Proposed CMSC Amendments- Imports & Exports

Intertie Trading Sub-committee

November 24, 2003

PUBLIC

Proposed Rule Amendments

• Background - MSP consultation • Negative Price Offers for Imports• Constrained Off Imports / Exports

Background - MSP Consultation

• Longstanding MSP concern about constrained-off payments

• Consultation began with discussion paper, in February 2003

• MSP report presented to IMO Board on July 3 • One conclusion and six recommendations

Summary of MSP Recommendations

• Three CMSC related recommendations– Negative offers should not be used to calculate

constrained-off payments.– Imports that cannot be scheduled should be removed

from stack so they do not receive CMSC payments.– Self-induced constrained-off payments to generators or

loads should not be made or should be fully recovered.

• Other recommendations included working groups– to look at the Niagara 25 Hz sub-system– to look at transmission planning issues in Ontario

Endorsements from Board

• The IMO Board endorsed the recommendations– authorized IMO to take actions necessary to implement

them.

• At the same time Board approved an Urgent Rule amendment– related to negative offer prices for generators

• Other rules have been brought to the Technical Panel

Negative Price Offers for Imports

• Issue - Potentially large CMSC without efficiency rationale (e.g.)

• If 50 MW constrained off at -$2000 offer & zonal price $100

CMSC = [50 * 100 -(-$2000)] = $105,000 per hour.

– Compared with 50 * $100 = $5000 per hourif offer were successfully scheduled.

• Rationale for Recommendation:– If payment of zonal price is sufficient for producing

energy, it should be sufficient for not producing.• Large negative prices are not indicative of costs incurred

Negative Price Offers - Proposal

• Proposed rule to limit CMSC payments to imports – when offer prices are below zero.

• CMSC calculated assuming a lower price limit– limit is zero $/MWh

• unless zonal price is less than zero, then limit is zonal price

– for fairness / symmetry, applies to positive and negative CMSC, constrained on and constrained off situations

• Interim application: after-the-fact adjustment– for subset: positive CMSC, > 1 MW constrained off

• identical to urgent rule applied to generators

Negative Price Offers - Examples

Price$/MWh

0

ZonalPrice

OfferPrice

Proposed CMSC

Applied Limit

Case 1:Zonal Price > 0

Generic Case: Import Constrained off from 50 MW (MS) to 0 MW

Proposed CMSC not

paid

Negative Price Offers - Examples

ZonalPrice

Zonal Price = Applied limitProposed CMSC = $0

Generic Case: Import Constrained off from 50 MW (MS) to 0 MW

Price$/MWh

Case 2

0

Case 2:Zonal Price < 0

Applied Limit

CMSC not paid

Negative Price Offers - Examples

Generic Case: Import Constrained off from 50 MW (MS) to 0 MW

OfferPriceCMSC < 0

No Change

Potential Limit, below offer;

no changeIOG will be positiveIOG + CMSC ~ zero

Price$/MWh

0

Case 3:Zonal Price < Offer Price< 0

Constrained Off Imports / Exports - Current Procedure

• After 2 hour ahead IMO pre-dispatch– IMO notifies NYISO of successful constrained

schedule imports and exports

• NYISO applies these as upper limits – in their hour ahead market.

• Going into 1 hour ahead IMO pre-dispatch – IMO applies limit for the constrained run only

– allows the unconstrained market schedule to float

• Could be further adjustments – for failures during checkout or new TLRs

Proposed Limits on Schedules

• Proposed rules to recognize such limits– generic: possible changes with New York or others

• Planned implementation for New York– CS1 CS2 [ CS = constrained predispatch schedule]

• 2 hr ahead constrained pre-dispatch is upper limit on 1 hour ahead (current procedure)

– MS1 max (MS2, CS2) [ MS = predispatch market schedule]

• 1 hour ahead unconstrained market schedule limited

– 2 hour ahead constrained value is the physical limit

– a larger 2 hour ahead MS implies schedule was being constrained off (MS >CS)

» CMSC payment deserved since this is part of congestion management

Limits on Schedules with NYISO - Examples

2 Hour Ahead 1 Hour Ahead MS1 max (MS2,CS2 )

CS2 MS2 CS1 MS1 Constrained Case

CS1 = CS2

0 0 0 0 None

100 100 100 100 None

100 0 100 100 Constrained On

0 100 0 100 Constrained Off100 200 100 200 Constrained Off

CS1 < CS2

100 100 50 100 None100 0 50 100 Constrained On100 200 50 200 Constrained Off

Implications of Scheduling Limits

• Market Schedules may change (be lower)– constrained schedules not affected

• CMSC can be smaller quantities (positive or negative) – depending on circumstances

– may be corresponding IOG reductions

• MCP in any interval can increase, decrease or remain unchanged depending on – whether import or export,

– whether replaced by another intertie transaction