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The Winter Program proposed by ISO presents a fragile and high-risk structure that could deter resource participation due to rigid inventory requirements and payment rates. Resources may face challenges reaching the necessary inventory levels or find the proposed rates too low. Additionally, those that opt in but fall short of requirements risk not receiving compensation for stored incremental fuel. The proposed payment rates may underestimate costs, suggesting the need for a more flexible inventory-payment model to ensure adequate participation and fuel assurance in the market.
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Winter Program Proposals Pete Fuller NEPOOL Markets Committee June 10, 2014
Today’s Discussion • As proposed by ISO, the Winter Program presents a fragile, high-risk structure • By rigidly specifying both the minimum inventory requirement and the payment rate, ISO risks resources choosing not to participate, either because they cannot reach the specified inventory levels or they find the payment rate too low, or both • Resources with fuel delivery challenges that elect to participate run the risk of falling just short of the required inventory, and getting no compensation at all for incremental fuel stored on-site • The proposed payment rate under-estimates the cost for many units
Availability-Adjusted Cost Source: Analysis Group Memo, “Further Explanation on Rate Calculations,” May 28, 2014; supplemental NRG analysis
NRG’s Proposal • Establish a ‘curve’ of start-of-season inventory levels and payment rates. • The payment rate for a given unit would be set based on the unit’s inventory level as of Dec 1 (or Jan 1, as provided in ISO’s proposal)
