congestion management settlement credits december, 2002

Congestion Management Settlement Credits


December, 2002

22

Market Design PrinciplesMarket Design Principles

• The price of energy at each time and place should reflect the marginal cost of producing or not consuming one more unit of energy (at that time and place)

• Dispatchable market participants should be compensated for the effects of constraints

• The price of energy at each time and place should reflect the marginal cost of producing or not consuming one more unit of energy (at that time and place)

• Dispatchable market participants should be compensated for the effects of constraints

33

CongestionCongestion

Occurs when physical capability of the transmission system cannot meet market

requirements

Occurs when physical capability of the transmission system cannot meet market

requirements

Operating ProfitOperating Profit

55

Operating ProfitOperating Profit

• Operating Profit is the difference between operating cost and revenue

• Market Rules written assuming participants bid and offer based on marginal benefit/cost

• Marginal Cost - Cost of producing next MW

• Marginal Benefit - Benefit of consuming next MW

• Operating Profit is the difference between operating cost and revenue

• Market Rules written assuming participants bid and offer based on marginal benefit/cost

• Marginal Cost - Cost of producing next MW

• Marginal Benefit - Benefit of consuming next MW

66

OP = Revenue - CostOP = Revenue - Cost

Quantity (MW)Quantity (MW)

MCP = 20MCP = 20

Price ($/MWh)Price ($/MWh)

MQSI=60MQSI=60

100100

1515

1010

55

2525

3030

808060604040202000

OP+OP+OP+OP+

OP+OP+

77

Skill Check

88

Skill Check• Generator A offer:

• 0-20 MW $15

• 21-30 MW $25

• 31 - 40 MW $100

Dispatched to 30 MW

• Generator A offer:• 0-20 MW $15

• 21-30 MW $25

• 31 - 40 MW $100

Dispatched to 30 MW

• Load B bid:• 0-10 MW $1,000

• 11-20 MW $500

• 21-30 MW $20

Dispatched to 20 MW

• Load B bid:• 0-10 MW $1,000

• 11-20 MW $500

• 21-30 MW $20

Dispatched to 20 MW

If MCP is $30, what is the OP for A and B?

1010

Congestion Management Settlement Credit

Congestion Management Settlement Credit

• CMSC payments are based on the difference between the Operating Profit that would result from the Market Schedule and Operating Profit resulting from the Dispatch Instruction

• CMSC payments are based on the difference between the Operating Profit that would result from the Market Schedule and Operating Profit resulting from the Dispatch Instruction

OP (MQSI) - OP (DQSI)Where MQSI = Market Quantity Scheduled for Injection

DQSI = Dispatch Quantity Scheduled for Injection

OP (MQSI) - OP (DQSI)Where MQSI = Market Quantity Scheduled for Injection

DQSI = Dispatch Quantity Scheduled for Injection

1111

Market ScheduleMarket Schedule

Requirement is Requirement is 190 MW190 MW

• Gen 1: 100 MWGen 1: 100 MW• Gen 2: 90 MWGen 2: 90 MW• MCP $20MCP $20• GEN 3: does not runGEN 3: does not run

Region 2Region 2Region 1Region 1

nonotransmissiontransmission

line limitline limit

Generator 3Generator 3

100 MW100 MW$25$25

LoadLoad

190 MW190 MW


100 MW100 MW$15$15


100 MW100 MW$20$20

1212

Transmission CongestionTransmission Congestion


• Gen 1: 100 MWGen 1: 100 MW• Gen 2: 50 MWGen 2: 50 MW• Gen 3: 40 MWGen 3: 40 MW• MCP $20MCP $20


100 MW100 MW$15$15


100 MW100 MW$20$20


100 MW100 MW$25$25

LoadLoad

190 MW190 MW


150 MW150 MWtransmissiontransmission


1313

CMSCCMSCFor Generator 2 in this case:MQSI = 90 Offer = $20

DQSI = 50 MCP = $20

For Generator 2 in this case:MQSI = 90 Offer = $20

DQSI = 50 MCP = $20

CMSC = OP(MQSI) - OP(DQSI) = (MCP-Offer) x MQSI - (MCP-Offer) x DQSI

= (20-20) x90 - (20-20) x 50= 0 - 0= $0


= (20-20) x90 - (20-20) x 50= 0 - 0= $0

1414

CMSCCMSCFor Generator 3 in this case:MQSI = 0 Offer = $25

DQSI = 40 MCP = $20

For Generator 3 in this case:MQSI = 0 Offer = $25

DQSI = 40 MCP = $20


= (20-25) x 0 - (20-25) x 40= 0 - (-$200)= $200


= (20-25) x 0 - (20-25) x 40= 0 - (-$200)= $200

1515

Gen 1- Constrained Off Gen 1- Constrained Off




100 MW100 MW$25$25

LoadLoad

190 MW190 MW




95 MW limit95 MW limitGenerator 1Generator 1

100 MW100 MW$15$15


100 MW100 MW$20$20

1616

Constrained Off PaymentConstrained Off Payment

Generator 1• Market Schedule: 100 MW• Dispatch : 95 MW• Offer: $15 /MWh• MCP: $20 /MWh


CMSC= OP(MQSI) - OP(DQSI) = (MCP-Offer) x MQSI - (MCP-Offer) x DQSI

= (20-15) x 100 - (20-15) x 95

= $25


= (20-15) x 100 - (20-15) x 95

= $25

1717

Gen 2 - Constrained Off Gen 2 - Constrained Off




100 MW100 MW$25$25

LoadLoad

190 MW190 MW




9595MWMW

100100MWMW


100 MW100 MW$15$15


100 MW100 MW$20$20

1818

Constrained Off PaymentConstrained Off Payment




= (20-20) x 90 - (20-20) x 55

= $0


= (20-20) x 90 - (20-20) x 55

= $0

1919

Constrained On PaymentConstrained On Payment

Generator 3• Market Schedule: 0• Dispatch : 40 MW• Offer: $25• MCP: $20 /MWh

Generator 3• Market Schedule: 0• Dispatch : 40 MW• Offer: $25• MCP: $20 /MWh


= ($20-$25) x 0 - ($20-$25) x 40 MW = $200


= ($20-$25) x 0 - ($20-$25) x 40 MW = $200

Constraint PaymentsConstraint Payments

When Actual Quantity Different than Dispatch Quantity

2121

Gen 1- Constrained Off Gen 1- Constrained Off




100 MW100 MW$25$25

LoadLoad

190 MW190 MW




95 MW limit95 MW limitGenerator 1Generator 1

100 MW100 MW$15$15


100 MW100 MW$20$20

Actually produces 50 MW

2222

Constraint PaymentsConstraint Payments

MQSI = 0 MW, DQSI=40 MW, AQEI =50MW

MCP = $20 Offer = $25

MQSI = 0 MW, DQSI=40 MW, AQEI =50MW

MCP = $20 Offer = $25

CMSC = OP (MQSI) - MAX [OP (DQSI), OP (AQEI)]= (20-25) x 0 - MAX [(20-25) x 40, (20-25) x 50]= $0 - MAX [$-200, $-250]= $-(-200)= $200

CMSC = OP (MQSI) - MAX [OP (DQSI), OP (AQEI)]= (20-25) x 0 - MAX [(20-25) x 40, (20-25) x 50]= $0 - MAX [$-200, $-250]= $-(-200)= $200

2323

CMSC for a Dispatchable LoadCMSC for a Dispatchable Load

• Load may be dispatched off or on

• Any time constrained and unconstrained are different, possibility exists for CMSC

• Load may be dispatched off or on

• Any time constrained and unconstrained are different, possibility exists for CMSC

2424


E.G.

• Load A bids for 100 MW at $2,000

• Market Clearing Price = $100

• Load A is dispatched to only 75 MW

• At a bid price of $2,000 Load A will be scheduled by the unconstrained algorithm for all 100 MW

E.G.

• Load A bids for 100 MW at $2,000

• Market Clearing Price = $100

• Load A is dispatched to only 75 MW

• At a bid price of $2,000 Load A will be scheduled by the unconstrained algorithm for all 100 MW

2525


• Bid = $2,000 MCP = $100

• MQSI = 100 MW, DQSI = 75 MW

• CMSC = OP(MQSI) - OP(DQSI) = ($2,000 - $100) x 100

- ($2,000 - $100) x 75)

= $1900 x 100 - $1900 x 75 = $47,500

• The lost Operating Profit is $47,500

• Bid = $2,000 MCP = $100

• MQSI = 100 MW, DQSI = 75 MW

• CMSC = OP(MQSI) - OP(DQSI) = ($2,000 - $100) x 100

- ($2,000 - $100) x 75)

= $1900 x 100 - $1900 x 75 = $47,500

• The lost Operating Profit is $47,500

2626

Negative CMSCNegative CMSC

• CMSC payments bring the participant back to the market schedule operating profit

• Generally CMSC payments will be a top-up to restore operating profit

• Sometimes the schedule would lead to lower profit than dispatch instructions


• Generally CMSC payments will be a top-up to restore operating profit

• Sometimes the schedule would lead to lower profit than dispatch instructions

2727

CMSCCMSC


• While CMSC can be negative, it is more often a payment to participants

• The cost of CMSC is recovered from loads based on their activity in the market


• While CMSC can be negative, it is more often a payment to participants

• The cost of CMSC is recovered from loads based on their activity in the market

congestion management settlement credits december, 2002

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