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NEPOOL Markets Committee Meeting on Auction for Quick-Start Capability

This agenda item discusses the auction process for Quick-Start Capability as presented by Mario DePillis. Key topics include offers, requirements, and resolving outstanding issues. It covers the distinctions between physical and financial methods for reserving capability, the initial offer structure, and the role of self-supply. The discussion includes the evaluation of auction prices, bilateral trades, obligations, energy bid limits, and penalties for non-compliance. The meeting aims to clarify the mechanics and expectations for the Quick-Start Capability auction system.

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NEPOOL Markets Committee Meeting on Auction for Quick-Start Capability

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  1. Agenda Item #2a 10/30/01 MC Mtg. Auction For Quick-Start Capability Mario DePillis 10/30/01 NEPOOL Markets Committee

  2. Outline • Basics: offers, requirements, fulfilling requirements. • Resolving outstanding issues. • Open for discussion.

  3. Basics: Physical Method High Operating Limit Maximum Capability Block Scheduled Spinning Reserve Normal Energy Dispatch Range New HOL Low Energy Block Low Operating Limit

  4. Basics: Financial Method High Operating Limit Maximum Capability Block Qualifying Blocks Normal Energy Dispatch Range Bid Price Floor Low Energy Block Low Operating Limit

  5. Basics: Reserving Capability • Physical vs. Financial • Physical reservation segregates resources, increases costs. • Physical reservation would require new vendor software for both commitment and dispatch.

  6. Basics: The Initial Offer • Portfolio offers (MW, $/MW). • 3 month supply period. • No resources identified. • Load can enter offer. • Offers of self-supply in MW. • Section 3

  7. Basics: The Product • The product: QS Capability. • 10 or 30 minute off-line reserve capability. Section 10. • Financially reserved capability. Section 9. • Qualifying blocks. Section 9. • No penalty or payment reduction if called for energy.

  8. Basics: Relation to Energy and TMSR • No penalty for energy provision. Section 10. • Still eligible to set ECP. • MW of QS Capability paid reduced by MW of TMSR designation. Section 8.1. • No additional penalty for TMSR designation.

  9. Basics: Meeting Individual Supply Requirement • Measured over all Settlement Resources. Section 7 and 8. • Excess QS 10 Cap substituted for QS 30 Cap to meet requirement. Section 7.

  10. Basics: Evaluation and Auction Prices • 10 Minute Resources may meet 30 minute auction purchase requirement. Section 3.3. • Explicit price cascading. Section 3.6.

  11. Basics: Self-Supply • Principles: • Same timing as central supply. • Same requirements on bids, delivery as central supply. • Same penalties for non-delivery. • Implementation: • Easiest implementation is $0/MW bid. • Other suggestions? • Section 3.4

  12. Basics: FEQSR Units • “Financial Equivalent Quick-Start Resource” • Required to have zero energy uplift for the day. • Energy uplift measured net of AGC and Transmission. • Section 9.2.2.

  13. Basics: Bilateral Trades • Essential for short-term adjustments. • Scheduled outage? Buy QS Capability bilaterally. • Lost auction? Sell QS Capability bilaterally. • No load? Accept QS Capability Obligations.

  14. Basics: Bilateral Trades • Two types of trades: obligations and resources. • System contracts transfer obligations. • Unit Contracts transfer resources. • Section 8.1 and forthcoming revised 12.A-5, 12.A-6.

  15. Basics: Obligations • Charges based on obligations, Section 12: • The Participant's allocated share of TMNSR (TMOR) hourly requirement. • System contracts transfer obligations. • Old system contracts now for QS Cap Obligations. • System dispatchable contracts carried as exchange of obligation.

  16. Energy Bid Limits • Upper limit at Min[Energy Bid Cap, $1000] • Lower limit: • 12,200 CT as benchmark off-line unit. • Adjust for forward gas prices, delivered. • Adjust for O&M. • Current estimate is slightly above $60.

  17. Limit on Start-Up and No-Load • Would not apply to FEQSR units. • Assures that unit is not misrepresenting flexible characteristics, Section 9.1. • May not be necessary with user financed audit, Section 11.2.

  18. Penalties • Participant concern over illiquid bilateral market, lack of liquid spot market. • Need for accurate voluntary reporting of capability and unit characteristics. • Two types of failure: • Failure to supply capability—low penalty. • Failure to supply energy per unit characteristics —high penalty.

  19. Penalties • Decision to allow $1,000/MWH energy bids =>Some unit characteristics never observed. • 1 “user financed” audit per auction period. • Seller incorporates cost into auction offer. • How to identify in portfolio delivery? • How to address MCC blocks with low ramp rates?

  20. Replacement Reserves • % TMOR in replacement reserve. • Average MW when units were committed for surplus. • Study to be done on old unit commitment runs.

  21. Limits On Forward Purchases • Forecasting Office doing study. • Procedure: • Select case with units committed for surplus. • Decommit units committed for surplus and measure change in cost. • Calculation will be monthly average cost, $/MW-Month. • Possible alternative is ICAP deficiency charge.

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