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Summer Peak Energy Pricing: ISO NE's Response and Recommendations

This report discusses the ISO NE's response to summer peak energy pricing in New England and provides recommendations for market monitoring and mitigation. It includes proposals for implementing the SMD, modifying reserve market changes, and improving transaction rules and procedures with NYISO and ISO NE.

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Summer Peak Energy Pricing: ISO NE's Response and Recommendations

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  1. Summer Peak Energy Pricing in New England: The ISO-NE Response Robert Ethier Manager, Market Monitoring & Mitigation ISO New England Inc. January 18, 2002

  2. Patton Report Recommendations 1. Implement SMD as soon as possible. • Provide option to self-schedule resources after the commitment process once the multi-settlement process under SMD is implemented 2. Reserve Market Changes - Include real-time replacement reserves in reserve markets - Include L.O.C. payments for reserves 3. Modify ECP eligibility rules for peaking units and units committed during reserve shortages 4. Seek improvements in transaction rules and procedures with NYISO and ISO-NE 5. Seek improvements in congestion management procedures

  3. Reserve Market Changes ISO New England Proposal • Include replacement reserves in TMOR Market • Implement reserve price cascading TMSR > TMNSR > TMOR • Include opportunity cost payments for all reserve markets (currently just TMSR) • Cap availability bids for reserves at $2.52 (same as NY)

  4. Modify ECP Eligibility Rules ISO-NE Proposal • Evaluate units at LOL for Eligibility to set RTMP during non-shortage system conditions • Applies to Fast Start Resources only • Min Run, Min Down < 1 Hour • Qualifies for TMNSR and TMOR • Start Time < 30 Minutes • Basic Criteria - If energy at LOL cannot be replaced with on-line energy, or unit is required to meet 10-minute spin requirement, then eligible to set RTMP • Units that cannot be replaced will have flag set making eligible to set RTMP • Process evaluates all eligible units every five minutes

  5. Modify ECP Eligibility Rules ISO-NE Proposal External Dispatchable Transactions • Same criteria as Units - If replacement energy is not available, or unit is required for reserves, transaction is eligible to set RTMP • Applies to non-shortage conditions • Analysis is performed at same time as units

  6. Modify ECP Eligibility Rules ISO-NE Proposal During Reserve Shortages (short of 30-minute operating reserves) • Any Fast Start Units Committed will set price • Externals will set clearing price

  7. Seek Improvements in Transaction Rules ISO New England Proposal • Modify the Unit Commitment rule governing transactions to increase the number of Short Notice External Transactions (SNT) • SNT Definition: • Either a System Contract for the purchase or sale of Energy 1 or a System Contract for the sale of Energy 2 • and submitted to the ISO after the Daily Trading Deadline has passed for the Scheduled Dispatch Period in which the transaction is to begin

  8. Seek Improvements in Transaction Rules ISO-NE Proposal • Increase the number of SNTs that flow in a direction consistent with economics of NYISO and ISO-NE dispatch • SNTs cannot be withdrawn • SNTs will be supported by Unit Commitment • Issues: • Single settlement SNTs may be used to manipulate market prices • Develop Arbitrage Screen to protect against market power • Out-Service: • Rationing of available Out-Service under Tariff • Elimination of Out-Service charge for hourly SNTs

  9. Seek Improvements in Transaction Rules Arbitrage Screen • SNTs from high price to low price area subject to arbitrage screen • If the difference in posted prices between NYISO and ISO-NE exceeds the price in the buyer’s control area by $X; transactions by participant can be limited in the future. • Design would limit use of uneconomic transactions to raise prices in NEPOOL

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