3 rd Stakeholder Update: Locational Capacity Demand Curves in ISO-NE

Copyright © 2014 The Brattle Group, Inc.

PREPARED FOR

PREPARED BY

3rd Stakeholder Update:

Locational Capacity Demand Curves in ISO-NE

Samuel A. NewellKathleen SpeesBen Housman

August 6 , 2014

ISO New England Markets Committee

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Contents

▀ Introduction▀ Import-Constrained Zones▀ Export-Constrained Zone▀ Next Steps▀ Appendix

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IntroductionObjectives for Today

▀ Respond to stakeholder questions and comments on importing and exporting zones

▀ Propose an initial candidate curve for the exporting zone (no change to the candidate curve for the importing zone)

▀ Gather additional input on both importing and exporting zone candidate curves

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IntroductionIndex to Stakeholder Questions

Importing Zone Questions SlidesHow does performance change with local Net CONE? 7

How sensitive are results to supply “lumpiness”? 8

How sensitive are results to +/-30% shock sizes? 9

What costs are associated with price separation above LSR? 10, A27-30

How do two steeper proposed curves perform (NESCOE, GDF Suez)? 11-12

Exporting Zone Questions Slides

How does a linearized curve through “reliability value” perform? 17

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Contents


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Import-Constrained ZonesRecap of Candidate Curve: 1.5x System Width

▀ Cap: − Quantity at “minimum acceptable” reliability, defined as

MAX[1-in-5 LOLE, TSA]− Price at 1.6x Net CONE

▀ Foot: − Quantity is 1.5x the ratio above “minimum acceptable”

compared to the system curve, mathematically the quantities are:

▀ Local Net CONE: − Assumed greater than or equal to system Net CONE− Estimate local Net CONE as a separate value only if likely

to be 15% higher than system− Currently estimating <5% higher for CT, NEMA/Boston,

and SEMA/RI

NEMA Candidate Curve

𝐹𝑜𝑜𝑡 𝑧𝑜𝑛𝑒=(1.5×( 𝐹𝑜𝑜𝑡𝑠𝑦𝑠𝑡𝑒𝑚𝐶𝑎𝑝 𝑠𝑦𝑠𝑡𝑒𝑚

−1))×𝐶𝑎𝑝 𝑧𝑜𝑛𝑒+𝐶𝑎𝑝 𝑧𝑜𝑛𝑒

Notes:Footsystem = 35,605 MWCapsystem = 32,053 MWCapNEMA = 8,059 MWCapCT = 10,089 MW

𝐹𝑜𝑜𝑡𝑁𝐸𝑀𝐴=(1.5×( 35,60532,053−1))×8,059+8,059=9,399

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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/Boston

Net CONE 1% Higher than System $11.2 $3.7 6.8% 4.7% 1,714 405 0.7% 0.7% 6.6% 0.096 $914 $490 $1,405Net CONE 5% Higher than System $11.6 $3.8 9.4% 15.2% 1,216 404 3.6% 3.6% 6.7% 0.097 $935 $494 $1,438

Net CONE 10% Higher (Base) $12.2 $3.9 14.2% 27.6% 916 403 9.4% 9.4% 6.9% 0.097 $959 $501 $1,461

Net CONE 15% Higher than System $12.7 $4.0 19.1% 37.0% 725 403 14.3% 14.3% 6.9% 0.098 $982 $508 $1,477

Net CONE 20% Higher than System $13.3 $4.0 25.2% 46.1% 545 403 20.9% 20.9% 7.1% 0.100 $1,003 $514 $1,483

Connecticut

Net CONE 1% Higher than System $11.2 $3.6 6.3% 6.1% 1,423 473 0.7% 0.5% 6.6% 0.097 $1,138 $663 $1,636Net CONE 5% Higher than System $11.6 $3.6 7.7% 19.1% 1,026 471 4.2% 2.6% 6.9% 0.100 $1,181 $690 $1,686

Net CONE 10% Higher (Base) $12.2 $3.7 11.5% 32.8% 774 470 9.7% 6.9% 7.4% 0.104 $1,234 $718 $1,739



Price

Import-Constrained ZonesHow Does Performance Change with Net CONE?▀ As a base assumption, we evaluate curve performance with true local Net CONE 10% above system

Net CONE to illustrate results with a moderate cost differential▀ We test here the performance of the curve under a range of true local Net CONE values (keeping

administrative Net CONE fixed at the system level)▀ If true local Net CONE is only 1-5% above the system Net CONE, import constrained zones attract

greater excess, resulting in good reliability and infrequent price separation ▀ Therefore if local Net CONE is ≥ 15% above system, we recommend estimating a separate

administrative Net CONE for importing zones above this threshold (same conclusion as from prior tests on other 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

Candidate Curve (1.5x System Ratio) $12.2 $3.9 14.2% 27.6% 916 403 9.4% 9.4% 6.9% 0.097 $959 $501 $1,461Smoothed Supply Curves $12.2 $3.7 13.1% 29.2% 904 391 9.3% 9.3% 5.6% 0.093 $958 $528 $1,442

Connecticut

Candidate Curve (1.5x System Ratio) $12.2 $3.7 11.5% 32.8% 774 470 9.7% 6.9% 7.4% 0.104 $1,234 $718 $1,739

Smoothed Supply Curves $12.2 $3.4 9.9% 34.8% 750 441 9.1% 6.3% 6.1% 0.101 $1,234 $762 $1,725

Price

Import-Constrained ZonesHow Sensitive are Results to Supply Lumpiness?▀ Our results incorporate the impact of

lumpy investment decisions (with offer curves in each zone reflecting the block sizes of historical FCA offers)

▀ This sensitivity tests our results with smoothed supply curves at the local level (keeping “shock” sizes the same)

▀ As expected, a smoother supply curve would improve performance in both price volatility and reliability

Example Local Supply Curves

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Base 30% Larger Shocks

30% Smaller Shocks

(MW) (MW) (MW)

Connecticut 598 778 419NEMA/Boston 703 914 492ME 325 423 228Total System 928 1,207 650



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

Candidate Curve (1.5x System Ratio) $12.2 $3.9 14.2% 27.6% 916 403 9.4% 9.4% 6.9% 0.097 $959 $501 $1,46130% Larger Shocks $12.2 $4.4 19.7% 24.4% 1,087 521 10.6% 10.6% 11.8% 0.112 $960 $421 $1,56030% Smaller Shocks $12.2 $3.2 7.8% 31.4% 754 287 6.6% 6.6% 1.8% 0.086 $959 $597 $1,352

Connecticut


30% Larger Shocks $12.2 $4.2 17.8% 28.6% 902 605 11.8% 9.2% 13.3% 0.121 $1,230 $628 $1,787

30% Smaller Shocks $12.2 $2.9 4.4% 37.6% 642 333 6.2% 3.5% 2.2% 0.091 $1,237 $829 $1,657

Price

Import-Constrained ZonesHow Sensitive are Results to Shock Sizes?▀ We tested the performance sensitivity

under base case with +/ 30% shock size sensitivities

▀ Standard deviation in prices would increase by $0.5/kW-m with 30% larger shocks (decrease by $0.7-0.8/kW-m with smaller shocks)

▀ Reliability performance also improves with smaller shocks (degrades with larger shocks)

Standard Deviation ofNet Supply minus Demand Shocks

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Draws Average Price Average Excess above

LSR

Count % of All DrawsAbsolute

PricePrice Delta

Above SystemQuantity

($/kW-m) ($/kW-m) (MW) $mil $mil

NEMA/BostonDraws w/ Price Separation Above LSR 199 20% $12.8 $3.3 384 $12.7 $1,045All Other Draws 801 80% $12.1 $0.6 1,034 $0.0 $939All Draws 1,000 100% $12.2 $1.1 905 $2.5 $960

ConnecticutDraws w/ Price Separation Above LSR 247 25% $11.7 $3.0 468 $14.2 $1,222All Other Draws 753 75% $12.4 $0.5 869 $0.0 $1,239All Draws 1,000 100% $12.2 $1.1 770 $3.5 $1,234

v

Average Price Premium *

Excess Above LSR

Average Procurement

Cost

Notes: See additional detailed histograms summarizing price, quantity, and cost results in this subset of draws in Appendix. Reported metrics reflect results from the 1.5x width Candidate Curve presented in the July MC meeting which used a vertical curve in Maine.

Import-Constrained Zones

What Costs are Associated with Price Separation above LSR?  Some were concerned that a sloped demand curve would lead to the zones having to buy a larger than

necessary fraction of its capacity locally at a price premium, focusing on a subset of draws in which: (a) quantity exceeds LSR, and (b) price separates above system

▀ 20% and 25% of draws fall into this subset in NEMA and CT respectively ▀ This subset of draws may seem counter-intuitive when taken individually (i.e. why pay a price premium in the zones during

years when the zone is long on supply?)▀ However, these results are consistent with the overall objectives of the demand curve and FCM when considering the need

to meet reliability objectives and mitigate price volatility, 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

▀ However, if reducing the frequency of such events, or reducing the average size of the excess procured local quantity across all zones were to be prioritized, this would suggest implementing a steeper curve (next 2 slides)

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Cap Kink Foot

Curve DefinitionPrice 2x Net CONE 1x Net CONE $0.0

QuantityMax of 1-in-5

LOLE or TSASee Footnote

1.1x Cap Quantity

Corresponding Quantities in FCA7

Local + Import MW 10,089 10,508 11,207

Local MW 7,489 7,908 8,607



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

Candidate Curve (1.5x System Ratio) $12.2 $3.9 14.2% 27.6% 916 403 9.4% 9.4% 6.9% 0.097 $959 $501 $1,461

GDF SUEZ: Cap at 2x Net CONE $12.2 $4.7 7.2% 17.3% 1,022 404 7.2% 7.2% 6.2% 0.095 $961 $494 $1,544

Connecticut


GDF SUEZ: Cap at 2x Net CONE $12.2 $4.6 6.3% 22.5% 795 470 9.2% 6.3% 6.7% 0.102 $1,234 $681 $1,929

Price

Import-Constrained ZonesGDF SUEZ Modeling Curve for Consideration

Connecticut GDF SUEZ Modeling Curve▀ We test here a steeper curve with a higher price cap▀ Curve shows improved performance on all reliability metrics, but

the tradeoff is a substantial increase in price volatility, and increases susceptibility to exercise of local market power

▀ Curve also shows greater local excess on average (due to higher cap and greater price spikes), suggesting that if the objective of this curve is to reduce the size of the local excess then this could be achieved by lowering the cap

*Same quantity as 1x System curve when price equals Net CONE

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Cap Kink Foot

Curve DefinitionPrice 1.6x Net CONE 1.2x Net CONE $0.0

Quantity LSR LSR See Footnote


Local + Import MW 10,203 10,203 11,042

Local MW 7,603 7,603 8,442



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

Candidate Curve (1.5x System Ratio) $12.2 $3.9 14.2% 27.6% 916 403 9.4% 9.4% 6.9% 0.097 $959 $501 $1,461

NESCOE: Vertical below LSR $12.2 $4.1 21.1% 22.1% 635 404 16.9% 16.9% 6.3% 0.097 $956 $498 $1,471

Connecticut


NESCOE: Vertical below LSR $12.2 $4.0 21.3% 25.6% 512 469 18.3% 13.7% 8.7% 0.111 $1,229 $692 $1,796

Price

Import-Constrained ZonesNESCOE Modeling Curve for Consideration

Connecticut NESCOE Modeling Curve

NESCOE Disclaimer: The request does not reflect a NESCOE position on the zonal demand curves or parameters or any individual state view. The request is intended to facilitate NESCOE's consideration of possible zonal demand curve parameters and proposals under consideration.

1.2x Net CONE

*Same quantity as previous NESCOE modeling curve, defined such that the slope of the curve passes through LSR at 1.2x Net CONE

▀ We test a left-shifted curve that increases vertically at LSR▀ Curve shows a much higher frequency of events below TSA, and

average LOLE worse than the target in CT (still meeting LOLE target in NEMA)

▀ Price volatility and susceptibly to exercise of local market power also increase somewhat with the steeper curve

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Import-Constrained ZonesSummary Comparison of Curves (Connecticut)

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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/BostonCandidate Curve (1.5x System Ratio) $12.2 $3.9 14.2% 27.6% 916 403 9.4% 9.4% 6.9% 0.097 $959 $501 $1,4611x System Ratio* $12.2 $4.0 16.6% 25.6% 785 404 12.2% 12.2% 6.2% 0.095 $958 $497 $1,4682x System Ratio* $12.2 $3.8 11.7% 30.1% 1050 403 6.8% 6.8% 6.2% 0.095 $962 $506 $1,457Vertical in Zones and System $12.2 $6.3 54.2% 10.7% 502 398 21.7% 21.7% 15.2% 0.145 $937 $275 $1,639Vertical in Zones (System Sloped) $12.2 $4.3 23.9% 18.3% 558 404 20.0% 20.0% 6.5% 0.097 $955 $493 $1,475Flatter, Curves at 1,500 Width* $12.2 $3.8 13.0% 27.4% 976 403 8.2% 8.2% 6.2% 0.095 $962 $505 $1,461Steeper, Cap at 1.75x in Zones* $12.2 $4.3 9.5% 23.2% 911 404 9.5% 9.5% 6.2% 0.094 $959 $496 $1,498PJM VRR* $12.2 $3.9 6.2% 25.8% 456 403 25.8% 25.8% 7.2% 0.099 $952 $497 $1,440NESCOE: LSR at 1.2x Net CONE* $12.2 $4.0 15.6% 24.3% 569 404 19.7% 19.7% 6.3% 0.097 $955 $499 $1,459NESCOE: Vertical below LSR $12.2 $4.1 21.1% 22.1% 635 404 16.9% 16.9% 6.3% 0.097 $956 $498 $1,471GDF SUEZ: Cap at 2x Net CONE $12.2 $4.7 7.2% 17.3% 1022 404 7.2% 7.2% 6.2% 0.095 $961 $494 $1,544

ConnecticutCandidate Curve (1.5x System Ratio) $12.2 $3.7 11.5% 32.8% 774 470 9.7% 6.9% 7.4% 0.104 $1,234 $718 $1,7391x System Ratio* $12.2 $3.9 15.2% 30.1% 594 469 14.9% 11.3% 7.7% 0.107 $1,233 $699 $1,7662x System Ratio* $12.2 $3.5 8.3% 35.1% 957 470 5.8% 3.5% 6.5% 0.098 $1,237 $743 $1,715Vertical in Zones and System $12.2 $6.2 53.0% 12.6% 345 443 22.9% 18.2% 18.6% 0.154 $1,203 $384 $1,848Vertical in Zones (System Sloped) $12.2 $4.3 24.7% 20.0% 409 469 22.2% 17.6% 10.5% 0.116 $1,228 $664 $1,809Flatter, Curves at 1,500 Width* $12.2 $3.7 12.3% 30.6% 728 470 11.0% 7.9% 6.9% 0.104 $1,233 $714 $1,747Steeper, Cap at 1.75x in Zones* $12.2 $4.1 7.9% 26.7% 721 469 11.1% 7.9% 6.9% 0.103 $1,232 $688 $1,833PJM VRR* $12.2 $3.8 6.2% 28.7% 329 469 26.7% 20.8% 12.0% 0.122 $1,225 $691 $1,713NESCOE: LSR at 1.2x Net CONE* $12.2 $3.9 15.0% 29.5% 432 469 21.4% 17.0% 10.3% 0.115 $1,230 $700 $1,759NESCOE: Vertical below LSR $12.2 $4.0 21.3% 25.6% 512 469 18.3% 13.7% 8.7% 0.111 $1,229 $692 $1,796GDF SUEZ: Cap at 2x Net CONE $12.2 $4.6 6.3% 22.5% 795 470 9.2% 6.3% 6.7% 0.102 $1,234 $681 $1,929

Price

Import-Constrained ZonesSummary Comparison of Curves

Notes: 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.*Curves modeled with vertical curve in Maine from prior MC meeting (slightly lowers average LOLE stats)

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Contents


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Quantity Zonal Load CostAverage Standard

DeviationFrequency

at CapFrequency

of Price Separation

Average Quantity

Above (Below) MCL

Standard Deviation

System LOLE

Final Customer

Costs

Averageof Bottom

20%

Averageof Top 20%

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

Maine

Candidate Curve (1.5x System Ratio) $10.0 $4.1 3.7% 18.2% (269) 161 0.096 $289 $122 $455

Vertical $10.0 $4.4 4.3% 13.2% (385) 152 0.093 $288 $103 $457

Price

Export-Constrained ZoneMaine Candidate Curve: Sloped through MCL

Maine Candidate Curve

Curve ParametersCap Foot Difference

Price 1.6x Net CONE $0 $17.7

Quantity -2.78% below MCL 1.1x Cap Quantity -

Corresponding Quantities in FCA7 (MW) 3,606 4,006 400

▀ Definition: Cap and foot quantities defined as the same % of MCL as system curve is of NICR

▀ How the curve meets objectives:− Mitigates price volatility in Maine, dropping standard

deviation from $4.4 to $4.1/kW-m compared to vertical− Small degradation in reliability at system level, increasing

LOLE by 0.003 events/yr− Concept is simpler than other possible clearing

mechanisms explored in July MC meeting

Slope: $4.4/kW-m per 100 MW

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DeviationFrequency

at CapFrequency

of Price Separation

Average Quantity

Above (Below) MCL

Standard Deviation

System LOLE

Final Customer

Costs

Averageof Bottom

20%

Averageof Top 20%


Maine

Candidate Curve (1.5x System Ratio) $10.0 $4.1 3.7% 18.2% (269) 161 0.096 $289 $122 $455

NESCOE: Linearized Reliability Value $10.0 $4.0 3.6% 21.3% (333) 156 0.095 $289 $129 $453

Price

Export-Constrained ZoneNESCOE: Linearized Reliability Value Curve

▀ We developed a linearized curve running through the “reliability value” function (cap moves left, foot in almost the same spot), reducing the expected quantity that can be procured from Maine

▀ Does not reflect the full “reliability value” clearing mechanics because Maine MW still count 1-to-1 toward system need

▀ Curve shows improvements in price volatility and reliability, tradeoff is increased complexity (unless a fixed curve shape is adopted rather than updating the reliability function)

Slope: $3.2/kW-m per 100 MWCurve Parameters

Cap Foot Difference

Price 1.6x Net CONE $0 $17.7

Quantity -6.94% below MCL 7.80% above MCL -

Corresponding Quantities in FCA7 (MW) 3,451 3,998 547

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Export-Constrained ZonesSummary Comparison of Curves

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DeviationFrequency

at CapFrequency

of Price Separation

Average Quantity

Above (Below) MCL

Standard Deviation

System LOLE

Final Customer

Costs

Averageof Bottom

20%

Averageof Top 20%


MaineCandidate Curve (1.5x System Ratio) $10.0 $4.1 3.7% 18.2% (269) 161 0.096 $289 $122 $4552x System Ratio $10.0 $3.7 3.1% 24.8% (178) 163 0.099 $288 $140 $448

NESCOE: Linearized Reliability Value $10.0 $4.0 3.6% 21.3% (333) 156 0.095 $289 $129 $453

Vertical $10.0 $4.4 4.3% 13.2% (385) 152 0.093 $288 $103 $457

Price

Export-Constrained ZoneMaine Simulation Results

Notes: 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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Next Steps

Date Meeting or Deadline

June 10-11, 2014 MC Capacity zone demand curve concepts and candidate curves

June 20, 2014 Participants submit additional questions which Brattle will endeavor to answer at the July 8-10 MC

July 8-10, 2014 MC Answers to stakeholder questions

July 18, 2014 Participants submit additional questions which Brattle will endeavor to answer at the August 5-6 MC

Aug. 5-6, 2014 MC Answers to stakeholder questions

Aug. 8, 2014 Participants submit additional alternative zonal demand curve proposals for quantitative & qualitative analysis

Sep. 3-4, 2014 MC Results of quantitative analysis for stakeholder proposals (and ISO proposed demand curves)

▀ Please submit questions, comments, or alternative proposed curves to ISO-NE by August 8 for Brattle response in the September MC meeting

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Contents


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Appendix

Import-Constrained Candidates: Parameter Values by Zone

ConnecticutNEMA

Notes: MW quantities based on FCA7; prices based on a Net CONE of $11.1/kW-m. Foot quantity based on the system demand curve foot-to-cap ratio of 1.1.TTC values were 2,600 MW CT, 4,850 MW NEMA in FCA& from http://iso-ne.com/markets/othrmkts_data/fcm/doc/summary_of_icr_values%20expanded.xls

Cap to Foot

Change in Price ($/kW-m) $17.7

Change in Quantity (MW) 1,340

Slope ($/kW-m per 100 MW) $1.32

Cap to Foot

Change in Price ($/kW-m) $17.7

Change in Quantity (MW) 1,677

Slope ($/kW-m per 100 MW) $1.06

Cap Foot

Curve DefinitionPrice 1.6x Net CONE $0

Quantity Max of 1-in-5 LOLE or TSA1.5x Wider than System

Ratio


Local + Import MW 8,059 9,399

Local MW 3,209 4,549

Cap Foot

Curve DefinitionPrice 1.6 Net CONE $0

Quantity Max of 1-in-5 LOLE or TSA1.5x Wider than System

Ratio


Local + Import MW 10,089 11,766

Local MW 7,489 9,166

http://iso-ne.com/markets/othrmkts_data/fcm/doc/summary_of_icr_values%20expanded.xls

http://iso-ne.com/markets/othrmkts_data/fcm/doc/summary_of_icr_values%20expanded.xls

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Appendix

NEMA Detailed Results

Candidate Curve

Vertical Curve for Zones (System Sloped)

Average Price $12.2/kW-m

Price Std. Deviation $4.3/kW-m

Draws Below TSA 20.0%

Average Cost $955 mil/yr





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Appendix

Connecticut Detailed Results




Average Cost $1,228 mil/yr





Average Cost $1,234 mil/yr

Candidate Curve

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Appendix

Maine Detailed Results

Local Curve Same Shape asSystem Curve

Note: Assumes import-constrained curves have same sloped shape as system.




Average Cleared Quantity as % of MCL 89.6%

% of draws above MCL 92.7%




Average Cleared Quantity as % of MCL 92.7%

% of draws above MCL 22.9%


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Appendix Price Separation When Zones Clear above LSRStakeholders requested to see distribution statistics for only those draws where the following two conditions are both met in importing zones:

▀ Cleared quantity exceeds LSR− 904 and 901 draws for NEMA and CT, respectively

▀ Local zone price separates from system− 199 and 247 draws for NEMA and CT, respectively (of the 904 and 901 draws where cleared

quantity exceeds LSR)

  For this subset of 199 and 247 draws, stakeholders requested the following three statistics for each capacity zone, shown on the following three slides:

1. Price Distribution (slide 29): The distribution of values equal to the amount by which the local price exceeds the system-wide price (based on a single pull).

2. Surplus MW Distribution (slide 30): The distribution of values equal to the amount by which the quantity of capacity procured under the local curve exceeds the LSR.

3. Distribution of Cost of Local Surplus (slide 31): The distribution of values equal to the product of (i) amount by which the local price exceeds the system-wide price (for only pulls in which the LSR is met), and (ii) the amount by which the quantity of capacity procured under the local curve exceeds the LSR.

Note: All distributions depicted in these slides are for the 1.5x Width (Candidate Curve) curve presented in the July 9th, 2014 MC Meeting. Results would

be slightly different if updated to reflect a sloped curve in Maine.

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Appendix(1) Distribution of Local Prices Minus System

NEMA CTStats on 199 draws Stats on 247 draws

Notes:All distributions depicted in these slides are for the 1.5x System Shape (Starting Point Curve) curve presented in the July 9th, 2014 MC Meeting.Results depict a subset of 20% and 25% of draws where both: (a) local cleared MW exceed LSR, and (b) local prices exceed system prices.

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Appendix(2) Distribution of Cleared Quantity Minus LSR

NEMA CTStats on 199 draws Stats on 247 draws

Notes:All distributions depicted in these slides are for the 1.5x System Shape (Starting Point Curve) curve presented in the July 9th, 2014 MC Meeting.Results depict a subset of 20% and 25% of draws where both: (a) local cleared MW exceed LSR, and (b) local prices exceed system prices.

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Appendix(3) Distribution of Costs of Local Surplus

NEMA CT

▀ These 199/247 draws represent events where the zones pay a premium on surplus capacity.▀ The expected annual cost of such events is the sum, over all 199/247 identified draws, of:

0.001 probability * Price Delta above System * Surplus observed in each draw.▀ The result is $2.5 mil and $3.5 mil for NEMA and CT, respectively▀ Note that this subset of local customer costs during price separation events above LSR reflect a

portion of the costs needed to maintain sufficient local excess in most years (thereby preventing more frequent and larger shortages in other years)

Stats on 199 draws Stats on 247 draws

Notes:All distributions depicted in these slides are for the 1.5x System Shape (Starting Point Curve) curve presented in the July 9th, 2014 MC Meeting.Results depict a subset of 20% and 25% of draws where both: (a) local cleared MW exceed LSR, and (b) local prices exceed system prices.0.001 probability applied to each draw because out of the 1,000 draws tested, the probability of any single draw occurring equals 1/1000th

Documents

3 rd Stakeholder Update: Locational Capacity Demand Curves in ISO-NE