OverviewofNewEnglandsWholesale

ElectricityMarkets

RobertB.Burke PrincipalAnalyst,MarketDevelopment
ISONewEnglandInc.

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Disclaimer
Thematerialspresentedareintendedasanoverviewanddoes
notaddressalltheissuesandrequirementsoftheWholesale
ElectricityMarketsoperatedbyISONewEnglandInc.

Youshouldnotrelysolelyonthispresentationforinformation,
butshouldconsulttheeffectiveMarkets,Servicesand
TransmissionTariff(Tariff)andtherelevantMarketManuals,
OperatingProceduresandPlanningProcedures(Procedures).

IncaseofadiscrepancybetweenthispresentationandtheTariff
orProcedures,theTariffandProceduresshallgovern.

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 NewEnglandsWholesaleElectricityMarkets

Quantitybuying,selling,and
resellingoftheelectricenergy
generatedbyabulkpowersystem NewEnglandsWholesale
tomeetthesystemsdemandfor ElectricityMarkets
electricenergy.

Ancillary
Energy
CapacityMarket Services
Market
Markets

Systemforpurchasingand Marketwhereresourcesreceive Servicesthatensurethe

sellingelectricityusingsupply compensationforhaving reliabilityofproductionand
anddemandtosettheprice investedincapacityanddelivers transmissionofelectricity
inthecapacitycommitment
period(s)

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 ElectricEnergyMarkets

Energy
Markets

DayAheadEnergyMarket RealTimeEnergyMarket

TheDayAheadEnergyMarket
producesfinanciallybinding
schedulesfortheproductionand
consumptionofelectricitythe
daybeforetheoperatingday.
TheRealTimeEnergyMarket
balancesdifferencesbetweenthe
dayaheadscheduledamountsof
electricityandtheactualreal
timerequirements.

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EconomicDispatchduringDayAheador
RealTimeCommittedResources
Objectiveisto minimizethetotalcostofproducingelectricity
whilekeepingthesysteminbalance
Economicdispatchusestheleastcostresourcesinasingle
period(hourlyintheDayAheadEnergyMarket,10minutesin
theRealTimeEnergyMarket)tomeetthedemand
NewEnglandassesseshourlyresourcecostsandestablishes
thewholesalecostofenergybasedonauniformclearing
priceauction

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LocationalMarginalPricing

Hundredsofregionalprice
pointshelpestablishwholesale
prices
Since2003,theEnergyMarket
featureslocational marginal
pricing(LMP)
Pricesaremadeupofenergy,
congestion,andlosses

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EssentialFeaturesoftheEnergyMarkets

Nodes
900+specificpricinglocationsacrossNewEngland
Generatorsarepaidattheirindividualnodalprice,whichisuniquefor
eachmodeledgenerator

Zones
Eightloadzones
Vastmajorityofloadsettlesatzonalprice
Zonalpriceisloadweightedaverageofnodalpriceswithinazone
19DispatchzonesfordispatchingactiveDemandResources
Hub
Predefinednode;straightaverageof32nodalprices
Hubwascreatedtosupportbilateraltrading

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TheElementsofLMP
Energy,Congestion,andLossesReflectLocalSystemConditions

Thesamepriceacrossall
Energy ofNewEngland;
$32.00/MWh establishedastheload
(sameacrossall weightedaverageLMP
NewEngland)
withinNewEngland
Locational
MarginalPrice
Thecostimpact,dueto
transmissionconstraints,
Congestion tooperateoneormore
$4.25/MWh expensive,localpower
$37.00/ planttomeetlocal
MWh demands

Theaddedcostduetothe
Losses energythatislostas
$0.75/MWh powerflowsacrossthe
transmissionsystem

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DayAheadMarket(DAM)

AforwardmarkettohedgeagainstRealTime(RT)price
volatility
AllowsGenerationandLoadParticipantstosecureDayAhead(DA)
pricesandreducevulnerabilitytoRTpricefluctuations
Allowswholesaledemandtoparticipateinpricedetermination
Providesastartingpointfortheinitialunitcommitmentforthenext
operatingday

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NewEnglandsElectricEnergyMarkets
DayAheadEnergyMarket

Energy
Markets

DayAheadEnergyMarket RealTimeEnergyMarket

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 DAMParticipantInputs

DayAheadMarket

Purchase Sell

Export Import
Demand/ARD Decrement Generator Increment
External External
Bids Bids Offers Offers
Transactions Transactions

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InputstoDayAheadEnergyMarket
PhysicalTransactions

DayAheadEnergyMarket
Tiedtoactualphysicalinjectionsor
withdrawalsexpectedintheRealTimeEnergy
Market
Allowsparticipantsanopportunitytoestablish
apositioninthefinancialmarket

PhysicalBids&Offers
Generatoroffers submittedinformation
containsincrementalenergyoffersin$/MWh,
alsomaycontainfixedcostsandparameters
whichcontainattributesaboutthegenerator
(minimumruntime,maximumoutput,etc.)

GeneratorOffers DemandBid
Demandbid abidtoprocureelectricityata
specifiedloadzoneintheDayAheadEnergy
Market;demandbidsmustbeassociatedwith
expectedconsumptioninrealtime

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InputstoDayAheadEnergyMarket
VirtualTransactions

Virtualtransactionsarenottiedtophysical
DayAheadEnergyMarket
deliveryofelectricity
Allowsparticipantsanopportunitytoestablish
apositionintheelectricitymarket
Incrementoffer(INC) afinancialoffertosell
VirtualBids&Offers
electricenergyataspecifiedlocationinthe
DayAheadEnergyMarket;virtualsupply
Decrementbid(DEC) afinancialbidtobuy
electricityataspecifiedlocationinthe
IncrementOffers DecrementBids
Sell Buy DayAheadEnergyMarket;virtualdemandnot
associatedwithaphysicalload

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InputstoDayAheadEnergyMarket

DemandBids SupplyOffers

Dayaheadbidsandoffersmust
besubmittedbynoontheday
beforetheoperatingday. DayAhead
EnergyMarket

Financialschedulesare
produced.Forgenerators,
thesefinancialschedules Schedules
translateintoscheduledhours
fortheoperatingday.

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OutputsofDayAheadEnergyMarket

Scheduleofcommitmentsfornextoperatingday
(generationandexternaltransactions)
DayaheadhourlyLMPs
Dayaheadsettlementisbasedonthedayaheadpricesand
quantitythatcleared
Outputsoccurby4:00p.m.(beforeoperatingday)

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MarketTimelines
DayAheadMarket(DAM)

PublishDAMLMPs,
DAMofferandbidperiod Schedules,and
closesat12:00 Constraintsat16:00

OPERATING DAY1 OPERATINGDAY

ReserveAdequacy Continuetoexecute
Assessment(RAA)/Security SCRAthroughoutthe
ReOfferPeriodopens
ConstrainedReliabilityAssessment OperatingDay
16:00 18:00
(SCRA)completeforOperatingDay
at22:00

RealTimeMarket(RTM)

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NewEnglandsElectricEnergyMarkets
RealTimeEnergyMarket

Energy
Markets

DayAheadEnergyMarket RealTimeEnergyMarket

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RealTimeEnergyMarket

InputsReoerPeriodbetween4:00 6:00p.m.(daybefore)
Actualsystemoperatingconditions
Meteredload,generation,tielineflows,etc.
ActualExternalTransactions

Outputs
RTHourlyCommitmentSchedulesareproducedafter6:00p.m.(day
before)
RTDispatchsignalsaresenttogenerators(anddispatchable load)
throughouttheday(asoftenasfiveminuteupdates)
RThourlyLMPsbasedonactualoperatingconditions
RTSettlement
BasedondeviationsbetweenDAscheduleandactualoperations

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AncillaryServicesMarkets

AncillaryServices
Market

Locational
Reserve RegulationMarket
Markets

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AncillaryServicesMarkets

Servicesthatensurethereliabilityandsupportofthe
transmissionofelectricitytoserveload,including:
Locational ForwardReserveMarket
Marketforacquiringofflineoperatingreserves
RealTimeReservesMarket
Marketforcompensatingoperatingreservesduringrealtimewhensupplies
arelimited
RegulationMarket
Marketforselectingandpayingforgenerationneededtomanagesmall
changesinsystemelectricalload

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AncillaryServicesMarkets

AncillaryServices
Market

Locational
Reserve RegulationMarket
Markets

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AncillaryServicesMarkets
ForwardReserveMarket

Compensatesresourcesthatwillbeusedasoperating
reserves
Operatingreservesareneededwhenthereisasuddenlossofalarge
generatororamajortransmissionlineduringonpeakperiods,both
systemwideandinsmallerloadcenteredareas

Withoutresourcestoreplacethissuddenloss,loadwould
havetobeshedtopreventablackout

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AncillaryServicesMarkets
ForwardReserveMarket(cont.)

Servicesprocured
10minutenonspinningreserves(TMNSR)generallyprovidedby
resourcesnotcurrentlysynchronizedtothegridbutcapableof
startingandprovidingoutputwithin10minutes
30minutereserves(TMOR)generallyprovidedbyresourcesnot
currentlysynchronizedtothegridbutcapableofstartingand
providingoutputwithin30minutes

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AncillaryServicesMarkets
RealTimeReserveMarket

Amarketusedtocompensateresourcesthatwereusedas
operatingreserves
Operatingreservesareneededwhenthereisasuddenlossofalarge
generatororamajortransmissionlineduringall periods
Withoutresourcestoreplacethissuddenloss,loadwould
havetobeshedtopreventablackout
Thismarkethasnobids/offersanduseslostopportunitycosts
ofreserveresourcesorpenaltypricingtosettheuniform
clearingprices

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DayAheadandRealTimeEnergyMarket
Timelines

DayAheadEnergyMarket(DAM)

OffersandBids DAMLMPsand Participantssubmit

submittedbyNoon Schedules(4PM) DAMBilateralContracts.

OPERATING DAY1 OPERATINGDAY OPERATINGDAY+1 OPERATINGDAY+2

ContinuousRAAandTransmission
Security
ReOfferPeriod
4 6PM
Participantssubmit
RealTimeEnergyMarket(RTM) RTMBilateralContracts
andMeterReadings.

Dispatchable
Imports/Exports

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AncillaryServicesMarkets

AncillaryServices
Market

Locational
Reserve RegulationMarket
Markets

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AncillaryServicesMarkets
RegulationMarket

Regulationservice,alsoknownasautomaticgeneration
control(AGC),allowsthesystemoperatortophysically
balancesupplyanddemandandmaintainfrequencyasclose
to60Hzaspossible
Approvedgeneratorssubmitoffers
AreaControlError(ACE)
Measuredeveryfourseconds
Determinesgenerationlevels(increaseordecreaseoutput)

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ComparisonofPhysicalandReliabilityNeedsto
NewEnglandMarketTools
Physical&Reliability MarketTools
Electricity ElectricEnergy Market
Daytodaypower DayAheadEnergyMarket&
RealTimeEnergyMarket

Reliability Ancillary ServicesMarket

Reservepower ForwardReserveMarket(FRM)
Frequency Regulation
Voltagesupport
Blackstartcapability

Congestion Management FinancialTransmissionRights

Assure longtermpower CapacityMarket

ForwardCapacityMarket

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WholesaleElectricityMarkets

WholesaleElectricityMarkets WholesaleCompetition

Thepurchaseandsaleofelectricity Asystemwherebyamarketeror
fromgeneratorstoresellers distributorofpowerwouldhave
(marketersandretailers),along theoptiontobuyitspowerfroma
withtheancillaryservicesneeded varietyofpowerproducers,and
tomaintainreliabilityandpower thepowerproducerswouldbe
qualityatthetransmissionlevel. abletocompetetoselltheirpower
FERCassuresjustandreasonable toavarietyofmarketersand
pricesatthewholesale(production distributioncompanies.
andtransmission)level.

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 Robert B. Burke
PrincipalAnalyst Market
Development
ISONewEnglandInc.
1SullivanRd.
Holyoke,MA010402841
Questions Office:4135354356
Fax:4135404226
Cell:8608335370
rburke@isone.com

Findotherinformationonoursite:www.isone.com/Support/Training/TrainingMaterials
Comingsoon(anticipatedbymidJune,2011),webbasedmodulesforSupplyResource
andDemandResourceOperatorTrainingcoursesrecentlyheld.

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