August 9, 2013 | Markets Committee

1. August 9, 2013 | Markets Committee Christopher Parent Market Development NCPC redesign for Offer Flexibility – proposal to conform other NCPC credit types NCPC Payments: other credits

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

3. 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

4. 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

5. 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

6. 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)

7. 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

8. 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 hourly demand bids at the time of the posturing order determines the bid price for NCPC compensation • DARD Pump hourly credit: MIN (DDP, Metered Output) x (Real-Time LMP – Bid Price)

9. Cancelled Start NCPC compensation is unchanged, but proposal modifies eligibility requirements • Starts scheduled in the day-ahead market are eligible • Day-ahead schedule Start-Up fees are 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 their Minimum Down Time after being cancelled are not eligible • Requirement that resources have a Notification Time not longer than 24 hours remains (no change)

10. 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

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

12. 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 Min Down time)

13. Minor changes are proposed to the Generator Posturing NCPC Credits • Determined using greater of the offer in place at the time the resource is postured or the revised offer for each hour • Actual reserve payments and estimated reserve payments will be included in the revenue calculations • Start-up fee (when applicable) and No Load fee will be included in the cost calculations • Non-limited energy resources will be evaluated hourly, rather than for a daily period

14. Generator Posturing NCPC • Only generator resources that are postured by the ISO are eligible for Posturing NCPC • Generators that have limited energy constraints are compensated over the period of the limited energy constraint not exceeding the end of the day • Generators without a limited energy constraint are compensated on an hourly basis • When resources are postured the resource’s expected economic operation will be determined using resource’s physical parameters (e.g., EcoMax, Available Energy) and Supply Offer and the real-time LMPs

15. Generator Posturing NCPC credit • Postured NCPC is calculated per posturing event as: Economic Operation Margin – Actual Operation Margin • Economic Operation Margin is calculated as the difference between Potential Revenue and Potential Offered Cost where: Potential Offered Cost = Start-Up + No Load + Energy Cost@Expected Operation Potential Revenue = Real-Time LMP x Expected Operation + Potential RT Reserve Payment

16. Generator Posturing NCPC credit (continued) • Actual Operation Margin is calculated as the difference between Actual Revenue and Actual Offered Cost where: Actual Offered Cost = Start-Up + No Load + Energy Cost@Metered Output Actual Revenue = Real-Time LMP x Metered Output + RT Reserve Payment + Regulation Opportunity Cost

17. 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 • Eliminates the exclusion of resources that re-offer in real-time • ISO is also evaluating applying the existing hourly shortfall calculation to non-dispatchable resources

18. Hourly Shortfall NCPC credit • Resources that cleared in the Day-Ahead Market, are offline and available, are not postured, but are not economically dispatched in real-time are eligible for this compensation • Hourly Shortfall NCPC is calculated using the same approach as postured, non-limited energy generator resource

19. 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)