1. Locational Installed Capacity Restructuring Roundtable
James G. Daly
On behalf of Coalition in FERC ER
03/18/05

2. Coalition Members
Attorney General of Massachusetts
Attorney General of Rhode Island
Rhode Island PUC
Associated Industries of Massachusetts
New Hampshire Consumer Advocate
NSTAR Electric and Gas
Strategic Energy LLC
The Energy Consortium

3. Devon Order – April 25, 2003 P37
FERC directed ISO-NE to file “a mechanism that implements location or deliverability requirements in the ICAP or resource adequacy market….so that capacity within DCAs may be appropriately compensated for reliability”
DCA = Designated Congested Areas

4. LICAP Milestones To Date
Event
Highlights
Date
Initial Filing
Heavily contested by all
03/01/04
FERC set for hearing
Parameters of Demand Curve
Capacity Transfer Rights
Capacity Transfer Limits
Delayed implementation until 01/01/06
06/02/04
ISO filed new case
New witnesses, new testimony
New Demand curves
Critical hours payments for capacity only
08/31/04
ISO-NE further revisions
New market power mitigation measures
10/12/04
Intervener Testimony
11/04/04
FERC narrows scope of hearing
NEMA/Boston is a LICAP zone
Alternative mechanisms won’t be considered
LICAP concerns cost recovery not incentives
States responsible for resource adequacy
No need to pursue 18.4 retirement in order to get to RMR
11/08/04

5. ISO-NE Demand Curve

6. Other filed Demand Curves
$/KWM
Applies to new capacity only

7. Estimated 5 year ISO LICAP Proposal Cost
ISO-NE
1/5/05
Revised
Coalition
1/28/05
Base LICAP Cost
$9.1B
$13.1B
Status Quo RMR Cost
$4.8B
$1.7B
PER adjustment
$0.9B
$1.4B
Current ICAP
$1.1B
Net Cost Impact
$2.3B
$8.3B

8. Net Incremental Bill Impact of ISO-NE Proposal

9. LICAP Very Sensitive to Capacity Changes
Impact of OC on LICAP cost
Increase OC by 4.86% in 2005 (Approved PC OC 03/11/05) and 2% in subsequent years
Base Case
Case with PC approved OC
Increase differential
5 year net cost
$8.3B
$14.5B
$6.2B
Impact of unit retirement on LICAP cost
Retire Salem Harbor 1-4 (711 MW) in 2006
Base Case
With Salem Harbor retired
Increase differential
5 year net cost
$8.3B
$12.7B
$4.4B

10. RMR Agreement Status
FERC Nov., 8 Order – “we expect that few additional units that have
not already applied for them will use RMR agreements”

11. RMR Agreement Status (cont’d)
Total: 6,738
For additional information, please go to:

12. Will LICAP eliminate RMR?
FERC objective to eliminate RMR
ISO response:
“What we're testifying to is that we've developed a proposal that will lessen the need for RMRs” (source Mr. LaPlante hearing transcript 3/10/05)
Units seeking RMR looking to cover cost-of-service
Units not seeking RMR content with market revenues
Market structure leading to the higher of cost of service or market