOL Markets Committee Meeting December 9-11, 2008 Michelle C. Gardner. Order 719: Wholesale Competition Reforms.

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Order 719 Compliance

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  1. Order 719 Compliance NEPOOL Markets Committee Meeting December 9-11, 2008 Michelle C. Gardner

  2. Order 719: Wholesale Competition Reforms FERC issued its Final Rule on October 17, 2008 regarding reforms to Wholesale Competition in Regions with Organized Electric Markets (RM07-19-000 and AD07-7-000) Requires ISO-NE to make a number of compliance filings either proposing tariff changes to comply with Final Rule or demonstrating existing compliance Compliance filings due on April 28, 2009 Follows in response to NOPR (Feb 22, 2008) and ANOPR (June 22, 2007) issued in proceeding

  3. Order 719: Wholesale Competition Reforms Final Rule addresses: (1) demand response and market pricing during periods of operating reserve shortage; (2) long-term power contracting; (3) market-monitoring policies; and (4) responsiveness of RTO/ISOs to customers and stakeholders Markets Committee charged with addressing #s (1) - (3) Separate working group established to address # (4), chaired by ISO-NE, NEPOOL, NECPUC, and consumer advocates (information to Participants Committee is forthcoming)

  4. Order 719: Wholesale Competition Reforms Presentation outlines FERC Compliance on Order 719 with respect to items before Markets Committee ISO-NE will make presentation in January to the Markets Committee with respect to how ISO-NE believes the region either complies with, or will comply with, the FERC’s Final Rule ISO-NE to make filing with FERC by April 28, 2009

  5. Demand Response Compliance Requirements Accept bids from demand response resources, on basis comparable to other resources, for ancillary services acquired in competitive bidding process if the demand response: (1) meets technical requirements and (2) submits a bid at or below the market-clearing price (unless otherwise prohibited under relevant state law) applies to markets, if any, for energy imbalance, spinning reserves, supplemental reserves, reactive supply and voltage control, and regulation and frequency response as defined in OATT (or functional equivalents) no obligation to create new ancillary markets

  6. Demand Response Compliance Requirements (con’t) no must-offer requirements on demand response intent not to create preferential treatment for demand response RTO/ISO to adopt reasonable technical requirements as to size, telemetry, metering and bidding compliance must include description of efforts to develop adequate customer baselines compliance must also include standards necessary for system operators to call on demand response

  7. Demand Response Compliance Requirements Allow demand response to specify limits on their bids in ancillary markets (or joint energy-ancillary services markets) maximum duration in hours and maximum number of times for one day that a resource may be dispatched, as well as a maximum amount of reduction that resource may be required to provide either daily or weekly (additional limits may be considered) current application to demand resources only RTO/ISOs to perform an assessment of smaller demand resources by the end of 2009 (pilot programs or other mechanisms) definition of “small” demand resources left to region to decide

  8. Demand Response Compliance Requirements Eliminate “deviation charges” to buyers in energy market who take less energy in RT than scheduled in DA during operating reserve shortages applicable to all buyers in energy market that can voluntarily reduce load upon request FERC stated that socialization of costs is justified, however, left it up to each region to determine appropriate allocation elimination for virtual purchases as well, unless ISO demonstrates that such elimination is not appropriate Permit aggregators to bid in demand on behalf of retail customers directly into wholesale markets (unless state law prohibits this) under certain criteria outlined by FERC

  9. Demand Response Compliance Requirements RTO/ISOs to assess and report on any remaining barriers to comparable treatment of demand resources MMU must submit a report describing its views on this to the FERC RTO/ISOs are required to identify any significant minority views reporting on energy efficiency and distribution generation may be included but is not required to be

  10. Market Pricing Compliance Requirements Pricing reforms to ensure that the market price for energy accurately reflects the value of such energy during shortage periods FERC offered 4 alternative approaches to meet this objective, one of which is the establishment of a demand curve for operating reserves adequate factual record to be submitted to FERC must show how approach meets six identified criteria (improving reliability, encouraging investment, comparability, etc.) market monitor must provide FERC with its view on any proposed reforms phase-in of reforms is allowed so long as not protracted does not eliminate or revise existing market power mitigation measures (e.g., conduct and impact tests in New England)

  11. Long-Term Contracting Compliance Requirements Dedicate a portion of ISO/RTO website for market participants to post offers to buy or sell power on a long-term basis long-term is defined as one year or more although can post offers for shorter terms if desired costs should be treated similarly as other website costs, although if significant, may propose cost recovery plan details on implementation largely left up to regions

  12. Market Monitoring Compliance Requirements(Independence and Function) FERC declined to mandate one structure for MMUs Tariffs should state that RTOs/ISOs are obligated to provide MMUs with necessary tools, access to RTO/ISO database, and granting MMUs exclusive control over any MMU-created data MMUs must report to the RTO/ISO board (may report to ISO management for administrative purposes) applies to internal MMUs as well to the extent responsible for carrying out “core” MMU duties

  13. Market Monitoring Compliance Requirements(Independence and Function) FERC updates and expands upon “core” MMU duties: evaluating existing and proposed market rule and tariff provisions and market design elements for effectiveness and proposing recommended changes to RTO/ISO as well as FERC Office of Energy Market Regulation and others reviewing and reporting on performance of markets to RTO/ISO, FERC and other interested entities identifying and notifying FERC Office of Enforcement staff of suspected market behavior by RTO/ISO as well as market participants

  14. Market Monitoring Compliance Requirements(Independence and Function) FERC may authorize internal MMUs in hybrid structures to conduct mitigation provided that external MMU is charged with reviewing its “quality and appropriateness” Regardless of above, internal and external MMUs can always conduct “retrospective” mitigation - mitigation that does NOT affect market outcomes on a forward-going basis (such as altering prices of offers or physical parameters of offers), and can provide inputs for “prospective” mitigation (e.g., reference levels, identifying system constraints, cost calculations) Administrative matters should be conducted by RTO/ISO (e.g., enforcement of late fees and timely submission of reports)

  15. Market Monitoring Compliance Requirements(Independence and Function) Tariffs should be reviewed and changed, if needed, to: clearly state what functions are to be performed by MMUs and which by RTO/ISOs make mitigation provisions as non-discretionary as possible include certain minimum ethics standards for MMU centralize all of the MMU provisions in tariff and include mission statement in introduction with goals of MMU to protect consumers and participants by identifying and reporting market design flaws and market abuses

  16. Market Monitoring Compliance Requirements(Information Sharing) MMU required to prepare annual state of markets reports as well as less extensive quarterly reports on market trends and performance of markets MMU must make staff available for conference calls with FERC, state commissions, RTO/ISO and market participants Lag time for release of physical and virtual bid and offer data reduced from 6 months to 3 months (retained masking of identities) Compliance must include justification of RTO/ISO policy regarding aggregation, or lack thereof, of bid and offer data

  17. Market Monitoring Compliance Requirements(Information Sharing) State commissions may make tailored requests for information to MMUs regarding general market trends and performance of wholesale markets (MMUs under no obligation if they determine request to be unduly burdensome) RTOs/ISOs to develop confidentiality provisions for release of information MMUs under no obligation to turn over raw data to state entities MMUs not permitted to provide information designed to aid state enforcement actions Market Participants must be able to contest release of data

  18. Market Monitoring Compliance Requirements(Information Sharing) State commissions may petition the FERC for the release of otherwise proscribed information FERC has ability to grant waiver of tariff provisions governing release of information MMU referrals to FERC must be kept confidential, as well as any resulting investigations FERC declined to mandate a proforma MMU tariff section, but offered suggestions on organization

  19. Questions or Comments?

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