1. Summer Peak Energy Pricing in New England: The ISO-NE Response
Robert Ethier
Manager, Market Monitoring & Mitigation
ISO New England Inc.
January 18, 2002

2. Patton Report Recommendations 1. Implement SMD as soon as possible.
Provide option to self-schedule resources after the commitment process once the multi-settlement process under SMD is implemented
2. Reserve Market Changes
- Include real-time replacement reserves in reserve markets
- Include L.O.C. payments for reserves
3. Modify ECP eligibility rules for peaking units and units committed during reserve shortages
4. Seek improvements in transaction rules and procedures with NYISO and ISO-NE
5. Seek improvements in congestion management procedures

3. Reserve Market Changes
ISO New England Proposal
Include replacement reserves in TMOR Market
Implement reserve price cascading TMSR > TMNSR > TMOR
Include opportunity cost payments for all reserve markets (currently just TMSR)
Cap availability bids for reserves at $2.52 (same as NY)

4. Modify ECP Eligibility Rules
ISO-NE Proposal
Evaluate units at LOL for Eligibility to set RTMP during non-shortage system conditions
Applies to Fast Start Resources only
Min Run, Min Down < 1 Hour
Qualifies for TMNSR and TMOR
Start Time < 30 Minutes
Basic Criteria - If energy at LOL cannot be replaced with on-line energy, or unit is required to meet 10-minute spin requirement, then eligible to set RTMP
Units that cannot be replaced will have flag set making eligible to set RTMP
Process evaluates all eligible units every five minutes

5. Modify ECP Eligibility Rules
ISO-NE Proposal
External Dispatchable Transactions
Same criteria as Units - If replacement energy is not available, or unit is required for reserves, transaction is eligible to set RTMP
Applies to non-shortage conditions
Analysis is performed at same time as units

6. Modify ECP Eligibility Rules
ISO-NE Proposal
During Reserve Shortages (short of 30-minute operating reserves)
Any Fast Start Units Committed will set price
Externals will set clearing price

7. Seek Improvements in Transaction Rules
ISO New England Proposal
Modify the Unit Commitment rule governing transactions to increase the number of Short Notice External Transactions (SNT)
SNT Definition:
Either a System Contract for the purchase or sale of Energy 1 or a System Contract for the sale of Energy 2
and submitted to the ISO after the Daily Trading Deadline has passed for the Scheduled Dispatch Period in which the transaction is to begin

8. Seek Improvements in Transaction Rules
ISO-NE Proposal
Increase the number of SNTs that flow in a direction consistent with economics of NYISO and ISO-NE dispatch
SNTs cannot be withdrawn
SNTs will be supported by Unit Commitment
Issues:
Single settlement SNTs may be used to manipulate market prices
Develop Arbitrage Screen to protect against market power
Out-Service:
Rationing of available Out-Service under Tariff
Elimination of Out-Service charge for hourly SNTs

9. Seek Improvements in Transaction Rules
Arbitrage Screen
SNTs from high price to low price area subject to arbitrage screen
If the difference in posted prices between NYISO and ISO-NE exceeds the price in the buyer’s control area by $X; transactions by participant can be limited in the future.
Design would limit use of uneconomic transactions to raise prices in NEPOOL