02/6/2013 Markets Committee

1. 02/6/2013 Markets Committee Aleks Mitreski Market Development amitreski@iso-ne.com (413) 535-4367 Proposed changes to the Energy Market Energy Market Offer Flexibility

2. Background • ISO is proposing the following changes to the energy market: • Ability to update offers in real-time • Vary supply offer values on an hourly granularity • Allow the ability to submit negative offers • Change the way Self-Scheduling is performed • The presentation provides discussion on outstanding items on the market design

3. Intra Hour Energy Offer Modifications • The ISO is proposing to allow energy offers to be modified in real-time as long as modifications are submitted 30 minutes before the top of an hour • Participants have raised concern with this approach since this approach prohibits any energy offer modifications intra-hour • For example after 9:30, the earliest when an energy offer can be modified is to be effective at 11:00 (90 minute delay) • Currently participants have the ability to self-schedule at a desired output as a price taker with a 30 minute advance timeframe

4. Intra Hour Energy Offer Modifications (cont.) • The ISO is proposing to allow participants to request a “Self-Scheduled” MW with a 30 minute advance notification to the control room • This action will cause a resource to be dispatched at the “Self-Scheduled” MW as if it the energy was offered at the floor price • This concept is fundamentally different than the current Self-Schedule practice because the Economic Min parameter will not be changed • If the energy price reaches the floor price, the resource can be dispatched down below this “Self-Scheduled” MW under normal dispatch • With a 30 minute advance notification participants will have the opportunity to set the Self-Scheduled quantity to 0MW

5. Intra Hour Energy Offer Modifications cont. • Participant requesting a generator to be “Self-Scheduled” at 200MW

6. Negative Offers • ISO is proposing the offer floor price to be -$150/MWh • Some participants suggested a lower offer floor price (e.g., -$1,000) • ISO intends to lower the offer floor price after the initial implementation of the -$150/MWh floor price • However, during this initial “burn in” period, our proposal remains to have the offer floor price at -$150/MWh • Resources most likely to offer negative offers (e.g., wind) are largely not dispatchable • Resources most likely to offer large negative offers (e.g. nuclear) are not dispatchable • Once negative offers are implemented, the actual offer data and clearing prices will indicate the need for further decrease of the floor price (i.e., will observe how many offers are submitted at the floor price)

7. Self-Scheduling Changes • Participant raised a question how the ISO can dispatch generators at a certain fixed output, above the Economic Min value due to reliability • The ISO has the ability to set “ISO Imposed Economic Min”, which temporarily modifies the Economic Min of a resource • Similar capability is available for Economic Max

8. Economic Min Definition • The ISO will modify the Economic Min definition to eliminate the provision that allows modification of this parameter for Self-Scheduling purposes • In the future, the Economic Min should indicate the maximum of the following values: • The Emergency Minimum Limit • The lowest output level as specified by design, environmental regulations or licensing limits. • The lowest output level at which a one increment increase in the output level would not decrease the incremental cost If all above are missing values, Economic Minimum will be set to zero.

9. Future Steps • March Markets Committee – presentation of market rule language • April Markets Committee – presentation of market rule language/potential stakeholder action • Q3 – 2013 FERC filing • Q4 2014 – Tentative implementation timeframe