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ISO-NE Proposal Designated Congestion Area An Impact Assessment

ISO-NE Proposal Designated Congestion Area An Impact Assessment. G. Elsoe Jorgensen Select Energy, Inc. December 13, 2003. DCA, FERC Uncertainty Level. ISO-NE originally proposed a congestion area mitigation methodology termed Designated Congestion Area, DCA, mitigation

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ISO-NE Proposal Designated Congestion Area An Impact Assessment

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  1. ISO-NE ProposalDesignated Congestion Area An Impact Assessment G. Elsoe Jorgensen Select Energy, Inc. December 13, 2003

  2. DCA, FERC Uncertainty Level • ISO-NE originally proposed a congestion area mitigation methodology termed Designated Congestion Area, DCA, mitigation • FERC in its 10/20 Order modified the ISO-NE proposal. • ISO-NE has requested FERC for rehearing still promoting its original proposal The rehearing requests is on the FERC Agenda for 12/18/ 2002 • It is premature to discuss and act on the DCA’ until FERC has finalized its DCA order. We are nevertheless prepared to discuss some parts of the DCA

  3. HHI facts within CT • Per Attorney General of the State of Connecticut filing in FERC Docket No. EC01-70-000 ( Proposed NRG purchase of Wisvest CT resources) the following “pivotal supplier” HHI indices for the early part of SMD were provided. • Variations in the HHIs are due to uncertainty of the in-services date of additional generation within the CT and SWCT areas, in particular the El Paso Energy units. (Note that an HHI above 1800 presents concern to the US DOJ) • HHI CT Area: 4206-2701 • HHI SWCT Area: 3350-2139

  4. ISO-NE bidding assumptions • Per ISO-NE FERC filings it has stated that generation is expected to create scarcity signals up to the Proxy Prices under the “safe harbor” DCA provisions • This means to Select that generation will be allowed by ISO-NE at any time to conduct market power behavior without fear of ISO-NE mitigation. • The CT AG’s HHI filings substantiates the existence of potential for market power abuses within the state of Connecticut

  5. Connecticut Load Facts • Connecticut estimated peak load: 6736 MW or about 37 MMWH annual • SWCT estimated peak load: 2284 MW or about 12 MMWH • Norw/Stam estimated peak load: 1163 MW or about 6 MMWH

  6. DCA Proxy Price Facts • Proxy Price, PP, for a Designated Congestion Area is determined based on ISO-NE assessment of DCA level of congestion. • FERC filed MRP1, Appendix A, brackets the range to between 500-2000 hours annually • Proxy Price formula: variable PP cost plus PP fixed costs of Gas Turbine. • PP Variable Cost about 45$/MWH and depends on cost of fuel • PP Fixed Cost depends on fixed cost of GT divided by estimated hours of DCA congestion. • Annual CT fixed cost by e-Acumen 73.81$/kW-Year • PP at 500 hours: 45+73.81*1000/500 or 45+147.62 or 193$/MWH • PP at 2000 hours: 45+73.81*1000/2000 or 45+36.9 or 82 $/MWH

  7. Cost Impact, 500Hrs Assumption • Average CT Load Zone energy price assuming competitive market: 50$MWH • Actual 500 hours of congestion and/or MP within CT’s DCAs • Connecticut a DCA: 37MMWH * (500/8760)* (193-50) or $302 Million annually for CT Load Zone • SWCT a DCA: 12MMWH* (500/8760)*(193-50) or $98 Million annually for the CT Load Zone • Norw/Stam a DCA: 6MMWH*(500/8760)*(193-50) or $49 Million annually for the CT Load Zone

  8. Cost Impact, 2000 Hrs Assumption • Average CT Load Zone energy price assuming competitive market: 50$MWH • Actual 2000 hours of congestion and/or MP with CT’s DCAs • Connecticut a DCA: 37MMWH * (2000/8760)* (82-50) or $270 Million annually for CT Load Zone • SWCT a DCA: 12MMWH* (2000/8760)*(82-50) or $87 Million annually for the CT Load Zone • Norw/Stam a DCA: 6MMWH*(2000/8760)*(82-50) or $44 Million annually for the CT Load Zone

  9. Cost Impact Summary for Connecticut for 500 hrs assumption • For a 500 hrs DCA and LMP at Proxy Price for 500 hours, the cost to CT could be at least $300 Million annually. • For a 500 hrs DCA and LMP at Proxy Price for more than estimated 500 hours, the cost to CT would be an additional cost of $60 Million for each 100 hours of congestion or market power behavior above the 500 hours assumed

  10. Cost Impact Summary for Connecticut for 2000 hrs assumption • For a 2000 hrs DCA and LMP at Proxy Price for 2000 hours, the cost to CT could be at least about $270 Million annually. • For a 2000 hrs DCA and LMP at Proxy Price for more than estimated 2000 hours, the cost to CT would be an additional cost of $14 Million for each 100 hours of congestion or market power behavior above the 2000 hours assumed

  11. Cost Summary of DCA as applicable to Connecticut • Estimated for DCA related impacts on Connecticut is estimated to be around $300 Million annually • Per ISO-NE Market Advisor David B. Patton, PH.D. FERC July 22, 2002 testimony it was estimated that one should not expect a price increase due to the mitigation procedures proposed by ISO-NE of more than 2 % annually. This corresponds to $37 million annually.

  12. Why defer DCA discussion? • FERC is expected to rule on requests for DCA related re-hearings on 12/18/02 • If re-hearings granted, FERC DCA might be drastically different. • ISO-NE should be given an opportunity to explain to the state of Connecticut why certain levels of market power behavior is acceptable in Connecticut and the reasonableness of the DCA related cost estimate impacts provided in this presentation or that of Dr Patton

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