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Demand Response Department ISO New England, Inc. Holyoke, Massachusetts July 7, 2004

ISO New England/NEPOOL Demand Response Working Group Meeting Alternatives to Full Nodal Pricing for Load. Demand Response Department ISO New England, Inc. Holyoke, Massachusetts July 7, 2004. Presentation Topics. Purpose and Background Summary of Recommendations and Findings

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Demand Response Department ISO New England, Inc. Holyoke, Massachusetts July 7, 2004

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  1. ISO New England/NEPOOLDemand Response Working Group MeetingAlternatives to Full Nodal Pricing for Load Demand Response Department ISO New England, Inc. Holyoke, Massachusetts July 7, 2004

  2. Presentation Topics • Purpose and Background • Summary of Recommendations and Findings • Special Case Nodal Pricing of Load • Next Steps

  3. FERC Order – January 28, 2004 • The Commission found nodal pricing for load to be a just and reasonable pricing method. • However, the Commission would reconsider if other methods could provide price transparency and accurate price signals for demand response more efficiently. • ISO-NE and NEPOOL were directed to study: • The potential reconfiguration of zones, and • Pricing alternatives “that would permit nodal pricing for some load in limited circumstances.” • By July 1, 2004, ISO-NE and NEPOOL were directed to file: • The results of the above-mentioned study. • Any changes recommended as a result of that examination, or a justification for retaining the status quo, and a timeframe.

  4. Study of Alternatives to Full Nodal Pricing for Load – Filed July 1, 2004 TABLE OF CONTENTS 1 Executive Summary • Background • Study Overview • Analysis of Alternative LMP Load Zone Configurations • Special Case Nodal Pricing • Recommendations Appendices

  5. Recommendations • Request the Commission to waive the full nodal pricing for load requirement. • Implement Special Case Nodal Pricing. • Continue to use the present eight Load Zones to price energy for load at this time. • However, if additional zones are created for other purposes (e.g., locational ICAP or reserves), then zonal energy prices should be recomputed under the new zonal configuration. • In a separate filing dated July 2, 2004, the ISO recommended that a separate ICAP region and energy zone for SWCT be implemented simultaneously on January 1, 2006.

  6. From ISO-NE July 2, 2004 Compliance Filing In docket: Devon Power LLC, et al., Docket Nos. ER03-563-030 and EL04-102-000

  7. Findings • Special Case Nodal Pricing (SCNP) • Recommend implementing SCNP to meet the Commission’s market efficiency and demand response objectives. • Participating load would be efficiently priced, which encourages efficient price-responsive demand in the market. • SCNP engenders lower implementation costs, and fewer liquidity problems and conflicts with existing state pricing policies and bilateral contracts. • Implementing full nodal pricing imposes transaction costs on those who stand to lose as well as those who stand to win. • SCNP requires participating loads that stand to benefit from nodal-based settlement to pay the transaction costs. • SCNP supports economic development and retention of large C&I customers.

  8. Special Case Nodal Pricing (SCNP) • SCNP permits specific loads to settle at nodal prices. • Individual end-use metered customers that are at least 5 MW in size, are connected to a single node, and are in compliance with certain technical and administrative criteria would be eligible to participate in SCNP. • Participating loads must be mapped to a specific SCADA point and node. Aggregation of loads would not be allowed at this time. • Such eligible customers would be allowed to enroll into SCNP through NEPOOL Participants with settlement accounts with ISO-NE by establishing a Load Asset consisting of the enrolled load. • NEPOOL Participants with the responsibility to serve the loads enrolled in SCNP are still required to meet all applicable wholesale requirements related to the enrolled load.

  9. Special Case Nodal Pricing (SCNP) • Load participating in SCNP must satisfy, at its own expense, all metering and telemetering requirements, including those required under OP 14 & 18. • Once in the program, customers may not switch back to zonal pricing for at least 12 months. • Participating customers are not eligible to participate in other LRP. • Two enrollment options under SCNP: • Non-dispatchable • Dispatchable • Those electing the dispatchable option would be eligible for ICAP credit. • Under both options, energy consumed would be settled at the applicable nodal LMP.

  10. SCNP – Dispatchable Option • Customer must designate a “Lead Participant” and a “Designated Entity,” in accordance with asset registration requirements. • Customer must register the amount of dispatchable load, which would receive Locational ICAP credit: • Must not exceed the customer’s non-coincident peak demand. • Minimum 5 MW of interruptible load, specified in full MW amounts. • Loads must be connected to a RIG box. • The customer must submit a Day-Ahead Demand Bid for its registered load to establish its dispatch rate. • If bid price > DA nodal price  load purchases DA energy. • If bid price < DA nodal price  load is scheduled to interrupt. • Operating Reserve charges apply if the load does not follow its interruption schedule in real time.

  11. SCNP – Dispatchable Option • Load must curtail at Action 9 of OP 4 – Actions During a Capacity Deficiency – within 30 minutes of ISO request. • Fully integrated Dispatchable Load will be available for real time dispatch when proposed changes under the Ancillary Service Market Project (ASMP) are completed. • If load is dispatched off, any energy purchased DA would be credited at the Real-Time LMP. • Dispatchable SCNP loads will be able to participate in the reserves markets pursuant to the ASMP.

  12. SCNP Implementation • Thorough review of several requirements and rules may necessitate changes: • OP 14 – Technical requirements for Generation, Dispatchable, and Interruptible Loads • OP 18 – Metering and Telemetering Criteria • Manual M-11 – Define operational requirements • Market Rule 1 & Manual 28 – Define settlement needs • Manual 20 – Define obligations to receive LICAP/LUCAP credit • Manual M-36 – Forward reserve market rules and procedures • Expand Asset Registration process to include Non-Dispatchable and Dispatchable Loads

  13. SCNP Implementation (cont) • Work with Meter Reader Working Group to refine eligibility rules, define roles, settlement needs, and modify data reporting procedures. • Modify settlement software to settle SCNP load and recalculate zonal prices. • Prepare special computer displays for use by ISO Control Room Operators. • Set up training sessions for customer Lead Participants and Designated Entities. • Establish communication protocols for economic and emergency dispatch of dispatchable loads.

  14. Schedule • April: Conduct analysis; share initial results with NEPOOL and NECPUC • May: Draft report; share with stakeholders • June: Stakeholder approval of FERC filing • July 1, 2004: File with FERC • Implementation in the June – October 2005 timeframe consistent with ASMP

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