The Northwest Power Pool Members’ Market Assessment and Coordination

Committee (MC) Initiative

Dan WilliamsPortland General Electric

NWPP MC Phase 2 Policy Workgroup Co-Chair

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October 10, 2013

WECC MIS/SIS Update

Agenda

• Background – Problem Statement Overview

• Phase 1– Overview of Outcomes

• Phase 2– Assessing Paths Forward

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Background

• NW BA leadership met in March 2012• Address renewable energy integration• Address regulatory pressure

– FERC– States

• Reduce operating costs• Control our own destiny

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NWPP MC Phase 1

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Bilateral Market Enhancement Opportunities

• I-TAP/webExchange,

• The Dynamic Scheduling Service,

• Implementation activities related to FERC Order 764,

• Encourage FERC to clarify and limit scope of the “Avista Rule” restrictions on ancillary services to allow a market for capacity products with sub-hourly dispatch to develop, and

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Bilateral Market Enhancement Opportunities cont’d

• Develop clear, workable policies and practices to enable the region to meet its near-term and long-term capacity needs (including ramping or “flexible” capacity) equitably and with fair compensation to those who supply capacity to meet the region’s needs.

• Following Reserve Assistance Program

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Energy Imbalance Market (EIM)

• Market Participants voluntarily submit availability of resources, min/max of resources, ramp rates and price curves of Resources (hourly submission).

• Market Operator Market System runs a security constrained (i.e. transmission) economic dispatch every 5 minutes to obtain the optimal economic and reliable solution that results in an Energy Imbalance (EIM Flow) within Market Operator market footprint.

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EIM Market Operator Role

• Market Operator provides asset owners the infrastructure necessary to offer their resources into the marketplace for use in providing Energy Imbalance.

• Market Operator owns the responsibility of accounting for and financially settling all EIM amounts (revenue neutral).

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EIM Transmission Usage

• EIM provides more complete transmission usage; dispatch factors in transmission congestion; does not proactively manage transmission congestion to increase ATC or replace OATT construct.

• The Energy Imbalance Market will use only the transmission system capability available in real-time after recognizing all flows resulting from scheduled uses, inadvertent interchange, and loop flow.

• Transmission flows resulting from EIM redispatch are assigned “priority zero” (last on, first off).

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NWPP Footprint Benefits Continuum Relative Value of Single Year Benefits BAU v. EIM (Millions $ in 2020)

• Conservative, annual benefits are clustering in the $70 to $80 million range

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$51.3$0 $16.7

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1Note: Each case is presented with a $42.00 per MWh and $57.50 per MWh (A1) value for excess hydro generation.

Phase 1 Market Operator Costs

• Market Operator (MO) start-up costs and variable costs:

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Start-up Costs Variable CostsCAISO Estimate (10.5)$ (6.7)$ SPP Estimate (12-4-2012) - Third-Party (37.4)$ (12.1)$ SPP Estimate (12-4-2012) - Stand-alone (74.9)$ (12.1)$ SPP Estimate (PUC EIM) (64.0)$ (28.0)$

NW EIM Participant Costs Ranges(Estimates assume incremental EIM costs above Order 764 implementation costs. Low

and High ranges reflect uncertainty associated with implementing Order 764.)

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Notes: Data submissions represent 91% of participating load (MWH) modeled in 2020 E3 EIM case; Costs were estimated for Participants who did not submit cost estimates.

Start-Up Cost On-Going Cost

Number of Parties

High Low High Low

Total 22 $60,002,242 $31,062,792 $33,321,650 $15,262,550

Hourly Coordination Cost $400,000 $70,000

$26,321,650

MC Phase 1 Summary Observations• Opportunity to reduce costs through market

design considerations– Market Participant costs are bigger driver than

Market Operator costs• Focus on ways to make foundational pieces

valuable to as many participants as possible• Leverage foundational pieces and assets to

gain multiple types of benefits, including reliability and other purposes

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NWPP MC Phase 2

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Phase 2 Overview

• Aug – Oct 2013 (Nov report release)• Accelerated efforts to further assess path

forward for NWPP Members• Retained Organizational Structure• Updated funding agreements• Recruited subject matter experts and PM• Identified near- and long-term benefits• Found leverage opportunities

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Phase 2 Deliverables

• Address outstanding qualitative questions – FERC Jurisdiction and Market Governance– Transmission treatment and visibility upgrades– Resource Sufficiency standards– Tailoring EIM to NWPP member realities

• Produce actionable market fundamentals report– Foundational bilateral market improvements– EIM scoping and roadmap

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Transmission Compensation Principles (example)

• The goals of an EIM transmission usage policy are:– accord with Open Access Transmission Tariff cost-causation

and undue discrimination principles, including protections for other transmission service classes;

– avoid disrupting bilateral market activity, and; – ensure that incentives are not inadvertently created that

may push load-resource and market optimization into the EIM time horizon simply to avoid day-ahead and hour-ahead transmission charges.

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Resource Sufficiency Requirements (example)

• The EIM does not reduce a participant’s need to carry sufficient flexible resources to balance its own system, but instead will improve the efficiency of dispatch for those carried reserves in real time.

• Participants must enter each EIM operating day/hour “sufficient” in terms of quantity and quality of balancing reserves (aka, load following, or non-contingency reserves), respecting transmission constraints.

• Associated EIM rules will need to be developed to provide sufficient incentive, visibility, and accountability to address resource sufficiency ahead of the operating day/hour.

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Revisiting NWPP MC Objectives

• Provide real-world benefits to NWPP footprint– Increased reliability for customers– More efficient management of power costs– Positive cost-benefit balance

• Retain NWPP member self-determination• Create roadmap that allows for optionality• Assess EIM end-state for NWPP footprint• Navigate FERC Jurisdiction concerns

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Questions

Dan Williamsdan.williams@pgn.com

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