Enhancing Internal Bilateral Transactions in Standard Market Design Proposal

1. Standard Market DesignProposedInternal Transactions6/27/2001Ronald CoutuPrincipal AnalystBusiness Architecture and TechnologiesISO New England

2. Why are we here? • View a Proposed implementation for Internal Bilateral Transactions under SMD • Explain the proposal in detail and answer questions about it • Gather your input/comments/concerns and ideas to enhance the proposal

3. Our Goals in this Process • Standardize • Remove seams • Provide consistent set of internal transactions • Flexibility • Allow Participants in the market to determine how contracts flow • Simplify • Makes rule changes easier

4. Current Internal Bilaterals • Load Asset Contracts • Unit Asset Contracts (each Market) • System Contracts Mwh (each Market) • Dispatchable (10 Blocks) • Must-Take • System Contracts % Obligation (each Market) • Dispatchable (10 Blocks) • Must-Take • Pre-determined Conditions

5. PJM Internal Contracts • RLR (Retail Load Responsibility) and WLR (Wholesale Load Responsibility)- Used similarly to our metering application • GEN (Generator) - Used similarly to our metering application • BILAT (Internal Bilateral) - Mwh • Regulation Contracts (uses eMKT) • Long-term joint ownership

6. Other Differences between Current and PJM • PJM has no Pre-Determined conditions • PJM contracts can be submitted after-the-fact • PJM contracts require confirmation

7. Other factors influencing design • With Multi-Settlement - Short-term Unit Contracts may place financial burden on purchaser of Unit Contract • Participants today often request a new contract type and/or how to make a contract “squeeze” into a type

8. Statistics of Active Internal Transactions(Energy Market - From Jan. 2001 to June 2001) • Assets with Short-Term Load Asset Contracts = 7 • Transfer of Obligation Contracts = 2 • Asset with Long-Term Load Asset Contracts = 160 • Assets with Short-Term Unit Contracts = 22 • Assets with Long-Term Unit Contracts = 29 • Not including Life-of-Unit • Assets with Life-of-Unit Contracts = 164 • System Contracts - Must Take - 20,960 • System Contracts - Dispatchable - 5,488 • Number of Linked to Reserve Contracts - 4,620 of 5,488 (84%)

9. Proposed SMD Internal Transactions • Bilateral for a Market • Bilateral for Load • Assets via Ownership Mechanism • Units (Life-of-Unit) • Loads (Long-Term)

10. Proposed Confirmation • Parties confirm either the contract or the schedule • A contract may be entered by the buyer, seller or a third party (agent). • If contract is entered by the buyer or seller their confirmation is assumed. • The other party to the contract must confirm or contract will not be processed.

11. Proposed Confirmation (continued) • Contracts may be entered for a long-term with hourly schedules entered in after the fact. • If the contract is confirmed the schedules will not need to be confirmed. • If the contract is not confirmed the hourly schedules will need to be confirmed individually.

12. Proposed Contract Deadline • At least as late as the Metering Deadline (noon the 2nd Business Day)

13. Standard Market Design Bilateral Market Transaction • Internal Transaction • One value for each Trading interval of the Market • Stated as an amount in the quantity of the Market (e.g. Mwhs) • Used to transfer the obligation in a specific Market from Buyer to the Seller • Transaction only affects that Market settlement • Energy Market • Mwhs • Location where the contract will be settled (Node, Zone or Hub) • Regulation Market (AGC) • Mwhs

14. Standard Market DesignBilateral for Load • Internal Transaction between Participants • Stated as a Mwh amount • Used to transfer load obligation from the Buyer Participant to the Seller Participant at a specific location • Transaction affects all Markets/Services or calculations which use load to determine market position specific charges or credits

15. Standard Market DesignDay-Ahead vs. Real-Time Contracts • Bilateral for Load • Real-Time only • Bilateral Market • Day-Ahead & Real-Time - or - • Real-Time • Bilateral Market (Regulation & Reserves) • Real-Time (no DA market)

16. Standard Market Design% Entitlement • Long-Term % Entitlement • Units (Life-of-Unit) • Loads • Used to handle transition from current contracts • Used for implementing Life-of-Unit Contracts • Used to facilitate current Long-Term (>1 months) % Load Asset Contracts

17. SMD Internal TransactionsMethods of Entry • Internal Market Bilateral/Internal Load Bilateral • One contract container entered by Buyer/Seller/Agent • Hourly values entered/updated by any of the parties • May be submitted after the fact (12+ hours)

18. SMD Internal TransactionsMethods of Entry • Long-Term (>1 month) % Entitlement • Submitted via form to ISO by Buyer/Seller • Confirmed by ISO with other party • ISO enters data into the system • Current Asset Registration Change process deadlines would apply

19. Life-of-Unit Contract Long Term Load Asset Contract (%) System Contract (Energy) System Contract (Regulation) Short-Term Load Asset Contract (%) Linked to Reserve Contract (Mwh in up to 4 different Markets) Transfer of Obligation Contract (%) [Any Market] Short-Term Unit Contract (%) [Any Market] Entitlement Transaction Entitlement Transaction Bilateral Market (Energy) Bilateral Market (Regulation) Bilateral Load (Mwh) Multiple Bilateral Market contracts (for each market) with agreed upon amounts entered in after-the-fact Bilateral Market (Mwh) [Any Market] Bilateral Market (Mwh) [Any Market] SMD Internal TransactionsConversion from current Current SMD

20. SMD Internal TransactionsConversion from current Example 1 - Long-Term Load Asset Contract (%) Ownership Participant A Load Asset 123 50% Long-Term % Entitlement Participant B Participant C 50% 25% Today Under SMD • Submitted via form to ISO by Buyer/Seller • Confirmed by ISO with other party • ISO enters data into the system • Current Asset Registration Change process deadlines would apply • Enter in prior to dispatch hour • Enter in by Seller or Agent for Seller • May have pre-determined conditions • Only end date may be changed • Confirmation of Contract sent to Buyer

21. SMD Internal TransactionsConversion from current Example 2 - System Contract (Energy) Quantity Participant A 50mwh Participant B Under SMD Today • Enter in by deadline occurring after-the-fact • Enter in by Seller, Buyer or Agent • No pre-determined conditions • No dispatch rate • Originally submitted as a container with no Schedule amounts • Hourly Schedule amounts submitted after-the-fact • Party not entering the contract must confirm the contract electronically (or both parties if Agent entered) • Enter in prior to dispatch hour • Enter in by Seller or Agent for Seller • May have pre-determined conditions • May have a dispatch rate • Only end date may be changed • Confirmation of Contract sent to Buyer

22. SMD Internal TransactionsConversion from current Example 3 - Short-Term Load Asset Contract (%) Quantity Participant A 50mwh Participant B Today Under SMD • Enter in by deadline occurring after-the-fact • Enter in by Seller, Buyer or Agent • No pre-determined conditions • No dispatch rate • Originally submitted as a container with no Schedule amounts • Party not entering the contract must confirm the contract electronically (or both parties if Agent entered) • Entered as Mwh by Submitter after-the-fact • Enter in prior to dispatch hour • Enter in by Seller or Agent for Seller • May have pre-determined conditions • May have a dispatch rate • Only end date may be changed • Confirmation of Contract sent to Buyer • Entered as % of Load Asset Reading converted to Mwh during Settlement

23. SMD Internal TransactionsConversion from current Example 4 - Linked to Reserve Quantity 50mwh Participant A Participant B Under SMD Today • Enter in by deadline occurring after-the-fact • Enter in by Seller, Buyer or Agent • No pre-determined conditions, dispatch rate or linking • Originally submitted as a container with no Schedule amounts • Hourly Schedule amounts submitted after-the-fact • Party not entering the contract must confirm the contract electronically (or both parties if Agent entered) • “Linking” of contracts done by Participant after-the-fact • Enter in prior to dispatch hour • Enter in by Seller or Agent for Seller • May have pre-determined conditions • Must have a dispatch rate • Only end date may be changed • Confirmation of Contract sent to Buyer • “Linking” of contract done by ISO during settlements

24. SMD Internal TransactionsConversion from current Example 5 - Transfer of Obligation (Energy) Quantity 50mwh Participant A Participant B Today Under SMD • Enter in by deadline occurring after-the-fact • Enter in by Seller, Buyer or Agent • No pre-determined conditions, dispatch rate or linking • Originally submitted as a container with no Schedule amounts • Hourly Schedule amounts submitted after-the-fact • Party not entering the contract must confirm the contract electronically (or both parties if Agent entered) • Calculated by party entering contract and entered in Mwh after-the-fact • Enter in prior to dispatch hour • Enter in by Seller or Agent for Seller • May have pre-determined conditions • May have a dispatch rate • Only end date may be changed • Confirmation of Contract sent to Buyer • Entered as % converted to Mwh by Settlement

25. How will contracts be submitted to the ISO? • Energy Market and Load • Enhanced Market System • Regulation and Reserve Contracts • eMKT application (Bidding UI)

26. Questions? Comments?