lemuel gonzalez operations solutions manager jeffrey iafrati manager, market and credit risk

Forward Capacity Market Demand Resource Dispatch Zone Disaggregation Update

DRWG December 1, 2010Lemuel GonzalezOperations Solutions Manager

Jeffrey IafratiManager, Market and Credit Risk

Agenda• Dispatch Zone Disaggregation

• Merging – Financial Assurance

• April ‘11 Split/Merge Timeline

• Resources Participating in Future FCAs

• Merging Options

• Allocation Model

• Outcome of Missing or Inconsistent Model Data

• Demand Resource Audits

• LP Next Steps & Questions

DRWG - December 1, 2010 2

• Market Rule 1 (“MR1”) requires disaggregation (“split”) of Active Demand Resources (“DR”) to Dispatch Zones by the start of second Capacity Commitment Period (“CCP”). Relevant MR Sections:– RTDR - III.13.1.4.6.2.1.

– RTEG - III.13.1.4.6.2.2.

• Aggregation (“merge”) of commercial and non-commercial Demand Resources can be accommodated for the second CCP

– A larger portfolio of Demand Assets backing each Demand Resource facilitates partial dispatch of Demand Resources and supports Lead Market Participant (“LP”) strategies to address frequency of customer activations and fatigue.

• Merging will not change Financial Assurance obligations on the non-commercial components of a merged Demand Resource provided the Demand Resource is compliant with MR1, Section 13.3.


Dispatch Zone Disaggregation (cont.)

• LPs have the same requirements on their resources regardless of how Demand Resources split and merge– Return of Financial Assurance and commercial determination based

solely on Demand Asset mapping changes, while an existing commercial Demand Resource of like DR Type and Dispatch Zone (“DZ”) is deficient, is inappropriate and requires corrective actions by the Lead Market Participant (and by the ISO).

• M-RPA, Section 1.7.6.1 contemplates some of these dynamics:– “When an Enrolling Participant has a choice of qualified Demand Resources to

which a Demand Asset may be mapped, the Enrolling Participant shall map new Demand Assets to Demand Resources that have lost commercial MWs through the retirement of Demand Assets before mapping new Demand Assets to cover a non-commercial Demand Resource or increment.”

• Merging Demand Resources shall not change the Qualified Capacity or Capacity Supply Obligation of the Demand Resources which are merged.


EXAMPLE 1A - Financial AssuranceNo Merge: No Change in Audit Values

Financial Assurance Requirement on 8 MW (5 MW + 3 MW)


Resource 1 Resource 2 Resource 3

Commercial? N N Y

Qual Cap 10 MW 10 MW 10 MW

CSO 10 MW 10 MW 10 MW

Current Audit (post merge effort)

5 MW 7 MW 10 MW

FA Requirement 5 MW 3 MW N/A

EXAMPLE 1B - Financial AssuranceMerge: No Change in Audit Values

No Change in FA Requirements: 8MW (30MW – 22MW)


Resource 1 Resource 2 Resource 3 Resource 4 (Child)

Commercial? N N Y N

Qual Cap 10 MW 10 MW 10 MW 30 MW

CSO 10 MW 10 MW 10 MW 30 MW

Current Audit(post merge effort)

5 MW 7 MW 10 MW 22 MW

FA Requirement

5 MW 3 MW N/A 8 MW

MERGE

EXAMPLE 2A - Financial AssuranceNo Merge: Commercial Over-Performs




Commercial? N N Y



Previous Audit 5 MW 7 MW 10 MW


5 MW 7 MW 12 MW


EXAMPLE 2B - Financial AssuranceMerge: Commercial Over-Performs

Reduction in FA Requirements from 8 MW to 6 MW (30 MW – 24 MW)



Commercial? N N Y N



Previous Audit 5 MW 7 MW 10 MW 22 MW


5 MW 7 MW 12 MW 24 MW

FA Requirement

5 MW 3 MW N/A 6 MW

MERGE

EXAMPLE 3A - Financial Assurance No Merge: Commercial Under-Performs




Commercial? N N Y



Previous Audit 5 MW 7 MW 10 MW


5 MW 7 MW 5 MW


EXAMPLE 3B - Financial AssuranceMerge: Commercial Under-Performs

No increase in FA requirement due to “high water” approach



Commercial? N N Y N



Previous Audit 5 MW 7 MW 10 MW 22 MW


5 MW 7 MW 5 MW 17 MW

FA Requirement

5 MW 3 MW N/A 8 MW

MERGE

EXAMPLE 4A - Financial Assurance No Merge: Commercial Under-Performs: Non-Commercial Fully Performs

Financial Assurance Requirement reduced from 8 MW to 3 MW



Commercial? N N Y



Previous Audit (1) 5 MW 7 MW 10 MW

Previous Audit (2) 5 MW 7 MW 5 MW


10 MW 7 MW 5 MW


EXAMPLE 4B - Financial AssuranceMerge: Commercial Under-Performs: Non-Commercial Fully Performs

No change in FA requirement as the increase in commercial capacity simply offset previous shortfall



Commercial? N N Y N



Previous Audit (1) 5 MW 7 MW 10 MW 22 MW

Previous Audit (2) 5 MW 7 MW 5 MW 17 MW

Current Audit (post merge effort)

10 MW 7 MW 5 MW 22 MW

FA Requirement 5 MW 3 MW N/A 8 MW

MERGE

Expected Timeline

• On or about February 1, 2011 – The ISO will distribute Resource Allocation Models to LPs.

• Training on the Allocation Model will be provided around the time the models are distributed to LPs.

• On or before February 15, 2011 – The LPs will return completed models to the ISO by emailing them back to Customer Support ([email protected]).

• Review period to allow ISO to analyze data returned in the Allocation Models and consult with LPs if necessary.

• Early April 2011 - Resources will be split and/or merged and child Resources will be viewable in the FCTS.

DRWG - November 3, 2010 13

mailto:[email protected]

• FCA 5 - The set of Demand Resources that exist today. – In other words, parent Resources of the April ‘11 split/merge will

participate in FCA 5, while child Resources of the April ‘11 split/merge will not participate in FCA 5.

• FCA 6 and Future FCAs:– The set of Demand Resources that exist today.– Minus parent Demand Resources of the April 2011 split/merge.– Plus child Demand Resources resulting from the April 2011

split/merge.

• SOIs submitted on parent Demand Resources for CP 6 will be transferred to child Demand Resources in April 2011.


Resources Participating in Future FCAs

April ‘11 Split/Merge Timeline


Child Resource Creation and Parent Resource Retirement Timeline


Merge Process Illustration

DRWG – November 3, 2010 17

Split/Merge Options• DZ disaggregation of RTDR and RTEG Resources is a MR1

requirement and must be completed prior to CCP 2. • Approach in the November 2010 DRWG presentation revised to

address concerns– All Demand Resources will be merged to a single Demand Resource by DR

Type and Dispatch Zone by LP; however,

– ISO will accommodate LP elections not to merge any of their Demand Resources.

• LPs may not have the ability to merge their Demand Resources in the future (there are no MR1 provisions to revisit this split/merge beyond this effort).

• Demand Resource to Demand Asset mappings will follow the allocation elections made by the LPs; customers can then remap subject to the mapping rules.


Allocation Model

• Each LP will receive a Microsoft (MS) Excel workbook containing data related to their Active DRs that require a DZ assignment.

• LPs will provide allocation factors beginning with CCP 1, or the soonest CCP for which the Resource cleared in the FCA, through CCP 5, for:– Any remaining Capacity that did not qualify via the SOI process

and does not already have a DZ assignment,– Each Project (i.e. Capacity that qualified via the SOI process)

that cleared in the FCA and/or elected CPS Monitoring that does not have a DZ assignment, and

– Permanent De-List Bids on Resources that do not have a DZ assignment.


Outcome of Missing/Inconsistent Model Data• Split/Merge model will be pre-populated with advisory DZ

allocations.• Advisory DZ allocations will be determined as follows:

– For Capacity that did not qualified via a Show of Interest (“SOI”) and that has at least one Asset currently mapped to it, the DZ(s) of the currently mapped Asset(s).

– For Capacity that qualified via an SOI and the associated LP provided a non-binding DZ(s) assignment(s), the non-binding DZ assignment(s) provided by the LP.

– For Capacity that does not fall into the first two bullets above, but has at least one Asset mapped to it, the DZ(s) of the currently mapped Asset(s).

– For Capacity that does not fall into the first three bullets above, evenly distribute across all DZs in the Load Zone (“LZ”).

• If LP does not return a completed model, or if the returned model contains inconsistent data and the LP fails to correct the data, the ISO will split the LP’s Demand Resources according to the advisory allocations and will merge the LP’s Demand Resources.


Demand Resource Audits

• Resource split/merge will not impact audit requirements, except that under the current provisions:– DR audits at the Demand Resource level and larger Demand

Resources implies that re-auditing affects a larger set of Demand Assets.

– Non-commercial Demand Resources that merge (and thereby become increments) may mean that a Demand Resource has to audit earlier in the DRV Auditing Period (though that requirement may have already been there if audits older than 12 months).


Next Steps for LPs

• Begin considering where (i.e., what DZs) Capacity that qualified via the SOI process should be physically located or assigned to.

• Plan to have sufficient staff and resources (in the period between the end of January and beginning of April) dedicated to this effort to:– Attend Allocation Model training (the ISO expects this to be

offered around the end of January).

– Complete and return Allocation Models (the ISO expects this step to be in early February 2011).

– Respond to any follow-up questions from the ISO.


23DRWG - December 1, 2010

Questions

lemuel gonzalez operations solutions manager jeffrey iafrati manager, market and credit risk

Documents

merged demand resource

merging demand resources

new demand assets

retirement of demand

demand asset mapping

financial assuranceno

commercial determination

commercial mws