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Designated Congestion Areas in NEPOOL

Mike Hachey Director Power Marketing TransCanada Power Marketing Ltd. Massachusetts Electric Restructuring Roundtable May 2, 2003. Designated Congestion Areas in NEPOOL. Designated Congestion Areas (DCAs) What they are: Northeastern Massachusetts and Boston (NEMA) Connecticut

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Designated Congestion Areas in NEPOOL

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  1. Mike Hachey Director Power Marketing TransCanada Power Marketing Ltd. Massachusetts Electric Restructuring Roundtable May 2, 2003 Designated Congestion Areasin NEPOOL

  2. Designated Congestion Areas (DCAs) What they are: • Northeastern Massachusetts and Boston (NEMA) • Connecticut  This area contains about 50% of New England’s electric consumption What the rules say: No market power mitigation of generator bids up to “DCA” threshold -- about $85/MWH ISO’s intent is to “send a signal for investment”

  3. New England Electric Load Concentrations

  4. The problems with the DCA concept: 1) Substantial concentration of generation ownership in DCAs: DCAHHI Index (2003) NEMA 6,107 SW Connecticut 2,238 Connecticut 2,003 HHI below 1000 unconcentrated HHI between 1000 and 1800 moderately concentrated HHI above 1800 concentrated

  5. NEMA / Boston Generation Supply Owner / PurchaserSummer MW% Exelon 2772 71 PGE - NEG 811 21 Mirant 203 5 Other 107 3 ____ ___ 3893 100

  6. The problems with the DCA concept (continued): 2) Barriers to entry: Time -- licenses, construction Most heavily developed / populated areas of New England Building on existing generating station footprints further concentrates market

  7. 3) NEMA DCA Designation Unsupported “Improving the Boston import limits was shown to result in little congestion reduction over the next five years. The on-going NEMA-Boston Upgrades, combined with the planned new generating capacity in the Boston area, were shown to have already minimized the short term potential for congestion.” Source: Regional Transmission Expansion Plan, November 7, 2002

  8. NEMA DCA Designation Unsupported The problems with the DCA concept (continued): 4) Consumer impacts: Socialization of congestion in New England ends with SMD Strong risk of unwarranted market price run-up in DCAs Simply fixing problems in niche areas far less costly, results far more certain than attempting to send niche “market signals” Mass. AG, NEMA consumers, NEPOOL are clear -- will pay for fixes, not “market signals”

  9. The problems with the DCA concept (continued): 4) Consumer impacts: Socialization of congestion in New England ends with SMD Strong risk of unwarranted market price run-up in DCAs Simply fixing problems in niche areas far less costly, results far more certain than attempting to send niche “market signals” Mass. AG, NEMA consumers, NEPOOL are clear -- will pay for fixes, not “market signals”

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