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May 7, 2014. Bob Laurita and Mario DePillis. Internal Market Monitoring. Conforming changes to Section III.A.8 due to Offer Flexibility. Determination of Offer Competitiveness During Shortage Events. Background.

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May 7, 2014


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    1. May 7, 2014 Bob Laurita and Mario DePillis Internal Market Monitoring Conforming changes to Section III.A.8 due to Offer Flexibility Determination of Offer Competitiveness During Shortage Events

    2. Background • During a Shortage Event some resources may be off-line and unavailable due to notification and start-up times. • A Market Participant may be entitled to a Shortage Event penalty exemption, under III.13.7.1.1.3 (c), if they offered their resources competitively. • The Internal Market Monitor (IMM) evaluates the Supply Offers of resources with a CSO that are off-line during a Shortage Event to determine the MWs that were offered competitively.

    3. Problem Statement • The current market rule (Section III.A.8) assumes a single Supply Offer in the Day-Ahead and Real-Time Energy Markets. • Offer Flexibility introduces the complexity of multiple (hourly) Supply Offers to the offer competitiveness test. • Similar to the recent changes to commitment and energy mitigation methodologies. • Section III.A.8 makes reference to tests and thresholds in other sections of the Appendix A that have been modified or removed as a result of Offer Flexibility.

    4. Current Competitive Offer Test - Summary (III.A.8)

    5. Proposed Solution • Align the offer competitiveness tests with Offer Flexibility and the recently revised commitment and energy mitigation methodologies. • Consistent with the Offer Flexibility rules, use Low Load Cost to test competitiveness at or below Economic Minimum • Consistent with the current market rule, use Energy Prices by Segments to test competitiveness above Economic Minimum. • Test the Real-Time Supply Offer submitted during the Operating Day.

    6. Proposed Competitive Offer Test - Summary

    7. Supply Offer Tests • The IMM will test the Supply Offers in all 24 hours in the Day-Ahead and Re-Offer Period. • Consistent with the current market rule which tests competitiveness for the entire day. • The economic decision of when and for how long to commit resources is based on selecting among multiple hourly offers • The majority of commitments are made in the Day-Ahead Energy Market and the initial RAA. • The IMM will test the Real-Time Supply Offer effective in the 1st hour of the Shortage Event • Represents the last opportunity a Market Participant had to offer competitively before the start of the Shortage Event • Provides sufficient incentive because the Market Participant has no foreknowledge which hour will be a Shortage Event.

    8. Example • Natural gas fired unit with the following characteristics: • 8,500 MMBtu/MWh heat rate • 6 Hour Minimum Run Time • 100 MW Economic Minimum • Reference Levels are marginal costs based on the Market Participant’s Fuel Price Adjustments (FPA) • The unit does not clear in the Day-Ahead Energy Market and is not committed in the RAA. • Participant does not change Supply Offer from Day Ahead to Re-Offer Period • Participant increases Startup and No Load Fees in Real-Time • The unit is off-line during a Shortage Event occurring HE 13 – HE 15 • The unit was located in a Constrained Area in Real-Time

    9. Day-Ahead and Re-Offer Period Supply Offers are Competitive in All Hours

    10. The Real-Time Supply Offer in HE 10 was Not Competitive

    11. Schedule • Introduction May 6 • Draft Market Rules June 10 - 11 • MC Vote July 8 – 10 • PC Vote August 1 • FERC Filing Shortly after August 1 • FERC Order (Expected) October - November