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May 7, 2014

May 7, 2014. Bob Laurita and Mario DePillis. Internal Market Monitoring. Conforming changes to Section III.A.8 due to Offer Flexibility. Determination of Offer Competitiveness During Shortage Events. Background.

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May 7, 2014

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  1. May 7, 2014 Bob Laurita and Mario DePillis Internal Market Monitoring Conforming changes to Section III.A.8 due to Offer Flexibility Determination of Offer Competitiveness During Shortage Events

  2. Background • During a Shortage Event some resources may be off-line and unavailable due to notification and start-up times. • A Market Participant may be entitled to a Shortage Event penalty exemption, under III.13.7.1.1.3 (c), if they offered their resources competitively. • The Internal Market Monitor (IMM) evaluates the Supply Offers of resources with a CSO that are off-line during a Shortage Event to determine the MWs that were offered competitively.

  3. Problem Statement • The current market rule (Section III.A.8) assumes a single Supply Offer in the Day-Ahead and Real-Time Energy Markets. • Offer Flexibility introduces the complexity of multiple (hourly) Supply Offers to the offer competitiveness test. • Similar to the recent changes to commitment and energy mitigation methodologies. • Section III.A.8 makes reference to tests and thresholds in other sections of the Appendix A that have been modified or removed as a result of Offer Flexibility.

  4. Current Competitive Offer Test - Summary (III.A.8)

  5. Proposed Solution • Align the offer competitiveness tests with Offer Flexibility and the recently revised commitment and energy mitigation methodologies. • Consistent with the Offer Flexibility rules, use Low Load Cost to test competitiveness at or below Economic Minimum • Consistent with the current market rule, use Energy Prices by Segments to test competitiveness above Economic Minimum. • Test the Real-Time Supply Offer submitted during the Operating Day.

  6. Proposed Competitive Offer Test - Summary

  7. Supply Offer Tests • The IMM will test the Supply Offers in all 24 hours in the Day-Ahead and Re-Offer Period. • Consistent with the current market rule which tests competitiveness for the entire day. • The economic decision of when and for how long to commit resources is based on selecting among multiple hourly offers • The majority of commitments are made in the Day-Ahead Energy Market and the initial RAA. • The IMM will test the Real-Time Supply Offer effective in the 1st hour of the Shortage Event • Represents the last opportunity a Market Participant had to offer competitively before the start of the Shortage Event • Provides sufficient incentive because the Market Participant has no foreknowledge which hour will be a Shortage Event.

  8. Example • Natural gas fired unit with the following characteristics: • 8,500 MMBtu/MWh heat rate • 6 Hour Minimum Run Time • 100 MW Economic Minimum • Reference Levels are marginal costs based on the Market Participant’s Fuel Price Adjustments (FPA) • The unit does not clear in the Day-Ahead Energy Market and is not committed in the RAA. • Participant does not change Supply Offer from Day Ahead to Re-Offer Period • Participant increases Startup and No Load Fees in Real-Time • The unit is off-line during a Shortage Event occurring HE 13 – HE 15 • The unit was located in a Constrained Area in Real-Time

  9. Day-Ahead and Re-Offer Period Supply Offers are Competitive in All Hours

  10. The Real-Time Supply Offer in HE 10 was Not Competitive

  11. Schedule • Introduction May 6 • Draft Market Rules June 10 - 11 • MC Vote July 8 – 10 • PC Vote August 1 • FERC Filing Shortly after August 1 • FERC Order (Expected) October - November

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