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NEPOOL Manual 6 Financial Transmission Rights Technical Review Session - Part III

NEPOOL Manual 6 Financial Transmission Rights Technical Review Session - Part III . June 3, 2002 Douglas James, ISO New England. Technical Review Session Content. M-06 Section 8 – Incremental ARRs Overview/Changes, Illustration: Interim IncARRs M-06 Section 7 – Auction Revenue Settlement

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NEPOOL Manual 6 Financial Transmission Rights Technical Review Session - Part III

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  1. NEPOOL Manual 6Financial Transmission RightsTechnical Review Session - Part III June 3, 2002 Douglas James, ISO New England

  2. Technical Review Session Content • M-06 Section 8 – Incremental ARRs • Overview/Changes, Illustration: Interim IncARRs • M-06 Section 7 – Auction Revenue Settlement • Changes, Illustration: MW Awards to $ • FTR Auction • Changes to M-06 • Illustration: Bidding Node-Zone vs. Zone-Zone • Illustration: Negative Bidding • Questions/Open Discussion

  3. NEPOOL Manual 6Financial Transmission RightsTechnical Review Session - Part III Session 1 - Incremental ARRs(Section 8) June 3, 2002 Douglas James, ISO New England

  4. Section 8 - Incremental ARRs • Schedule 15 provides few specifics • In keeping with SMD, looked to PJM while respecting differences in OATTs • Design principles: • Conform to NEPOOL OATT and existing processes governing transmission upgrades • Measure incremental value of upgrade fairly using mature tools • Offer choices to customers • Provide reasonably enduring results • Correlate with related PJM practices

  5. Section 8 - Incremental ARRs • IncARRs and Eligibility for Awards • Early Estimate of IncARRs • Interim IncARR Awards • IncARR Awards • IncARR Business Rules • Actions: who does what

  6. Section 8- Incremental ARR Overview • IncARRs and Eligibility for Awards • Awarded for new transmission upgrades that make additional FTRs possible [new => after March 1, 1997] • Upgrades paid by RNS rate do not qualify • Share costs, share IncARRs proportionately • IncARRs continue with cost support/upgrade life • In MW, unidirectional, from Node/to Node • A claim on auction revenue, not an FTR • Multi-step process offering customer choice • Initially, will offer Interim IncARRs on auction by auction basis (until first annual auction)

  7. Early Estimates of IncARRs • Early Estimate of IncARRs • Optional non-binding estimate to become available as part of Facility Study • Up to 3 pairs of Node-to-Node combinations

  8. Interim IncARR Awards • Awarded following each on-peak and off-peak auction prior to first annual auction • Represent direct share of auction revenues • Process • Direct allocation specific to each upgrade • Sequential evaluation of upgrade value • Uses FTR Auction software • When cost responsibility is shared Interim IncARRs are shared

  9. Interim IncARR Award Steps • Begin with FTR Auction model, bids, prices, total revenue (Q0) and ordered list of upgrades • Remove last upgrade, re-run auction with original bids; value resulting FTRs with original prices to determine new total revenue (Q1) • Interim IncARR value of the last upgrade is Q1- Q0 • Remove next to last upgrade, re-run auction with original bids; value resulting FTRs with original prices to determine new total revenue (Q2) • Interim IncARR value of the last upgrade is Q2- Q1 • Repeat until all upgrades are exhausted

  10. Incremental ARR Awards • Awarded sequentially for fixed duration for use beginning first annual auction • Awards applied to both on and off peak auction revenue settlements • Process • Application initiates multi-round allocation specific to each upgrade • Uses FTR Auction and ARR allocation software with on-peak network model • When cost responsibility is shared, lead customer requests and accepts IncARRs

  11. Incremental ARR Award Steps • Requests • Completed application requires information to properly model the upgrade in the ISO EMS Network Model • Requests submitted point-to-point (from/to Nodes) • Evaluation/Award • ISO establishes base conditions and base performance • Upgrades added, IncARRs corresponding to request are determined and offered to customer • Customer accepts in full, in part, or rejects • Repeat request/evaluation cycle with accepted IncARRs modeled as pre-existing in subsequent rounds • Up to three rounds

  12. Incremental ARR Business Rules • ISO interacts with only one entity when accepting applications, evaluating requests and offering resulting IncARRs • IncARRs offered become binding unless ISO receives alternative request within 3 business days • IncARRs continue as long as upgrade costs are supported or for life of upgrade, if shorter • IncARR awards may be reviewed periodically • IncARRs are not subject to reduction in ARR allocation

  13. Actions - Interim Incremental ARRs Actions: who does what • ISO • Requests information necessary to make awards • Awards FTR Auction Revenues per Interim IncARR methodology • Maintains record of Interim IncARR awards ($) each auction • Upgrade Sponsor • Provides information necessary to model upgrades and determine cost responsibility

  14. Actions - Incremental ARRs • Actions: who does what (going forward): Requesting Entity ISO Submit applications Receive/respond Submit requests Evaluate requests Offer IncARR awards (MW) Accept awards (MW) Post IncARR awards (MW) Maintain record of IncARRs (MW) • For upgrades in-service/expected to be in-service prior to first annual auction, ISO will initiate process in sequential order

  15. Questions?(Interim IncARR Process Illustrationto Follow)

  16. NEPOOL Manual 6Financial Transmission RightsTechnical Review Session - Part III Session 2 – FTR Auction Revenue Settlement (Section 7) June 3, 2002 Douglas James, ISO New England

  17. Section 7 – ARR Overview Section • Revenue Allocation • by IncARRs & Load Share of Generation (4 stages) • 4-Stage Allocation Process (MW) • Generation: Seasonal Claimed Capability at Node • Tie Sources: Total Transfer Capability at External Node • Load: Distribution from network model used by FTR Auction, scaled up to meet Generation and Tie Sources

  18. Section 7 – ARR Overview Section • Value 4-Stage ARR (MW) Awards • At each destination Node (load), multiply each ARR award (in MW) by the $ value in the FTR Auction for an FTR having the same origin and destination Node as the ARR award. • Sum $ Value of ARR Awards by Load Zone • Apply Proportional Adjustment to Achieve Revenue Neutrality

  19. Section 7 – ARR Overview Section • Distribute $ Shares Within Each Load Zone • In proportion to Real-Time Adjusted Load Obligation, excluding External Transactions, within the Load Zone. • With adjustments for Excepted Transactions and NEMA Contracts. • RTALO at the time of the NEPOOL coincident peak for the month being settled. • Illustration

  20. NEPOOL Manual 6Financial Transmission RightsTechnical Review Session - Part III Session 3 – FTR Auction June 3, 2002 Douglas James, ISO New England

  21. FTR Auction • Changes • Section 1 (and 3): Non-Participant registration fee of $5000. • Section 3: Added Financial Assurance test at close of auction window and before conducting auction. • Questions • Bidding Node-Zone vs Zone-Zone • Negative Bidding

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