M A R C H 1 3 , 2 0 1 4

| N E P O O L M A R K E T S C O M M I T T E E

Jonathan LowellP R I N C I P A L A N A L Y S T | M A R K E T D E V E L O P M E N T

Updates to Market Rule 1 and Appendix F.3 to Address the New NCPC Payments Design

NCPC Cost Allocation –Conforming Changes

Background – Conforming and Cleanup Changes are Required in Several Areas Related to EMOF and NCPC

• ISO is grouping these changes into two projects:

• All changes related to Appendix F NCPC cost allocation will be included under the NCPC Cost Allocation: Phase 1 project• Conforming changes that do not modify the NCPC cost allocation are

described in this presentation• The Phase 1 Cost Allocation changes are discussed in a separate

presentation as part of the same March MC agenda item

• All changes related to Market Rule 1, Appendix A and Appendix F (NCPC payments) will be included under the Energy Market Offer Flexibility Conforming Changes project• This topic will be presented in a separate agenda item at March MC

Meeting

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Conforming Changes Required for NCPC Cost Allocation – Appendix F• Existing language in III.3.2.3 is being consolidated into

Appendix F – NCPC– Some portions were incorporated into F.2 NCPC Credits, but not

removed from III.3.2.3 at that time.– One provision with general applicability will be moved into F.1– Portions related to NCPC cost allocation will be removed from III.3.2.3

and pulled into Appendix F.3 Charges for NCPC– Appendix F becomes “home sweet home” for all things NCPC-related

in Market Rule 1

• The new NCPC Payments design eliminates Minimum Generation Emergency (MGE) Credits as a separate NCPC credit calculation.– This requires conforming changes in Appendix F.3 so as to not impact

how MGE costs are allocated

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Overview of Min Gen Emergency NCPC – Old Design

• The “old” MGE credit compensated generators that were dispatched up out of rate by the ISO during a MGE, when most resources are being dispatched to their Emergency Min, and RTLMP is administratively set to $0/MWH

• The cost of MGE credits was allocated to Real-Time Generation Obligations (RTGO), excluding any Exempt RTGO– Exempt RTGO = RTGO – EcoMin energy (i.e. the out-of-merit dispatch

requested by the ISO)

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Overview of MGE NCPC – New Design

• In the “new” NCPC Payments design, out-of-rate dispatch is addressed by the Real-Time Dispatch Credit, which compensates resources when dispatched by the ISO to operate out of rate, including during an MGE

• To avoid any change in NCPC cost allocation, RT Dispatch Credits during a MGE must be accumulated separately for allocation to RTGO excluding exempt RTGO

• To abuse the famous words of William Shakespeare,“A Min Gen Emergency Credit by any other name would still smell as sweet [and still be allocated like a Min Gen Emergency Credit].”

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Overview of MGE NCPC – New Design

• To accomplish these changes:– Minimum Generation Emergency Credits are redefined in terms of

Real-Time Dispatch Credits during a MGE– Definition of Exempt RTGO is eliminated– Rather than referring to Exempt RTGO, tariff language will instead

refer to “RTGO during an MGE that is eligible for a RT Dispatch NCPC Credit”

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Conforming Changes to Address MGE Cost Allocation

• MGE Credit definition modified to conform to new NCPC Payments terminology

• Definition of Exempt RTGO eliminated, but the same concept still applies

• Definition of MGE Charge eliminated – not used or referred to anywhere

• Appropriate sections of Appendix F.3 rewritten for clarity, but allocation is unchanged.

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Appendix F.3 is Rewritten to Provide Consistency with the New Appendix F.2 and to Improve Clarity

• The rewrite makes no changes to how NCPC costs are allocated

• It does consolidate language from III.3.2.3 into one convenient location

• The rewritten App F.3 will no longer require a secret decoder ring to parse sentences like:

“The ISO calculates for each Operating Day the non-Postured non-Synchronous Condenser related, Synchronous Condenser related, non-Local Second Contingency Protection Resource related, non-Regulation and non-SCR related economic NCPC Charges for the Real-Time Energy Market for each Market Participant …”

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Summary of Changes in Appendix F

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Original Section

Description New Location

Discussion

I.2.2 Definition of MGE Credits I.2.2 Conformed to new NCPC Credit rules

I.2.2 Definition of MGE Charge Removed No longer needed. Implicitly included in F.3.1.4

I.2.2 Definition of Exempt Real-Time Generation Obligation

Removed Incorporated into the description in F.3.1.4 of how the cost of Min Gen Emergency Credits are allocated.

III.3.2.3(e)(iii) Description of "following dispatch instructions"

F.1(h) No change

III.3.2.3(f) Postured for reliability credit F.2.3.4 No longer needed. Addressed in NCPC Payments redesign.

III.3.2.3(g) Accumulation of NCPC Credits to be allocated

F.3.1.2 Now incorporated into the new F.3.1.2

Summary of Changes in Appendix F

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Original Section

Description New Location

Discussion

III.3.2.3(h) Allocation of "all other" RT NCPC charges

F.3.1.2(g) The tariff structure is reorganized to first describe how the cost of specific credit categories are allocated, and then describing how "all remaining" RT credits are allocated.

III.3.2.3(h) No NCPC deviations for gen cleared in DA but dispatched off in RT due to MGE

F.3.1.3(a) No change

III.3.2.3(h) Exclusion of DARD pump RTLO in accordance with ISO instructions from RTLO deviations.

F.3.1.3(b) No change

III.3.2.3(i) Credits for synchronous condensing

F.2.3.5 No longer needed. Addressed in NCPC Payments redesign.

III.3.2.3(j) Synchronous condensing NCPC charge

F.3.1.2(e) Implicitly included in"all remaining" RT NCPC costs.

Summary of Changes in Appendix F

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Original Section

Description New Location

Discussion

F.3.1 Description of how the cost of DA NCPC Credits are allocated.

F.3.1.1 Tariff structure reorganized for DA cost allocation

F.3.1 Description of how the cost of RT NCPC Credits are allocated.

F.3.1.2 Tariff structure reorganized for RT cost allocation

F.3.1(1) - F.3.1(4)

Allocation of costs for Min Gen Emergency Credits

F.3.1.2(f) The conformed language describes the calculation in a single step, replacing the step-by-step instructions in the current rule, and recognizes that Exempt RTGO corresponds to the RTGO during a MGE that would be eligible for a RT NCPC Dispatch Credit (i.e. the out-of-rate MWH between the EDP and the DDP)

F.3.2.1 Accumulation of DA NCPC for generators, postured generators (non-VAR), and DARDs (pumps only).

F.3.1.1 Reworded for simplicity and clarity

Summary of Changes in Appendix F

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Original Section

Description New Location

Discussion

F.3.2.2 Accumulation of DA LSCPR credits F.3.1.1(c) Reworded for simplicity and clarity

F.3.2.3 Accumulation of DA VAR related credits

F.3.1.1(a) Reworded for simplicity and clarity

F.3.2.4 Allocation of DA economic NCPC F.3.1.1

F.3.2.4 Allocation of DA NCPC for exports and Decs to DAGO at the External Node

F.3.1.1(e) Reworded for simplicity and clarity

F.3.2.4 Allocation of DA NCPC for imports and Incs to DALO at the External Node

F.3.1.1(d) Reworded for simplicity and clarity

F.3.2.5 “Reserved” deletedF.3.2.6 Allocation of DA NCPC VAR-

related costsF.3.1.1(a) Reworded for simplicity and clarity

F.3.2.7 Allocation of RT Economic NCPC (Non-SCR)

F.3.1.2(g) Reworded for simplicity and clarity

F.3.2.8 Accumulation of RT LSCPR credits F.3.1.2(e) Reworded for simplicity and clarity

Summary of Changes in Appendix F

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Original Section

Description New Location

Discussion

F.3.2.9 Accumulation of RT SCR credits F.3.1.2(b) Reworded for simplicity and clarity

F.3.2.10 Accumulation of RT VAR credits (including Synch Conds & Posture)

F.3.1.2(a) Reworded for simplicity and clarity

F.3.2.11 Accumulation of RT Credits for ISO Initiated Audit

F.3.1.2(c) Reworded for simplicity and clarity

F.3.2.12 Determination of participants hourly RTLO deviations as the sum of the difference between RTLO and DALO over all locations

F.3.2(e) Reworded for simplicity and clarity

F.3.2.13 “Reserved” (no content) deleted

Summary of Changes to Appendix F.3

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Original Section

Description New Location

Discussion

F.3.2.14 Determination of participants hourly RTGO deviations at External Nodes as the sum of the difference between RTGO and DAGO over all External Nodes

F.3.2(f) Reworded for simplicity and clarity

F.3.2.15 Allocation of "all other" economic RT NCPC costs not specifically allocated otherwise

F.3.1.2(g)

F.3.2.15(a) RT Gen deviations F.3.2(a)

F.3.2.15(b) RT Gen deviations F.3.2(b)

F.3.2.15(c) RT Gen deviations F.3.2(c)

F.3.2.15(d) RT Gen deviations F.3.2(d)

Summary of Changes to Appendix F.3

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Original Section

Description New Location

Discussion

F.3.2.15(e) RTLO deviations F.3.2(e)

F.3.2.15(f) RTGO deviations at External Nodes

F.3.2(f)

F.3.2.15(g) Increment Offers F.3.2(g)

F.3.2.16 (overall text)

Local Second Contingency Protection Resource NCPC Charges

F.3.3 Simplified/clarified language

F.3.2.16(a) LSCPR/External Node CETICZ F.3.3(a) Simplified/clarified language

F.3.2.16(a) LSCPR/External Node Emergency Energy sale

F.3.3(b) Simplified/clarified language

F.3.2.16(b) LSCPR Reallocation Trigger Conditions

F.3.3(c) No change

Summary of Changes to Appendix F.3

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Original Section

Description New Location

Discussion

F.3.2.17 Allocation of RT VAR charges F.3.1.2(a) Incorporated into restructured description of allocations

F.3.2.18 Allocation of RT SCR charges F.3.1.2(b) Simplified/clarified language

F.3.2.19 Allocation of RT ISO Initiated Audit NCPC charges

F.3.1.2(c) Simplified/clarified language

Next Steps

• Tariff review will follow the stakeholder schedule for the NCPC Cost Allocation Phase 1

• These tariff changes will be voted as part of the NCPC Cost Allocation Phase 1 – Request for MC vote at either April or May meeting

• Targeted for Q4 2014 effective date– No implementation concerns, because these changes do not alter the

settlement of NCPC Charges.

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