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Pay for Performance Regulation. Donald Tretheway Senior Market Design and Policy Specialist January 11, 2012. Agenda. ISO Policy Initiative Stakeholder Process. POLICY AND PLAN DEVELOPMENT. Issue Paper . Straw Proposal . Draft Final Proposal . Board. Stakeholder Input. We are here. - PowerPoint PPT Presentation
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Pay for Performance Regulation
Donald TrethewaySenior Market Design and Policy Specialist
January 11, 2012
Agenda
Time Topic Presenter1:00 – 1:15 Introduction Chris Kirsten
1:15 – 1:30 FERC Order 755 Don Tretheway
1:30 – 2:50 Changes from Straw Proposal Don Tretheway
2:50 – 3:00 Next Steps Chris Kirsten
Page 2
ISO Policy Initiative Stakeholder Process
POLICY AND PLAN DEVELOPMENT
IssuePaper Board
Stakeholder Input
We are here
StrawProposal
Draft FinalProposal
FERC Order 755
• ISO compliant– Capacity payment based upon energy opportunity costs of
marginal unit– Payment of net energy from providing regulation
• ISO non-compliant– Market based mileage payment– Accuracy adjustment for mileage payment– Inter-temporal opportunity costs implemented in participant’s bid
not by the ISO, but must be verifiable by the ISO
Page 4
What is mileage and accuracy?
• Mileage: the absolute change in AGC set points between 4 second intervals
• Accuracy: comparison of AGC set point to actual telemetry
1. Mileage adjustment for under-response
2. Hourly percentage for response accuracy to AGC set points
Page 5
Changes from Straw Proposal (1 of 2)
• Clarified the methodology to set marginal clearing prices for regulation capacity and mileage rate based upon the expected total regulation costs and the historical accuracy of individual resources
• Modified calculation of the mileage multiplier to an hourly value using historical data from the prior week
• Changed the interval to calculate accuracy and mileage for individual resources from hourly to 15 minutes
• Clarified how the ISO will settle incremental RTPD mileage awards and the impacts of these awards on bid cost recovery revenue
Page 6
Changes from Straw Proposal (2 of 2)
• Modified how the ISO will measure the minimum performance threshold to reflect a monthly 30 day average of 15 minute interval accuracy measurements
• Propose to publish a report on pay for performance data to assess mileage multiplier calculation, bid cap, and minimum performance threshold after obtaining one year of actual data
• Added a mileage bid cap of $50.00• Determined ramp period for regulation certification will be
10 minutes
Page 7
Mileage Multiplier and Historical Performance
• Hourly Mileage Multiplier based upon prior week
• Resource specific historical accuracy– Calculated monthly based upon prior 30 day average
15 minute accuracy– Used for minimum performance threshold and to
determine market awards
Page 8
HE 08 Friday Saturday Sunday Monday Tuesday Wednesday Thursday TotalCapacity 350 400 375 350 375 375 350 2575
Resource A Mileage 800 600 400 100 250 500 600 3250Resource B Mileage 500 500 500 250 300 400 300 2750Resource C Mileage 700 600 700 100 500 200 500 3300Total Mileage 2000 1700 1600 450 1050 1100 1400 9300
Mileage Multiplier 5.71 4.25 4.27 1.29 2.80 2.93 4.00 3.61
Determination of Market Clearing Prices
A: Determine expected costB: Divide expected cost by historical accuracyC: Select the highest mileage bid that clearedD: Capacity is highest expected cost less expected mileage
Page 9
Mileage Multiplier 5Regulation Requirement 100
Awarded CapacityCapacity
BidOpportunity
CostMileage
BidExpected
Cost AccuracyAdjusted
Cost Expected MileageResource A Yes 20 5.00$ 2.00$ 0.50$ 9.50$ 85% 11.18$ 9.50$ 0.50$ Resource B Yes 20 7.00$ 2.00$ 0.80$ 13.00$ 85% 15.29$ 13.00$ 0.80$ Resource C Yes 20 9.00$ -$ 0.30$ 10.50$ 85% 12.35$ 10.50$ 0.30$ Resource D No 0 -$ -$ 3.00$ 15.00$ 80% 18.75$ -$ -$ Resource E No 0 1.00$ 12.00$ 0.10$ 13.50$ 70% 19.29$ -$ -$ Resource F Yes 20 7.00$ -$ 1.00$ 12.00$ 95% 12.63$ 12.00$ 1.00$ Resource G Yes 20 6.00$ -$ 0.10$ 6.50$ 80% 8.13$ 6.50$ 0.10$ Total 100
Mileage Rate 1.00$ Capacity 8.00$
A BCD
Alignment with RT regulation 15 minute award interval
• Accuracy and mileage determine per 15 minute interval– Same measurement interval for DA and RT awards
• Mileage rate if both DA and RT regulation award– Weighted price paid for actual miles in 15 minute interval
• Mileage payments included in BCR revenue– Weighted split if DA and RT regulation award– No accuracy adjustment included
Page 10
Market performance report 1 year after implementation
• Using actual mileage and accuracy data to evaluate:– Appropriateness of the minimum performance threshold level – Historical data used to calculate the mileage multiplier used to
determine the expected cost of regulation– Level of the mileage bid cap given the change in resource
participation under the new compensation mechanism– Other
• Determine if modifications are needed to refine PFP regulation design
Page 11
Next Steps
Page 12
Please submit comments to [email protected]
Item Date
Post Revised Straw Proposal January 4, 2012
Stakeholder Conference Call January 11, 2012
Stakeholder Comments Due January 18, 2012
Post Draft Final Proposal February 8, 2012
Stakeholder Conference Call February 15, 2012
Stakeholder Comments Due February 22, 2012
Board Meeting March 22, 2012
