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Adjusting the “Dispatch Instructions” to Adjusting the “Dispatch Instructions” to the Defined Metering Point the Defined Metering Point (DMP).(DMP).

“Functional Deferral 6 (FD-06)”“Functional Deferral 6 (FD-06)”

Market Operations Standing Committee (MOSC)

April 23rd, 2003

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BackgroundBackground• March 2000, the TP was informed that certain functionalities would be

deferred beyond the November market commencement date.

• FD-06 - Adjusting Dispatch Instructions to the DMP

– Requires mapping of the operational meter data to the point of sale.

– Impacts CMSC as the dispatch instruction is currently treated as occurring at the operational meter.

• Technical Panel (March 7, 2000) deemed the deferral to be acceptable and staff should assess the impact of high loss situations if any. The Panel noted that the losses could be significantly larger when viewed as a portion of CMSC.

• Current thinking shows that both over and under payments to dispatchable facilities can occur.

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What will change? What will change?

~Operational

Meter DMPRWM

TODAY•Dispatch Instructions (DI) and Market Schedules (MS) are issued to the Operational Meter.

•Dispatch and dispatch compliance is measured at the Operational meter.

•Settlement (CMSC) uses the DI and MS referenced to the operational meter.

•Actual output and energy payment is based on the AQEI which is the RWM actual converted to the DMP using a correlation factor.

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What will change? What will change?

~Operational

Meter DMPRWM

FUTURE•Dispatch Instructions (DI) and Market Schedules (MS) are issued to the Operational Meter for realtime dispatch BUT are converted to the DMP prior to settlements.

•Dispatch and dispatch compliance is measured at the Operational meter.

•Settlement (CMSC) uses the DI and MS referenced to the defined metering point.

•Actual output and energy payment is based on the AQEI which is the RWM actual converted to the DMP using a correlation factor.

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Current StatusCurrent Status• The IMO has filed for, and received an exemption for the

period of March 1st to August 1, 2003.

• Conditions of the exemption include:– Provide a detailed study to identify and better understand the

implications on the marketplace;

– Identify and understand the impacts associated with implementing the functionality (Market Participants and the IMO);

– Determine whether or not the implementation of this functionality will materially benefit the marketplace; and

– Stakeholder recommendations with Market Participants.

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Options Going ForwardOptions Going Forward• Option A

– Considering the impacts, remove the functional requirement and retain existing settlement calculation.

• Option B– Implement the functionality:

• Register operational meter and DMP relationship.

• Translate the dispatch instructions and market schedule quantities to the DMP after the dispatch day but prior to settlement determinations.

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Areas of Discussion TodayAreas of Discussion Today

• Market costs to implement loss calculations.

• IMO costs to meet the intent of FD-06.

• Meter Evolution.

• CMSC Evaluation.

• Issue Evaluation.

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Market Costs to ImplementMarket Costs to Implement• The actual implementation details are not finalized at this

time but there are two general approaches currently under debate:– Option A - Where the operational meter is registered with the IMO similar to

the RWM, a “correlation factor” will be determined and used by the IMO. This factor would reflect, with some accuracy, installations with loads between the operational meter and RWM & operational meter inaccuracy. Cost estimated to be ~$700K split evenly between the IMO and MP.

– Option B - Where the IMO uses simple losses from the operational meters. (Installations with loads between the the operational meter and RWM would need further consideration.) Cost estimated to be ~$320K.

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IMO Costs to ImplementIMO Costs to Implement• Initial assessment indicates system costs of about ~$350K.

– Includes vendor system changes to Market Information Systems (MIS) and Settlements systems, testing and documentation.

• Costs associated with Option A (IMO’s portion) ~$350K + $50K/year maintenance.

• Resource costs are not as well defined but based on previous experience defining the RWM/DMP relationship this activity could take upwards of two years.

– Includes the calculation and registration of loss factors in cooperation with dispatchable participants for ~300 meters.

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Total CostsTotal Costs

• Total estimated costs are:

– Option A ~$1 million

– Option B ~ $700 thousand

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Meter EvolutionMeter Evolution• Some new meter installations have “hybrid” meters with the

RWM and operational meter at the same source.– If this evolution continues then the functionality is no longer

required.

– Issues such as divergent standards for repair may impede this evolution:

• Operational metering repairs are required, due to real-time impacts, within a relatively short period (24/48 hours).

• RWM errors due to the “Validate, Edit, Estimate (VEE)” process have to be resolved within 6 days.

• MSP costs to maintain the operational meter may overwhelm the savings associated with the single meter design.

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Quantifying CMSC ImpactsQuantifying CMSC Impacts

• Import and Export CMSC is unaffected due to the use of schedules for settlement.

• Preliminary review indicates that OR CMSC payments are also unaffected due to schedule versus actual settlement.

• Due to the limited amount of CMSC associated with nuclear facilities these facilities are not considered to be large contributors to the market impact.

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Assumptions and Examples Assumptions and Examples • Primary impact of this functionality is on the CMSC quantity. The following

examples express MW differences between CMSC quantity today and a post implementation quantity.

• Dispatch instructions are issued to the operational meter for real-time operation of the facility. The translation, of the dispatch instruction and market schedule quantity, to the DMP would occur after the dispatch and prior to settlements.

• The examples assume 100% compliance with the IMO dispatch instructions at the operational meter.

• For illustration purposes, losses in the example are 1% from the operational meter to the DMP.

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Assumptions and ExamplesAssumptions and Examples• Existing CMSC calculation rules:

– Constrained ON calculations for generators use the lesser of the actual output at the DMP or the dispatch instruction.

– Constrained OFF calculations for generators use the greater of the actual output at the DMP or the dispatch instruction.

• Definitions:– Market Schedule = MS

– Dispatch Instruction = DI

– Actual output at the DMP = AQEI

– Losses of 1% = f

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Current vs. Future - Current vs. Future - Constrained ONConstrained ON

~Operational

Meter DMP

TODAY

MS = 100 MW

DI = 150 MW

AQEI = 148.5 MW

CMSC Quantity = 48.5 MW

Today & Future the RT dispatch is to a DI of 150MW.

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Current vs. Future - Current vs. Future - Constrained ONConstrained ON

~Operational

Meter DMP

TODAY

MS = 100 MW

DI = 150 MW

AQEI = 148.5 MW

CMSC Quantity = 48.5 MW

FUTURE

MS = 99 MW

DI = 148.5 MW

AQEI = 148.5 MW

CMSC Quantity = 49.5 MW

Today & Future the RT dispatch is to a DI of 150MW.

This illustration shows that during a constrained “on” event the constrained participant is receiving less CMSC than if the functionality were implemented.

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Current vs. Future - Current vs. Future - Constrained OFFConstrained OFF

~Operational

Meter DMP

TODAY

MS = 200 MW

DI = 150 MW

AQEI = 148.5 MW

CMSC Quantity = 50 MW

Today & Future the RT dispatch is to a DI of 150MW.

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Current vs. Future - Current vs. Future - Constrained OFFConstrained OFF

~Operational

Meter DMP

TODAY

MS = 200 MW

DI = 150 MW

AQEI = 148.5 MW

CMSC Quantity = 50 MW

FUTURE

MS = 198 MW

DI = 148.5 MW

AQEI = 148.5 MW

CMSC Quantity = 49.5 MW

Today & Future the RT dispatch is to a DI of 150MW.

This illustration shows that during a constrained “off” event the constrained participant is receiving more CMSC than if the functionality were implemented.

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““Rules of Thumb”Rules of Thumb”

• Constrained ON– With the AQEI defining the CMSC quantity the participant, without the

functionality, is being paid less today by an amount equal to the market schedule quantity, prior to adjustment, multiplied by the loss factor or….

CMSC Underpayment = f * MS pre

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““Rules of Thumb”Rules of Thumb”• Constrained ON

– With the AQEI defining the CMSC quantity the participant, without the functionality, is being paid less today by an amount equal to the market schedule quantity, prior to adjustment, multiplied by the loss factor or….

CMSC Underpayment = f * MS pre

• Constrained OFF– The participant, without the functionality, is being paid more today by an amount equal to the

difference between the market schedule and dispatch instruction quantities, prior to adjustment, multiplied by the loss factor or….

CMSC Overpayment = f * [MS pre - DI pre]

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Quantifying the IssueQuantifying the Issue

• Are Market Participants adjusting their offers to compensate for differences between operational meters and DMP?

• IMO experience shows that the majority of meters have little or no losses between operational meter and DMP.

• Are the benefits of implementation greater than the costs?

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Next Steps Next Steps • Finalized detailed assessment of impact to the market.

• Ongoing Market Participant stakeholdering (MOSC and TP).

• Develop recommendations for next MOSC and future TP meetings.

• Develop action plan based on those recommendations.

• Prepare to meet the Exemption obligations.