Proposal for New Capacity Zone Impact Analysis Tariq N. Niazi Senior Manager, Consumer Interest Liaison New York Independent System Operator Installed Capacity Working Group September 11, 2012 KCC
Proposed Agenda Timing of the Impact Analysis Key Assumptions for Consumer Impact Analysis Elements of the Impact Analysis Empirical analysis Next Steps 2
Timing of Impact Analysis Since the final boundaries of the New Capacity Zone (NCZ) and other inputs needed for the Impact Analysis, like the Demand Curves and Locational Minimum Installed Capacity Requirements (LCRs) for the NCZ, are not known at this time, we will have to make certain assumptions to conduct the Impact Analysis To address this uncertainty, we will conduct the Impact Analysis for more than one set of assumptions 3
Key Assumptions Zonal Boundaries Zonal Nesting Design Demand Curve Slopes External Resources Indicative LCRs 4
Zonal Boundaries We will look at two possibilities: A new capacity zone (Locality) that includes Load Zones G, H & I A new capacity zone that includes Load Zones F, G, H & I 5
Zonal Nesting Design Since zones J & K are downstate of zones G, H and I and all these zones are east of central east, the new zone might involve a nested design. We will assess the consumer impact of: A new capacity zone including G, H, I & J We will also analyze a combined: F, G, H, I, & J 6
Demand Curve Slope The actual demand curves for the NCZ will be determined as part of the reset process. For the Impact Analysis, we will assume the following for all NCZs: A 15% crossing point A 12% crossing point 7
Indicative Locational Capacity Requirements (Indicative LCRs) Indicative LCRs for the New Capacity Zone will be identified by the NYISO as part of the process of determining the ICAP Demand Curve for the proposed NCZ. (Actual LCRs for any FERC-accepted NCZ would be determined in early 2014, along with the other LCRs) We will use Indicative LCRs for the conducting the Impact Analysis 8
External Resources It will be assumed that capacity resources located in New England will be delivered on the external side of UPNY/SENY interface and not included in the NCZ It will also be assumed that PJM capacity (other than Neptune, VFT or HTP) will be delivered into the upstate region 9
Elements of the Impact Analysis Price Impacts: Impact on capacity prices in the new ROS (NYCA minus the NCZ and Zones J and K) after carving out Zones G, H & I or Zones F, G, H & I, to create a G, H, I, and J or F, G, H, I and J New Capacity Zone Capacity prices in the NCZ under different assumptions The price of capacity in Zone J and K Analysis of long-term consumer impact 10
Other Impacts to be analyzed Reliability The creation of a NCZ would better reflect reliability needs, as deliverability evaluations would more accurately reflect locational needs. The impact analysis will consider the effect of avoiding the potential for surplus capacity (e.g., in the West) to mask the need for more capacity in Zones F, G, H & I. To evaluate the impact on reliability, the analysis would compare the amount of capacity that cleared in Zones G, H & I or F, G,H & I in the last auction with the indicative LCRs for the NCZ 11
Other Impacts, Contd. Environment With the creation of a NCZ, some potential new capacity resources in the new ROS (NYCA minus NCZ and Zones J & K) may no longer have a deliverability constraint These potential new resources, if deliverable, could displace older higher emission units and have a positive environmental impact. 12
Other Impacts, Contd. Transparency The creation of a NCZ would lead to more informative capacity market prices both in the new capacity zone and new ROS (NYCA minus NCZ and Zones J & K) 13
Empirical Analysis Use data from previous auctions to gain insight into the impact on capacity prices for the new ROS (NYCA minus NCZ and Zones J & K) Estimate how much generation in the West, that could not participate in the capacity market because it was not deemed deliverable to Zones F, G, H or I, will now become deliverable in the new ROS with the creation of the NCZ Examine the generation queue in the West to estimate how much capacity under development and /or construction, that would not have been able to participate in the capacity market because it would have been deemed not deliverable to Zones F, G, H & I, will likely become deliverable in the new ROS with the creation of the NCZ Look at additional capacity, for example HQ that would likely qualify as deliverable in the new ROS Perform a sensitivity analysis of potential exit of capacity in the new ROS,,particularly if capacity yprices fall 14
Empirical Analysis, Contd. Use data from previous auctions to gain insight into impact on capacity prices for the NCZ Estimate what capacity prices in Zones G, H & I would have been with the new Capacity Zone by determining how much of Zones G, H & I capacity was offered, how much cleared the auction and compare that with the indicative LCRs for these zones Estimate the possible range of future capacity prices in Zones G, H and I using a combination of data from past auctions and data on new entry and projected peak load Compare the supply in Zone J to the LCR for the combined G, H, I & J capacity zone at various points on the demand curve for both a 12 percent and 15 percent crossing point Repeat the above analyses for a combined F, G, H, I & J capacity zone Make a qualitative assessment of the potential for a new capacity zone to reduce the LCR for Zone J 15
Next Steps Conduct the Empirical Analysis Report Back to ICAP Report to BIC Report to MC 16
The New York Independent System Operator (NYISO) is a not-for-profit corporation responsible for operating the state s bulk electricity grid, administering New York s competitive wholesale electricity markets, conducting comprehensive long-term planning for the state s electric power system, and advancing the technological infrastructure of the electric system serving the Empire State. www.nyiso.com 17