MINUTES OF THE
MARKETS COMMITTEE (MC) MEETING
HELD ON TUESDAY AND WEDNESDAY, MAY 5 and 6, 2015

IN WESTBOROUGH, MASSACHUSETTS

Attendee / 05/05 / 05/06 / Member/
Alternate / Market Participant
A. DiGrande / ü / ü / Chair / ISO New England Inc.
E. Abend / ü* / ü* / Member / Summit Hydropower, Inc.
C. Belew / ü / ü / Member / Mass Attorney General’s Office
R. Borghesani / ü* / ü / Member / The Energy Consortium
Temporary Alternate / Associated Industries of Massachusetts and Harvard Dedicated Energy Limited
T. J. Brennan / ü / ü / Member / National Grid, US
J. Briscoe / ü* / Alternate / BP Energy Company
R. Cables / ü / ü* / Member / United Illuminating Company
R. Carrier / ü / ü / Member / Energy America, LLC
D. Cavanaugh / ü / ü / Member / NRG Power Marketing, LLC
N. Chafetz / ü / ü / Member / Galt Power Inc.
Alternate / Repsol Energy North America Corporation
Temporary Alternate / Customized Energy Solutions for BP Energy Company, DTE Energy Trading, Inc., Energy America, LLC and Mercuria Energy, Inc.
J. Dannels / ü / ü / Member / Consolidated Edison Energy, Inc.
J. Davis / ü / ü / Member / Dominion Energy Marketing, Inc.
K. Dell Orto / ü / Alternate / Entergy Nuclear Power Marketing LLC
V. Divatia / ü / Alternate / Eversource Energy
D. J. Duffy / ü / Member / Generation Group Member
J. Elmer / ü / ü / Member / Conservation Law Foundation
D. A. Errichetti / ü* / ü / Alternate / Eversource Energy
M. A. Erskine / ü* / ü* / Alternate / Central Maine Power Company
F. Ettori / ü / ü / Member / Vermont Electric Power Company, Inc.
J. Flumerfelt / ü / Member / Calpine Energy Services, LP
B. Forshaw / ü / ü / Member / CMEEC
W. Fowler / ü / ü / Member / Granite Ridge Energy, LLC
Alternate / EquiPower Resources Management, LLC, Essential Power Massachusetts, LLC and Exelon New England Holdings, LLC
Temporary Alternate / Dynegy Power Marketing, LLC, Calpine Energy Services, LP and Entergy Nuclear Power Marketing LLC
J. S. Gordon / ü / ü / Member / PSEG Energy Resources & Trade LLC
L. Guilbault / ü / ü / Member / H.Q. Energy Services (U.S.) Inc.
H. Healy / ü / ü / Member / EnerNOC, Inc.
R. Howland / ü* / Alternate / New Hampshire Electric Cooperative, Inc.
D. Hurley / ü / ü / Member / Conservation Services Group, Inc. and Energy Federation Inc.
Alternate / NH Office of Consumer Advocate
Temporary Alternate / EnerNOC, Inc., Harvard Dedicated Energy Limited, The Energy Consortium, Union of Concerned Scientists and Vermont Energy Investment Corporation
T. Kaslow / ü / ü / Member / GDF SUEZ Energy Marketing NA, Inc./FirstLight Power Resources Management, LLC
J. Keene / ü / Member / First Wind Energy Marketing
J. Jones / ü* / Alternate / Emera Maine, Inc.
W. Killgoar / ü* / ü / Member / Long Island Power Authority
S. Kirk / ü / ü / Member / Exelon New England Holdings, LLC
B. Kruse / ü / ü / Alternate / Calpine Energy Services, LP
A. W. Kuznecow / ü / ü / Secretary / ISO New England Inc.
T. Martin / ü / ü / Temporary Alternate / National Grid, US
A. Mitreski / ü* / Member / Brookfield Energy Marketing, Inc.
D. Norman / ü / Alternate / Verso Maine Energy LLC
D. Pierpont / ü / ü / Member / CPV Towantic, LLC
Alternate / Millenium Power Partners, LP
F. Plett / ü / ü / Alternate / Mass Attorney General’s Office
G. S. Poole / ü / ü / Member / Verso Maine Energy LLC
Temporary Alternate / Competitive Energy Services
F. Pullaro / ü* / Member / Union of Concerned Scientists
Temporary Alternate / First Wind Energy Marketing
M. Q. Riding / ü* / Member / Essential Power Massachusetts, LLC
J. A. Rotger / ü / ü / Alternate / Emera Maine, Inc.
P. Smith / ü / ü / Member / Wallingford, Town of
Alternate / Braintree Electric Light Dept, Concord Municipal Light Plant, Georgetown Municipal Light Dept, Hingham Municipal Lighting Plant, Littleton (MA) Electric Light Dept, Merrimac Municipal Light Dept, Middleton Municipal Light Dept, Pascoag Utility District, Rowley Municipal Lighting Plant, Taunton Municipal Lighting Plant, and Wellesley Municipal Light Plant
R. de R. Stein / ü / ü / Alternate / Signal Hill for Footprint Power LLC and H.Q. Energy Services (U.S.) Inc.
Temporary Alternate / Signal Hill for First Wind Energy Marketing and Generation Group Member
J. Suh / ü* / ü* / Temporary Alternate / Noble Americas Gas & Power Corp.
W. Seldon / ü* / Alternate / Reading Municipal Light Department
B. Swalwell / ü / ü / Member / Tangent Energy Solutions, Inc.
D. Thompson / ü / ü / Temporary Alternate / CT Office of Consumer Counsel
A. Trotta / ü / Alternate / United Illuminating Company
J. Wadsworth / ü / Member / Vitol Inc.
G. Will / ü / ü / Member / MMWEC
Temporary Alternate / CMEEC
Guest / Affiliation
C. Adams / ü* / Calpine Energy Services, LP
P. Alivand / ü / ISO New England Inc.
B. Anderson / ü / ü / NEPGA
E. Annes / ü / CT DEEP
P. Asarese / ü / ü / ISO New England Inc.
M. Babula / ü* / ISO New England Inc.
J. Bentz / ü / ü / NESCOE
N. Beuller / ü* / FERC
M. Brewster / ü / ISO New England Inc.
T. Burdis / ü* / PJM
S. Cary / ü* / ISO New England Inc.
P. Chattopadhyay / ü* / NH Office of Consumer Advocate
L. Corcoran / ü / ISO New England Inc.
B. D’Antonio / ü / NESCOE
J. Dombrowski / ü / ISO New England Inc.
J. Douglass / ü / ü / ISO New England Inc.
B. Ewing / ü / ISO New England Inc.
J. Fagen / ü* / Day Pitney
M. Giaimo / ü / ü / ISO New England Inc.
A. Gillespie / ü / ISO New England Inc.
E. Graessley / ü* / FERC
M. Gulluni / ü* / ISO New England Inc.
C. Hamlen / ü / ü / ISO New England Inc.
M. Karl / ü / ISO New England Inc.
M. J. Krolewski / ü / ü / VT PSB
S. Lombardi / ü / ü / Day Pitney
J. Lowell / ü / ISO New England Inc.
K. May / ü / ü / ISO New England Inc.
J. McDonald / ü* / ISO New England Inc.
C. Mendrala / ü / ISO New England Inc.
M. Menino / ü / ü / MA DPU
J. Murphy / ü / MA DPU
J. Newton / ü* / NextEra Energy Resources, LLC
E. O’Brien / ü / ISO New England Inc.
M. Palmer / ü / Repsol Energy North America Corporation
C. Parent / ü / ISO New England Inc.
C. Scott / ü* / FERC
C. Waterhouse / ü / ü / ISO New England Inc.
J. Wilson / ü* / Wilson Consulting
P. Wong / ü* / ISO New England Inc.
H.Yoshimura / ü / ISO New England Inc.

* -- Indicates participated by telephone

19

After determining that a quorum was present, the meeting was called to order.

Agenda Item #1: CHAIRWOMAN’S OPENING REMARKS

The Chair welcomed the Committee members and had those participating by telephone identify themselves.

Agenda Item #2: FCM SLOPED DEMAND CURVE: LOCAL ZONES: FCA 10

Mr. Karl provided an update on the ISO’s sloped zonal demand curve proposal for the tenth Forward Capacity Auction to the Committee. After explaining the ISO’s decision regarding this subject, Mr. Karl proceeded to discuss a potential solution space where New England could move away from a set of static demand curves. If we are short of the ICR value then we could move the curve to the right based on a pre-defined methodology. The methodology the ISO is currently considering would be based on a control system model. As an example, the methodology would look at a set of performance metrics (e.g., ICR and LSR) and see how close the actual values are to the performance metrics and, if they are within a predetermined bandwidth, then the region is meeting its objectives. If not then the curve would move to bring the market toward the bandwidth. The dynamic curve is a conceptual idea that is being analyzed by the ISO Market Development staff. Similarly, if we are long and consistently buying long then we should shift the curve to the left. We would try to develop a methodology that is pre-programmed for the curve shift. It is not the region’s desired outcome to consistently buy extra or be short in the capacity auctions. New England has rolled out a number of market design projects in a short period of time. Taking a time out for the sloped zonal demand curve subject appears to be appropriate. During and after the update, the following points were raised:

(1) A Committee member asked how would the creation of a smaller capacity zone result in a detriment to reliability.

(ISO: The ISO responded that smaller capacity zones could be a benefit in some cases. We made the SEMA capacity zone smaller and now we just have to focus on NEMA/Boston and we have more generation there that improves reliability. If we have a large number of small capacity zones (e.g., 13 zones that are contained in the RSP model) it is the increasing number of constraints between generation and load that needs to be addressed. If we had a tiny capacity zone, how would we draw a demand curve for that zone? Small changes in entry and exit can cause very large changes in capacity price. From a new entry standpoint, the three new capacity zones provide a better model for more new entry and more competition.)

The Committee member questioned paying for the generation being built in NEMA/Boston as well as the transmission lines needed for this generation.

(ISO: The ISO explained that the proposal must recognize the ability to move great amounts of power over great distances. Generation additions need to be evaluated against transmission solutions.)

(2) A Committee member said that smaller capacity zones do not provide greater reliability. The number of constraints and the lumpiness of resources to meet the constraints in a small capacity zone are issues that need to be addressed. The local zone demand curve issue should become irrelevant if the local zone demand curve meets its own capacity requirement.

(ISO: The ISO replied that was true right up to the point where the constraint binds in a small capacity zone. We would probably have some cost allocation issues within the zone if 200 MW from a 500 MW source could export out of the small zone.)

The Committee member noted that a small capacity zone could have a very flat demand curve and what would be the issue with that scenario.

(ISO: The ISO replied that the maximum dollars available in the capacity market is when the region is at criterion. When we are long or short then the market is either paying more or less. Having small capacity zones and a lot of them would be another design challenge.)

(3) A Committee member recalled “the summer of LICAP”. We do not want to relive that event. He agreed with the ISO regarding the uncertainty and it having a negative impact. The ISO memo last week made it worse. Did the ISO look at the reliability impact when applying the new local zone demand curve design with the same zones as FCA 9?

(ISO: The ISO responded that the FCA 9 system configuration with NEMA, SEMA and CT import-constrained capacity zones could not be studied in The Brattle Group model because the model would support only two import zones.)

The Committee member replied we do need to take a pause in the market design process but it needs to be broader than what is being discussed today. We should run FCA 10 with the FCA 9 capacity zones. What is the reliability impact of doing that on the FCA 9 capacity zones?

(ISO: The ISO said that The Brattle Group did not perform the analysis for the FCA 9 capacity zones. We do have the results for the FCA 10 capacity zones and the sloped zonal demand curves and the reliability result was poor. If we did perform the analysis, the reliability results would be just slightly less than 1 in 10 LOLE.)

The Committee member requested that the ISO think about the suggestion and consider deferral of these new capacity zones for FCA 10. Take the FCA 9 structure and bring it forward for FCA 10. That would provide some market certainty.

(ISO: The ISO said it would give this suggestion some consideration.)

(4) A Committee member noted that the proposed approach will cause a lot more confusion. There is a significant amount of background on how PJM and NYISO have performed with capacity zone demand curves. Switching the capacity zones on an annual basis is not appropriate. The drivers for these new capacity zone configurations have been known for several years by the ISO. We want to eliminate some confusion. Keep the old capacity zones then vote in the zonal capacity demand curves. Going forward we need to address how do we evolve the capacity zones so that they do not obscure the price signal with the topology changes. We have a hard time understanding how that would be negative.

(ISO: The ISO said that it is the creation of capacity zones that is the issue. PJM capacity zones follow the utility footprint. New England’s load zones do not follow the old utility boundaries but they are not far from them. New England was a tight pool to start with and the boundaries were blurring quite a bit. Figuring out how to draw capacity zones here is more like the lower Hudson area in NYISO than PJM.)

(5) A Committee guest asked if the ISO thought the timing difference between the planning side and the market side presented a problem and if there was some solution space other than making market design changes.

(ISO: The ISO responded that the certification of the Transmission Owner as to what is going to be in service is another piece of this subject. Planning’s function is to do a number of “what ifs” and come up with an understanding of what the system configuration is likely to be along with the stability position for several years. This would be a more stable contingency planning process.)

(6) A Committee member said he was thankful that the reliability problem was identified. He said he was not opposed to having smaller more granular capacity zones. The capacity auction clearing rule is the “so what” to us. We have that rule and it affects competition in the capacity market.