FERC Order 719 Compliance Requirements

Bob Laurita, ISO New EnglandPresentation to NEPOOL Markets Committee MeetingFebruary 9, 2010

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FERC Order 719 Background

• In Order 719, the FERC established reforms in the following areas:1. Demand Response;

• Including pricing during periods of operating reserve shortage;

2. Long-Term Power Contracting;

3. Market-Monitoring Policies; and

4. ISO/RTO Responsiveness to their customers and other stakeholders

• Order 719 joint filing by NEPOOL and ISO-NE made on April 28, 2009

• FERC Order on Order 719 filing issued on January 21, 2010

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Summary of FERC Order

• FERC found that the compliance filing, with certain modifications, complies in part with Order No. 719 in the areas of:1. Demand Response

2. Long-Term Power Contracting; and

3. Market-Monitoring Policies

• FERC made no findings regarding ISO/RTO Responsiveness

• NEPOOL and ISO-NE are required to make a compliance filing within 90 days of the date of issuance of the order

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Issue #1: Real-Time Reserve Clearing Price for DARD

• FERC Determination:– Paragraph 48: “Filing Parties did not provide enough information

in the compliance filing to demonstrate how the tariff revisions with respect to DARDs without Forward Reserve Obligations (that simply have avoided costs) satisfy the requirements of Order No. 719.”

• ISO Action:– The ISO will develop an example of how a DARD without a

Forward Reserve Obligation will receive the Real-Time Reserve Clearing Price

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Issue #2: DARD Minimum Size and Aggregation

• FERC Determination:– Paragraph 49: “If the stakeholders commit to its retention, we

will also require an examination of the current rules that require a minimum 5 MW peak load size requirement and deny DARDs the ability to aggregate.”

• ISO Action:– The ISO will propose market rule changes to allow DARD

registration at a minimum size of 1 MW and allowing aggregation of retail customers at the same PNODE

• Effective date of the market rule change would be linked to the Host Participant Meter Readers informing the ISO that they are prepared to implement the change

• The ISO plans to file the proposed market rule changes as part of the 90 day compliance filing

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Issue #3: Pricing Out-of-Market Actions

• FERC Determination:– Paragraph 88: “the Commission encourages ISO-NE to work

with its stakeholders to develop the best method for pricing the marginal cost of these out-of-market actions to avoid sending inefficient price signals during such occurrences. ”

• ISO Action:– Per current Market Rules, Demand Resource activation and other non-

market operator actions such as Voltage Reduction are not priced

– Demand Resources receiving capacity credit through the FCM, when called upon, will not be reflected in the real-time dispatch solution

– To prevent prices from collapsing, pricing algorithms must be appropriately designed

– The ISO plans to initiate discussions with stakeholders in Q4 2010

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Issue #4: Long Term Power Contracting

• FERC Determination:– Paragraph 115: “If ISO-NE decides to use the PJM-operated

(long-term power contracting) bulletin board, we direct Filing Parties to submit, within 90 days of the date of this order, an informational filing so notifying the Commission.”

• ISO Action:– The ISO will notify the Commission that it is currently using the

PJM-operated bulletin board

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Issue #5: Comparability in the Provision of Ancillary Services

• FERC Determination:– Paragraph 49: “ISO-NE’s filing must demonstrate how DARDs

or any revised mechanism that is developed for demand response resources complies with the comparability requirements of Order No. 719 as they pertain to the provision of ancillary services as previously discussed.”

• ISO Action:– The ISO plans to address the comparability issues in the

provision of ancillary services in Phase 2 of the PRD filing

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Issue #5: Comparability in the Provision of Ancillary Services (Continued)

• The ISO is planning a Phase 1 PRD Filing on April 30, 2010, that will cover the following PRD design issues:1. Product Definition

2. Eligibility

3. Payment Rate

4. Cost Allocation

• A Phase 2 PRD Filing will take place after the Commission’s order on the Phase 1 design issues and will cover the remaining design issues, including the comparability requirements of Order No. 719 as they pertain to the provision of ancillary services from DARD and demand response resources

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Compliance Filing Schedule

Issue Description Filing Date

1 Example of how a DARD can receive the Real-Time Reserve Clearing Price

April 21, 2010

2 Change market rules regarding DARD Minimum Size and Aggregation

April 21, 2010

3 Pricing Out-of-Market Actions April 21, 2010

4 Commit to using PJM’s Long-Term Power Contracting Bulletin Board

April 21, 2010

5 Discuss Comparability Issues in the Provision of Ancillary Services

Included in Phase 2 PRD Filing

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