1 / 6

FCM Delists AND NPRR s Rejected for Reliability

NEPOOL Markets Committee May 7, 2014. FCM Delists AND NPRR s Rejected for Reliability. Bruce Anderson New England Power Generators Association. The Problem.

oriel
Download Presentation

FCM Delists AND NPRR s Rejected for Reliability

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. NEPOOL Markets Committee May 7, 2014 FCM Delists AND NPRRs Rejected for Reliability Bruce Anderson New England Power Generators Association

  2. The Problem • At the October 9 Markets Committee meeting, the ISO explained that the administrative offers entered into the FCA for de-list bids and NPRRs rejected for reliability causes price suppression and the displacement of economic resources, and under certain circumstances causes the ISO to rely on reconfiguration auctions to meet the region’s resource adequacy needs. The ISO also introduced the concept of a Local Reliability Obligation. • Presentation available at: http://www.iso-ne.com/committees/comm_wkgrps/mrkts_comm/mrkts/mtrls/2013/oct892013/index.html • When a de-list or retirement request is rejected because of a local reliability constraint, the resource is retained to meet the local need, but it is also counted towards meeting the system/zonal need • The MW contribution of a rejected de-list bid/retirement request towards meeting the system/zonal need is uneconomic; this capacity costs more than the clearing price - if it were not for the local need this resource would have exited the auction • This affects price formation: • This capacity is kept in the auction (similar to a ‘price-taker’) • This effectively shifts the supply curve to the right, tending to lower the clearing price and displacing other, lower priced, capacity offers/bids • Accepting any rejected de-list bid or retirement request after the FCA cannot undo this effect (the ‘missing’ capacity is covered in a subsequent reconfiguration auction) • When an ‘out-of-market’ resource is retained to meet the system requirement it can displace both new and existing ‘in-market’ resources

  3. The Problem – Additional Points • When ISO rejects an NPRR, it is not clear that the resource owner will actually accept a CSO – under existing rule an NPRR rejected for reliability may elect to retire after the FCA (and after its MWs are counted against the ICR) • If entered into the FCA and awarded a CSO, failure of these resources to accept CSO doubles the reliability risk – original local problem plus deficit versus ICR requirement • Market Rule changes may remedy this concern prior to FCA 9 • If ISO resolves local reliability need prior to delivery year, releasing the de-list or NPRR unit now risks resource adequacy deficit. • This has been common occurrence in past FCAs (releasing the CSO); but was not a problem when we had surplus capacity to take up the CSO. That is no longer the case. • ISO ability to buy < ICR under demand curve makes this particularly problematic (say we purchase 97% of ICR, then large unit that had rejected delist has the local reliability need resolved – we lose its CSO as well). • As ISO noted (Slide 12 of their 10/9/13 Powerpoint), problems are exacerbated and goals of FCM-PI are frustrated (if FCM-PI is approved)

  4. Proposed Solution • Based on ISO concept from October. • Award “Local Reliability Obligation” instead of CSO • LRO DAEM and RTEM offer obligation can be tied to the specific need that drove the reliability rejection • Based on load levels, contingencies, other factors, or some combination thereof • Would allow resource to be “released” if local need is resolved, without jeopardizing resource adequacy • Could tailor “release” criteria or compensation to particular situation based on standard objective criteria • Compensation based on delist bid price for delists, and either a COS, market-based rate, or other price or for NPRs (ISO proposed a COS rate) • Provision to negotiate compensation for resources released from reliability obligation prior to CCP • If, like for CSO resources, the payment entitlement would not vest until 1 year before the CCP, LRO resource should be compensated for maintaining (and improving) the resource to be available in the CCP • Resources should be guaranteed some level of payment to compensate for costs incurred prior to entitlement to revenues – for example, 30% of the payment rate for each year of a resources holding an LRO

  5. Benefits of Proposed Solution • Price formation in main FCA is not disrupted • Price signals remain accurate for rest of market • Release of unit once reliability need is resolved is facilitated and does not cause capacity shortfall • Retained resource is fairly compensated, even if released prior to delivery year • Tailoring obligation to actual need, and allowing for compensation upon release would give a rejected NPRR greater incentives to accept the LRO

  6. Schedule • Important to get this matter resolved before FCA-9 • Pool is tight, many units facing environmental and economic challenges. There is no more surplus to save us if we get it wrong. • Need FERC order no later than mid-Sept • May MC: Overview, questions, and suggestions • June MC: Finalize proposal, review Tariff language • July MC: Vote • Implement for FCA-9

More Related