Transcript Devon Power LLC, et al. ER03-563-00 ISO FERC Order in G

ISO
NEW ENGLAND
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FERC Order in
Devon Power LLC, et al. ER03-563-00
Robert Ethier
Director, Market Monitoring
ISO New England
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May 2, 2003
T H E P E O P L E B E H I N D N E W E N G LA N D ’S P O W E R .
ISO
NEW ENGLAND
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Background
• NRG had applied for Reliability Must Run (RMR)
agreements with the FERC to recover the full cost of
service for its Connecticut fleet.
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• ISO-NE had proposed, and the Commission had
accepted, a scarcity pricing mechanism called the ‘Proxy
CT’ that provided special mitigation
rules for generators
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in chronically congested areas (DCAs).
• The intent of the Proxy CT was to control local market
power while allowing price signals to incent investment
in chronic problem areas.
• These areas were identified as CT, SWCT and
NEMA/Boston
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ISO
NEW ENGLAND
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FERC Action on April 25, 2003
• Denied NRG’s request for RMR arrangements
for full cost of service recovery
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• Allowed guaranteed
recovery of only certain
maintenance costs required for reliability
• New agreements required
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reflecting this ruling
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ISO
NEW ENGLAND
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FERC Action (cont’d)
• FERC rejected the Proxy CT (combustion
turbine) proposal it had previously accepted
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• ISO to modify
Market Rule 1 by June 1 with
temporary measure – ‘Peaking Unit Safe
Harbor’ offer
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– Allows fixed cost component in offers of certain units
• ISO-NE required to file Locational ICAP plan by
March 1 ,2004.
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ISO
NEW ENGLAND
FERC Action (cont’d)
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• Directed ISO-NE to establish temporary
bidding rules:
– Permit selected
G200peaking units to raise their offers to
reflect fixed and variable costs (PUSH) Peaking Unit
Safe Harbor
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– Peaking unit defined as capacity
factor less than
10%, resident in identified DCAs
– Allow peaking units to set price
– Offers would be allowed to reflect total fixed costs,
levelized over 2002 MWh’s of generation
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ISO
NEW ENGLAND
FERC Action (cont’d)
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FERC Rationale:
• RMR contracts suppress market-clearing
G200uplift payments, and make it
prices, increase
difficult for new generators to profitably enter
the market.
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• In short, extensive use of RMR contracts
undermines effective market performance.
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ISO
NEW ENGLAND
FERC Action (cont’d)
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FERC Rationale:
• Our reason for increasing the safe harbor
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energy bids of
these units is to provide a
market mechanism for high cost, seldom run
units to recover their fixed
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• When a peaking unit is called, all sellers will
be able to receive a high market price and
recover fixed costs. This feature will
encourage entry by new generators.
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ISO
NEW ENGLAND
Rule Development
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• ISO-NE intends extensive discussions with
stakeholders on rules changes
• Regular and G
special
Markets Committee
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meetings in May to develop rules
• ISO-NE to make compliance
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• ISO-NE to implement temporary rules changes
on June 1
• Rule changes in effect until introduction of
Locational ICAP
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ISO
NEW ENGLAND
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Locational ICAP
• Order directs ISO-NE to develop a mechanism to
implement location or deliverability requirements in the
ICAP or resource adequacy market
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– Capacity within200
chronically constrained areas to be
appropriately compensated for reliability
• Discussions ongoing with stakeholders
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– Resource Adequacy Working Group
– Markets Committee
• ISO-NE intends to file revised ICAP rules no later than
March 1, 2004, for implementation no later than June 1,
2004, as required by the Order
– Consistent with existing
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