Resource Retirement Reforms - PowerPoint Presentation

1. Resource Retirement ReformsNEPOOL Markets CommitteeOctober 9, 2015NRG Proposal

2. Markets Committee October 9, 2015Resource Retirement ReformsISO ObjectivesConcerns with ISO ProposalNRG ProposalOptionsQuestions1

3. Markets Committee October 9, 2015ISO objectivesAllow market response to proposed existing resource retirementProvide the marketplace information on prospective resource retirements prior to Show of Interest window deadline.Notice may incent investors, not already proposing a project for the instant FCA, to enter an Show Of Interest (SOI) based on interest generated by retirement notificationsProvide mitigation of perceived exercise of market power from existing resource retirement2

4. Markets Committee October 9, 2015Concerns with ISO ProposalBinding nature of Price Retirement bids submission reduces an Existing Resource owner’s ability to effectively manage its resources in the FCMImposes significant risk on resource owners by not allowing Price Retirement bids to fully reflect latest information, market conditions or other options on capital deploymentCreates and further exacerbates discriminatory treatment of Existing Resources in FCA through its inability to reflect its cost for market exit closer to or in the FCAMoves the FCM farther away from functioning as a “market” where all resources compete in the auction directlyReduces consumer benefits by forcing reduced competition in the auction3

5. Markets Committee October 9, 2015NRG Retirement ProposalMarch 1 - Retirement notification provided to ISO June 1 - Lead Market Participant files Price Retirement Bid with Commission under 205 Mitigation aspects of proposal is only applicable to Market Participant with greater than one resource in its portfolio NRG proposal satisfies the ISO objectives of:Priced Resource RetirementMitigation of Market PowerProviding notice to market of potential retirements prior to Show Of Interest window Mitigates the Actor and NOT the Market4

6. Markets Committee October 9,2015NRG’s Proposal – Resource RetirementOption 1”Accept Commission Determined Price”Within 10 days of RDN Market Participant notifies ISO it will accept Commission determined priceResource entered in FCA at the Commission determined priceRetirement bid will allow CAPEX costs to be recovered over economic evaluation period, not to exceed 5 years Resource awarded CSO if FCA clearing price is above Commission determined bid priceIf Resource is awarded CSO, retirement bid is binding in subsequent FCA, subject to adjusted bid priceIf FCA clearing price is below Commission determined price the resource is not awarded a CSO and is retired from FCM 5

7. Markets Committee October 9,2015NRG’s Proposal – Resource RetirementOption 2 “Withdraw Price Retirement Bid”Within 10 days of RDN Market Participant notifies ISO it has fully withdrawn its Price Retirement bidResource participates in FCA as Existing ResourceAwarded CSO at FCA clearing priceNo change in how resource participates in future FCA6

8. Markets Committee October 9,2015NRG’s Proposal – Resource RetirementOption 3 “Unconditional Retirement”Within 10 days of RDN Market Participant notifies ISO of unconditional resource retirementApply “market power screen” to portfolio of retiring resource ownerIf retirement would not increase total portfolio FCA revenue, only perform Step 1If retirement would increase total portfolio FCA revenue, perform Steps 1 and 2Step 1:FCA is run with all qualified resources, excluding unconditionally retired resources, in supply stackFCA clearing price from Step 1 is applied to all resources excluding those under a price lock from previous FCAIf the IMM determines the portfolio of a unconditionally retired resource benefited financially from the retirement then move to Step 2Step 2:Rerun FCA with unconditionally retired resource in the supply stack of auction, at Commission-determined priceIf clearing price of Step 2 FCA run is less then Step 1 FCA clearing price apply that price to the resources in the portfolio associate with the unconditionally retired resource7

9. Markets Committee October 9,2015NRG’s Proposal – Resource RetirementOption 3 “Unconditional Retirement” (Con’t)The market price (Step 1) reflects the actual supply situation for the FCA, ie, the resource is retiredPrice distortion in market is avoidedActor is mitigated NOT the Market8

10. Markets Committee October 9,2015NRG’s Proposal – Resource RetirementOption 4 “Conditional Retirement Bid”Within 10 days of RDN Market Participant notifies ISO of conditional resource retirementStep 1:FCA is run with all qualified resources, with retiring resource at participant-submitted price, establishing a clearing priceIf FCA clears above Market Participant submitted retirement bids no further actions required. Resource is awarded CSOFCA Clearing Price from Step 1 is applied to all cleared Resource, except Resources under the price lock from previous FCAIf FCA clears below Commission Determined bid price ,resource retires from FCM. No further actionsIf FCA clears between a Market Participant’s retirement bid and Commission determined bid price the resource retires. No CSO awarded.If the IMM determines a resources owner’s portfolio benefited from its resource retirement then move to Step 29

11. Markets Committee October 9,2015NRG’s Proposal – Resource RetirementOption 4 “Conditional Retirement Bid” Con’tStep 2:Rerun FCA including in the supply stack conditionally retired resources that the IMM deemed to have been provided benefit to a resources owner’s portfolio, at the Commission-determined priceIf clearing price of Step 2 FCA run is less then Step 1 FCA clearing price apply that price to the resources in the portfolio associated with the conditionally retired resourceThe market price (Step 1) reflects the actual supply situation in the FCA, ie, the resource is retiredPrice distortion in market is avoidedActor is mitigated NOT the Market10

12. Markets Committee October 9,201511NRG’s ProposalQuestions ?