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RTO Market Design Update April 15, 2002 Bob Thompson and Dave LaPlante

RTO Market Design Update April 15, 2002 Bob Thompson and Dave LaPlante. Market Evolution. MACC. PJM. PJM. Possible Northeast Market Evolution (including Canada). CONSOLIDATE MARKETS. STANDARDIZE MARKET DESIGN. Stage 3 – Consolidated Market. IMO. Value Creation.

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RTO Market Design Update April 15, 2002 Bob Thompson and Dave LaPlante

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  1. RTO Market Design Update April 15, 2002 Bob Thompson and Dave LaPlante

  2. Market Evolution MACC PJM PJM Possible Northeast Market Evolution (including Canada) CONSOLIDATE MARKETS STANDARDIZE MARKET DESIGN Stage 3 – Consolidated Market IMO Value Creation Stage 2 - NY Implements SMD 2.0 IMO NPCC IMO SMD2.0 ? IMO IMO Stage 1 - NE Implements SMD 1.0 NPCC NYISO ISO-NE SMD2.0 IMO ISO-NE NYISO IMO IMO IMO SMD2.0 SMD 1.0 NYISO ISO-NE NPCC Stage 0 - Current State Markets MACC PJM NY SMD 1.0 PJM IMO IMO IMO IMO MACC PJM NPCC NYISO ISO-NE PJM NY NEPOOL PJM MACC PJM

  3. Standard Market Design -- Northeast and Nationwide • What is SMD ? • SMD - is an evolving wholesale electricity market design based on the PJM market design enhanced by best practices from New York and New England • FERC’s SMD is based largely on the Market Designs in the 3 Northeastern ISOs. • ISO-NE and NYISO generally support FERC’s SMD

  4. SMD and the Northeast RTO • The Evolution of SMD into the NERTO Market Design • SMD1.0 is the ISO-NE SMD implementation planned for 1Q 03 • Advances the ball with the addition of losses, spinning reserve markets, day-ahead optimization of Energy Limited Resources and other improvements • SMD2.0 will initially be implemented in NY • Advances it further – as discussed later in presentation • SMD2.0 will in large part be the design of the NERTO markets • SMD2.0 conforms with FERC’s intended SMD

  5. Standard Market Design Evolution – NYISO Perspective • Outline of Presentation • NYISO –SMD features implemented • SMD2.0 - Changes from Current NYISO Rules to SMD “Best Practices” • SMD2.0 - Major Changes From SMD1.0 • SMD2.0 - Compliance With FERC SMD • Current market design process in NY – status and issues

  6. SMD Update: NYISO – SMD Features Already Implemented • Virtual Bidding – in operation late 2001 • Ability of generation to follow price – in operation late 2001 • Addition of a ramp and transmission advance reservation process – in operation April 2002

  7. SMD Update: SMD2.0 - Changes to Current NYISO Rules to Reflect SMD Best Practices • Ability to accommodate transaction changes at 15 minute intervals • Ability to accept Short Notice External Transactions • e-schedules for internal transactions – changes up to start of daily settlement • Self commitment • Self scheduling • Ex-post pricing • Nodal pricing at load buses

  8. SMD Update: SMD2.0 - Major Changes From SMD1.0 as implemented in New England • NYISO “Best Practices” • Simultaneous co-optimization of ancillary services and energy in Day-Ahead and Real-Time Market commitment decisions • 10 minute spinning and non-spinning reserve • 30 minute operating reserve • Regulation • Generator bids may vary by hour • Generators may change bids up to 1 hour in advance of “Real-Time” -- Options still under review • Ability to bid negative prices • Price responsive day-ahead demand reduction program • Locational reserves (similar to New England reliability must run units) • Automated mitigation procedures in Day-Ahead and Real-Time markets

  9. SMD Update: SMD2.0 Compliance With FERC SMD • Transmission rights • TCCs conform • Options and flow-gates are concepts that can be accommodated when more fully developed • Day-ahead markets • FERC has generally described the SMD2.0 DAM • Multi-part load bids are a future enhancement that may be accommodated after more careful definition • Reserve self-scheduling needs careful design if real time co-optimization is used in economic dispatch • Real-time markets • SMD2.0 appears fully compliant with FERC SMD

  10. SMD Update: SMD2.0 Compliance With FERC SMD • Regulation and Operating Reserve • SMD is generally compliant • Ability for Demand side resources to supply reserve exists now for pumped storage, additional demand resources can be added with adequate with adequate metering and communication • At least 2 issues need further clarification • Reserving or blocking off transmission to accommodate self-supply • Energy prices cascaded with ancillary service prices • Use of ex-ante mitigation methods • FERC has identified SMD2.0 Automated Mitigation Procedure as a preferred methodology

  11. SMD Update: SMD2.0 NY Development Status and Issues • Development Status • Updating NY’s current design to SMD2.0 requires changes significant changes to New York’s real-time markets but only minimal changes to Day Ahead Market or FTRs • Most significant change is a replacement process for the Balancing Market Evaluation (BME) and a replacement of 25 year old legacy Security Constrained Dispatch (SCD) • Concept of Operation due to be completed in May, with detailed specs finished in June.

  12. SMD Update: SMD2.0 NY Development Status and Issues • Issues • Commitment/dispatch structure and energy scheduling - drafted • External Transaction scheduling – NYISO and ISO-NE staff agreed on approach, market participants to review and comment • Ancillary services scheduling and pricing - under discussion • Published information and posting processes - to be addressed soon • Will go to NY committees for approval June & July

  13. SMD Update: SMD2.0 NY Development Status and Issues • ISO-NE market participant input to the real-time NY design is encouraged to obtain as much input as possible on SMD 2.0 • Input and understanding is best gained through participation in the Market Structure Working Group (MSWG) • Meeting schedules and all materials (including the current Concept Of Operation Paper) are posted on NYISO web site • ISO-NE staff and some NE MP’s are involved along with some IMO staff and MP’s • Final NERTO market rules will vary somewhat from SMD2.0 in NY but the overall market design including real-time will be very close • Now would be a good time to get involved • An RTO Market Design Working Group will be established

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