1. Vice President, Markets Development
September 2002
ISO New England Inc.
Massachusetts Restructuring Roundtable ISO New England Perspectives on the FERC SMD NOPR
Dave LaPlante
Vice President, Markets Development
September 13, 2002

2. New England Standard Market Design
Standard Market Design (SMD) is a major revamp of the current wholesale electricity market in New England
Establishes congestion management/multi-settlement system in New England
Locational Prices more accurately reflect cost of power delivery and value resources in specified areas
Day-ahead settlement provides market certainty
Cost effective approach to complete market redesign
SMD FTR’s fully consistent with CRR’s in SMD NOPR

3. New England Standard Market Design Consistent With FERC SMD
September 2002
ISO New England Inc.
New England Standard Market Design Consistent With FERC SMD ? ? ? ? ? ?

4. Key Issues for New England
Governance
Transmission Planning and Cost Allocation
Resource Adequacy
Load Response

5. Governance ISO-NE supports core principles in NOPR
Independent Board of Directors; accountable to FERC
ISO-NE believes stakeholders should NOT have a hand in electing Board members
Regional variation should be allowed
Board meetings should be closed
Commission should allow latitude as long as independence and reporting to FERC criteria is met

6. Transmission Planning & Cost Allocation
FERC has defined the Northeast as planning region
New England’s planning process (RTEP), the envisioned NERTO process (NSP) are consistent with the NOPR position
States should play advisory role in developing pricing mechanisms for needed expansion.
Currently, cost of reliability and system benefit upgrades socialized in New England
FERC proposes 138 kV to 345 kV and above threshold
ISO-NE feels 138 KV could be local and 345 is more appropriate
FERC has expressed interest in a “cost causation” approach
A default funding mechanism is needed to assure that projects can move forward

7. Resource Adequacy ISO supports:
Forward-looking requirement
Assurances that constructed capacity can be delivered
Penalties for failure to meet obligation
RSAC oversight at the regional level
Final rule should codify principles and allow regional variation
Load shifts under retail access must be recognized
RSAC jurisdiction should be clearly outlined

8. SMD and Seams Elimination
Key objective is to standardize markets to reduce seams
Seams are affected by operating protocols/practices
To eliminate seams, additional detail on transaction protocols between ITPs may be needed
Scheduling frequency
Data exchange
Transaction evaluation methods

9. NERTO addresses regional differences and Preserves New England Priorities
Balanced independent governance structure
Prudent implementation, no risk to power supply
Future NERTO Board adopts “no net harm” standard to protect smaller regions from cost shifting
Fairly allocates transmission upgrade costs

10. Load Response Demand response should be built into market design
Price transparency and rules that accommodate characteristics of demand response resources are necessary
Eliminate retail restrictions that prevent demand response resources from participating effectively in wholesale markets
Resolve technical measurement and metering issues
Encourage development of demand response technology to enable participation of demand response in the energy markets

11. September 2002
ISO New England Inc.
In Conclusion
ISO New England is supportive of FERC’s Standard Market Design
SMD 1.0 (New England’s SMD; 3/1/03) is consistent with FERC’s SMD
ISO suggests RTO/ITP Business Practices enhancements
Governance
Transmission
Cost allocation
Resource adequacy