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NEPOOL Markets Committee November 13, 2007 Kristine Mespelli Chair of SSPAC

Response of SSPAC to ISO-NE Proposed Revision to the Treatment of Dispatchable Capacity Imports over the Phase I/II HQ Interconnection. NEPOOL Markets Committee November 13, 2007 Kristine Mespelli Chair of SSPAC. Who is SSPAC?.

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NEPOOL Markets Committee November 13, 2007 Kristine Mespelli Chair of SSPAC

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  1. Response of SSPAC to ISO-NE Proposed Revision to the Treatment of Dispatchable Capacity Imports over the Phase I/II HQ Interconnection NEPOOL Markets Committee November 13, 2007 Kristine Mespelli Chair of SSPAC

  2. Who is SSPAC? • Schedule 20A Service Providers Administrative Committee (SSPAC). • SSPs are those public utility transmission providers who hold the rights to the transmission capacity over the Phase I/II HVDC-TF and who make those rights available on open-access basis to Transmission Customers under Schedule 20A of the ISO-NE OATT. • SSPs are a subset of the Interconnection Right Holders (“IRH”), the entities that pay for the Phase I/II HVDC-TF and in return receive the rights to the transmission capacity under certain financial support agreements. • SSPAC has the sole authority to file Section 205 changes to Schedule 20A.

  3. ISO-NE Proposal ISO-NE proposal is apparently based on the following section of the FCM Settlement Agreement : “VI. Agreements Regarding External Resources. Market Rules, operating procedures and manuals shall be changed to allow External Resources to participate in the Forward Capacity Market and Transition Period on a basis comparable to internal generation Resources. Among the changes that are required are that the timing for Real Time contract submittals be modified to allow them to be made after the Day Ahead Energy Market closes and as soon as one hour before an operating hour in order to allow for the purchase of required transmission.” ISO-NE proposal includes two significant changes to the treatment of dispatchable imports receiving capacity payments: (1) removes the current requirement that Non-PTF transmission reservations be linked to associated transactions by 12:00 noon the day before the operating day; -instead, as proposed, the transmission reservations will be allowed to be submitted any time prior to 60 minutes before the operating hour; (2) removes the current requirement to have 24/7 transmission reservations linked to a dispatchable capacity import; -instead, as proposed, transmission reservations will only be checked, and potential capacity availability penalties will only be imposed, if and when the EES dispatch rate for the hour is greater than the price submitted for the dispatchable energy transaction (i.e., only checked/penalized if the transaction would otherwise have been scheduled to flow but for the lack of a reservation).

  4. SSPAC’s Position • Change (1) is O.K. provides more time, flexibility and is all that is required to comply with the FCM Settlement Agreement Section VI. • Change (2) goes well beyond what is required for compliance, and violates the understanding reached at the time of the FCM Settlement. In complying with Section VI, ISO-NE and NEPOOL must not ignore and violate understandings reached in other sections of the FCM Settlement Agreement… “VIII. Agreements Regarding Transition Period…K. Phase I/II HQ Interconnection. During the Transition Period,...The remaining 600 MW of transmission may be used for UCAP over the Phase I/II interconnection by any supplier that arranges for transmissionover the Interconnection…” (emphasis added) The ISO-NE proposal, with “Change (2)”, allows a supplier to use the interconnection for UCAP without ever purchasing transmission capacity from the SSPs who hold the transmission capacity rights. - A supplier can simply price a dispatchable capacity import high enough to avoid being dispatched for energy in most, and often all, hours of a capacity commitment period. Transmission reservations will not be verified or required for any of those hours, yet the supplier will receive payments for UCAP.

  5. Impact on New England Customers • Unwarranted Change to current practice for dispatchable capacity imports over non-PTF interconnections • today, the transmission capacity rights must be acquired from the rights holders for all hours of the capacity commitment period in order for a supplier to use the interconnections for capacity market payments • ISO-NE is now proposing that load make these additional capacity market payments to suppliers that have not acquired the transmission rights for the commitment period. • Moreover, most of this same New England load will be harmed by the reduction of revenues to SSPs for their Phase I/II HVDC entitlements. One SSP is estimating the ISO-NE revised proposal would deprive its customers of $4 - $5 million per year in lost revenues credited to them. • If ISO-NE does not change its proposal, SSPAC will need to raise this issue at the FERC; In addition to being a clear violation of the FCM Settlement, the proposal results in an unjust and unreasonable transfer of the value of transmission capacity (from the load supporting the costs of this transmission to the supplier able to receive full capacity market value without acquiring the transmission rights). • To contact SSPAC: Kristine Mespelli, Chair (508)389-2835 or kristine.mespelli@us.ngrid.com.

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