nodal/ zonal pricing settlement model background

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T H E P E O P L E B E H I N D N E W E N G L A N D ’ S P O W E R .

Nodal/ Zonal PricingSettlement Model Background

Mark Karl, Manager Market DesignISO New England

8/11/2003

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Presentation Overview

• This Summary-level Presentation sets the stage for further in-depth review and discussion of nodal pricing.

– Review the Background for Nodal Pricing

– Explain the Operations/ Settlement Model and its Implications

– Review Available Options

– Present Workshop Process

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Nodal Pricing Compliance Order Background

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Nodal Pricing Background

• FERC first ordered implementation of Nodal/ Zonal choice in the CMS/MSS order– CMS/MSS Abandoned in favor of SMD

• FERC SMD NOPR suggested a requirement for nodal pricing for load as part of a “National Standard”– ISONE comments estimated a minimum 18 month

implementation in New England

• ISO-NE SMD Filing proposed implementation of nodal pricing for generation with zonal pricing for load

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Nodal Pricing Background• Zonal-only pricing was challenged by NICC

– FERC Response to ISO-NE SMD filing imposed nodal pricing compliance requirement

– Accepted 18 month implementation estimate

– Required progress reports in quarterly update filings

• ISONE/ NEPOOL submitted request for clarification– FERC responded that 18 month clock started 3/1/03

– FERC agreed 18 month estimate is approximate

– FERC agreed that NEPOOL could wait for simultaneous implementation

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Nodal Pricing Background• Currently active challenge at FERC filed by

NICC– Requests FERC declare 18 month implementation

clock start date coincident with SMD order (9/2002).– Requests FERC order a Date Certain for

implementation.– Requests customers with interval metering be

permitted nodal option now.– Requests implementation of “Nodal Choice”.

• Filing opposed by NEPOOL, ISO-NE, CMP, NU– Discuss implementation difficulties and point to

ongoing stakeholder process

• Decision still pending

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Power System and Settlement Model Overview

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Operations Locational Model

• The “Electric System Model” used in EMS

• Modeling for the purpose of defining Pricing Locations

• Locations are used in:

– Financial Transmission Rights Auction

– Day Ahead Market

– Real Time Market

– Settlement

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e-Nodes

• Electrical Nodes• A point in the Electric

system which may be electrically isolated by open circuits.

• Prices may be calculated at every e-Node

eNode

eNode eNode

eNode

eNodeeNode

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p-Nodes

• Pricing Nodes that are captured by the system

• Linked to any e-Node

eNode

eNode eNode

eNode

eNodeeNode

pNode

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Private p-Nodes

•“Private” p-Nodes

–Used for modeling purposes as part of ap-Nodes

–Prices calculated but not viewable by Market

–Location is not usable by Market for Bidding/FTRs/Transactions

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Public p-Nodes

•“Public” p-Nodes

–Locations that may have Bids/FTRs/Transactions

–Prices are published for DA/RT and FTR Markets

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ap-Node

•Aggregated p-Node (ap-Node)

–Public Locations

–Used for Nodes, Zones and Hubs

–Contains two-to-many p-Nodes weighted average prices

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ap-Node (Combined Cycle Unit)•Combined Cycle Unit

–Individual Units modeled as private pNodes

–Bidding only at “public” apNode level

apNode

pNode pNodepNode pNode

---------- CC Units --------------

CC Plant

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ap-Node (Multiple Bus node)

• Multiple Bus Node– Not a station that can

split and create differing prices

– Multiple private buses that are load weighted to create the one public location

– Allows ISO to add new buses without changing the public model

apNode


---------- Individual Buses --------------

MultipleNode

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ap-Node (Zone)

• Zones– Public Locations– Made up of individual p-

Nodes (both public and private)

– Each p-Node is load weighted

apNode


---------- "Public/Private Nodes" --------------

Zone

pNode

pNode

pNode

pNode

pNode

pNode

pNode

pNode

pNode

pNode

pNode

pNode

pNode

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ap-Node (Hub)

• Hub– Public Location– Made up of the same

locations that make up 15 Public ap-Nodes/p-Nodes and 17 Private p-Nodes.

– Each p-node in the Hub is non-weighted

apNode

---------- "Public/Private Nodes" --------------

Hub

pNodepNodepNodepNodepNodepNodepNodepNode




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Settlement Model

• Used for calculation and assignment of load to Participants

• Accounts for all load• Puts electric system (EMS) model data in a

framework to assign payment responsibility• Allows for reconciliation of differences between

EMS data and revenue-quality retail data

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Settlement Model Pieces

Unit

Area

Load

NodeNode

Area

UnitLoad

Load

Node

Tie

Tie

Tie

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Meter Domains

Meter Domains

• Tool used to group electric system Nodes (p-nodes) for any business purpose

• Typically associated with a “Host Utility”• Geographically bounded

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Meter Domains

Meter Domains

• Each Node (p-node) must be part of at least one Meter Domain

• Each Meter Domain must contain at least one Node (p-node)

• Meter Domains used to determine if all load was assigned.

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Meter Domains

Meter Domains

• A Node (p-node) may be part of one and only one Meter Domain

• Metering Domains must be encapsulated in one Load Zone (Pricing Zone)– This was the “driver” for splitting NGRID and NSTAR

territories into multiple domains.

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Tie Lines

• Physical electrical lines• Used to connect “Metering Domains”

Tie Lines

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Tie Lines

• One domain is monitor; other is receiver• Reading is from monitor’s perspective• Monitor is usually the Metering Domain where

the meter is located

Tie Lines

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Loads

• Loads are used for any of the following:– Dispatchable load – Load (wholesale, retail, etc…)– Low voltage(LV) transmission losses

LoadsLoads

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Loads

• Meter loads reported currently • Used also for dispatchable loads

– including pumped storage pumping

• One unmetered load asset for each domain– Used to ensure load balances within the domain

LoadsLoads

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Units

• Modeled the way they are telemetered to Operations

• Also model “Settlement Only Generators” which are too small to be modeled in the EMS

UnitsUnits

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Putting the Pieces Together

Area

Area

Node

Node

Node

Tie

Tie

Unit Unit

Load

Load

Load

LoadLoadUnmetered

LoadUnmetered

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Calculating Unmetered Load (Balancing Load at the Metering Domain)

- ( Generation + Load + LV Losses - Tie Lines)

Generation = 310Load = -120LV Losses = -5Tie Line = 100

= -(310 + -120 + -5 - 100)= -85 is the value of the Unmetered LoadLoad

Unmetered-5

(LV loss)

Node ABC

-25 150

100

Node XYZ

-40-55

160

0

Network Area 123 – “Metering Domain”

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Linkage of Wholesale to Retail

• Metering domains do not cross pricing zone boundaries.

• Therefore all load in the domain pays the same (zonal) price.

• Retail customers are mapped to “Load Assets”.

• Load assets are logical customer groupings which are the wholesale representation of retail load.

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Linkage of Wholesale to Retail

• Host Utility Responsibilities:– Create and manage “Load Assets”.– Map Retail customers to Load Assets.– Report Hourly Load Asset loads to ISO.– Report Hourly Generator and Tie data to ISO– Balance load of the metering domain (through

resolving discrepancies in reported data)

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Depiction of “Load Asset” Mapping

Network Area 123 - “Metering Domain”Unmetered

Load Asset 1000

Node ABC

100

Node XYZ Node EFGLoad Asset 2000

Load Asset 3000

Load Asset 5000

Load Asset 4000

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Calculation of Payment by Load

• EMS Calculates Nodal Prices using Bids and State Estimator Input.

• Zonal Prices Calculated as Load Weighted Average of Nodes in Zone.

• AMR Submits Load Asset hourly consumption.

• ISO associates Load Asset with appropriate Zone and charges hourly zonal price.

• Ownership contracts assign Participant responsibility for load assets.

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Nodal Pricing Implementation Choices and Issues

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Nodal Pricing Implementation Options

• At this point, four basic options have been identified for nodal pricing compliance.

• From easiest to hardest implementation:

– More/Smaller Zones

– “Special Circumstances” Nodal

– Full Nodal Pricing

– Nodal Choice

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• Implement more/ Smaller Zones– Not a “Nodal Pricing” solution but similar impact.

– Split zones which experience intra-zonal congestion.

– NGRID and NSTAR have already been through this process.

– Delivers most of the benefit of nodal pricing at minimal cost and with minimal contracting disruption.

– Maintains a robust zonal pricing system for those wanting that type of price stability.

– Maintains existing Load Asset accounting and contract system.

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• “Special Circumstances” Nodal – Certain Customers may Qualify

– All the load at a node chooses Nodal.

– Includes Load Assets associated only with load at that Node.

– Requires OP18 Compliant Metering – Interval Metering is not sufficient.

– The Node is removed from the Zonal Price Calculation.

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Nodal Pricing Implementation Options• “Special Circumstances” Nodal Alternate

approach:– Requires customer install OP18 metering – Interval

metering is not sufficient.

– ISO redefines the Node

• Previous single node becomes an ap-Node made up of two p-Nodes.

• One p-Node counts toward zonal price and the other does not.

– Load opting for Nodal price becomes a meter reader.

• ISO requires node weighting to allow zonal price to be calculated.

• Weighting could be fixed or dynamic

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Nodal Pricing Implementation Options• Full Nodal – All customers move to nodal

pricing on a given date.

– Option to Balance load at the node or use Node estimation approach. (Very different costs)

– Allows calculation of zonal price in real time, but zonal price not used in settlement.

– Requires new node-associated Load Assets.

– Requires retail load mapping to nodes as well as to Load Assets.

– No choice regarding nodal versus zonal pricing.

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Nodal Pricing Implementation Options• Nodal Choice – customers at each node may

chose nodal or zonal price.– Zonal price is a residual calculation of load weighted

average of that portion of load opting for zonal price.

– Almost impossible to calculate a real-time zonal price.

• Actual vs Estimated node weights

• Real-time calculation using actual weights would require extensive telemetry.

– Requires balancing of load at each node.

– Requires reconfiguration of Load Assets and may require nodal/zonal specific Load Assets.

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Nodal Pricing Implementation Issues• Many NEPOOL Participants are Opposed

• Potential disruption of existing contracts

• Requirement to redefine Load Assets possibly down to a nodal level

• Determination of cost/ benefits

• Need for agreement regarding the specific option to be implemented

• Agreement as to who pays for implementation

• Need for State Regulatory support

• Need to come to regional agreement on issues and possibly file with FERC

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Nodal Pricing Implementation Issues• Retail Load is not mapped at a nodal level

– Much of Retail load has network service

– Routine changes on Distribution System frequently change retail node mapping

• Load Assets exist at Zonal Level – not Nodal

• Fully balancing load at the nodal level requires substantial expenditures

• Nodal choice effectively precludes real-time calculation of zonal price

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Nodal Pricing Next Steps• ISO will schedule a series of Participant Forums.

– ISO and NEPOOL will present Foundation Issues.

– ISO will not present or defend a “straw proposal” in workshops.

– ISO will focus on presenting implementation issues and will facilitate Participant discussion.

– Participation by State Regulators is essential to Process.

• Based on Stakeholder input, ISO will develop a recommendation for presentation to NEPOOL.

• Target start of workshops in September with recommendation to NPC by end of this year.

nodal/ zonal pricing settlement model background

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