1. Locational ICAP in New England
Massachusetts Electric Restructuring Roundtable
Peter D. Fuller
March 26, 2004

2. Resource Adequacy Capacity Market Energy Market Reserve Market(s) + +
Ancillaries =
Sufficient capacity, of the right type, in the right place
at the right time
Energy Market
LMPs do not reflect all constraints
Reserve Markets
Forward Reserves
Co-optimized Reserves are years away
Ancillaries
Source: Corporate Branding, LLC

3. Capability to meet regional and local peak demand plus reserves
Capacity Market
Capability to meet regional and local peak demand plus reserves
The only intrinsically meaningful features of capacity in this context are EFORd and location
Not peaking vs. intermediate vs. baseload
Not quick-start vs. thermal
Not supply vs. demand
Not gas vs. oil vs. hydro vs
“… the Commission finds that all capacity suppliers, regardless of the age of their resources, are entitled to the same treatment in the ICAP market.”

4. Attributes of a LICAP Solution
Promote investment in capacity-short sub-areas
Caps confound this objective
Forward signals for investment
Lack of commitment to proposal confounds this objective
Well-defined product
No progress in defining the obligations
Non-discriminatory pricing
Caps/transition payments confound this objective

5. ISO-NE Proposal
NEMA
Boston
Rest Of Pool
Maine CT

6. ‘Nested’ Approach
NEMA
Boston CT
ISO-NE
w/o Maine
Entire ISO-NE

7. Areas of Urgent Need Major Market Deficiencies
Valuing Reliability Dispatch Decisions
Defining Capacity Resource Obligations
Setting Capacity Requirements
Necessary Demand Curve Refinements
Cost of Entry
Revenue Offset Assumptions

8. Conclusion Resource Adequacy is more than ICAP Capacity is Capacity
LICAP Proposal is not a consensus proposal and fails to meet objectives
Nested clearing methodology is needed
Other aspects of the markets are critically ‘incomplete’