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Peter Wong Manager, Resource Adequacy

Local Sourcing Requirement (LSR) and Maximum Capacity Limit (MCL) Calculation Methodology – Revised from June 15, 2009 Presentation. Peter Wong Manager, Resource Adequacy. RC Meeting July 13, 2009. What is Local Sourcing Requirement and Maximum Capacity Limit?.

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Peter Wong Manager, Resource Adequacy

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  1. Local Sourcing Requirement (LSR) and Maximum Capacity Limit (MCL) Calculation Methodology – Revised from June 15, 2009 Presentation Peter Wong Manager, Resource Adequacy RC Meeting July 13, 2009

  2. What is Local Sourcing Requirement and Maximum Capacity Limit? Local Sourcing Requirement (LSR) is the minimum amount of capacity that must be electrically located within an import-constrained Load Zone to meet the Installed Capacity Requirement (ICR) Maximum Capacity Limit (MCL) is the maximum amount of capacity that can be procured in an export-constrained Load Zone to meet the ICR

  3. LSR and MCL Calculated According to Section III.12.2 of Market Rule 1, Local Sourcing Requirements and Maximum Capacity Limits* * For details, please see http://www.iso-ne.com/regulatory/tariff/sect_3/09-4-1_mr1-sect_1-12.pdf

  4. Calculation Steps for LSR and MCL • Model the Load Zone under study vs. the rest of the New England Control Area using the GE MARS simulation model • Reflect load and resources electrically connected to them, including external Control Area support from tie benefits • Model the transmission interface constraint between the Load Zone under study and the rest of the New England • If the system is less reliable than 0.1 days/year Loss of Load Expectation (LOLE), add proxy units that are required in New England to meet the resource adequacy planning criterion of 0.1 days/year LOLE • If the system LOLE with proxy units added is less than 0.1 days/year • Firm load is added (or unforced capacity is subtracted) • Ensure New England system LOLE equals 0.1 days/year • If the system is more reliable than 0.1 days/year, then keep the system LOLE as is

  5. Calculation Steps for LSR and MCL, cont. • Beginning with the New England system days/year – either “as is” or “at criterion” if proxy units are required • Adjust the firm load within the Load Zone under study • Until the LOLE of the New England Control Area LOLE reaches 0.105 days/year • As firm load is added to the Load Zone under study, an equal amount of firm load is removed from (or added to) the rest of the New England Control Area • Note that New England’s share of tie benefits from New York, New Brunswick and Quebec are considered pre-existing in the rest of New England

  6. Methodology for Calculating Local Sourcing Requirement Calculate the LSR for the import-constrained Load Zone in accordance with the following formula LSRz = Resourcesz + Proxy Unitsz – (Proxy Units Adjustmentz/ (1-FORz)) – (Firm Load Adjustmentz/ (1-FORz)) in which • LSRz = MW of Local Sourcing Requirement for Load Zone Z • Resourcesz = MW of resources electrically located within the Load Zone Z, including Import Capacity Resource on the import-constrained side of the interface, if any • Proxy Unitsz = MW of proxy unit additions in the Load Zone Z • Proxy Units Adjustmentz = MW of firm load added to (or unforced capacity subtracted from) Load Zone Z until the system LOLE equals 0.1 days/year • Firm Load Adjustmentz = MW of firm load added (or subtracted) within the Load Zone Z to make the LOLE of the New England Control Area equal to 0.105 days per year • FORz = Capacity weighted average of the forced outage rate modeled for all resources within the Load Zone Z, including any proxy unit additions to the Load Zone Z

  7. Methodology for Calculating Maximum Capacity Limit Calculate the MCL for the export-constrained Load Zone Y in accordance with the following formula Maximum Capacity LimitY = ICR – LSRRestofNewEngland in which • Maximum Capacity LimitY = Maximum amount of resources, including import Capacity Resources on the export-constrained side of the interface, if any that can be procured in the export-constrained Load Zone Y under study to meet the ICR • ICR = MW of Installed Capacity Requirement for the New England Control Area • LSRRestofNewEngland = MW of Local Sourcing Requirement for the rest of the New England Control Area, which for the purposes of this calculation is treated as an import-constrained region. LSRRestofNewEngland is determined in accordance with the methodology presented in prior slides

  8. LSR and MCL Calculation Example Using ISO Recommended Values for 2012/13 Capability Year

  9. Calculation ProcedureLSR for Connecticut ~ TB-HQ ~ TB-HQ ~ TB-HQ ~ TB-MT ~ TB-MT ~ TB-MT ~ TB-NY ~ TB-NY ~ TB-NY ~ Existing 27,948 MW ~ Existing 27,948 MW ~ Existing 37,059 MW ~ Existing 9,111 MW Rest of NE Rest of NE ~ Existing 9,111 MW FLA -2,325 MW FLA 2,325 MW CT CT LOLE = 0.105 LOLE = 0.001 LOLE = 0.001 Model the transmission interface between CT and Rest of NE. System LOLE remains at 0.001. Because LOLE is less than 0.105, Firm Load Adjustment (FLAz) will be made. After adding 2,325 MW load to CT and subtracting 2,325 MW from Rest of NE, system LOLE reaches 0.105. LSR for CT is then determined as LSRz = Resourcesz + Proxy Unitsz – (PUAz/ (1 – FORz)) – (FLAz/ (1 – FORz)) = 9,111 + 0 – 0 /(1 – 0.0592) – 2,325/(1 – 0.0592) = 6,640 MW System LOLE < 0.1 with existing resources modeled, proxy units are NOT needed, and no Proxy Units Adjustment (PUAz) is required. Note: PUAz is the Proxy Units Adjustment FLAz is Firm Load Adjustment

  10. Calculation ProcedureLSR for NEMA/BOSTON ~ TB-HQ ~ TB-HQ ~ TB-HQ ~ TB-MT ~ TB-MT ~ TB-MT ~ TB-NY ~ TB-NY ~ TB-NY ~ Existing 33,246 MW ~ Existing 33,246 MW ~ Existing 37,059 MW ~ Existing 3,813 MW Rest of NE Rest of NE ~ Existing 3,813 MW FLA -1,620 MW FLA 1,620 MW BOS BOS LOLE = 0.105 LOLE = 0.001 LOLE = 0.001 Model the transmission interface between NEMA/BOSTON and Rest of NE. System LOLE remains at 0.001. Because LOLE is less than 0.105, Firm Load Adjustment (FLAz) will be made. After adding 1,620 MW load to NEMA/BOSTON and subtracting 1,620 MW from Rest of NE, system LOLE reaches 0.105. LSR for NEMA/BOSTON is then determined as LSRz = Resourcesz + Proxy Unitsz – (PUAz/ (1 – FORz)) – (FLAz/ (1 – FORz)) = 3,813 + 0 – 0 /(1 – 0.0970) – 1,620/(1 – 0.0970) = 2,019 MW System LOLE < 0.1 with existing resources modeled, proxy units are NOT needed, and no Proxy Units Adjustment (PUAz) is required. Note: PUAz is the Proxy Units Adjustment FLAz is Firm Load Adjustment

  11. Calculation ProcedureMCL for Maine ~ TB-HQ ~ TB-MT ~ TB-MT ~ TB-MT ~ TB-NY ~ Existing 3,616 MW ~ Existing 3,616 MW ~ TB-HQ ~ TB-HQ ~ Existing 37,059 MW ~ Existing 33,443 MW ME ME Rest of NE Rest of NE ~ Existing 33,443 MW FLA -4455 MW ~ TB-NY ~ TB-NY LOLE = 0.001 LOLE = 0.105 LOLE = 0.001 FLA 4,455 MW After adding 4,455 MW load to Rest of NE and Subtracting 4,455 MW from Maine, system LOLE reaches 0.105. LSR for Rest of NE is determined as LSRrestofNewEngland = Resourcesz + Proxy Unitsz – (PUAz/ (1-FORz)) – (FLAz/ (1 – FORz)) = 33,443 + 0 – 0 /(1 – 0.0591) – 4,455/(1 – 0.0591) = 28,708 MW MCL for Maine is then determined as MCL = ICR –LSRRestofNewEngland = 31,965 – 28,708 = 3,257 MW Model the transmission interface between Maine and Rest of NE. System LOLE remains at 0.001. Because LOLE is less than 0.105, Firm Load Adjustment (FLAz) will be made. System LOLE < 0.1 with existing resources modeled, proxy units are NOT needed, and no Proxy Units Adjustment (PUAz) is required. Note: PUAz is the Proxy Units Adjustment FLAz is Firm Load Adjustment

  12. Issue with the Existing LSR and MCL Calculation Methodology

  13. Issue with the Existing Calculation Methodology The current methodology used to calculate LSR and MCL does not adjust for surplus capacity unless the surplus is associated with the use of a “proxy unit” This is equivalent to calculating LSR and MCL using possible “as is” system conditions Some are concerned that using possible “as is” system conditions may understates LSR and overstates MCL when the system has surplus capacity The following tables show the results of the 2012/13 LSR and MCL using “as is” and “at criterion” conditions to illustrate the point

  14. 2012/13 vs. 2011/12 LSR – Connecticut

  15. 2012/13 vs. 2011/12 LSR – NEMA/BOSTON

  16. 2012/13 vs. 2011/12 MCL – Maine

  17. Why should LSR and MCL should be calculated using “at criteria” system conditions? .

  18. Why should LSR and MCL be calculated using “at criteria” system conditions? With respect to resource adequacy/reliability: • The Installed Capacity Requirement (ICR) is the minimum amount of installed capacity NE requires to meet the 0.1 days/year LOLE resource adequacy planning criterion. The ICR is calculated assuming that capacity will be installed in transmission import constrained Load Zones to eliminate the impact of transmission constraints on system LOLE. • The objective of the LSR and MCL is to identify the minimum amount of capacity thatisneeded in these transmission import constrained Load Zones, so the NE system will meet the 0.1 days/year LOLE criterion given the ICR.

  19. Why should LSR and MCL be calculated using “at criteria” system conditions? (cont.) With respect to the Forward Capacity Market: • The ICR is the amount of installed capacity the ISO will purchase in the Forward Capacity Auction (FCA). • The LSR and MCL determine the amount of capacity needed in the Load Zones such that the amount of ICR purchased by the ISO will meet the 0.1 days/year LOLE criterion. • If resources are inadequate in these Load Zones, then ISO will purchase the minimum amount neededin these Load Zones in the FCA.

  20. Why should LSR and MCL be calculated using “at criteria” system conditions? (cont.) The problem with using “as is” system conditions: • Calculating the LSR and MCL using “as is” system conditions does not equate to determining the minimum amount of capacity needed in transmission import constrained Load Zones associated with the ICR that the ISO will purchase. • Calculating the LSR and MCL using “as is” system conditions will determinethe minimum amount of capacity needed in transmission import constrained Load Zones using capacity that hasno obligation to serve New England.

  21. Proposed Changes to Calculate LSR and MCL with “At criteria” System Conditions

  22. Proposal to Modify the Existing Calculation Methodology • ISO-NE proposes that the LSR and MCL be calculated using “at criteria” system conditions all the time. • Modifications to Section III.12.2 of Market Rule 1, Local Sourcing Requirements and Maximum Capacity Limits, would be required to accommodate this proposal. • ISO will present the proposed language changes in a future meeting.

  23. Proposed LSR Calculation Methodology • Model the Load Zone under study and the rest of the NE Control Area using the GE MARS simulation model • Reflect load and resources electrically connected to them, including external Control Area support from tie benefits • Add proxy units that are required, if any, in the NE Control Area to meet the resource adequacy planning criterion of once in 10 years disconnection of non-interruptible customers. • Calculate the Additional Load Carrying Capability (ALCC) of Load Zone under study, ALCCz, and the rest of NE control Area, ALCCRestofNE, such that: • NE system LOLE is at 0.1 days/year exactly when the transmission constraint between the Load Zone under study and the rest of NE Control Area is not enforced, and • NE system LOLE is at 0.105 days/year when the transmission constraint between the Load Zone under study and the rest of NE Control Area is enforced.

  24. Proposed LSR Calculation Methodology Calculate the LSR for the import-constrained Load Zone in accordance with the following formula: In which, • LSRz = MW of Local Sourcing Requirement for Load Zone Z • Resourcesz = MW of resources electrically located within the Load Zone Z, including Import Capacity Resource on the import-constrained side of the interface, if any • ALCCz = Additional Load Carrying Capability of Load Zone Z without causing system LOLE to exceed 0.105 days/year • APkz = Annual 50/50 peak of Load Zone Z

  25. Methodology for Calculating Maximum Capacity Limit (No Change) Calculate the MCL for the export-constrained Load Zone Y in accordance with the following formula: Maximum Capacity LimitY = ICR – LSRRestofNewEngland In which, • Maximum Capacity LimitY = Maximum amount of resources, including import Capacity Resources on the export-constrained side of the interface, if any, that can be procured in the export-constrained Load Zone Y under study to meet the ICR. • ICR = MW of Installed Capacity Requirement for the NE Control Area • LSRRestofNewEngland= MW of Local Sourcing Requirement for the rest of the NE Control Area, which for the purposes of this calculation is treated as an import-constrained region. LSRRestofNewEngland is determined in accordance with the methodology presented in prior slides.

  26. LSR Calculation Methodology ~ TB-HQ ~ TB-HQ ~ TB-HQ ~ TB-MT ~ TB-MT ~ TB-MT ~ TB-NY ~ TB-NY ~ TB-NY ~ Existing 27,948 MW ~ Existing 27,948 MW ~ Existing 37,059 MW Rest of NE Rest of NE ~ Existing 9,111 MW ~ Existing 9,111 MW CT CT LOLE = 0.001 LOLE = 0.100 LOLE = 0.105 ∞ 50/50 Load 21370 MW 50/50 load 21370 MW 50/50 load 7650 MW ALCCct X MW ALCCct X MW ALCCrestofne Y MW ALCCrestofne Y MW 50/50 load 7650 MW 2500MW

  27. Questions

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