1 / 49

June 10, 2014 | NEPOOL Markets Committee

June 10, 2014 | NEPOOL Markets Committee. ISO New England Staff. System & market Operations, Market Development, Market Monitoring . Discussion of proposed changes focused on Dual Fuel Capability, Unused Oil Inventory, Unused Contracted LNG and Demand Response. Winter Reliability Program.

blaise
Download Presentation

June 10, 2014 | NEPOOL Markets Committee

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. June 10, 2014 | NEPOOL Markets Committee ISO New England Staff System & market Operations, Market Development, Market Monitoring Discussion of proposed changes focused on Dual Fuel Capability, Unused Oil Inventory, Unused Contracted LNG and Demand Response Winter Reliability Program

  2. Proposal Summary • The ISO is proposing changes focused on dual fuel resource participation in the markets: • Additional compensation will be provided to offset commissioning costs • Additional compensation will be provided for unused oil inventory • ISO is also proposing permanent rule changes through separate initiatives • Requirement to burn higher cost fuel when offered/cleared will no longer be required under competitive market conditions • ISO-initiated audit rules will be extended to apply to, and compensate for, dual fuel resource annual tests • The ISO is proposing to provide additional compensation for: • Unused oil inventory of non-dual fuel resources • Unused LNG contract volume of pipeline gas resources • Demand response (similar to Winter 2013/14)

  3. Unused Oil Inventory Program Summary of modifications made to the program rules since the Markets Committee meeting on June 3

  4. The minimum target level is being reduced to 85% usable tank capacity or 10 days operation • Based upon feedback received from participants, the proposed minimum target level is being changed to 85% usable tank capacity or 10 days of full load operation • The program aggregate minimum inventory level is reduced from 3.0M barrels of oil to 2.8M barrels of oil

  5. Unused CONTRACTED LNG Program Summary of modifications made to the program rules since the Markets Committee meeting on June 3

  6. The maximum eligible compensation level is increased from two days to four days at full load • Based upon feedback received from participants, the proposed maximum compensation level for a resource with unused LNG has been increased to four days at full load based upon the winter SCC • This will allow increased participation by individual resources while maintaining a constraint that would ensure that by program design the LNG must be distributed across a number of resources in the fleet • At four days full load the total potential program participation level increases to about 12 Bcf assuming 100% participation (versus 6 bcf under the two days full load scenario assuming 100% participation) • The ISO is adding a specific limit of 6 Bcf to the participation level originally proposed • Proposals would be accepted on a first come/first served basis up to the 6 BCF level

  7. Dual Fuel Commissioning Program Summary of modifications made to the program rules since the Markets Committee meeting on June 3

  8. Extend this program for another year, but with a reduced cost recovery limit for the extended period • This program has been extended until December 1, 2016; however, resources that are commissioned after December 1, 2015 have a lower cost recovery limit based upon 10 hours at full load and three cold starts • This approach, while extending the program, maintains a strong incentive for resources to commission their dual fuel capability prior to December 1, 2015 • Resources that miss the December 1, 2015 will have their cost recovery limit recalculated based upon lower level • Any payments made above the revised level will be charged back to the participant

  9. Proposal Summary & Schedule

  10. Proposal Summary • The ISO is proposing changes focused on dual fuel resource participation in the markets: • Additional compensation will be provided to offset commissioning costs • Additional compensation will be provided for unused oil inventory • The ISO is proposing to provide additional compensation for: • Unused oil inventory of non-dual fuel resources • Unused LNG contract volume of pipeline gas resources • Demand response (similar to Winter 2013/14)

  11. Modified Slide Appendix: Full Program Proposal New Slide The material includes the complete proposal that was presented at the Markets Committee on May 6, May 23 and June 3 Substantive changes to the design or additional details on the design have the associated slides identified as “modified” in the upper right corner with modified text highlighted in red New slides are identified as “new” in the upper right corner

  12. Modified Slide Additional information on Winter 2013/2014 operations and Winter 2013/14 Program • When comparing last year’s program participation to the proposed program’s minimum requirement (the lesser of 85% of usable tank capacity or 10 days at full load operation) 64% of resources that participated met or exceeded the requirement* • Of those that would not have met the requirement, only one resource missed the requirement by a significant margin • When comparing last year’s program participation to the proposed program’s maximum requirement (the lesser of 95% of usable tank capacity or 15 days at full load operation) 220,000 barrels (or ~6%) were awarded above this requirement * • When comparing the $18/bbl price proposed for this year’s program against the offers from last year’s program, there would have been approximately 1.7M barrels of oil that would have cleared at or below $18/bbl * • During last winter 244,000 MWh across the 17 units studied were produced by oil units operating out of merit (define as receiving NCPC on a day)* • About 20% of the total MWh generated by these 17 units over the period • About 1% of total MWh generated by all units over the period * There are significant differences between the programs (e.g., penalties), so while participants have requested this data, it should not be viewed as direct comparison or of particular relevance to this year’s program design.

  13. Dual Fuel Commissioning Program

  14. Offset testing costs associated with restoring or commissioning dual fuel capability • Program design is intended to offset testing costs associated with restoring or commissioning dual fuel capability • Resources that are eligible and elect to participate in the program will be compensated through real-time NCPC for any testing related costs capped at a resource specific cost recovery limit • Resources that do not maintain their dual fuel capability per the obligations of the program will be charged back a portion of the compensation

  15. Resources that have not recently operated on their secondary fuel are eligible to participate • Any resource that burns natural gas as its primary fuel, has not demonstrated their ability to operate on its secondary fuel since December 1, 2011, is able to switch fuels within eight hours and has a minimum tank size is eligible to participate in this program • Minimum tank size is based upon the fuel required to start the resource from a cold state plus to support EcoMin operation of the resource for the greater of the for four hours or their Minimum Run Time • This minimum tank size is intended to minimize barriers of entry and is consistent with the minimum inventory level requirements of the program • The ISO expects participants to size their tanks based upon the capability of their resources • Participants with resources that would like to participate need to submit a formal request to the ISO prior to December 1, 2014 • The ISO will work with a participant to establish a plan to commission (or restore) their resource’s dual fuel capability

  16. Modified Slide Participants will have a cost recovery limit established based upon their commissioning date • At the time a participant requests to participate in the program, the ISO will establish a resource specific cost recovery limit (in dollars) • For resources scheduled to be commissioned on or before December 1, 2015, this is calculated based upon 20 hours of testing at full load (based upon winter SCC) adjusted for energy revenues and assuming three cold starts being incurred in supporting of testing using a similar approach to how reference levels are determined by the market monitor • For resources scheduled to be commissioned after December 1, 2015 and on or before December 1, 2016, this is calculated based upon 10 hours of testing at full load (based upon winter SCC) adjusted for energy revenues and assuming three cold starts being incurred in supporting of testing using a similar approach to how reference levels are determined by the market monitor

  17. Resources will be compensated for testing costs required to commission the dual fuel capability • Resources will be compensated for any testing costs that they incur through the real-time NCPC settlement pursuant to Market Rule 1, Appendix F up to the cost recovery limit • Once the resource has exceeded the cost recovery limit, all testing associated with commissioning or restoring the dual fuel capability will be ineligible for any additional real-time NCPC • For the period prior the Energy Market Offer Flexibility changes being implemented, the NCPC adjustment proposed under the permanent dual fuel resource auditing rules will apply as appropriate • NCPC costs related to this program are allocated to daily RTLO excluding DARD pumps

  18. Eligible resources that elect to participate in the program must maintain their dual fuel capability • Resources that request this compensation are expected to maintain the dual fuel capability through May 31, 2018 • After a resource has established its dual fuel capability, the resource will be required to demonstrate its capability each year by: • Performing a dual fuel resource audit prior to December 1 • The ISO will schedule this audit and compensate performance consistent with the dual fuel resource audit rules • Having a minimum fuel inventory on December 1 to be able to start the resource from a cold state plus to support EcoMin operation of the resource for the greater of four hours or their Minimum Run Time • Any fuel oil burned since November 15 will be considered as in inventory • Any fuel oil burned for testing since November 15 would need to be replenished by January 1

  19. Modified Slide Resources that do not demonstrate their capability may have their compensation reduced or eliminated • Resources that do not successfully establish duel fuel capability through a dual fuel resource audit by on or before December 1, 2015 will have their cost recovery limit reduced (based upon 10 days at full load) • Any prior compensation above the revised limit would be refunded back to monthly RTLO (excluding DARD pumps) in the month in which the resource failed to demonstrate • Resources that do not successfully establish duel fuel capability after their commissioning testing is complete through a dual fuel resource audit by December 1, 2016 will not be compensated for their commissioning testing costs • Any prior compensation would be refunded back to monthly RTLO (excluding DARD pumps) in the month in which the resource failed to demonstrate (e.g., November-2015)

  20. Resources that do not maintain their capability will be charged back a portion of their payments • Resources that are commissioned after November 15, 2014 and prior to February 1, 2015 have 15 days after their commissioning date to meet the minimum fuel inventory requirement • Resources commissioned after February 1, 2015 must meet the minimum inventory requirement by December 1, 2015 • Resources that do not maintain their dual fuel capability for the obligation period (through May 31, 2018) as demonstrated each year through performance and achieving the minimum inventory requirement are charged for the compensation associated with the remaining period for which they are obligated • If the resource was unable to demonstrate their capability because of an unplanned outage or annual maintenance no compensation would be charged back; however, the resource would be expected to demonstrate within 30 days of becoming available • If the resource is not able to demonstrate prior to May 31, 2018, the participant would be charged for the period since the resource had last met these requirements • Resources that successfully demonstrates through a dual fuel resource audit and achieve the minimum inventory requirement would be able to “recover” funds for the remainder of the period for which they are obligated

  21. Example: Resource fails to demonstrate capability after successfully restoring dual fuel capability • Resource A established their dual fuel capability on December 1, 2015 incurring total testing costs paid through real-time NCPC of $300K • This resource has an obligation to maintain their capability until May 31, 2018 (or 30 months) • The equivalent monthly rate of the $300K payment is $10K • ($300K payment / 30 months) • If Resource A is unable to demonstrate their capability for December 1, 2017, the participant would be charged back $60K for the 6 months remaining in the period • 6 months x $10K equivalent monthly rate

  22. Example: Resource demonstrates its capability after being unable to prior to December 1 • Building upon the prior example, Resource A is able to successfully demonstrate their capability on January 20, 2018 • Payments are restored starting on the first of the next month • There are 4 months remaining in the period from February 2018 through May 2018 • The participant would be paid $40K for restoring their dual fuel capability • 4 months x $10K equivalent monthly rate

  23. Costs associated with this program will be billed as part of NCPC weekly, but will be reported separately • NCPC related to dual fuel commissioning activities will be included on in the hourly services bill issues on a bi-weekly basis • These costs will be included as part of the auditing costs related to NCPC • The accompanying bill job aid will provide a breakdown of the costs associated with this program

  24. Unused Fuel Inventory Program Discussion of background information from Winter 2013/2014 and comparing and contrasting the last year’s program and this year’s program quantities

  25. Modified Slide Program values were established based upon this year’s proposed program structure • The unused fuel program proposed this year contemplates payment for only unused inventory subject to minimum and maximum levels • Last year’s program established a requirement of 4.2 million barrels of oil, and paid for upfront inventory and replenishment • Requirements are intended to offer the ISO’s perspective to the marketplace on the winter operations needs and are not directly comparable to last year • Focus of program design is obtaining incremental fuel above what may otherwise have been available • Assuming 100% participation in the unused oil inventory program, the minimum level eligible for compensation is 2.8 million barrels, while the maximum level eligible for compensation is 3.8 million barrels • The LNG component is unique and is an attempt by the ISO to balance the need to be more ‘fuel neutral,’ while understanding the benefits that accrue to the region • The maximum quantity eligible for compensation of 6 Bcf of LNG does not guarantee ‘incremental fuel’ being available to New England

  26. Unused Oil Inventory Program

  27. Offset risk of unused fuel oil inventory at the end of the Winter Period • Program design is intended to offset risk of having unused fuel oil inventory at the end of the winter period • Resources that are eligible and elect to participate in the program will be compensated for any unused fuel oil up to the lesser of the maximum compensation level and the initial inventory level based upon a fixed rate • Resources that are fully unavailable for any hours during the winter period will have their payments reduced

  28. Resources that are able to operate on oil must meet specific criteria to participate in the program • A resource must be dispatchable and use oil as its primary fuel OR • A resource must be dispatchable, use natural gas as its primary fuel and oil as its secondary fuel that: • has successfully demonstrated its dual fuel capability prior to December 1; OR • has its dual fuel capability commissioned prior to January 1 (pursuant to the Dual Fuel Commissioning Program)

  29. Modified Slide Eligible resources that elect to participate in the program must meet minimum inventory requirements • Participant must submit a request by October 1 to the ISO for each resource they would like to have participate in the program • This request would include the target inventory level • Resources are obligated to hold a minimum usable inventory as of December 1 at least equal to the lesser of: • 10 days’ supply at full load operation based upon the winter SCC or • 85% of usable fuel storage capacity on-site or dedicated tank at adjacent location • Any fuel oil burned since November 15 will be considered as in inventory when evaluating if a resource met the minimum inventory obligation • All units at a station with a shared fuel supply are required to participate if one unit elects to participate unless a unit is expected to be unavailable for the winter period • This is required to assure that the program supports the addition of incremental fuel for units participating in the program

  30. Resources that do not meet the minimum criteria have until January 1 to meet the program obligations • Resources that do not meet the minimum inventory requirement to participate in the program on December 1 have until January 1 to meet these requirements • Any fuel oil burned since November 15 will be considered as in inventory • Any fuel oil used in testing (or commissioning) on or after November 15 must be replenished by the later of January 1 or 15 days after the commissioning date of the dual fuel resource • Resources that do not meet these criteria will not be eligible to participate in the program • The defined thresholds must be fully met for qualification in the program

  31. Resources participating in the program are expected to offer into the markets • Regardless of whether the resource has a Capacity Supply Obligation, participants must submit Supply Offers for resources participating in the program into the Day-Ahead Energy Market and Real-Time Energy Market at the resource’s maximum physical capability for each hour of the day

  32. Participants will need to maintain fuel for use in the production of electricity that is delivered in February • Any fuel that is delivered after February 1 must be maintained by the facility for use in the production of electricity through the end of November in order to prevent resources from bringing in late season deliveries solely for maximizing their program payout • Any fuel that is not used for the production of electricity will be charged back to the participant at the fixed Program Rate

  33. Resources will be compensated based upon unused oil inventory • The Program Payment is calculated as: Eligible Inventory x Program Rate Where: • the Eligible Inventory will be the lesser of: • Maximum eligible inventory level • determined as the lesser of: • 15 days’ supply at full load operation based upon winter SCC or • 95% of usable fuel storage capacity on-site or dedicated tank at adjacent location • Inventory (adjusted for recent burn) on December 1 or • Inventory at the end of the day on February 28 • the Program Rate is $18/bbl • Program payments are allocated to RTLO (excluding DARD pumps) for the winter period (December 1 through February 28)

  34. Eligible resource’s compensation is based upon inventory at the start and end of the Winter Period

  35. Resources that are unavailable during the winter will have their payments reduced • The final program payments made to participants with resources participating in the program will be adjusted for their resource’s availability Program Payment x Availability Metric Where: • the Availability Metric is calculated as: (Hours resource was available for operation in period or unavailable due to a transmission outage) / (Total period hours from December 1 through February 28) • Final program payments are allocated to RTLO (excluding DARD pumps) for the winter period (December 1 through February 28)

  36. Unused CONTRACTED LNG Program Discussion of proposed mechanics for LNG program

  37. Offset risk of unused contracted LNG at the end of the Winter Period • Program design is intended to offset risk of having unused contracted LNG volumes at the end of the winter period providing compensation for resources that acquired firmer fuel which they did not use • This program’s focus is on providing a peaking service that would augment the availability of pipeline gas • Resources that are eligible and elect to participate in the program will be compensated for any unused contracted LNG volumes up to the maximum program level based upon a fixed rate • Resources that are fully unavailable for any hours during the winter period will have their payments reduced

  38. Modified Slide Contracts that are submitted to participate in the program must meet specific criteria • Contract duration would be from December 1 through at least February 28 • All contracted volumes must be available to be called in this period • Must follow a “take-or-pay” construct • Must be resource (delivery point/gas meter) specific and include pipeline transportation to the meter • Only dispatchable resources that use natural gas as its primary fuel (including dual fuel resources) and can use pipeline gasor LNG may participate in the program • Contracts are expected to be used for the generation of electricity at the specified resource during the winter period; however, participants are not prohibited from transferring LNG to an alternate generator for the production of electricity in New England • Availability criteria is not transferable and must remain with the generator participating in the program • Maximum contract volume eligible for compensation is set at four days at full load based upon the winter SCC • There is no minimum contract volume to participate in the program • Fuel equivalent to ‘four days at full load’ is expected to support resource operation for several days over the peak load hours augmenting access to pipeline gas

  39. Modified Slide Contracts that do not meet the program obligations are not eligible to participate in the program • Participants must submit proposed contracts to the ISO by October 1 • These proposal must include the resource, LNG provider and proposed contract volumes (including any limitation on the volumes that can be taken hourly, daily, monthly or over the period) • The ISO will review and accept proposals on a first come/first served basis up to the daily capability of the LNG providers and the 6BCF total program limit and will provide notice back to participants by October 15 • Participants must submit the contracts with the LNG providers based upon their accepted proposals to the ISO on or before December 1 along with certification that the contract includes a “take or pay” construct, a term that spans the winter, and pipeline transportation to the resource’s gas meter • Any contracts that are submitted after December 1 or do not meet the program obligations will not be eligible for compensation in the program

  40. Modified Slide Participants will be compensated based upon unused contract volumes on eligible contracts • The Program Payment is calculated as: Eligible Quantity x Program Rate Where: • the Eligible Quantity will be the lesser of: • Maximum eligible contracted volume • 4 days at full load based upon winter SCC • Contracted volume on December 1 or • Unused contracted volume at the end of the day on February 28 • the Program Rate is $3/MMBTU

  41. Resources that are unavailable during the winter will have their payments reduced • The final program payments made to participants with resources participating in the program will be adjusted for their resource’s availability Program Payment x Availability Metric Where: • the Availability Metric is calculated as: (Hours resource was available for operation in period or unavailable due to a transmission outage) / (Total period hours from December 1 through February 28) • Final program payments are allocated to RTLO (excluding DARD pumps) for the winter period (December 1 through February 28)

  42. Unused Fuel Programs Settlement and Billing Discussion of mechanics of how the Unused Oil Inventory Program and the Unused Contracted LNG Program will be settled and billed

  43. ISO will bill load based upon estimated unused fuel on a monthly basis • ISO will estimate what the remaining quantities at the end of the season for both unused fuel programs and will determine an estimated Total Estimated Unused Fuel Charge • Estimate will be based on 75% of program eligible December inventory • The monthly Estimated Program Charges for December, January and February will be calculated as: Total Estimated Unused Fuel Charge x (Days in Month/Days in Period) • The Estimated Program Charges will be include on the non-hourly services bill following each month and will be allocated to RTLO excluding DARD pumps • Estimated unused fuel program charge line items will be separately identified in the bill

  44. ISO will bill actual unused fuel inventory costs on a monthly basis • Actual Program Payments adjusted for availability would be allocated to each month in the same manner as the Total Estimated Unused Fuel Charge • On the April non-hourly services bill, the actual Program Payments adjusted for availability will be billed to load for December, January and February • If the estimated quantities were greater than the actual quantities available at the end of the season (adjusted for availability), this would be a refund to load • If the estimated quantities were less than the actual quantities available at the end of the season (adjusted for availability) this would be an incremental charge to load • All payments associated with the unused fuel programs will be included on the May non-hourly services bill • Unused fuel program payment and charge line items will be separately identified on the bill

  45. Resettlements will be handled in the same manner as other market and services • Since Program Payments net Availability Charges have been allocated to each month and the Program Payments net Availability Charges will not change after the initial settlement, each month will be resettled following the same process as other charges included in non-hourly services bill • This resettlement re-allocates charges based upon changes to RTLO • Any Meter Request for Billing Adjustments (RBA) would also be handled following the same approach

  46. Winter Demand Response Reliability Program

  47. Demand response component is similar to the 2013/14 Winter Reliability Program • Designed for assets that are capable of reducing load between 0500 and 2300 on any day for up to 180 hours for winter period • Assets may or may not be assigned to an FCM resource • Committed MW must be incremental to any CSO if there is an FCM audit or dispatch coincident to a winter program dispatch • Performance based compensation • Monthly program payment • Energy payments

  48. Additional similarities to 2013/14 Winter DR Program • Must be a Real-Time Demand Response (RTDR) Asset • Manual program dispatch may be at zonal or asset level if there are transmission constraints • Monthly payment based on committed MW • No payment made if performance is below 75% of commitment • Auditing requirement if no simultaneous FCM dispatch • Continue to bill in the monthly following the month and issue payments on a one month lag

  49. Modified Slide A number of changes are being proposed from the 2013/14 Winter DR Program • Limit participation to no more than 100 assets and 100MW • Requests to participate in the program must be received by October 1 • A fixed monthly payment rate of $1,800/MW-month will be set to align with other aspects of the program design • Proposed changes to the dispatch commitment and flexibility will be made based both operational needs and participant feedback • 6 hour maximum dispatch • Up to 30 dispatches per season • 4 hour minimum time between dispatches • Elimination of energy penalty for underperformance to align with other aspects of the program design • Addition of a deduction (E Payment) in any energy payment otherwise made for Net Supply to a generation asset located at the same Retail Delivery Point • In the event that there are multiple demand response assets participating in the program located behind a single Retail Delivery Point, the reduction for any E Payments based on energy delivered from that Retail Delivery Point will be allocated on a pro-rata basis

More Related