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Welcome to . . .

SMD. Understanding the New England Hub. Welcome to. Ron Coutu. Introduction. Presenters and SMEs. Spider Phone Objectives. Provide key concepts to assist Participants in understanding the Hub which include: Reasons for having a Hub Requirements for Hub design

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  1. SMD Understanding the New England Hub Welcome to . . . Ron Coutu

  2. Introduction • Presenters and SMEs

  3. Spider Phone Objectives • Provide key concepts to assist Participants in understanding the Hub which include: • Reasons for having a Hub • Requirements for Hub design • New England Hub location and design • Confirm that the requirements for effective Hub design have been achieved

  4. Spider Phone Agenda • Introduction • Concepts of Hub • Summary

  5. Logistics • Spider Phone introduction • Asking Questions • Questions will be allowed during the presentation via e-mails received at: onlineforums@iso-ne.com • As time permits, a Q and A session will be held at the end of the presentation. • Instructions will be provided at that time.

  6. Spider Phone Agenda • Introduction • Concepts of the Hub • Summary

  7. Concepts of the New England Hub

  8. Section Objectives • Origin of the Hub Definition • New England Hub Requirements • New England Hub as Proposed • Hub Benefits • Example of Hub transactions

  9. Origin of the Hub Definition • Virtual Hubs (Definition from Bill Hogan) • Price at the virtual hub is representative of movements of the prices in the market. • Deliveries to and from the virtual hub amount to the equivalent deliveries to and from the underlying real buses. • Virtual hub is configured so that as many locations as possible are close to it. • Participants at any location would trade through the “closest” virtual hub.

  10. New England Hub Requirements (from 5/1999) 1. Physical viability: sufficient number of buses to assure that there will be virtually no chance that the hub will be lost from service. 2. Price stability supported by tight connectivity: sufficient number of buses such that the unavailability of a bus or outage of an adjacent line to any one bus or subset of buses would have an insignificant impact on the hub price

  11. New England Hub Requirements (continued) 3. Individual bus availability: individual buses have a relatively high rate of service availability. 4. Internally unconstrained: transmission among the buses is relatively unconstrained. 5. Diversity of load and generation entities: load and generation directly connected to the hub is not dominated by any one company (lesson from PJM’s eastern hub).

  12. New England Hub Proposal - “Central Massachusetts” 1. Physical viability 32 substations, 345 kV, 230 kV and 115 kV 2. Price stability supported by tight connectivity all Eastern buses are tightly connected 3. Individual bus availability: (Approximately 20 buses have many buses and breakers) 4. Internally unconstrained (generally) 5. Diversity of load and generation entities • several municipals and major distribution companies inside the hub • direct physical access to major generators and load markets

  13. Hub benefits • This identification of a common delivery point for trading purposes should: • facilitate the development of standardized financial hedging products • provide increased price certainty for bilateral transactions. • have an hourly LMP which approximates the current ECP • create a common trading point for internal bilateral transactions

  14. For Example – Suppliers getting to the Hub • Supplier 1 with Generators in Export Constrained area to the Hub • Supplier 2 with Generators in Area that is sometimes export constrained to the Hub • Supplier 3 in Area that is never Export Constrained to the Hub

  15. Example - Continued • Supplier 1 buys FTR from Generators to the Hub at price which could be high • Supplier 2 buys FTR from Generators to Hub at a much lower price • Supplier 3 can choose not to buy the FTR • This provides the three Suppliers options at the Hub such as selling internal bilaterals

  16. Example – LSEs • LSE 1 with Load in Zone that is never import Constrained from the Hub • LSE 2 with Load in Area that is often import constrained from the Hub • LSE 3 in Area that is sometimes import constrained from the Hub

  17. Example - Continued • LSE 1 can choose not to buy the FTR • LSE 2 buys FTR from Hub to the Zone at price which could be high • LSE 3 buys FTR from Hub to Zone at a much lower price • This example provides the three LSEs more options to offset costs

  18. Example – Finished • Supplier 1 has options to sell energy at the Hub that offset congestion • LSE 3 has options to purchase energy at the Hub without regards to congestion • Any Supplier can sell to any LSE in this example without knowing the final deliver point for the energy and any LSE can purchase from any Supplier without knowing the origin of the energy

  19. Spider Phone Agenda • Introduction • Concepts of the Hub • Summary

  20. SMD Understanding the New England Hub Summary of . . .

  21. Spider Phone Review • Key concepts of New England Trading Hub • Physical viability • Price stability • Individual bus availability • Internally unconstrained • Diversity of load and generation entities

  22. Future Training Sessions • Settlements / MIS • Internal Bilateral Transactions • Regulation Market • Operating Reserve • ICAP

  23. Still have questions? • ISO on the web: • www.iso-ne.com Online Forum Email: • onlineforums@iso-ne.com • General SMD Email: • cstedu@iso-ne.com

  24. Answers

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