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Federal Energy Regulatory Commission. A ROADMAP TO FERC’S STANDARD MARKET DESIGN NOPR. Scott Miller Federal Energy Regulatory Commission Boston, MA September 13, 2002. WHY IS THIS NEEDED?. Increasingly Regional Nature of Electricity Trade Residual Discrimination – Independence Issue

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a roadmap to ferc s standard market design nopr

Federal Energy Regulatory Commission

A ROADMAP TO FERC’S STANDARD MARKET DESIGN NOPR

Scott Miller

Federal Energy Regulatory Commission

Boston, MA

September 13, 2002

why is this needed
WHY IS THIS NEEDED?
  • Increasingly Regional Nature of Electricity Trade
  • Residual Discrimination – Independence Issue
  • Minimize “Seams”
  • Avoid Market Manipulation
  • Promote Investment in Necessary Infrastructure
    • gx vs. tx vs. demand response
    • encourage development of new technology
  • Lower Costs to Customers
  • Framework for Effective State & Federal Regulation
pre nopr outreach
PRE-NOPR OUTREACH
  • RTO Week October 2001
  • Follow-on Technical Conferences
  • Comments on Working Paper and Options Paper
  • Meeting with major industry segments
  • Federal/State Commissioner Dialog on RTO issues
preserving state prerogatives
PRESERVING STATE PREROGATIVES

In addition, we are proposing:

Regional State Advisory Committees for policy issues and RTO management and budget review

Multi-State Entities for planning, certification, and siting at a regional level

Complements recommendation of Task Force to National Governors Association

States continue to: Set retail rates

Site transmission and generation

Deal with local distribution issues

major elements
MAJOR ELEMENTS
  • Independent Transmission Provider
  • New Transmission Tariff
  • Transmission Pricing Reform
  • Organized Day-ahead & Real Time Spot Markets
  • Mitigation of Market Power/Market Monitoring
  • Resource Adequacy
  • Regional Planning Process
independent transmission provider
Independent Transmission Provider
  • Operates Transmission Facilities
  • Administers Transmission Tariff
  • Administers Organized Spot Market
  • Same Definition of Independence as in Order No. 2000
  • Could be RTO (or some other independent entity)
new transmission tariff
NEW TRANSMISSION TARIFF
  • Network Access Service
  • All Customers Subject to the same terms and conditions of Transmission service
  • Transition
    • Customers under OATT – Network Access Service
    • Bundled retail service – LSE takes Network Access Service to serve these customers
    • Pre-Order No. 888 contracts – Can convert to network Access service, if not, then LSE takes Network Access Service to serve these customers
transmission pricing
TRANSMISSION PRICING
  • Embedded costs
    • access charge paid by load
    • license plate to address cost shifts
  • LMP Pricing for Congestion Management
  • Pricing of expansions
    • With ITP - consider participant funding
    • Without ITP - presumption will be to roll-in cost of expanding high voltage lines
  • No Access charges for transactions across RTO Borders (cost allocation remedy for cost shifts)
organized spot markets
ORGANIZED SPOT MARKETS
  • Supplement Long-Term Bilateral Contracts
  • Day Ahead & Real Time
  • Implements LMP
  • Congestion Revenue Rights
    • Financial right that entitles holder to congestion revenue (enables customer to protect itself from congestion costs)
    • Initial allocation process will be difficult
    • Rights of existing customers should be preserved
    • How do we accommodate unique needs of NW?
mitigation measures
MITIGATION MEASURES
  • Three required Components
    • Must offer obligation for localized market power
    • Safety-net bid cap - e.g., $1000 Mwh
    • Resource adequacy requirement for load
  • Fourth measure could be used if non-competitive conditions exist
    • Could limit bids if bid are high due to withholding and not scarcity
    • Need for measure determined on a regional basis
market monitoring
MARKET MONITORING
  • NOPR lays out framework
  • Independent market monitoring unit
    • Evaluates State of Markets
    • Identifies need for changes in market rules
    • Identifies load pockets & areas where infrastructure is needed for competition
  • Reports to FERC, Regional State Advisory Committee, and Board of Directors
  • Flexibility to adapt measures to regional market conditions
resource adequacy requirement
RESOURCE ADEQUACY REQUIREMENT
  • Customer protection
  • Forward-looking requirement developed on a regional basis
  • Encourages long-term contracts for supply
  • Avoids “free rider” opportunities
  • Preserves strong State role in establishing adequate reserve margins
resource adequacy requirement1
RESOURCE ADEQUACY REQUIREMENT
  • Annual regional demand forecast by RTO
  • Minimum 12% reserve margin, region could decide on higher level
  • Forward looking - e.g. , 3 years in advance
  • Regional flexibility
  • LSE that does not satisfy requirement assessed penalties for spot market purchases during shortage
regional planning process
REGIONAL PLANNING PROCESS
  • Start process within six months to facilitate development of infrastructure
  • Ground-up process with regional coordination to address loop flow
  • Four regions to start
  • ITPs would act as clearinghouse and evaluate alternative proposals
post nopr process
POST-NOPR PROCESS
  • Comments Due November 15
  • Reply Comments Due December 20
  • More Technical Conferences
  • Final Rule Implementation
    • Sept. 30, 2003 ---- Bundled Retail Under Tariff
    • Dec. 1, 2003 ---- SMD Compliance Filings
    • 1 Yr. after Rule ---- Regional Planning
    • Jan. 31, 2004 ---- Security Standards
    • Sept. 30, 2004 ---- SMD in effect