New England’sLoad Response Program:

Proposed Enhancements For 2002

NEPOOL Markets Committee MeetingOctober 30, 2001

Paul McCurleyISO New England

Agenda Item #410/30/01 MC Mtg.

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Purpose of Presentation

• Present proposed program and rule changes

for LRP II 2002• Objectives of LRP Revisions:

– Increase program participation and value (i.e.,

make it simpler, easier and add more money)– Address administrative issues for next summer’s

program– Build onto current NEPOOL program as much as

possible (i.e., no “radical” changes for 2002)

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Overview of Presentation

• The Current Program• Implementation Issues With Current Program • Status of Current Program• Summer 2001 Results• Proposed Enhancements to Load Response For 2002• Additional Issues Considered for 2002 Enhancements• Next Steps• Feedback Process• Additional Information

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The Current Program

• The current Load Response Program was filed in March of 2001and included two distinct classes:– Class 1 – An emergency interruptible load program

where loads guarantee a Contract MW amount and are paid the ECP and TMOR payments

– Class 2 – A price responsive program where customers are paid the ECP when they respond to an ISO notice voluntarily

– The RETX Internet Based Communications System is required to participate

• LRP payments and approved connection costs are allocated to NEPOOL Participants based on pro-rata share of Electrical Load.

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Implementation Issues In Current Program

• Complex system vs. “old” manual interruptible

load programs • Cost of implementation • Administration cost• No minimum payment or interrupt time

guaranteed– NYISO, PJM both offer $500/MWH for up to 4 hours

• TMOR payment for Class 1 amounts to very little• No ICAP for Class 1

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Status of Current Load Response Program

• Class 1, Demand Response– 18 sites for 6.8 MW

• Class 2, Price Response– 106 sites for 58.8 MW

• LSEs continue to sign up customers• ISO and stakeholders meeting monthly

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Summer 2001 LRP Market Results

Date

Hours Program in Effect

TOTAL ECP Payment

Class 2 MW Respondin

g

Estimated Class 2

Payments at ECP

Class 1 TMOR

Payment

7/24/01 13 (11-23) $3,984.46 15 $59,767 $2,911.93

7/25/01 11 (13-23) $8,165.25 15 $122,479 $1,869.07

8/7/01 7 (17-23) $709.56 17 $12,063 $329.77

8/8/01 12 (12-23) $833.80 17 $14,175 $22.65

8/9/01 11 (13-23) $2,946.78 18 $53,042 $729.91

8/10/01 14 (10-23) $855.45 20 $17,109 $277.95

Total for all days for 1 MW:$17,495.30 $278,634 $6,141.28

Total TMOR 6/1- 8/14 for 1 MW: $7,175.00

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Summary of Proposed Enhancements

• Allow “low tech” providers to participate in

program• Make Class 1 providers eligible to receive

ICAP credit• Set a minimum price and payment duration to

increase price certainty• Change the time frame that participants are

required to be available to accommodate

larger potential participant base

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Allow Low-Tech Option

• The current LRP requires the RETX Internet

Based Communications System• Potential customer feedback was for simpler

protocol that would:– be less expensive for customers to administer, – allow site aggregation and a level of measurement

tolerance

• Proposal: Provide the option of a low-tech

communications protocol

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Implementing the Low Tech Solution

• Low Tech solution providers may participate in both

Class 1 and Class 2 • Must demonstrate capabilities to meet Class 1

requirements except mandatory use of RETX System– Means for determining ICAP credit discussed later

• Metering data must be submitted in ISO defined

format• ISO will modify internal business processes to

accommodate different notification procedures– Pager, fax, email, etc.

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Providing ICAP Credit

• Issue: The current LRP does not provide a direct ICAP benefit to program participants.

• Factors to consider:– Demonstrable load response is equivalent to

generation capability, particularly from an ICAP perspective

– ICAP payments for Class 1 customers would be a logical means to increase value of the program and encourage more participation

– New York (ICAP credit available) and PJM (only impacts ICAP obligation) take different approaches

– Value of ICAP determined in bilateral market under current NE ICAP rules

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ICAP Credit Proposal and Implementation

• Proposal– Provide Class 1 Customers with ICAP benefit by giving

them an ICAP credit that can be valued and sold

through the bilateral market.

• Implementation– Treat Class 1 Customers similar to the Settlement

Only generation resources (< 5 MW) to provide them

with an ICAP Settlement Resource– Participant may then sell ICAP in bilateral market– No ICAP credit given until customers demonstrate

curtailment to obtain their capability rating.

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Price Certainty

• Potential customers desire a level of price certainty before committing to join the LRP

• Both NY and PJM’s LRPs provide:– a minimum payment ($500/MWh) and,– a minimum payment period (NY 4 hours, PJM 2 hours)

• Factors to consider– Both PJM and NY floor prices are applied for

emergency programs only– What would be an appropriate minimum price for New

England’s LRP?– Should Class 2 be treated any differently than Class 1

with respect to minimum payments?

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Price Certainty Proposal• Minimum Price

– Class 1• Pay greater of ECP or $100/MWh for MWh curtailed in response to ISO

request– Class 2

• Pay ECP for all voluntary curtailments between 0800 – 2300 as per procedures today

• Pay greater of ECP or $100/MWh for MWh curtailed when requested by ISO

• Minimum payment duration– Customers guaranteed payment for at least 2 hours of curtailment per

notification even if ISO notice is for shorter duration– Example

• ISO issues curtailment notice from 1600 to 1700• Customer curtails load for 2 hours starting at 1630• Customer eligible for payment for 2 hours of curtailment• Customer only receives payment for actual load curtailed

• Eliminate TMOR payments since these are less understandable to LRP Customers and it will simplify settlements

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Earlier Availability Period End Time

• Currently LRP Customers must be available to

curtail from 7 a.m. until 11 p.m. • Potential LRP Customers are restricted from

participating in the program due to their own

operations that end by 5-6 p.m. • Proposal

– Set the required availability period end time to 6 p.m.

for Class 1 customers– No mandatory availability period required for Class 2

since program is voluntary

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Additional Issues Considered for 2002 Enhancements

• Considerations for ECP Reciprocity• Locational Value Considerations Relative to

Congestion Zones• SMD Program Compatibility• Others?

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ECP Reciprocity Considerations

• Class 1 units only interrupted during emergencies,

therefore price will likely be at or near $100• Class 2 units guaranteed $100 payment when price

is forecast or be $100 or higher• Resulting differences between LRP payments and

payments to generators are likely to be very small• Main objective is to get more MW into program for

2002• SMD will address in 2003

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Zonal Congestion Value for LRP

• Concept being considered is a “zonal congestion

multiplier”• Utilizing historical congestion costs and RTEP analysis,

ISO determines an average zonal ratio of congestion

price to ECP (e.g., NEMA =1.8; SWCT=1.5; etc.)• Ratio is then used as a “multiplier” to the settlement

price for LRP in the most congested areas• All multipliers would be equal to greater than “1”• Multipliers could be in effect at all times for simplicity

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SMD Considerations

• Issues regarding price certainty are likely to be

the same under SMD as today (e.g., frequency

and accuracy of forecasts)• Current program is real-time, and should be

compatible with the SMD model (e.g., NYISO is

considering adopting NE real-time program)• DA programs can be designed to work with

proposed program for 2002 and beyond

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Next Steps

• Key milestones to approve proposed changes– November 20 – MC vote on proposed rule changes for

LRP 2002 – December 7 – PC vote on proposed rule changes– December 28 – Rule changes filed with FERC

• Other activities– Modify OP 14 to accommodate low tech solutions– Update LRP Manual to reflect proposed changes– Define LRP requirements in context of SMD

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LRP Feedback Process

• Load Response Program Working Group (meets

monthly)– Includes

• Participants Active and Inactive in Program• Regulators• ISO LRP team (includes IT, CS&T, Market Development,

Operations)

– Discusses Problem & Issues– Suggests solutions

• Group e-mail and contact lists• Contact a member of the ISO LRP team

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Additional Information

• ISO New England Contact Information– Customer Service Hotline (413) 540-4220– Customer Service Email custserv@iso-ne.com

• ISO New England Website (http://www.iso-ne.com)– Select on Projects then Load Response

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Questions??