Deborah Cooke 413 5404488 dcookeisonecom Triennial Review postponement to FCA 16 Cost of New Entry and Offer Review Trigger Prices Cost of New Entry and Offer Review Trigger Prices ID: 1044684
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1. October 9, 2018 | Westborough, MADeborah Cooke(413) 540-4488 | dcooke@iso-ne.comTriennial Review postponement to FCA 16Cost of New Entry and Offer Review Trigger Prices
2. Cost of New Entry and Offer Review Trigger Prices WMPP ID: 132Proposed Effective Date: Spring 2021 (Show of Interest Submission Window, FCA 16)Tariff provisions require triennial review and recalculation of the Cost of New Entry (CONE), Net CONE, and Offer Review Trigger Prices (ORTPs)CONE is an estimate of the cost to build a new resource in New England, and Net CONE is an estimate of the first year revenues needed by the resource to be economically viableORTPs are low-end estimates of Net CONE for specific types of technologiesISO also committed to review the Dynamic De-list Bid Threshold (DDBT) and Performance Payment Rate (PPR) for Forward Capacity Auction (FCA) 15 or Capacity Commitment Period (CCP) 2024/25Proposed tariff changes would postpone recalculation of all of the parameters to FCA 162
3. 3Winter Energy Security Improvements will impact Net CONE and ORTPsNet CONE and ORTPs will be impacted by any winter energy security improvements through changes to revenues and expectations of winter scarcity hoursThese changes are required to be filed by July 1, 2019Under current rules, ISO would need to develop revised Net CONE/ORTPs for FCA 15 – in parallel with discussion on winter energy security improvements – but the anticipated schedule would not allow for the impacts of the winter energy improvements to be evaluatedISO expects it would need to develop revised Net CONE and ORTPs for FCA 16 to assess the impacts of the winter energy security improvements Developing revised Net CONE and ORTPs in consecutive years is a significant undertaking considering the need to focus on winter energy security improvements
4. 4The current annual update process for CONE and ORTPs will be used for FCA 15 CONE, Net CONE, and ORTP values will be adjusted for FCA 15 using the same annual update process currently used in between the full reviews of these valuesIndices detailed in III.A.21.1.2 PPR and DDBT would not be reviewed or modified for FCA 15Proposed Tariff changes postpone the development of revised CONE, Net CONE and ORTPs, and the DDBT, to a three year cycle starting with FCA 16
5. 5Performing targeted updates of certain parameters has limited valueAt the October 2018 committee meeting, members asked if the DDBT could be updated to reflect the full PPR of $5,455/MWh which takes effect in June 1, 2024Our analysis estimates, if only the PPR is modified, are:DDBT increase of $0.20 (from $4.30 to $4.50/kW-month) Net CONE decrease of $0.10 (from $8.04 to $7.94/kW-month) At the time the ISO committed to recalculate the DDBT for FCA 151 to reflect the full PPR, the anticipated changes associated with winter energy security were not known New revenue streams and winter scarcity hours will impact the DDBTThese changes were not known at the time of the DDBT filing, thus, the proposal to postpone the review and update to the DDBT for FCA 16 to reflect these impactsThis commitment to review and update the DDBT for FCA 16 is being added to the Tariff1 ER18-620-000, Update to the FCM Dynamic De-List Bid Threshold
6. Tariff ReferenceSection NameSummary of ChangeIII.13.1.2.3.1ADynamic De-List Bid ThresholdSpecify that this value will be recalculated for CCP beginning June 1, 2025III.13.2.4Forward Capacity Auction Starting Price and the Cost of New EntrySpecify that this value will be recalculated for CCP beginning June 1, 2025III.A.21.1.2Calculation of Offer Review Trigger PricesSpecify that this value will be recalculated for CCP beginning June 1, 20256Proposed Tariff Changes
7. Stakeholder Committee and DateScheduled Project MilestoneMarkets CommitteeSeptember 2018Introduction of topicProposed Tariff language Markets CommitteeOctober 2018Discussion and vote on Tariff languageParticipants CommitteeNovember 2016Discussion and vote on Tariff language7Proposed Stakeholder Schedule
8. Deborah Cooke(413) 540-4488 | dcooke@iso-ne.com8
9. 9Acronyms Used in this PresentationCCP = Capacity Commitment PeriodCONE = Cost of New EntryDDBT = Dynamic De-list Bid ThresholdFCA = Forward Capacity AuctionFCM = Forward Capacity MarketORTP = Offer Review Trigger PricePPR = Performance Payment Rate
10. AppendixOverview and description of FCM parameters10
11. 11Overview of the FCM parametersNamePurposeCost of New EntryInput to calculation of FCA starting priceNet Cost of New EntryInput to calculation of FCA starting priceUsed in calculation of scaling factor for zonal demand curvesOffer Review Trigger PricesBenchmark prices for specific technologies, used to screen for non-competitive offer prices in the FCADynamic De-list Bid Threshold PriceThreshold above which de-list bids are subject to review by the Internal Market MonitorPerformance Payment RateRate used to pay/charge resources for capacity obligation deviations during scarcity conditions