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Allocation Of Marginal Loss Revenue Fund

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  1. Allocation Of Marginal Loss Revenue Fund Status Report June 16, 2003 Dave LaPlante

  2. Loss Revenue AllocationWhy RTLO? • In support of the Bi-lateral Energy markets in NEPOOL, it is important to maintain a “pure” energy product; one that is not encumbered with settlement adjustments imposed by the SMD settlement process • Counter-parties can agree on a price and evaluate the effectiveness of the transaction based on final LMP with no adjustments

  3. Current Settlement Allocations • Auction Revenue Rights: RTLO • Year End Excess Congestion Revenue: Under funded FTR’s and RTLO • Economic Operating Reserve: • DALO • RTLO Deviation • Daily RMR • DALO (Reliability Region) • RTLO Deviation (Reliability Region)

  4. Current Settlement Allocations, cont. • Regulation Operating Reserve: • Regulation Obligation based on RTLO +/- bilateral purchases or sales of Regulation • VAR Operating Reserve: • Schedule 2 of NOATT • SCR Operating Reserve: • Schedule 19 of NOATT

  5. Current Loss Allocation • Loss Revenue Allocation: RTALO • Does not value locational price differences by using MW interchange • Impacts parties that are “net RTALO sellers” to the market by charging for additional Loss Revenue beyond the calculated Loss Revenue Fund • Is inconsistent with allocation of other settlement obligations shown above

  6. Current Loss Allocation, cont. • Internal bilateral transactions for energy are purely financial and have no impact on actual losses in either the DA or RT markets • Energy trades must wait for final NEPOOL settlement before evaluating effectiveness of energy transactions

  7. Other Allocation Alternatives • Several methods have been evaluated • Balanced FTR’s • Directional FTR’s • Spot FTR’s • Complex processes to implement • Complex to evaluate market value and effectiveness • May not provide a complete hedge against losses

  8. Other Allocation Alternatives, cont. • Final result of complex methods would allocate Loss Revenue to RTLO via FTR like process • Simple solution: Assign Loss Revenue to RTLO