4 th Stakeholder Update: Locational Capacity Demand Curves in ISO-NE

Copyright © 2014 The Brattle Group, Inc.

PREPARED FOR

PREPARED BY

4th Stakeholder Update:

Locational Capacity Demand Curves in ISO-NE

Samuel A. NewellKathleen SpeesBen Housman

October 7 , 2014

ISO New England Markets Committee

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Contents

▀ Introduction▀ Impact of Model Updates▀ Stakeholder Questions

− Import-Constrained Zonal Demand Curves− Export-Constrained Zonal Demand Curves

▀ Summary Comparison of Zonal Demand Curves▀ Appendix

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IntroductionObjectives for Today

▀ Benchmark the impact of model updates (described in ISO-NE’s prior presentation)

▀ Provide analytical results illustrating performance of ISO-NE’s proposed locational demand curve and market clearing rules

▀ Summarize analysis of stakeholder proposed curves and respond to stakeholder questions

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IntroductionIndex to Stakeholder Questions

Importing Zone Questions Slides

NU &UI: FCA 8 Back-Cast, ISO-NE Proposed Curve, FCA 8 Cleared Supply as Price-Takers 11

NU: FCA 8 Back-Cast, ISO-NE Proposed Curve, FCA 8 Cleared Supply, Plus 600 MW plant in CT at $7/kW-m 11

NU: Cap at 1-in-5, Foot at 1-in-87 12

NESCOE: NESCOE Curve, 70% shock size, more elastic supply curve 13

CT PURA & DEEP: Proposed Curve, LOLE capped at TSA 14-16

CT PURA & DEEP: Proposed Curve, No Demand Shock 14-16

CT PURA & DEEP: Proposed Curve Shifted to LOLE at 0.105, 70% Shock Size 14-16

CT PURA & DEEP: Proposed Curve Shifted to LOLE at 0.105, LOLE capped at TSA 14-16

CT PURA & DEEP: Proposed Curve Shifted to LOLE at 0.105, No Demand Shock 14-16

CT PURA & DEEP: Cap at 1-in-5, LOLE at 0.105 14-16

CT PURA & DEEP: Cap at 1-in-5, LOLE at 0.105, LOLE Capped at TSA 14-16

CT PURA & DEEP: Cap at 1-in-5, LOLE at 0.105, LOLE Capped at TSA, No Demand Shock 14-16

UI: What Are Local Prices When LOLE is Similar to System? 17-18

Exporting Zone Questions Slides

Emera Energy: 1.5x Width 20

NESCOE: Cap at MCL, Foot at 1x Foot 21

NESCOE: Cap at MCL, Vertical to System Net CONE, Foot at 1x Foot 21

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Contents




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Model UpdatesDescription of Model Updates

▀ We describe and show the impacts of two simulation model changes that we have implemented to reflect ISO-NE’s requested updates (see Appendix and written stakeholder responses for more detail):

1. Updated LOLE Calculation and Reporting

2. FCM Auction Clearing Rules

▀ The updated LOLE calculation results in minor changes

▀ Adjustment to the auction clearing has more impact on results− Differences occur in approximately 1/3 of draws, when one or both

import zones price separate− Results are the same as the prior clearing model if there is no price

separation (if assuming the same supply and demand in a particular draw, i.e. with no “smart block” adjustment)

− Comparison of results for a range of zonal curves is included in appendix

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Model UpdatesImpact on System Results

▀ Updated LOLE calculation shows minimal impact (but new reported metric provides additional information)

▀ Revised clearing algorithm slightly increases price volatility and reduces reliability system-wide

▀ Effect becomes larger with increasing width of local curves and number of importing zones

System Performance Impacts of Model UpdatesISO-NE Proposed System and Local Curves (1x No TTC)

Reliability System Load Cost

AverageStandard Deviation

Frequency at Cap

Constra ined System

LOLE

Unconstra ined System

LOLE

Average Reserve Margin

Reserve Margin St. Dev.

Frequency Below NICR

Frequency Below

1-in-5 in RoP

AverageAverage of

Bottom 20%

Average ofTop20%

($/kW-m) ($/kW-m) (% of draws) (events/yr) (events/yr) (%) (%) (% of draws) (% of draws) ($mil/yr) ($mil/yr) ($mil/yr)

Prior Model $11.1 $3.7 6.3% n/a 0.097 13.5% 2.7% 30.9% 6.8% $4,523 $2,638 $6,416Updated LOLE Calculation $11.1 $3.7 6.3% 0.111 0.097 13.5% 2.7% 30.9% 7.2% $4,523 $2,638 $6,416Updated LOLE and Clearing Rules $11.1 $3.8 6.3% 0.120 0.109 12.9% 2.7% 37.2% 10.1% $4,506 $2,685 $6,428

Price

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Quantity Zonal Load Cost

Average Standard Deviation

Frequency at Cap

Frequency of Price

Separation

Average Excess

(Deficit) Above LSR

Standard Deviation

Frequency Below

LSR

Frequency Below

TSA

Frequency Below 1-in-5

Average LOLE

Average Customer

Costs

Average of Bottom

20%

Average of Top 20%

($/kW-m) ($/kW-m) (% of draws) (% of draws) (MW) (MW) (% of draws) (% of draws) (% of draws) (events/yr) ($mil/year) ($mil/year) ($mil/year)

NEMA/BostonPrior Model $12.2 $4.2 20.8% 20.8% 652 404 16.2% 16.2% 7.4% 0.099 $955 $494 $1,471Updated LOLE Calculation $12.2 $4.2 20.8% 20.8% 652 404 16.2% 16.2% 7.3% 0.097 $955 $494 $1,471Updated LOLE and Clearing Rules $12.2 $4.1 18.9% 16.9% 743 405 13.7% 13.7% 10.2% 0.109 $946 $497 $1,421

ConnecticutPrior Model $12.2 $4.0 16.9% 25.9% 523 469 17.8% 13.3% 9.0% 0.112 $1,228 $689 $1,774Updated LOLE Calculation $12.2 $4.0 16.9% 25.9% 523 469 17.8% 13.3% 10.4% 0.111 $1,228 $689 $1,774Updated LOLE and Clearing Rules $12.2 $3.9 15.9% 21.9% 615 469 14.1% 10.9% 13.3% 0.120 $1,221 $696 $1,739

Price

▀ Revised clearing algorithm shows slightly lower price volatility in zones▀ Reliability below target in zones, associated primarily with lower reliability

on a system basis (see prior slide)▀ But more supply is locally-sourced (reducing the contribution of LOLE from

locally-driven events)

Model UpdatesImpact on Importing Zone Results

Importing Zone Impacts of Model UpdatesISO-NE Proposed System and Local Curves (1x No TTC)

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Quantity Zonal Load CostAverage Standard

DeviationFrequency

at CapFrequency

of Price Separation

Average Quantity

Above (Below) MCL

Standard Deviation

Constrained System

LOLE

Unconstrained System

LOLE

Final Customer

Costs

Averageof Bottom

20%

Averageof Top 20%

($/kW-m) ($/kW-m) (% of draws) (% of draws) (MW) (MW) (events/yr) (events/yr) ($mil/year) ($mil/year) ($mil/year)

Prior Model $10.0 $4.1 3.8% 19.2% (263) 163 n/a 0.097 $288 $121 $455Updated LOLE Calculation $10.0 $4.1 3.8% 19.3% (263) 163 0.111 0.097 $288 $121 $455Updated LOLE and Clearing Rules $10.0 $4.1 4.0% 19.1% (267) 168 0.120 0.109 $287 $120 $457

Price

ISO-NE ProposalImpact on Exporting Zone Results

▀ Minimal changes to realized performance in Maine▀ Primary performance change is associated with impact of revised clearing

mechanics on system price and reliability results

Exporting Zone Impacts of Model UpdatesISO-NE Proposed System and Local Curves (1x Curve in Exporting Zone)

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Contents




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Back-Cast of FCA 8 Results

Import-Constrained ZonesNU & UI: FCA 8 Back-Cast with Proposed Curves

▀ Request to re-run FCA 8 auction results with system and local demand curves treating cleared supply as price takers

▀ No price separation occurs across zones▀ Back-cast prices would have dropped from

$15.0 to $13.9/kW-m in the presence of the system demand curve

▀ Adding a 600 MW plant would have reduced the prices to $11.9/kW-m

Assumptions

• FCA 8 demand parameters• System demand curve with Net CONE at

11.08/kW-m• ISO-NE proposed curve in zones • Case 1: FCA 8 cleared supply as price-takers• Case 2: Add a 600 MW plant at $7/kW-m in

Connecticut

Note: Cleared quantity excludes TTC.

Cleared Quantity Cleared Price MWs Above (Below) Requirement

System CT NEMA Maine System CT NEMA Maine NICR CT LSR NEMA LSR ME MCL(MW) (MW) (MW) (MW) ($/kW-m) ($/kW-m) ($/kW-m) ($/kW-m) (MW) (MW) (MW) (MW)

Actual (No Administrative Pricing) 33,702 9,191 3,821 3,755 $15.00 $15.00 $15.00 $15.00 (153) 1,872 393 (205)

Case 1: System Sloped (Zones Vertical) 33,702 9,191 3,821 3,755 $13.90 $13.90 $13.90 $13.90 (153) 1,872 393 (205)

Case 1: ISO-NE Proposed Curves 33,702 9,191 3,821 3,755 $13.90 $13.90 $13.90 $13.90 (153) 1,872 393 (205)

Case 2: ISO-NE Proposed Curves, Add 600 MW in CT 34,302 9,791 3,821 3,755 $10.99 $10.99 $10.99 $10.99 447 2,472 393 (205)

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Frequency at Cap

Frequency of Price

Separation

Average Excess

(Deficit) Above LSR

Standard Deviation

Frequency Below

LSR

Frequency Below

TSA


Average LOLE

Average Customer

Costs

Average of Bottom

20%

Average of Top 20%


NEMA/Boston

ISO-NE Proposal (1.0x No TTC) $12.2 $4.1 18.9% 16.9% 743 405 13.7% 13.7% 10.2% 0.109 $946 $497 $1,421NU: Cap at 1-in-5, Foot at 1-in-87 $12.2 $3.8 10.3% 21.4% 726 403 14.4% 14.4% 13.3% 0.125 $938 $466 $1,445

Connecticut

ISO-NE Proposal (1.0x No TTC) $12.2 $3.9 15.9% 21.9% 615 469 14.1% 10.9% 13.3% 0.120 $1,221 $696 $1,739

NU: Cap at 1-in-5, Foot at 1-in-87 $12.2 $3.7 10.3% 24.6% 1,277 471 1.6% 0.8% 13.5% 0.126 $1,226 $708 $1,695

Price

Performance

Import-Constrained ZonesNU Curve: Cap at 1-in-5, Foot at 1-in-87

▀ Concept is to define local demand curves according to the same LOLE-based definition as in system

▀ Results in flatter local curves and lower price volatility▀ However, reliability is degraded in both zones:

− Result may appear counter-intuitive, but is a consequence of implementing a wide curve in combination with updated clearing rules

− Wide local curves result in less rest-of-system procurement during price separation, therefore reduced rest-of-system reliability and increased rest-of-system price volatility

− ISO-NE clearing rules will prohibit use of a zonal curve this wide with three importing zones (demand quantity in zones could exceed system curve width)

Connecticut

Note: Curve names are labeled based on the stakeholder suggesting those curves for analysis, but do not necessarily reflect that stakeholder’s recommended approach in all cases.

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Frequency at Cap

Frequency of Price

Separation

Average Excess (Deficit) Above

LSR

Standard Deviation

Frequency Below

LSR

Frequency Below

TSA


Average LOLE

Average Customer

Costs

Average of Bottom

20%

Average of Top 20%


Base AssumptionsNEMA/Boston

ISO-NE Proposal (1.0x No TTC) $12.2 $4.1 18.9% 16.9% 743 405 13.7% 13.7% 10.2% 0.109 $946 $497 $1,421NESCOE Modeling Curve $12.2 $4.0 15.1% 17.5% 683 404 15.8% 15.8% 11.0% 0.112 $943 $497 $1,413

ConnecticutISO-NE Proposal (1.0x No TTC) $12.2 $3.9 15.9% 21.9% 615 469 14.1% 10.9% 13.3% 0.120 $1,221 $696 $1,739

NESCOE Modeling Curve $12.2 $3.9 14.0% 21.7% 544 469 17.4% 12.7% 14.7% 0.125 $1,219 $690 $1,725

70% Shocks, Supply Elasticity, and No LumpinessNEMA/Boston

1.0x No TTC $12.2 $3.0 14.2% 21.3% 499 265 12.1% 12.1% 3.4% 0.095 $952 $679 $1,307NESCOE Modeling Curve $12.2 $2.8 9.8% 25.9% 413 265 16.5% 16.5% 4.0% 0.098 $949 $679 $1,282

Connecticut1.0x No TTC $12.2 $2.8 9.5% 28.9% 410 301 12.9% 8.1% 4.6% 0.103 $1,230 $930 $1,674NESCOE Modeling Curve $12.2 $2.7 7.8% 30.8% 320 301 17.7% 11.7% 6.0% 0.108 $1,228 $930 $1,647

Price

Import-Constrained ZonesNESCOE Curve w/ 70% Shocks, Supply Elasticity

▀ Requested analysis of NESCOE proposed curve (1x system ratio, above and below LSR; see figure on slide 23)

▀ With three changes to modeling assumptions that each reduce price volatility and improve reliability: (1) reduce shock sizes to 70% of base; (2) increase supply elasticity (see right); (3) remove supply lumpiness

▀ Combined effect under sensitivity assumptions is a substantial improvement in all price volatility and reliability metrics

Performance

Supply Curves with More Elasticity

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Import-Constrained Zones CT PURA & DEEP: Simulation Requests

▀ CT PURA & DEEP requested simulation results under different combinations of sensitivity assumptions, and using two different LOLE tuning approaches

▀ Sensitivity assumptions would reduce price volatility and increase reliability, including:1. 70% shock sizes 2. No demand shocks3. LOLE capped at the value when local MW are at TSA (i.e. consistent with an assumption of

ISO-NE intervention to restore local MW to TSA)▀ Tuning approaches are conceptually similar to approaches we used system-wide, with

local LOLE tuned to 0.105 LRA target (note: this request contemplates allowing for the violation of the “minimum acceptable” at TSA)

▀ However, because system LOLE is above 0.105 under the revised clearing mechanics, no amount of tuning can restore the zones to this level. We therefore re-interpret this question as tuning the local curves to reach a local adder of 0.005 LOLE (consistent with the LRA delta above NICR)

▀ Re-interpreted tuned curves reflect:1. ISO-NE proposed curve, shifted to a local LOLE adder of 0.005 events/year2. Cap at 1-in-5 LOLE, adjust foot to meet a local LOLE adder of 0.005 events/year

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Import-Constrained Zones CT PURA & DEEP: Tuned CurvesCandidate Curve, Left/Right Shifted to Tune LOLE* Cap at 1-in-5, Foot Adjusted to Tune LOLE*

NEMA

Connecticut

NEMA

Connecticut

Notes:The “truncated LOLE” curves were not possible to develop in NEMA because the LOLE adder at TSA was too low (i.e. the LOLE adder cannot be increased to 0.005 because the LOLE adder at TSA is close to zero).See appendix slide 34 for system simulation results under the same curves.

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Frequency at Cap

Frequency of Price

Separation

Average Excess

(Deficit) Above LSR

Standard Deviation

Frequency Below

LSR

Frequency Below

TSA


Average LOLE

Average Customer

Costs

Average of Bottom

20%

Average of Top 20%


NEMA/Boston

ISO-NE Proposal (1.0x No TTC) $12.2 $4.1 18.9% 16.9% 743 405 13.7% 13.7% 10.2% 0.109 $946 $497 $1,421

1.0x (No TTC) Curve, Varying Assumptions70% Shock Size $12.2 $3.5 13.8% 18.9% 544 286 12.5% 12.5% 4.2% 0.098 $949 $585 $1,326LOLE Capped at TSA $12.2 $4.1 18.9% 16.9% 743 405 13.7% 13.7% 10.1% 0.109 $946 $497 $1,421No Demand Shocks $12.2 $3.6 16.9% 25.0% 388 402 16.4% 16.4% 5.7% 0.104 $942 $620 $1,249

1.0x (No TTC) Curve, Shifted to Local LOLE70% Shock Size $12.2 $3.5 13.7% 19.2% (249) 287 67.7% 67.7% 5.7% 0.102 $938 $585 $1,302LOLE Capped at TSA n/a (see note below)No Demand Shocks $12.2 $3.6 16.8% 25.0% (323) 403 78.4% 78.4% 7.0% 0.111 $932 $619 $1,232

Cap at 1-in-5, Foot Adjusted to Local LOLEBase Assumptions $12.2 $3.9 11.6% 19.7% 130 403 43.8% 43.8% 13.6% 0.125 $931 $468 $1,426LOLE Capped at TSA n/a (see note below)LOLE Capped at TSA, No Demand Shocks n/a (see note below)No Demand Shocks $12.2 $3.4 6.1% 28.3% (332) 403 78.8% 78.8% 8.7% 0.121 $929 $544 $1,293

Connecticut

ISO-NE Proposal (1.0x No TTC) $12.2 $3.9 15.9% 21.9% 615 469 14.1% 10.9% 13.3% 0.120 $1,221 $696 $1,739

1.0x (No TTC) Curve, Varying Assumptions70% Shock Size $12.2 $3.3 9.7% 25.3% 461 332 12.5% 8.4% 6.2% 0.105 $1,227 $801 $1,685LOLE Capped at TSA $12.2 $3.9 15.9% 21.9% 615 469 14.1% 10.9% 11.6% 0.114 $1,221 $696 $1,739No Demand Shocks $12.2 $3.5 14.8% 27.3% 406 468 19.1% 14.4% 9.7% 0.116 $1,224 $780 $1,684

1.0x (No TTC) Curve, Shifted to Local LOLE70% Shock Size $12.2 $3.3 9.6% 25.2% 598 332 7.6% 4.8% 5.0% 0.102 $1,229 $802 $1,691LOLE Capped at TSA $12.2 $3.9 15.9% 21.9% 615 469 14.1% 10.9% 11.6% 0.114 $1,221 $696 $1,739No Demand Shocks $12.2 $3.5 14.8% 27.3% 663 468 8.0% 5.1% 7.8% 0.111 $1,227 $780 $1,696

Cap at 1-in-5, Foot Adjusted to Local LOLEBase Assumptions $12.2 $3.7 10.3% 23.0% 855 469 8.0% 5.5% 14.0% 0.125 $1,221 $707 $1,690LOLE Capped at TSA $12.2 $3.8 11.0% 22.2% 637 468 13.9% 10.6% 13.2% 0.123 $1,219 $687 $1,699LOLE Capped at TSA, No Demand Shocks $12.2 $3.2 5.2% 27.2% 593 468 11.1% 6.6% 8.6% 0.120 $1,223 $792 $1,623No Demand Shocks $12.2 $3.1 5.1% 26.3% 667 468 8.5% 5.2% 9.3% 0.121 $1,225 $801 $1,622

Price

Import-Constrained Zones CT PURA & DEEP: Simulation Results

Note: Tuned curves could not be drawn in NEMA in the cases where local LOLE was capped at TSA. Because the local LOLE “adder” becomes close to zero at TSA, the local curve could never be 0.005 events/year above Unconstrained System LOLE.See appendix slide 34 for system simulation results.

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Import-Constrained Zones

UI: What Are Local Prices When LOLE is Similar to System?

Question: “How often would we expect customers in import constrained zones to pay higher capacity prices than customers in the rest of pool for the same level of reliability (as measured by the LOLE metric)?”

▀ We focus on the subset of draws in which: (a) local price separates above system (b) local LOLE is within 0.005 events/year above unconstrained system LOLE

▀ 16% and 2% of draws fall into this subset in NEMA and CT respectively (greater in NEMA because TSA & LSR are right-shifted compared to LRA, and so local LOLE adder is usually very small)

▀ The results in this subset of draws may seem counter-intuitive when taken individually (i.e. why pay a price premium in the zones when local reliability is no worse than rest of pool?)

▀ However, these results are consistent with the overall reliability and price volatility objectives of the demand curve and FCM, because the price premium paid in this subset of draws helps to support sufficient local supply to prevent larger price separation or lower-reliability events from occurring in other years

▀ Further, focusing only on LOLE does not account for the transmission security objective TSA

Draws Average Price Price Standard Deviation

Count % of All DrawsAbsolute

PricePrice Delta

Above SystemAbsolute

PricePrice Delta

Above System

Average Premium as a % of System Price

Average Excess above

LSR

Average Price Premium *

Total Quantity Cleared in (%) ($/kW-m) ($/kW-m) ($/kW-m) ($/kW-m) (%) (MW) ($mil)

NEMA/BostonDraws w/ Price Separation and Similar LOLE 157 16% $16.5 $6.3 $2.6 $3.7 80% (183) $644All Other Draws 843 84% $11.4 $0.1 $3.9 $1.2 2% 915 $14All Draws 1,000 100% $12.2 $1.1 $4.1 $2.9 14% 743 $113

ConnecticutDraws w/ Price Separation and Similar LOLE 16 2% $6.7 $1.1 $4.2 $0.9 22% 422 $150All Other Draws 984 98% $12.3 $1.1 $4.1 $2.7 15% 618 $138All Draws 1,000 100% $12.2 $1.1 $3.9 $2.7 15% 615 $138

v

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Average Price Differential

% of Draws w/ Price Separation and Similar LOLE

When Zones Separate and LOLE

Is Similar

All Other Draws All Draws

(%) ($/kW-m) ($/kW-m) ($/kW-m)

[1] [2] [3] [4]

NEMA/Boston

ISO-NE Proposal (1.0x No TTC) 16% $6.3 $0.1 $1.1

1.5x System Ratio 17% $6.5 $0.0 $1.1

2.0x System Ratio 18% $6.2 $0.0 $1.1

Vertical in Zones and System 9% $10.8 $0.2 $1.1

Vertical in Zones (System Sloped) 15% $6.7 $0.1 $1.1

PJM VRR 17% $6.0 $0.1 $1.1

NESCOE: LSR at 1.2x Net CONE 16% $6.3 $0.1 $1.1

GDF SUEZ: Cap at 2x Net CONE 17% $6.4 $0.0 $1.1

NU: Cap at 1-in-5, Foot at 1-in-87 20% $5.1 $0.1 $1.1

CT PURA/DEEP Tuned 13% $5.6 $0.4 $1.1

Connecticut

ISO-NE Proposal (1.0x No TTC) 2% $1.1 $1.1 $1.1

1.5x System Ratio 13% $4.9 $0.5 $1.1

2.0x System Ratio 17% $4.9 $0.3 $1.1

Vertical in Zones and System 0% $9.6 $1.1 $1.1

Vertical in Zones (System Sloped) 0% $5.9 $1.1 $1.1

PJM VRR 0% $5.2 $1.1 $1.1

NESCOE: LSR at 1.2x Net CONE 2% $4.9 $1.0 $1.1

GDF SUEZ: Cap at 2x Net CONE 5% $5.1 $0.9 $1.1

NU: Cap at 1-in-5, Foot at 1-in-87 22% $4.5 $0.2 $1.1

CT PURA/DEEP Tuned 14% $4.8 $0.5 $1.1

Import-Constrained Zones

UI: Comparison of Statistics Across All Curves▀ Comparing all candidate curves in

instances where:− The zone price-separates, and− LOLE adder in zone is < 0.005

▀ Anywhere from 0-22% of draws depending on the curve

▀ NEMA always shows greater frequency from these draws for any curve drawn to the right of TSA

▀ Average price differential above system is the same across all curves (even though the price differential associated with this subset of draws varies substantially)

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Contents




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Export-Constrained ZoneEmera Energy: 1.5x Width Curve

▀ Emera Energy proposed a curve with width 1.5x of system ratio (flatter than proposed)

▀ Results in modest improvement in price volatility in Maine (modest degradation in System LOLE) compared to ISO-NE proposal

Performance

Note: Curve names are labeled based on the stakeholder suggesting those curves for analysis, but do not necessarily reflect that stakeholder’s recommended approach in all cases.


DeviationFrequency

at CapFrequency

of Price Separation

Average Quantity

Above (Below) MCL

Standard Deviation

Constrained System

LOLE


LOLE

Final Customer

Costs

Averageof Bottom

20%

Averageof Top 20%


ISO-NE Proposal (1.0x System Ratio) $10.0 $4.1 4.0% 19.1% (267) 168 0.120 0.109 $287 $120 $4571.5x System Ratio $10.0 $4.0 3.4% 21.8% (218) 168 0.122 0.111 $287 $130 $454

Price

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DeviationFrequency

at CapFrequency

of Price Separation

Average Quantity

Above (Below) MCL

Standard Deviation

Constrained System

LOLE


LOLE

Final Customer

Costs

Averageof Bottom

20%

Averageof Top 20%


ISO-NE Proposal (1.0x System Ratio) $10.0 $4.1 4.0% 19.1% (267) 168 0.120 0.109 $287 $120 $457NESCOE: Foot Same as 1x System Ratio, Cap at MCL $10.0 $4.2 4.5% 16.7% (226) 168 0.122 0.110 $287 $116 $459NESCOE: Kink at Net CONE, Vertical to Cap $10.0 $4.2 4.6% 17.3% (287) 168 0.120 0.109 $287 $121 $460

Price

Export-Constrained ZoneNESCOE: Curves at or Above MCL

▀ NESCOE proposed looking at two curves that would be right-shifted compared to MCL

▀ Both curves perform similarly to the ISO-NE proposal (very small increase in price volatility in both cases; and degradation in system reliability in one case)

▀ Both options would prevent procuring less than MCL supply in Maine in the event of system-wide shortage

Notes: Runs modeled with ISO-NE Proposed curve in NEMA/Boston and Connecticut.Curves names are labeled based on the stakeholder suggesting those curves for analysis, but do not necessarily reflect that stakeholder’s recommended approach in all cases

Performance

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Contents




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Curve ComparisonAlternative Importing Zone Curves (Connecticut)

Note: Curves names are labeled based on the stakeholder suggesting those curves for analysis, but do not necessarily reflect that stakeholder’s recommended approach in all cases.

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Frequency at Cap

Frequency of Price

Separation

Average Excess

(Deficit) Above LSR

Standard Deviation

Frequency Below

LSR

Frequency Below

TSA


Average LOLE

Average Customer

Costs

Average of Bottom

20%

Average of Top 20%


NEMA/BostonISO-NE Proposal (1.0x No TTC) $12.2 $4.1 18.9% 16.9% 743 405 13.7% 13.7% 10.2% 0.109 $946 $497 $1,4211.5x System Ratio $12.2 $4.0 13.6% 17.4% 1091 403 6.0% 6.0% 11.5% 0.115 $946 $484 $1,4222.0x System Ratio $12.2 $4.0 12.1% 18.2% 1270 402 3.0% 3.0% 12.1% 0.119 $946 $474 $1,426Vertical in Zones and System $12.2 $6.2 53.6% 10.4% 627 399 16.2% 16.2% 20.1% 0.160 $927 $286 $1,596Vertical in Zones (System Sloped) $12.2 $4.1 21.1% 16.9% 633 405 17.1% 17.1% 10.1% 0.107 $947 $509 $1,418PJM VRR $12.2 $3.9 8.1% 18.6% 566 404 19.7% 19.7% 10.8% 0.111 $942 $499 $1,409NESCOE: LSR at 1.2x Net CONE $12.2 $4.1 18.6% 17.6% 734 405 13.9% 13.9% 10.6% 0.111 $945 $500 $1,418GDF SUEZ: Cap at 2x Net CONE $12.2 $4.0 16.2% 17.1% 967 405 8.4% 8.4% 10.6% 0.111 $948 $499 $1,420NU: Cap at 1-in-5, Foot at 1-in-87 $12.2 $3.8 10.3% 21.4% 726 403 14.4% 14.4% 13.3% 0.125 $938 $466 $1,445CT PURA/DEEP Tuned $12.2 $3.9 11.6% 19.7% 130 403 43.8% 43.8% 13.6% 0.125 $931 $468 $1,426

ConnecticutISO-NE Proposal (1.0x No TTC) $12.2 $3.9 15.9% 21.9% 615 469 14.1% 10.9% 13.3% 0.120 $1,221 $696 $1,7391.5x System Ratio $12.2 $3.8 11.6% 22.8% 930 469 6.1% 4.0% 13.0% 0.120 $1,224 $701 $1,7142.0x System Ratio $12.2 $3.7 10.2% 22.7% 1168 470 2.2% 1.5% 13.0% 0.121 $1,226 $709 $1,698Vertical in Zones and System $12.2 $6.2 52.7% 11.6% 442 447 19.0% 14.2% 24.4% 0.176 $1,200 $388 $1,831Vertical in Zones (System Sloped) $12.2 $4.2 22.4% 18.7% 493 470 18.8% 14.2% 13.4% 0.120 $1,222 $680 $1,778PJM VRR $12.2 $3.8 8.1% 21.4% 421 469 21.8% 17.9% 15.9% 0.131 $1,219 $689 $1,700NESCOE: LSR at 1.2x Net CONE $12.2 $4.0 19.0% 22.7% 595 469 14.7% 11.3% 13.8% 0.122 $1,221 $690 $1,754GDF SUEZ: Cap at 2x Net CONE $12.2 $4.0 16.5% 21.7% 760 469 9.9% 7.0% 12.6% 0.118 $1,223 $689 $1,749NU: Cap at 1-in-5, Foot at 1-in-87 $12.2 $3.7 10.3% 24.6% 1277 471 1.6% 0.8% 13.5% 0.126 $1,226 $708 $1,695CT PURA/DEEP Tuned $12.2 $3.7 10.3% 23.0% 855 469 8.0% 5.5% 14.0% 0.125 $1,221 $707 $1,690

Price

Curve ComparisonPerformance in Import-Constrained Zones

Notes: Curve names are labeled based on the stakeholder suggesting those curves for analysis, but do not necessarily reflect that stakeholder’s recommended approach in all cases. Base case assumes true Net CONE in NEMA/Boston and Connecticut is 10% higher than system.Zonal load costs reflect capacity procurement costs paid by customers in each zone, assuming all zonal CTRs are awarded to local customers.

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Zonal Load Cost


Frequency at Cap

Constra ined System

LOLE


LOLE




Frequency Below

1-in-5 in RoP

AverageAverage of

Bottom 20%

Average ofTop20%


ISO-NE Proposal (1.0x No TTC) $11.1 $3.8 6.3% 0.120 0.109 12.9% 2.7% 37.2% 10.1% $4,506 $2,685 $6,4281.5x System Ratio $11.1 $4.2 8.7% 0.120 0.115 12.7% 2.7% 41.0% 11.5% $4,509 $2,595 $6,5442.0x System Ratio $11.1 $4.4 9.4% 0.121 0.119 12.5% 2.6% 43.2% 12.1% $4,508 $2,522 $6,575Vertical in Zones and System $11.1 $6.3 44.4% 0.176 0.160 10.7% 1.8% 60.5% 20.1% $4,437 $1,546 $7,017Vertical in Zones (System Sloped) $11.1 $3.6 4.7% 0.120 0.104 13.1% 2.7% 35.6% 8.9% $4,513 $2,669 $6,378PJM VRR $11.1 $3.9 8.1% 0.131 0.111 12.9% 2.7% 38.0% 10.6% $4,500 $2,665 $6,505NESCOE: LSR at 1.2x Net CONE $11.1 $3.8 5.6% 0.123 0.111 12.9% 2.7% 37.9% 10.6% $4,505 $2,657 $6,431GDF SUEZ: Cap at 2x Net CONE $11.1 $3.9 6.5% 0.118 0.111 12.9% 2.7% 37.8% 10.6% $4,510 $2,664 $6,449NU: Cap at 1-in-5, Foot at 1-in-87 $11.1 $4.7 10.2% 0.127 0.125 12.2% 2.5% 47.1% 12.9% $4,500 $2,296 $6,622CT PURA/DEEP Tuned $11.1 $4.4 9.7% 0.130 0.120 12.4% 2.6% 43.4% 12.0% $4,490 $2,421 $6,584

Price Reliability

Curve ComparisonSystem-Wide Performance Impacts

Notes: Curve names are labeled based on the stakeholder suggesting those curves for analysis, but do not necessarily reflect that stakeholder’s recommended approach in all cases. All curves were run with the ISO-NE Proposed 1.0x System Ratio (No TTC) curves for NEMA/Boston and Connecticut and the ISO-NE Proposed 1.0x System Ratio curve in Maine.

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Curve ComparisonAlternative Exporting Zone Curves

Note: Curve names are labeled based on the stakeholder suggesting those curves for analysis, but do not necessarily reflect that stakeholder’s recommended approach in all cases

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DeviationFrequency

at CapFrequency

of Price Separation

Average Quantity

Above (Below) MCL

Standard Deviation

Constrained System

LOLE


LOLE

Final Customer

Costs

Averageof Bottom

20%

Averageof Top 20%


MaineISO-NE Proposal (1.0x System Ratio) $10.0 $4.1 4.0% 19.1% (267) 168 0.120 0.109 $287 $120 $457Vertical $10.0 $4.5 4.9% 13.7% (385) 168 0.118 0.106 $287 $99 $4601.5x System Ratio $10.0 $4.0 3.4% 21.8% (218) 168 0.122 0.111 $287 $130 $4542.0x System Ratio $10.0 $3.8 2.9% 25.2% (177) 168 0.124 0.112 $287 $138 $449

NESCOE: Foot Same as 1x System Ratio, Cap at MCL $10.0 $4.2 4.5% 16.7% (226) 168 0.122 0.110 $287 $116 $459

NESCOE: Kink at Net CONE, Vertical to Cap $10.0 $4.2 4.6% 17.3% (287) 168 0.120 0.109 $287 $121 $460

Price

Curve ComparisonPerformance in Export-Constrained Zones

Notes: Curve names are labeled based on the stakeholder suggesting those curves for analysis, but do not necessarily reflect that stakeholder’s recommended approach in all cases.All curves were run with the ISO-NE Proposed 1.0x System Ratio (No TTC) curves for NEMA/Boston and Connecticut.Base case assumes true Net CONE in NEMA/Boston and Connecticut is 10% higher than system, Maine Net CONE is 10% lower than system .Zonal load costs reflect capacity procurement costs paid by customers in each zone, accounting for CTRs that are awarded to local customers.

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Contents




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AppendixUpdated LOLE Calculation and Reporting

  System:▀ Previously reported only “System LOLE,” which

reflected the LOLE that ISO-NE would calculate if there were no internal constraints (i.e. “copper sheet” assumption used when estimating NICR)

▀ That metric will now be labeled as “Unconstrained System LOLE” and used as a primary metric for evaluating the system demand curve

▀ Also reporting a new metric “Constrained System LOLE,” which reflects the max of the LOLE of any zone in any one draw (consistent with NPCC definition of system LOLE in the presence of zonal constraints)

  Import Zones:▀ Zonal LOLE is affected by MW of supply both within

the zone (determines local events) and outside the zone (determines system events)

▀ Previously calculated zonal LOLE as the maximum of local and system LOLE

▀ Updated approach calculating local LOLE “adder” on top of system events (results very similar to prior approach)

Revised Local LOLE Approach

Local LOLEUnconstrained System LOLE

“Local LOLE Adder”

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AppendixUpdated Local Clearing Approach

System-Wide Clearing Price and Quantity▀ Updated clearing mechanics will produce the same prices as the prior model if there is no price separation (clear on system demand curve)

▀ If importing zones do price-separate, then system-wide prices and quantities will clear below and to the left compared to prior modeled clearing mechanics (which assumed system + all zones supply would clear on the aggregate system demand curve)

▀ Affects approximately 1/3 of draws (any time one or both import zones price separate)

Clearing in Example Draw

Example Draw(See Below)

ExampleDraw

Individual Draws(Each w/ unique

“Residual” System Demand Curve)

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Appendix Range of Import Zone Curves Compared

▀ We tested a range of import zone demand curves under the updated simulation model

− Updated LOLE Calculation− FCM Auction Clearing Rules

▀ Intended to provide stakeholders more information about results that can be expected with varying widths of local curves

▀ General observations:− System reliability and price

volatility worsen with wider zonal curves

− Zonal metrics move in the opposite directions (i.e. local reliability and price volatility improve with wider curves)

ConnecticutCurves Tested Under Updated Model

Note: “1x System (No TTC)” curve applies the system ratio multiplier to NEMA and CT local curves without including the TTC MW in the calculation.

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Reliability System Load Cost


Frequency at Cap

Constra ined System

LOLE


LOLE




Frequency Below

1-in-5 in RoP

AverageAverage of

Bottom 20%

Average ofTop20%


Vertical $11.1 $3.6 4.7% 0.123 0.107 13.1% 2.7% 35.5% 9.8% $4,508 $2,673 $6,3550.5x System Ratio $11.1 $3.7 5.8% 0.123 0.109 13.0% 2.7% 36.8% 10.1% $4,505 $2,678 $6,413ISO-NE Proposal (1.0x No TTC) $11.1 $3.8 6.3% 0.120 0.109 12.9% 2.7% 37.2% 10.1% $4,506 $2,685 $6,4281.0x System Ratio $11.1 $3.9 7.0% 0.120 0.112 12.8% 2.7% 38.4% 10.8% $4,506 $2,656 $6,4801.25x System Ratio $11.1 $4.1 7.9% 0.119 0.113 12.8% 2.7% 39.7% 11.1% $4,508 $2,632 $6,5121.5x Width $11.1 $4.2 8.7% 0.120 0.115 12.7% 2.7% 41.0% 11.5% $4,509 $2,595 $6,544

Price

AppendixSystem Simulation Results

Note: All runs modeled with a 1x system ratio curve in Maine.

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Frequency at Cap

Frequency of Price

Separation

Average Excess

(Deficit) Above LSR

Standard Deviation

Frequency Below

LSR

Frequency Below

TSA


Average LOLE

Average Customer

Costs

Average of Bottom

20%

Average of Top 20%


NEMA/BostonVertical $12.2 $4.1 21.1% 16.9% 633 405 17.1% 17.1% 10.1% 0.107 $947 $509 $1,4180.5x System Ratio $12.2 $4.1 17.8% 17.3% 768 405 13.1% 13.1% 10.2% 0.109 $946 $503 $1,416ISO-NE Proposal (1.0x No TTC) $12.2 $4.1 18.9% 16.9% 743 405 13.7% 13.7% 10.2% 0.109 $946 $497 $1,4211.0x System Ratio $12.2 $4.0 15.1% 17.6% 916 404 9.4% 9.4% 10.8% 0.112 $946 $496 $1,4161.25x System Ratio $12.2 $4.0 14.4% 17.7% 999 404 7.7% 7.7% 11.1% 0.113 $946 $491 $1,4191.5x Width $12.2 $4.0 13.6% 17.4% 1091 403 6.0% 6.0% 11.5% 0.115 $946 $484 $1,422

ConnecticutVertical $12.2 $4.2 22.6% 18.9% 491 470 18.9% 14.3% 13.7% 0.123 $1,222 $679 $1,7770.5x System Ratio $12.2 $4.0 17.9% 20.8% 521 469 18.1% 13.4% 14.2% 0.123 $1,220 $684 $1,749ISO-NE Proposal (1.0x No TTC) $12.2 $3.9 15.9% 21.9% 615 469 14.1% 10.9% 13.3% 0.120 $1,221 $696 $1,7391.0x System Ratio $12.2 $3.9 13.9% 21.9% 711 469 11.3% 8.2% 13.2% 0.120 $1,221 $690 $1,7321.25x System Ratio $12.2 $3.9 12.9% 23.2% 819 469 8.4% 6.1% 13.0% 0.119 $1,222 $693 $1,7241.5x Width $12.2 $3.8 11.6% 22.8% 930 469 6.1% 4.0% 13.0% 0.120 $1,224 $701 $1,714

Price

AppendixImporting Zones Simulation Results

Note: All runs modeled with ISO-NE Proposed 1x system ratio curve in Maine.

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Zonal Load Cost


Frequency at Cap

Constra ined System

LOLE


LOLE




Frequency Below

1-in-5 in RoP

AverageAverage of

Bottom 20%

Average ofTop20%

($/kW-m) ($/kW-m) (% of draws) (events/yr) (%) (%) (% of draws) (% of draws) ($mil/yr) ($mil/yr) ($mil/yr)

ISO-NE Proposal (1.0x No TTC) $11.1 $3.8 6.3% 0.120 0.109 12.9% 2.7% 37.2% 10.1% $4,506 $2,685 $6,428

1.0x (No TTC) Curve, Varying Assumptions70% Shock Size $11.1 $3.0 1.4% 0.105 0.098 13.1% 2.0% 32.0% 4.2% $4,516 $3,072 $6,028LOLE Capped at TSA $11.1 $3.8 6.3% 0.114 0.109 12.9% 2.7% 37.2% 10.1% $4,506 $2,685 $6,428No Demand Shocks $11.1 $2.8 1.2% 0.116 0.104 13.1% 2.2% 33.6% 5.6% $4,489 $3,024 $5,918

1.0x (No TTC) Curve, Shifted to Local LOLE70% Shock Size $11.1 $3.0 1.3% 0.107 0.097 13.1% 2.0% 31.8% 4.1% $4,505 $3,057 $6,022LOLE Capped at TSA $11.1 $3.8 6.3% 0.114 0.109 12.9% 2.7% 37.2% 10.1% $4,506 $2,685 $6,428No Demand Shocks $11.1 $2.8 1.2% 0.115 0.106 13.0% 2.3% 33.6% 5.6% $4,483 $3,016 $5,913

Cap at 1-in-5, Foot Adjusted to Local LOLEBase Assumptions $11.1 $4.4 9.7% 0.130 0.120 12.4% 2.6% 43.4% 12.0% $4,490 $2,421 $6,584LOLE Capped at TSA $11.1 $4.4 9.3% 0.123 0.118 12.5% 2.6% 42.5% 11.7% $4,487 $2,451 $6,569LOLE Capped at TSA, No Demand Shocks $11.1 $3.9 4.5% 0.120 0.115 12.6% 2.2% 39.9% 7.5% $4,463 $2,682 $6,216No Demand Shocks $11.1 $3.9 4.9% 0.126 0.116 12.6% 2.2% 40.5% 7.5% $4,463 $2,657 $6,234

Price Reliability

AppendixCT PURA & DEEP System Simulation Results

Note: All runs modeled with a 1x system ratio curve in Maine.

4 th Stakeholder Update: Locational Capacity Demand Curves in ISO-NE

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Transcript of 4 th Stakeholder Update: Locational Capacity Demand Curves in ISO-NE