1. Changes to New England’s Forward Capacity Market 120th New England Electricity Restructuring Roundtable Paul Roberti* Commissioner, RIPUC Boston, Massachusetts December 17, 2010
*Views expressed herein do not represent RIPUC or NECPUC, but are solely those of the author.

2. What Drive’s State Action/Perspectives on FCM Market Reforms?
Cost Control/
Rate Impacts
Market
Functionality
Reliability
Regional Cooperation/
State Cohesion
Environmental Goals/
Federal & State Initiatives

3. Translation
Let Clearing Price Drop – No more Floors!
(Excess Capacity and Insufficient Delist Activity)
Administratively- Set Prices (APR and Demand Curves) Are Wrong!
Capacity surplus =
Market Functionality
LSR/ TSA Analyses are Overly Conservative , Unnecessary and Costly!
States Have Unique Infrastructure, Different LSRs, and Different Policies/Perspec-tives
LTCs Are New Norm:
APR Proposals Inappropriately Discriminate Against LTCs , DR & EE Initiatives

4. Reality Check? Litigation Risk? (FERC)
Adequate Compensation for Existing Resources??
Hello RMRs/
Goodbye DR
Does Capacity Market Reflect CONE when New Entry is Needed?
Is Surplus Rational?
LSR/TSA Requirements Are Driven by NERC Requirements (even if conservative by some standards)
Litigation Risk?
(FERC)
Long term risk and Volatility?
Is Outcome Better with State supported Solution?
LTCs and other state –sponsored capacity additions not within the Realm of the Market?
(i.e., OOM)

5. Caught between market ideology and a dysfunctional commodity

6. Market Expectations Vs. Today’s Reality
Resources offer at net-CONE
Capacity additions: natural gas
Three year lead time to build
FCAs would drive new builds
Prices trend to net-CONE
Steady regional load growth
Stable Financial markets
Laissez-faire economics
Net going-forward/opportunity costs
DR/plant upgrades/renewables
Lead times much shorter
Long term contracts/incentives
Prices trend downward to “floors”
Flat or declining load patterns
Stressed capital markets/tighter credit
Growing “administrative” meddling

7. Comments and Caveats
Information from ISO-NE Public Web Site
Links are provided within tab
Market structures changed dramatically between
Installed Capacity Requirement during Transition Period shown as positive value, but consistent with 'Objective Capability'.
$/MW-Month have been converted to $/kW-Month in the final column.
The rates from FCA 1, 2, and 3 are shown in this updated graph, and are arrived at via auction, rather than the transition period rate that was in effect between Dec. '06 and May '10.
The graph extension through May 2013 does not show the effect of pro-rations, Peak Energy Rent, zonal price separation, etc. and therefore, is most "consistent" with the historical series, and is, for lack of a better term, a "supply side" number.

8. LOOKING FORWARD
Despite differences, FERC will make the decision
LICAP PTSD has faded – and should (probably) not return
Lifting cap on energy prices simply not palatable
Convert FCM to deficiency auction and encourage self-supply?
Markets are consistent with most state policies and remain best approach, although administrative “meddling” appears inevitable
Capacity surplus situation provides opportunity to iron out market defects
Stakeholder processes: a time-honored tradition in N.E.
Guideposts: revenue requirements vs. rate stability
Success of DR and the coming “Smart Grid”: Could it eliminate need for a capacity market over the long term?
Reliability check: Stay focused on our common interest

9. Demand Resources Growing in New England
2010/11–2013/14: Total DR cleared in FCAs 1–4 (New and Existing); Real-Time Emergency Generation capped at 600 MW.
© 2010 ISO New England Inc.

10. FLASHBACK: The LICAP Demand Curve!
$/kW-month

11. Thank You Paul J. Roberti, Commissioner
Rhode Island Public Utilities Commission
89 Jefferson Blvd.
Warwick, RI
(401)