Transcript The Midwest Independent Transmission System in the New

The Midwest ISO Market Design
Roberto F. Paliza, Ph.D.
Federal Energy Regulatory Commission
Electricity Market Design and Structure
Conference
January 22-23, 2002
Topics
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The Midwest ISO
The Midwest Market
Market Design Process
Design Framework
Common Design Elements
Unique Design Features
Implementation Challenges
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Midwest ISO Statistics
• 25 Transmission-Owning Members
• 35 Non-Transmission Owning Members
• MISO Service Territory
– 81,000 MW Peak Load
– 74,000 miles of transmission
– More than 8 million customers
– 15 states and 1 Canadian province
– 3 states with retail access
• Detroit ITC approved under Appendix I and
TransLink awaiting approval
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Midwest ISO Operations
• Day-1
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Security coordination
Outage coordination
Tariff administration
Congestion management
Energy imbalance
Billing and settlements
Market monitoring
• Day-2
– Implementation of a single market in the Midwest
– LMP and Financial Transmission Rights
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Proposed Midwest Market
• Includes MISO, SPP, and Alliance
• TransCos: Detroit ITC, TransLink,…..
• Midwest Market Statistics
– Over 200,000 MW of generation capacity
– Includes 23 states and 1 Canadian province
– 6 states with retail access
– Approximately 200,000 miles of transmission
– Serving over 30 million customers
– The largest market in the US
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Operational Characteristics
• Electrically intertwined systems with heavy
interdependencies in some regions
• Covers MAIN, MAPP, SPP and most of ECAR
reliability councils and associated reserve sharing
agreements
• Over 40 control areas responsible for the dispatch
and regulation of their systems
• Currently there are four security coordinators and
several tariff administrators
• Coordination issues will be addressed by the
implementation of one RTO in the Midwest and a
single market
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Proposed Midwest Market
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Market Design Process
• Stakeholder driven process
• Focused group composed of stakeholders and staff
responsible for the design
• High level design is completed
• Working on the detailed design
• Implementation alternatives are being studied in
parallel with the design
• Staged approach to achieve ultimate goal
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MISO Design Framework
• Bid-based security constrained dispatch
• Locational Marginal Pricing for imbalances and
congestion
• Financial transmission rights based on PTP and
FGR (options and obligations)
• Real-time and day-ahead markets
• Works within a multi-control area structure
– Existing reserves groups will transition to a
MISO-wide market
– Existing control area regulation will transition
to a MISO-wide market
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MISO Market Operations
Market Inputs
Generator Bids
Load Bids
Bilateral
Schedules
Self Schedules
RTO
Functions
Market Support
Cover
Imbalances
Ensure Reliability
Bid based
SecurityConstrained
Dispatch
Calculate
Nodal
Prices
RTO Market Settlements
At Nodal Prices
Real-Time
Balancing
Buy and Sell
In Spot Market
Congestion
Redispatch
Buy Through
Congestion
Transmission
Rights
$$$
Hedge
Congestion
Market-Driven
Decisions
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Common Design Elements
• The MISO Market Design includes the core
elements of the emerging standard market design:
Existing
Proposed
Real-Time Market
FERC Staff
PJM
New York NEPOOL
MISO
 Simultaneously balances generation
and load and manages congestion
Yes
Yes
Yes
Yes
Yes
 LMP Pricing
Yes
Yes
Yes
Yes
Yes
 Permits Self-Scheduling
Yes
Yes
Yes
Yes
Yes
 Permits Bilateral Schedules
Yes
Yes
Yes
Yes
Yes
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Common Design Elements
Existing
Day-Ahead Market
Proposed
FERC Staff
PJM
 Day-ahead schedules based on
security constrained dispatch
Yes
Yes
Yes
Yes
Yes
 Voluntary, bid-based, and permits
self-scheduling
Yes
Yes
Yes
Yes
Yes
 LMP Pricing
Yes
Yes
Yes
Yes
Yes
 Does not require balanced
schedules
Yes
Yes
Yes
Yes
Yes
 Schedules financially binding
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
 Reliability commitment by
ISO/RTO
New York NEPOOL
MISO
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Common Design Elements
Existing
Transmission
Proposed
FERC Staff
PJM
New York NEPOOL
MISO
 Consistent LMP pricing of
transmission usage and energy
Yes
Yes
Yes
Yes
Yes
 Combined markets for energy and
transmission usage
Yes
Yes
Yes
Yes
Yes
 Transmission rights are financial
Yes
Yes
Yes
Yes
Yes
 Does not require transmission rights
to obtain transmission service
Yes
Yes
Yes
Yes
Yes
 Unused day-ahead schedules settle
at real-time congestion prices
Yes
Yes
Yes
Yes
Yes
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Transmission Rights Allocation
• Initial allocation of transmission rights
– Grandfathered rights (non-OATT) have the choice
to convert or keep them as they are until expiration
– Existing OATT contracts will be converted to PTP
• Transition to a full auction of transmission rights after
a transition period
• Transition period needs to be determined
• Develop methodology to ensure that allocated
transmission rights are simultaneously feasible
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Types of Transmission Rights
• Financial Transmission rights are defined in terms of
Point-to-Point (PTP) and Flowgate (FGR) rights:
– PTP and FGR can be options as well as obligations.
– Flowgate is a transmission element or a set of
elements which represent transmission operational
constraints (thermal, voltage, or stability)
– Flowgates (FGRs) can be defined as having:
– Monitored elements only
– Monitored and contingency elements
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Obligations vs Options
• Transmission rights can be options or obligations.
Settlement of these financial rights depend on the
direction of congestion. For example for A-B right:
A
B
A
B
$20
$70
$70
$20
Obligation:
Obligation:
Holder receives $50
Holder pays $50
______________________________________________
Option:
Option:
Holder receives $50
Holder receives/pays $0
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Flowgate Right Characteristics
• FGRs as proposed for implementation by MISO
have the following characteristics:
– FGRs can be options or obligations
– The flowgate right holder is hedged for
congestion only on the specified constraint
– The flowgate right holder decides how many
flowgate rights will be necessary to hedge its
transactions
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Multi-Control Area Structure
• The Midwest region includes over 40 control areas in
which a variety of important functions are performed
by the control area operator
• The design accommodates existing control areas (does
not require CA consolidation)
• The design includes a phase-in approach to move
towards centrally coordinated markets
• Dispatch is centrally coordinated first, followed by
reserves and regulation
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Operating Reserves
• The Midwest includes portions of four existing
reserve sharing agreements: ECAR, MAIN,
MAPP, and SPP
• These agreements are similar but each has its own
characteristics and implementation
• During a transition period, MISO will coordinate
existing reserve groups and reserve activation
• After the transition period, a MISO-wide reserves
market will be established
• To properly maintain reliability in the Midwest
region, reserve zones may have to be defined
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Resource Adequacy
• Alternatives for assuring long-term resource adequacy
– ICAP markets
– Pricing mechanism
– Load shedding responsibility
• Preliminary assessment of above methods led to
primary reliance on the pricing mechanism (supported
by load shedding rules) but more investigation is
required
– High price/bid caps
– Demand is price-sensitive
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Resource Adequacy
• Ensure short-term resource adequacy
– All generation is “visible” to the MISO
– Price will rise until generation meets load
• MISO does not propose that control areas share
responsibility for load shedding in all
circumstances
• If load shedding is required as a result of
inadequate day-ahead resource commitment,
distribution companies that lack resources to meet
their loads will bear more of the load shedding
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Market Power Mitigation
• Market power concerns in load pockets have been brought to
the attention of the MISO
• These market power concerns will be addressed as part of the
Market Design by the Independent Market Monitor (IMM),
MISO, and stakeholders
• Proposed mitigation mechanisms will be filed with FERC
and, if approved, incorporated in the implementation of the
congestion management system
• Any exercise of market power in the Midwest will be
monitored and identified on an ongoing basis by the IMM
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MISO-TransCo Coordination
• MISO-TransCo coordination process is under
development:
– Avoid the creation of internal seams (single market)
– Provide appropriate incentives for transmission
expansion
• Some of the TransCo functions may include:
– Transmission ownership and maintenance
– Physical operation of transmission system
– Work with MISO on transmission planning
– Transmission expansion
– Collect payments for transmission service provided
under MISO tariff
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Inter-RTO Coordination
• The establishment of large RTOs employing real-time
redispatch across broad regions will require changes in interregional coordination mechanisms
• FERC Standard Market Design will reduce seams issues but
will not eliminate them
• In addition to the standard market design, there is a need for
coordination mechanisms that would address issues such as:
– Impact of loop flow and compensation
– Impact of real-time redispatch
– Transmission rights across RTO boundaries
• MISO-PJM Letter of Intent
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Implementation Challenges
• The scale of MISO operations requires a careful
evaluation of implementation alternatives
• Combination with SPP and Alliance will help greatly
in resolving seams issues in the Midwest
• The key challenge for MISO is to successfully
implement the “Single Market” in the Midwest:
• Establishment of real-time and day-ahead markets
• Allocation of financial transmission rights
• Coordination of these markets by MISO
• Implementation risks and cost will be managed by
staging the implementation and establishing
cooperating agreements with other RTOs
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Questions/Comments
• [email protected]
• [email protected]
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