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Market Rule Changes for Locational ICAP ISO New England Market Monitoring. December 18, 2003. Robert G. Ethier, Ph.D. Director, Market Monitoring. OUTLINE. Why do we need MMM for LICAP? Why is energy mitigation being revised? Changes under LICAP

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December 18 2003

Market Rule Changes forLocational ICAP

ISO New England

Market Monitoring

December 18, 2003

Robert G. Ethier, Ph.D.

Director, Market Monitoring


Outline
OUTLINE

  • Why do we need MMM for LICAP?

  • Why is energy mitigation being revised?

  • Changes under LICAP

  • De-listing in Import Constrained ICAP Regions (ICIRs)

  • ICIRs and LICAP Spot Market

  • Energy Market Constrained Area Threshold Changes


Why do we need mmm for licap
WHY DO WE NEED MMM FOR LICAP?

  • Identified LICAP sub-areas have concentrated ownership

    • High HHI’s (between 2,307 and 5,346 in June 2003)

    • High ownership share of two largest participants (between 63% and 92% in June 2003)

  • Demand curve helps reduce incentive to exercise market power, but is insufficient

    • Cournot modeling shows that largest two participants have incentive to raise prices to the cap

  • No mitigation authority for “Rest of Pool” ICAP


Why is energy mitigation being revised
WHY IS ENERGY MITIGATION BEING REVISED?

  • Parallel to NYISO approach to mitigation with introduction of LICAP: tighter thresholds in ICIRs, relaxed thresholds in non-ICIRs

  • Current congestion thresholds were intended for typically unconstrained regions

  • In ICIRs, current thresholds too loose given frequent need to dispatch units to relieve constraints (and expected ICAP prices)

  • Outside ICIRs, experience has shown constraints to be infrequent, suggesting that relaxing thresholds is ok


Overview of changes under licap
OVERVIEW OF CHANGES UNDER LICAP

  • MMM will monitor de-listing requests and have the authority to deny de-listing in ICIRs

  • MMM will have mitigation authority in the LICAP spot auction in ICIRs

  • Changes to Constrained Area energy market thresholds in both ICIRs and Rest of Pool


De listing in icirs
DE-LISTING IN ICIRs

  • MR 1 requires justification of de-listing requests

  • Two clear justifications for de-listing:

    • Sale of capacity to another control area

    • Cost savings of de-listing exceeds expected capacity revenue

  • Each justification may require submittal of verification

  • Resources without such justification may be denied de-listing


De listing in icirs continued
DE-LISTING IN ICIRs (Continued)

  • Start-Up of LICAP market

    • MMM to review and possibly re-list Resources whose de-listing is inconsistent with acceptable de-listing criteria

  • Resources in ICIRs denied de-listing may be eligible for a Transitional Locational ICAP payment


Icirs and licap spot market
ICIRs AND LICAP SPOT MARKET

  • Mitigation in LICAP spot market based on the conduct and impact test model

  • Applicable only in ICIRs, not Pool-wide

  • Conduct Threshold: $1.00/kW-month

  • Market Impact Threshold: $1.00/kW-month

  • MMM will not mitigate offers in ICIRs below the ICAP clearing price in the unconstrained Rest of Pool Region


Icirs and licap spot market continued
ICIRs AND LICAP SPOT MARKET (Continued)

  • Reference Levels

    • Based on going forward costs

      • Participant may provide justification 15 days prior to spot market clearing at their discretion

    • Net of expected net revenues

    • Default reference value of $1.00/kW-month


Rationale for conduct and impact threshold
RATIONALE FOR CONDUCT AND IMPACT THRESHOLD

  • Reflects inexact nature of Reference Price calculation for LICAP

  • Intended to reflect value of obligations incurred by ICAP resources

    • Recallability of energy sales to external control areas

    • Risks associated with obligation to offer in DA market

    • Limits on ability to take economic outages

    • Limits on ability to schedule planned maintenance


Energy market constrained area threshold changes
ENERGY MARKET CONSTRAINED AREA THRESHOLD CHANGES

  • Conduct and Impact thresholds generally the same

  • In the unconstrained Rest of Pool Region

    • Energy thresholds for units providing transmission system support change from $25/MWh or 50% to $50/MWh or 100% increase

  • In the ICIRs

    • Energy thresholds for units providing transmission system support change from $25/MWh or 50% to $12.50/MWh or 25% increase

    • Start-Up and No-Load Conduct threshold changes from 50% to 25%

    • OR Impact threshold changes from 100%/$10/MWh to 50%/$10/MWh


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