MMWEC modifications to FCMPI

1. MMWEC modifications to FCMPI Gary Will Massachusetts Municipal Wholesale Electric Company

2. Eliminate non-performance penalties when due to a loss of transmission When the generation resource is ready and able to provide energy but cannot: • loss of production is beyond generators control • there is no basis to penalize the resource • the penalty cannot serve to encourage the generation resource owner to make different arrangements • the generator already suffers lost opportunity • pointless and presents a risk that cannot be hedged

3. Eliminate non-performance penalties when on a planned outage. A power generating plant may not be able to deliver energy or reserves when on a planned outage: • ISO New England Operating Procedure No. 5 • Generator and Dispatchable Asset Related Demand Maintenance and Outage Scheduling (OP-5) • already accounted for in establishing ICR

4. Elimination of provisions of FCMPI from applying to the NYPA contracts • Import Capacity Resources associated with the NYPA contracts listed in Section III.13.1.3.3(c) • power deliveries to New England from NYPA’s Niagara and St. Lawrence hydro-projects • Federal Preference Power • mandated by federal law • required under 50-year, FERC-approved licenses • predate both the FCM and SMD

5. NYPA contracts (cont.) Power flowing from NYPA contracts to New England entities • NYPA imports are unique • firm capacity • almost perfectly-available due to the reliability of the underlying hydroelectric facilities • scheduled power at multiple interconnection points • NYPA contractual replacement-energy obligations

6. NYPA contracts (cont.) FERC’s Jan. 8, 2008 Forward Capacity Market Rules Order • different treatment of these contracts for FCM purposes is not unduly discriminatory • ISO urged for different treatment and FERC agreed • special treatment under the FCM rules needed "in order to better recognize the rights of certain existing long-term import capacity contracts."

7. NYPA contracts (cont.) “FCM Competitive Import Requirements” • requires capacity importers to submit energy offers at competitive prices • subject capacity importers to penalties for failing to comply with “FCM” participation requirements • included an exemption for Existing Import Capacity Resources associated with Specific Long-Term Contracts • accepted by FERC Order issued May 20, 2010, • In approving the revisions, the Commission stated that it “finds that the reformed penalty structure on the whole will provide a more meaningful incentive for capacity importers to deliver energy when they are requested to do so.”

8. Elimination of provisions of FCMPI from applying to Intermittent Resources • Qualified Capacity is currently based on the median summer and winter reliability hours averaged over a five year period (Market Rule 1, Section 13.1.2.2.2.1 (a)-(d) and 13.1.2.2.2.2) • significantly reduction from nameplate rating • Shortage Event hours added to the total reliability hours during the respective summer and winter periods • Serve as a Performance Incentive potentially reducing the capacity payments further • ICR calculation and other practices and planning procedures already take into account the intermittent nature of these resources

9. III.13.7.2.5 Capacity Performance Payment Rate. For the three Capacity Commitment Periods beginning June 1, 2018 and ending May 31, 2021, the Capacity Performance Payment Rate shall be $2000/MWh. For the three Capacity Commitment Periods beginning June 1, 2021 and ending May 31, 2024, the Capacity Performance Payment Rate shall be $3500/MWh. For the Capacity Commitment Period beginning on June 1, 2024 and ending on May 31, 2025 and thereafter, the Capacity Performance Payment Rate shall be $5455/MWh. The ISO shall review the Capacity Performance Payment Rate in the stakeholder process as needed annually and shall file with the Commission a new Capacity Performance Payment Rate if and as appropriate.

10. Questions?