New Hampshire Winter 2013/14 Proposal . Presentation to: Joint Markets/Reliability Committee Meeting May 13, 2013 George McCluskey New Hampshire Public Utilities Commission. Background.
Joint Markets/Reliability Committee Meeting
May 13, 2013
New Hampshire Public Utilities Commission
Develop a RFP to procure 1.08 TWh of incremental energy for Winter 2013/14
The procurement would enhance the ISO’s ability to maintain system reliability during the coming winter under weather conditions similar to those experienced Winter 2003/4
The ISO may have to resort to other means to maintain system reliability if Winter 2013/14 turns out to be colder than Winter 2003/4
The RFP would be open to demand response assets, oil-fired generators, and gas-fired generators that use fuel oil and LNG as back-up fuels
Market participants, however, would be required to demonstrate for each resource that the MWhs offered exceed the MWhthat would have been delivered absent the winter program
The MWh delivered by a resource absent the winter program is referred to as the baseline amount
The ISO would purchase commitments to deliver MWhs that in aggregate total 1.08 TWh
To control costs, the ISO would purchase no more than the target amount
Market participants with obligations would be responsible for making all fuel supply decisions including
The ISO offered two reasons for excluding LNG from its winter proposal:
The basis of the ISO’s argument, as we understand it, is that it is extremely difficult to make accurate determinations of the baseline amounts for LNG-fired generators when weather conditions are abnormal and data on inventory levels for LNG storage facilities is not publicly available.
NH agrees that the task of determining accurate baseline amounts is challenging. Nonetheless, we propose as a proxy that the baseline be generator specific and that it reflect for each generator the MWh produced in Winter 2012/13 from burning LNG vapor. This information, if not already in the ISO’s possession, could be obtained by requiring the submission of last winter’s invoices from LNG suppliers.
The argument we believe is based on the theory that the additional natural gas supply that results from LNG’s inclusion in the winter program increases the regional natural gas supply, resulting in lower natural gas prices. Since gas-fired generators are on the margin most hours, these lower natural gas prices depress electricity prices below their efficient levels.
Fairness dictates that the distortionary effects of including LNG in the program be balanced with the potential loss of cost savings to load if LNG is not allowed to compete with other fuels to provide the incremental energy need. That notwithstanding, the ISO has provided no evidence to indicate that the magnitude of the market distortion warrants the exclusion of LNG.