FEBRUARY 27, 2014

Bob LauritaINTERNAL MARKET MARKETING

Offer Review Trigger Prices (ORTP) Compliance Filing

Background

• On December 13, 2013 the ISO submitted proposed revisions to the FCM Offer Review Trigger Prices (ORTP).

• On February 11, 2014 the Commission accepted in part and rejected in part the proposed revisions.

• The Commission rejected the ISO’s proposed on-shore wind ORTP and the proposed ORTP construct for Demand Resources composed of both Load Management and Distributed Generation.

• The Commission ordered the ISO to submit a compliance filing, within 30 days of the order, to remove the rejected tariff language.

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Summary of the Commission Determination

• On-Shore Wind ORTP– At this time, the Production Tax Credit has expired and the assumption

that a resource will receive Production Tax Credit revenues in the 2018-2019 Capacity Commitment Period is inappropriate.

• Demand Resources ORTP– Tying the ORTP for a Demand Resource composed of both Load

Management and Distributed Generation to the ORTP of the underlying generation technology type is inconsistent with the goal of setting ORTPs to the low end of the competitive range of expected offers.

– The incremental costs of offering existing distributed generators in the FCM is likely far less than the capital cost of a new merchant generation resource.

– The proposed ORTP can result in an illogical ORTP for Demand Resources composed of both Load Management and Distributed Generation assets

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On-Shore Wind ORTP

• The IMM recalculated the ORTP for on-shore wind removing the Production Tax Credit and leaving all other assumptions unchanged.

• The resulting on-shore wind ORTP is $10.32/kW-month

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Demand Resource ORTP (As Proposed in 12/13 Filing)

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Technology Scenario 1(Combo)

Scenario 2 Scenario 3

Load Management

Yes Yes No

Distributed Generation

Yes No Yes

Proposed ORTP Highest of the applicable ORTPs

$1.14/kW-month

Underlying Generation

Technology Type

The Commission determined this outcome is inconsistent with the low end

of competitive range

The Commission determined the incremental cost of “existing” DG to be less

than new merchant generation

Demand Resource ORTP (Revised for Compliance Filing)

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Technology Scenario 1a(Combo)

Scenario 1b(Combo)

Scenario 2 Scenario 3a Scenario 3b

Load Management

Yes Yes Yes No No

Distributed Generation

Previously Installed

New No Previously Installed

New

Proposed ORTP

$1.14/kW-month

Weighted Average

ORTP

$1.14/kW-month

$1.14/kW-month

Underlying Generation Technology

Type

No Proposed Change

No Proposed Change

Scenario 1a and 3a: Load Management and/or Previously Installed Distributed Generation• Expand the Load Management technology type to include Demand

Resources composed of Load Management and/or previously installed Distributed Generation

• The Project Sponsor’s incremental costs to participate in the FCM using Load Management technologies is the same as that of using previously installed Distributed Generation. – Incremental costs include metering and communications equipment,

customer incentives and sales expenses.

• The ORTP for Load Management and/or previously installed Distributed Generation is $1.145/kW-month

• This outcome is consistent with the Commission’s Order that the ORTP be at the low end of the competitive range of expected offers

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New Distributed Generation

• A distributed generator is considered new (not previously installed) if:

• The Project Sponsor offering the new Demand Resource had a financial interest in the development, installation or financing of the distributed generator within the prior five years of the start of the Capacity Commitment Period, and

• The distributed generator has not participated in the Forward Capacity Market in a prior Capacity Commitment Period

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Scenario 1b: Load Management and/or Previously Installed Distributed Generation and New Distributed Generation• The IMM will calculate an ORTP for the combination resource based

on the expected MW allocation between Load Management and/or previously installed Distributed Generation and new Distributed Generation assets and the ORTPs for the asset technology types.

• Example:– The expected MW reductions from a new Demand Resource is composed

of 90% Load Management and previously installed DG and 10% New DG.– The new Distributed Generation is a combustion turbine.– The Weighted Average ORTP is calculated as (0.9 x $1.145/kW-month) +

(0.1 x $13.424/kW-month) = $2.373/kW-month

• The IMM will determine the MW allocations and ORTPs for the asset technology types based on documentation in the Project Sponsor’s qualification package.

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