Proposed Modification to Zonal Modeling Trigger

1. Proposed Modification to Zonal Modeling Trigger NEPOOL Reliability Committee Meeting December 17, 2013 On behalf of Exelon Generation

2. Concern • ISO’s proposal to trigger modeling of a zone essentially says “model the zone only if delist of the largest station puts the zone short of requirements.” • Two concerns: • There are no provisions to deal with reasonable levels of small, additional delists • It is unrealistic to believe that a large station would delist out of a zone, but there would be zero other small delist requests. • Zones without a single large station fail to be modeled when delist of several small units could cause a problem • Vermont is an example – 52 MW is largest station.

3. Historic Example • Some history • In FCA-4 the entire Salem Harbor Station requested delist • In that same auction, at least 28 other, small projects in NEMA delisted (64 MW total) • Under ISO’s proposal, if Salem were the largest NEMA station, and NEMA was long only by Salem Harbor’s capacity, the zone would not be modeled, and every one of these 28 delist requests would be rejected for reliability as necessary to meet an (unmodeled) TSA need. • This would significantly disrupt proper functioning of the auction. • New capacity that wanted to build inside NEMA would see no signal to do so, and their offers could not be accepted unless they cleared at the Pool-wide price

4. Another Example • FCA-8 status • EquiPower requested delist of Brayton Point Station. • In addition, we know at least 14 other small facilities (101 MW total) also requested NPRs in the SEMARI zone. • We don’t know how many actual (non-Brayton) delists will be offered in SEMARI, but is seems unrealistic to say 0 • Under ISO’s proposal, if SEMARI was long by only Brayton’s capacity, then the zone would not be modeled, all pending delists would be rejected, the other NPRs would be requested to stay for reliability (and potentially be paid under RMR’s), and the zone would face reliability problems to the extent those resources left anyway • Any retained resources would disrupt proper functioning of the auction. • New capacity that wanted to build inside SEMARI would see no price signal to do so, and their offers could not be accepted unless they cleared at the Pool-wide price.

5. Solution • Provide an additional buffer to model the zone so as to capture realistic delist requests that will come irrespective of a large station’s decision to delist. • Propose that this buffer be 15% of the LSR • No downside – if you model the zone and indeed those additional delists don’t show up, then there is no price separation, and result is the same as if the zone was not modeled • Inverse is not true. Failing to model a zone when you should have can have major disruptive impacts to the market.

6. Proposed Language • Using ISO’s proposed language: • MR1 Section 12.4(b) insert two words: • (b) The ISO shall model in the Forward Capacity Auction, as separate import-constrained Capacity Zones, those zones identified in the most recent annual assessment of transmission transfer capability pursuant to ISO Tariff Section II, Attachment K, for which the second contingency transmission capability results in a line-line Transmission Security Analysis requirement, calculated pursuant to Section III.12.2.1.2 and pursuant to ISO New England Planning Procedures, that is greater than 85% of the Existing Qualified Capacity in the zone, with the largest generating station in the zone modeled as out-of-service. Each assessment will model out-of-service all Non-Price Retirement Requests and Permanent De-List Bids as well as rejected for reliability Static De-List Bids from the most recent previous Forward Capacity Auction and rejected for reliability Dynamic De-List Bids from the most recent previous Forward Capacity Auction.