M A Y 2 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

Chris ParentC P A R E N T @ I S O - N E . C O M | 4 1 3 . 5 4 0 . 4 5 9 9

Conforming compensation rules to support extending IS0-initiated audit rules to apply to dual fuel resources

Dual-Fuel Resource Auditing

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ISO-initiated audit rules will be extended to apply to dual fuel resources

• Permanent audit rules enabling the ISO to:– Audit dual fuel resources at ISO’s initiative– Confirm operational readiness of the Generating Asset on a specific fuel– Obtain updated information about the maximum capability on a specific

fuel– Obtain updated fuel switching information (if capable)

• Utilizes the ISO-Initiated Audit structure except:– Audits will be announced and scheduled in advance unless unit runs on

specified fuel in merit

• Dual Fuel Resource Audits will inform better decision making and promote confidence in dual fuel resource reliability and flexibility

Note: Audit rules are being discussed at the RC and compensation and cost allocation are being discussed at the MC

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Resources will be compensated for any ISO-initiated Dual Fuel Resource Audits through real-time NCPC

• Energy Market Offer Flexibility, effective December 1, 2014, will ensure resources are compensated properly – Appropriate fuel costs, depending upon effective offer, will be used in NCPC

calculation

• Prior to Energy Market Offer Flexibility, an interim compensation structure is necessary to compensate resources while auditing– Depending upon when the unit was eligible for NCPC, compensation will be

based on an NCPC adjustment for either DA or RT included as part of real-time NCPC

– Adjustment will use reference level fuel costs to compensate resources while operating on a specific fuel

• The cost allocation will go through the existing mechanism for allocating costs for ISO-initiated audits pursuant to Market Rule 1, Section III.F.3.2.19 – Daily Real-Time Load Obligation (RTLO) excluding DARD pumps

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Total real-time NCPC cost related to dual fuel auditing would be $7M annually

• Assumptions– Only included units with natural gas listed as either primary or secondary fuel on

NX-12– Units start on primary fuel and can swap to secondary fuel without coming offline– Operate for one hour at EcoMax and the remainder of minimum run time at

EcoMin

• If daily cost > daily revenue, unit is paid NCPC. Costs include:– Start up cost as offered on primary fuel– Energy costs and No load cost as offered on secondary fuel

• All costs are from Market Monitoring reference level data– Data is from 11/13/2013 – a day in which a dual fuel audit from last year’s winter

program occurred; intended to reflect similar conditions to when audits may occur

• Revenue is calculated using the average real-time Hub LMP from October and November of 2013 ($40.44)

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Proposal Summary and Schedule

• ISO-initiated audit rules will be extended to apply to dual fuel resources to ensure dual fuel resource capability– Resources will be compensated through real-time NCPC

• Audit rules are being discussed at the RC and compensation and cost allocation are being discussed at the MCDate Committee ActionMay 20, 2014 RC Discuss Proposal & Tariff LanguageMay 23, 2014 MC Discuss ProposalJune 3, 2014 MC Discuss Proposal & Tariff LanguageJune 10-11, 2014 MC VoteJune 18, 2014 RC Vote

•Proposal would be effective for September/October 2014