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New York State Electricity Markets

New York State Electricity Markets. Federal Energy Regulatory Commission Market Design Technical Conference January 22, 2002. Charles A. King - Vice President, Market Services. Outline of Today’s Presentation. Overview of New York’s Market Structure Day-Ahead Market Real-Time Market

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New York State Electricity Markets

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  1. New York StateElectricity Markets Federal Energy Regulatory Commission Market Design Technical Conference January 22, 2002 Charles A. King - Vice President, Market Services

  2. Outline of Today’s Presentation • Overview of New York’s Market Structure • Day-Ahead Market • Real-Time Market • Transmission Service Markets • Financial Transmission Rights • Ancillary Services Markets • Long-Term Capacity Markets • Market Monitoring and Mitigation Appendix – Statistics and Examples

  3. I. NYISO Overview New York ISO "Hub of the Northeast" Hydro Quebec 19,410 MW* ISO - New England 25,158 MW* IMO 23,857 MW* New York ISO 30,983 MW* PJM 54,176 MW* * = Peak Load in Megawatts

  4. NYISO OverviewNew York Electric Industry Restructuring • New York Transmission Owners entered into settlement agreements with New York Public Service Commission in mid 1990s which required divesture of generating units • Established phased schedule for retail access • Wholesale markets launched and NYISO began operation on December 1, 1999

  5. NYISO OverviewNYISO Governance

  6. NYISO OverviewUnique System Characteristics • Transmission prone to thermal, voltage and stability limitations which can bifurcate NYISO system (east vs. west) • Much higher degree of transmission congestion • FERC 12/19/01 Electric Transmission Constraint Study • High degree of generation divestiture • Investor-owned utility divesture currently at 91 percent

  7. I. NYISO Overview New York Independent System Operator High Voltage Transmission System - 230 kV and above Transmission

  8. NYISO OverviewMarkets • Bid-Based Markets • Energy • Regulation • Spinning and Non-Spinning Reserves • Three-part bids • Self-scheduling • Other Markets • Installed Capacity • Transmission Congestion Contracts • Two Settlement System • Day-Ahead Market • Real-Time Market

  9. NYISO OverviewMarkets (continued) • Locational Based Marginal Pricing • Nodal congestion management pricing system • Marginal losses • Financial Hedging Instruments • Transmission Congestion Contracts • Contract For Differences • Virtual Trading • Demand Response Program • Day-Ahead • Emergency

  10. NYISO OverviewMarkets (continued) • Flexible market structure accommodates: • Bilateral Transactions • Existing Transmission Agreements • Scheduling of Energy Limited Resources • Municipal Customers • Power Marketers • Price responsive load customers

  11. NYISO OverviewNew York's Two-Settlement Process Bids by 5 a.m. Day before DAM = Day-Ahead Market SCUC = Security Constrained Unit Commitment BME = Balancing Market Evaluation RT = Real-Time Market SCD = Security Constrained Dispatch Forward Contracts Day-Ahead Market SCUC (Hourly Process) Schedules Bids by 90 min before hour BME Basepoints Real-Time Market Supplemental Resource Evaluation Real Conditions Gen SCD

  12. Day-Ahead MarketHighlights • Bids submitted by 5:00 am previous day • Suppliers submit MW quantity and price bids for each hour including any ancillary services bids • Loads submit MW requirement bids for each hour including any price cap load bids • Includes bids for virtual supply and virtual load • Security Constrained Unit Commitment (SCUC) scheduling software simultaneously cooptimizes energy and ancillary services for least cost solution

  13. Day-Ahead MarketHighlights (continued) • Locational Based Marginal Prices (LBMP) posted by 11:00 am previous day • Accommodates bilateral transaction scheduling concurrently with supply and load bids • Any deviations in supply or demand settled in Real-Time Market

  14. Day-Ahead MarketBenefits • Provides price certainty while avoiding volatility of Real-Time Market • Simultaneous co-optimization process maximizes the use of the existing transmission system and provides for appropriate cost allocation • Highly automated system manages complex operating processes

  15. Day-Ahead MarketBenefits(continued) • Multi-pass Security Constrained Unit Commitment (SCUC) process accommodates • Reliability requirements • Market mitigation • Cost assignment of uplift

  16. Day-Ahead MarketUnique Characteristics • Day-Ahead prices include effect of reliability commitments and all scheduled external transactions • Incorporates automated mitigation (in-city and automated mitigation procedures (AMP)) • Ancillary Services secured and priced • Fully unbundled • Simultaneous co-optimization of individual availability bids

  17. Real-Time MarketHighlights • Balances system supply and demand every five minutes • Bids may be adjusted to address in-day operating conditions • Accommodates additional bilateral transactions and changes to fixed output generator schedules • Security Constrained Dispatch (SCD) software re-optimizes energy and ancillary service markets onsystem-wide basis • Provides for commitment of “quick start” resources • Locational Based Marginal Prices (LBMP) posted every five minutes

  18. Real-Time MarketBenefits • Simultaneous co-optimization process maximizes the use of the existing transmission system while maintaining reliability • Provides for least cost dispatch of Real-Time resources • Provides Real-Time price transparency

  19. Real-Time MarketUnique Characteristics • Ex-ante pricing based upon “scheduled” generator basepoint vs. ex-post pricing based upon generator actual output • NYISO uses unit-specific MW signal instead of dollar zonal price signal • Minimum energy bid is -$1000 vs. $0 in PJM. NYISO practice allows market to resolve min-gen scenarios instead of dumping energy

  20. Real-Time MarketUnique Characteristics (continued) • Variations on criteria used to determine which units are eligible to set Locational Marginal Pricing (LMP) • PJM only allows units that respond to $ zonal price signal to set LMP • NYISO used hybrid pricing method to allow inflexible units to set LMP. PJM does not allow inflexible units to set price

  21. Transmission Service MarketsHighlights • Firm transmission service available to users willing to pay congestion costs • Continuous redispatch to support firm transactions • Transmission Congestion Contracts (TCCs) provide financial hedge against congestion costs • Non-firm transmission service curtailed when congestion exists • Cost of transmission marginal losses included in clearing price

  22. Transmission Service MarketsHighlights • Long-term prescheduling and ramp management will enhance ability to acquire explicit long-term transmission service across control area boundaries • Facilitation of “counter-flow” transactions in hourly scheduling process avoids need to curtail day-ahead transactions for transmission system security • Implementation of Open Scheduling System (OSS) for “One Stop Shopping”

  23. Transmission Service MarketsBenefits • Loads pay non-pancaked license plate Transmission Service Charge • All parties pay the same rate at the same location • All parties have equal access to the transmission system, no physical reservations / rights to hoard • Day-Ahead transaction certainty enhanced through presence and utilization of counter-flow transactions

  24. Transmission Service MarketsUnique Characteristics • NYISO utilizes an implicit bid-based transmission reservation scheduling process • NYISO planned implementation of explicit transmission pre-scheduling process provides physical long-term reservation and schedule at NYISO boundaries • Utilization of “counter-flow” transaction avoids curtailment of Day-ahead schedules • Open Scheduling System (OSS) facilitates transaction scheduling

  25. Transmission Service MarketsUnique Characteristics • Blended (flow-based) export transmission service charge rate • Generation minimum interconnection criteria is “access-based” with no deliverability requirement • Special protection schemes fully addressed

  26. Financial Transmission RightsHighlights • Transmission Congestion Contracts (TCCs) sold through auction - serves as a congestion hedge, or as financial instrument available to the market • Auctions held on a semi-annual basis for TCCs for variable time periods (half-year to 5 years) • Monthly “Re-configuration Auctions” conducted • Auction results posted • TCCs settled in Day-Ahead market • May be specified between generators, zones, external proxy buses, NYISO reference bus

  27. Financial Transmission RightsBenefits • All Transmission Congestion Contracts (TCCs) auctioned except those associated with Grandfathered Transmission Wheeling Agreements • Fully funded TCCs provide hedging certainty • Multiple round auction enhances price discovery

  28. Financial Transmission RightsBenefits (continued) • “Alternating Current (AC) Power flow” solution provides for improved accuracy • Simultaneous feasibility is assured to avoid “over selling” of Transmission Congestion Contracts (TCCs) • TCCs are “unbundled” - for more liquid market • Moving towards a simultaneous, multi-period TCC auction process by Summer 2003

  29. Financial Transmission RightsUnique Characteristics • NYISO fully funds TCCs and balances over/under collection with Transmission Owners • PJM passes revenue shortfalls to FTR holder and over-collection is refunded to loads • High degree of capability offered for sale in the auction • TCCs may be purchased up to 5 years vs. monthly in PJM

  30. Ancillary Services MarketHighlights • Market-Based Services • Regulation • Spinning Reserve • 10-Minute Non-Spinning Reserve • 30-Minute Non-Spinning Reserve • Simultaneously co-optimized with energy markets both Day-Ahead and Real-Time • Incorporates locational reserve requirements • Cost-Based Services • Scheduling, Control and Dispatch • Voltage Support • Black Start

  31. Ancillary Services MarketBenefits • Separate but simultaneously co-optimized markets provide an efficient mechanism for obtaining the least-cost solution • Lost opportunity cost payments ensure availability of sufficient resources • Markets can satisfy locational needs • Allows for a more precise ability to control and dispatch resources to maximize use of the transmission system

  32. Ancillary Services MarketUnique Characteristics • Fully unbundled regulation and reserve services • Four markets vs. single regulation market in PJM • Explicit availability bids for each Ancillary Service Market • Specific locational requirements met • Ancillary services are fully scheduled in the Day-Ahead Market, with in-day adjustments made through hourly and supplemental processes • Energy and ancillary services simultaneously co-optimized

  33. Long Term Capacity MarketsHighlights • Installed Capacity (ICAP) requirements for Load Serving Entities (LSE’s) based on annual peak load • Long-term ICAP requirement • Monthly ICAP auctions accommodate load-shifting and latest generator performance • Supply can be via Bilateral Transaction, self supply, or auction

  34. Long Term Capacity MarketsHighlights(continued) • Locational requirements apply (in-city and Long Island) • Deficiency charges applied to Load Serving Entities (LSEs), if requirements are not met • Market power mitigation measures apply in New York City

  35. Long Term Capacity MarketsBenefits • NYISO market similar to neighbors for product consistency • Ensures resource adequacy to meet reliability requirements • Installed Capacity (ICAP) reflects experienced availability: Unforced Capacity (UCAP) • Intermittent resources (windmills, etc…) eligible • Demand-side resources allowed to participate

  36. Long Term Capacity MarketsUnique Characteristics • 4 hour qualification test vs. 2 hour test in PJM • Full credit for ICAP / UCAP for interruptible loads and intermittent generators • Monthly certification • Deficiency penalty applied monthly

  37. Market Monitoring & MitigationHighlights • NYISO market monitoring procedures … • foster transition to a fully competitive market • seek to maintain a competitive supply demand relationship under all conditions • minimize unnecessary market intervention • insure delivery of market based products from suppliers • Mitigation based upon Conduct and Impact standard • Multiple mitigation needs addressed through variable thresholds, margins, and reference offers/bids

  38. Market Monitoring & MitigationHighlights • Market Monitoring accountable to NYISO Board of Directors • Independent Market Advisor provides oversight • NYISO applying comprehensive mitigation approach to address all mitigation needs based upon conduct / impact standard • Day-Ahead Market (DAM) In-City with structural component • Real-Time (RT) In-City with structural component • Statewide Automated DAM

  39. Market Monitoring & MitigationHighlights • Market monitoring of: • Physical Withholding / physical audits • Economic Withholding • Uneconomic production • Submission of false information • Failure to follow dispatch instruction • Under-scheduling load • Transmission congestion contracts • Transmission service / transactions • Installed Capacity Markets • Market participant financial positions against collateral

  40. Market Monitoring & MitigationBenefits • Mitigation parameters (triggers, thresholds, reference prices, etc) may be tailored to address specific needs • Reference prices reflect historical accepted competitive offers whenever possible • Process provides for consultation with market participants prior to mitigation • Procedures automated to prevent “lost day” • Mitigation parameters can be reviewed and adjusted over time, allows Market Participants to “build out “ of a congested pocket

  41. Market Monitoring & MitigationUnique Characteristics • NYISO relies on a conduct / impact standard to determine exercise of market power (except for New York City pocket mitigation; plan under development to add conduct / impact plus structural component) • PJM assumes market is un-competitive when transmission congestion exists (except for East/Central/West voltage constraints) • NYISO mitigates to a competitively set reference bid • PJM mitigates via cost-capping (cost + 10 percent)

  42. Market Monitoring & Mitigation Universal Market Mitigation Framework CONDUCT TEST M A R G I N S T H R E S H O L D C O N S U L T A T I O N T R I G G E R S MARKET IMPACT TEST Generator Reference Prices Historical 90 day Competitive Negotiated Default Mitigation Occurs Only During Non-competitive Times

  43. APPENDIX Statistics and Examples

  44. Day-Ahead MarketPerformance Statistics • High degree of price certainty • Load zones A, G, and J used as trading indices by power marketers • 95% of New York’s energy transactions settled Day-Ahead • Includes both Day-Ahead Market and Bilateral Transactions • All Transmission Congestion Contracts (TCCs) settled Day-Ahead

  45. Day-Ahead MarketNew York Market Share Bilaterals 50% NYISO Day-Ahead Market 45 – 50% Real Time <5% Bilateral Contracts outside the NYISO 50% NYISO Day-Ahead Market 45 - 50% NYISO Real-Time Market <5% 100%

  46. Real-Time MarketPerformance Statistics • Represents less than 5 percent of New York energy market transactions • Less than .05 percent of price intervals corrected in 2001 • Improved NERC control performance

  47. Real-Time MarketPerformance Statistics

  48. Transmission Service MarketsOpen Scheduling System (OSS) What is OSS? • OSS is comprised of an industry leading set of tools for Market Participants and Scheduling Coordinators to interact, trade and communicate within and across control areas • Initially, OSS will provide the ability to: • Enter bilateral transaction bids across Scheduling Coordinator borders with a single data entry interface • View status from each Scheduling Coordinator • View schedules from each Scheduling Coordinator • Request transmission and ramp reservations

  49. Transmission Service MarketsOpen Scheduling System (OSS) What is OSS? • OSS is comprised of an industry leading set of tools for Market Participants and Scheduling Coordinators to interact, trade and communicate within and across control areas • Initially, OSS will provide the ability to: • Enter bilateral transaction bids across Scheduling Coordinator borders with a single data entry interface • View status from each Scheduling Coordinator • View schedules from each Scheduling Coordinator • Request transmission and ramp reservations

  50. Transmission Service MarketsOpen Scheduling System (OSS)

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