July 8-10, 2014 | NEPOOL MARKETS COMMITTEE

1. July 8-10, 2014 | NEPOOL MARKETS COMMITTEE Matt Brewster Market Development413.540.4547 | mbrewster@iso-ne.com Reliability requirements for capacity zones FCM Local Sloped Demand Curves

2. ISO intends to use existing reliability requirements to design capacity zones demand curves • ISO-NE is not proposing to change how the locational resource requirements (i.e., LSR, TSA, LRA, MCL) are determined as part of the demand curve project • Current requirements for capacity zones will be used to establish curve shape and performance criteria (as was done for the system curve) • Several questions submitted by stakeholders pertained to methods used to establish capacity zone requirements • The concepts and methodologies are fully-described in the annual report of ICR-related values (2017/18 report) and Section III.12 of Market Rule 1 • This presentation highlights the relevant points about resource requirement determinations for capacity zones

3. Import-Constrained capacity zones Resource requirements: LSR, LRA, TSA

4. For import-constrained capacity zones, the requirements define a minimum capacity amount • Import-constrained zones are areas that, due to transmission constraints, are close to the threshold where local resources and transmission import capability may not be enough to reliably serve local demand • The Local Sourcing Requirement (LSR) is the minimum amount of capacity that must be located within an import-constrained zone to satisfy resource adequacy and transmission security requirements • LSR is set at the higher of: • Local Resource Adequacy (LRA) – slide 5 • Transmission Security Analysis (TSA) – slide 6

5. Local Resource Adequacy (LRA) • Minimum amount capacity that must be located in an import-constrained zone to meet system 0.1 days/year LOLE criteria • Probabilistic analysis which models the transmission interface limit between the zone under study and the rest of the system • Import zone target LOLE is 0.105 days/year • 0.105 days/year LOLE is the point at which resources available within the zone are insufficient; further reduction in local capacity would cause the system LOLE to increase above the 0.1 days/year criteria • Allowance for transmission-related LOLE of 0.005 days/year • Market Rule 1 Section III.12.2.1.1

6. Transmission Security Analysis (TSA) • Deterministic reliability screen using operable capacity analysis to develop a resource requirement for import-constrained zones which is sufficient to allow the system to operate through stressed conditions • Analysis models first contingency (N-1) and second contingency (N-1-1) conditions for the zone • Due to deterministic and transmission-security nature of TSA, some assumptions differ from those used to establish ICR • Market Rule 1 Section III.12.2.1.2

7. EXPORT-Constrained capacity zones Resource requirement: MCL

8. For export-constrained capacity zones, the requirement defines a maximum capacity amount • Export-constrained zones are areas that, due to transmission export constraints, could have locked-in resources that cannot be used to reliably serve the demand in the rest of the system • The Maximum Capacity Limit (MCL) is the maximum amount of capacity that can be procured from an export-constrained zone to meet the ICR • MCL = ICR New England – LRA Rest of New England (outside export zone) • ICR New England is the total amount capacity needed for the system • LRA Rest of New England is the minimum amount of capacity required outside the export-constrained zone to meet 0.1 days/year LOLE • Market Rule 1 Section III.12.2.2