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New Hampshire Winter 2013/14 Proposal . Presentation to: Joint Markets/Reliability Committee Meeting May 13, 2013 George McCluskey New Hampshire Public Utilities Commission. Background.

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New hampshire winter 2013 14 proposal

New Hampshire Winter 2013/14 Proposal

Presentation to:

Joint Markets/Reliability Committee Meeting

May 13, 2013

George McCluskey

New Hampshire Public Utilities Commission


Background
Background

  • ISO-NE conducted an assessment of the incremental energy needed to ensure a reliable electric system this coming winter under weather conditions that result in reduced natural gas availability compared to last winter

  • The Winter 2013/14 needs assessment was based on temperatures from Winter 2003/4, which had the coldest weather in the last 10 years

  • Depending on the availability of LNG and Maritimes natural gas, the assessed incremental need for Winter 2013/14 varied from 1.08 TWh to 1.5 TWh


Objective

Objective

; ;

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


Eligible resources

Eligible Resources

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


Nh s procurement design

NH’s Procurement Design

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

Procurement

Transportation

Storage

Conversion

Disposal


Nh s procurement design cont
NH’s Procurement Design (Cont.)

  • NH supports the ISO’s proposed Winter DR Program

  • Each market participant offering generation resources in response to the RFP would specify for each resource:

    • the max hourly rate of delivery

    • the max MWhs available over the winter period

  • The actual rate of delivery in any hour and the actual MWhsdelivered over the winter would be determined by the ISO

  • Failure to deliver for any reason would expose market participants to financial sanction

  • Each market participant would submit proof that it intends to purchase adequate quantities of firm fuel supplies to support any max MWh offer


Procurement design cont
Procurement Design (Cont.)

  • Market participants would provide a baseline amount for each resource. The ISO would be responsible for validating the amount and for making any final determination.

  • Market participants would submit for each resource a two-part pricing proposal comprising:

    • A $/MWh fixed charge applied to the difference between a resource’s max MWhsand its baseline amount.

    • A $/MWh variable charge that would be applied to the difference between the actualMWhsdelivered by a resource and its baseline amount.


Lng issues
LNG Issues

The ISO offered two reasons for excluding LNG from its winter proposal:

  • Baseline determination

  • Market distortion

    Baseline Determination:

    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.


Lng issues cont
LNG Issues (Cont)

Market Distortions:

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.


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