Barker, Dunn & Rossi 1

Bilateral Contract and Settlement Market Rules for CMS Phase I

Presented to

NEPOOL Markets Committee

January 23, 2001

Barker, Dunn & Rossi 2

Drafting Principles

CMS Phase I Rules (Contracts & Settlements) drafted using Sept, 2000 draft of “End-State” CMS/MSS Rules.

Cross references to RNA used where possible

All Settlements Calculations contained in single section

All Bilateral Contracts contained in single section

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Scope of Presentation

Overview of Rules Bilateral Contracts – Section 4

Settlements Calculations – Section 6

Numerical Examples

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Overview of Rules

Bilateral Contracts and Settlement Treatment

Real-Time Market Settlements

NCPC Calculations NCPC Rules will be included when finalized

FCR Settlements

Marginal Loss and Congestion Revenue

Inadvertent

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Types of Bilateral Contracts

Relevant sections Section 4.2 covers basic rules and timelines

Types Unit, System, Obligation Transfer, Load Asset Contract

and External (ICAP Only) Unit Contract must specify Location System Contract must specify Location Obligation Transfer Contract must settle where actual load

obligation resides Above Continue to be financial instruments only External must link with Supply Offer or Demand Bid at

External Node

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Bilateral Contract Submittal

Section 4.3 describes submittal process

Appendix-4A sets out content requirements

Submittal similar to today except: No External Contracts other than ICAP

No Pre-Determined Conditions

No Non-Standard Provisions

Linked Dispatchable and Firm Contracts retained

Validation similar to today

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Bilateral Contract Settlement Treatment

Section 6.3 describes settlement treatment Settlement treatment similar to today except

Location specific for Energy

Seller incurs an increased financial obligation for Unit, System, Obligation Transfer and Load Asset (Operating Reserve) Contracts

Seller incurs a reduction in financial obligation for Load Asset (Energy) Contract

System and Obligation Transfer Contracts remain dispatchable

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Real-Time Settlements

Sections 6.4, 6.5 and 6.6

Settlement Quantities

Supply Obligation Payments

Settlement Obligation Payments

Net Settlements

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Real-Time Settlement Quantities

Real-Time Base Supply Obligation and Base Settlement Obligation quantities for Energy as submitted by Assigned Meter Reader

Electrical Load calculated for External Nodes, Nodes and Load Zones.

Real-Time Ancillary Service Supply Obligation based on designated amounts

Schedule changes at External Nodes accounted for

Dispatchable Loads pay Nodal, all other Loads pay Zonal

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Real-Time Supply Obligation Payments

Energy Settlements based on Nodal Prices

Ancillary Service Settlements based on A/S Clearing Price

Unit Contract Transactions included

Load Asset Transactions (Reserve) included

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Real-Time Settlement Obligation Payments - Energy

Payments from Participants based on Settlement Obligation as modified for Bilateral Transactions

Energy Settlements based on Locational Prices Nodal for Dispatchable Load

Zonal for all other Load

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Real-Time Energy Settlement - Examples

Examples Energy Settlement with Unit Contract

Energy Settlement with System Contract

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Real-Time Energy Settlement – Unit Contract Example

400 Mws400

Mws

Generator Load

50% UC Sale at Zone ANode A CP = $30

Zone A = CP = $35

Gen Settlements at Zone A

(-200 x 35) = -$7000

Load Settlements at Zone A

(+200 x 35) = +$7,000

(-400 x 35) = -$14,000

Gen Settlements At Node A:

(400 x $30) = $12,000

Note: $2,000 ($14,000 - $12,000) excess collected = Congestion Cost

Gen Supply Obligation at Node A = 400

Gen Supply Obligation at Zone A = -200

Load Supply Obligation at Zone A = 200

Load Settlement Obligation at Zone A = -400

-$7000

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Real-Time Energy Settlement – System Contract Example

400 Mws400

Mws

Generator Load100 MW System Contract Sale at Zone A (Gen is seller)

Node A CP = $30

Zone A = CP = $35

Gen Settlements at Zone A

(-100 x 35) = -$3500

Load Settlements at Zone A

(-300 x 35) = -$10,500

Gen Settlements At Node A:

(400 x $30) = +$12,000

Note: $2,000 ($14,000 - $12,000) excess collected = Congestion Cost

Gen Supply Obligation at Node A = 400 MWs

Gen Settlement Obligation at Zone A = -100 MWs

Load Settlement Obligation at Zone A = (-400 + 100) = -300

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Real-Time Energy Settlement – Obligation Transfer Contract Example

400 Mws400

Mws

Generator Load50% Obligation Transfer Contract – Gen is SellerNode A CP = $30

Zone A = CP = $35

Gen Settlements at Zone A

(-200 x $35) = -$7,000

Load Settlements at Zone A

(-200 x $35) = -$7,000

Gen Settlements At Node A:

(400 x $30) = +$12,000

Note: $2,000 ($14,000 - $12,000) excess collected = Congestion Cost

Gen Supply Obligation at Node A = 400 MWs

Gen Settlement Obligation at Zone A = (-400 x .5) = -200 MWs

Load Settlement Obligation at Zone A = (-400 – (-400 x.5)) = -200 MWs

Note: Must Settle at Zone A

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Net Monthly Settlement

Section 6.16

Just a summation of all Trading Interval calculations performed for a Billing Period

Adjusted Net Interchange calculation retained (Section 6.15). Posturing and EET’s

Supply Obligation payments and Settlement Obligation payments netted for each Participant.

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Settlement Obligation Payments – Ancillary Services

Sections 6.7 and 6.8 A/S Clearing Prices calculated based on Co-optimized

results. Payments from Participants based on sum of Real-

Time Supply Obligation payments made to Participants AGC and Operating Reserve

AGC payment based on REG share of total AGC requirement Operating Reserve payment based on MW share of total Operating

Reserve Requirement

System Contracts and Obligation Transfer Contracts included as an adjustment to MW Settlement Obligations

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Marginal Loss Revenue

Section 6.13.1

Calculated based on comparing for each Trading Interval: Sum of Supply Obligations payments (less Congestion

Component portion) and

Sum of Settlement Obligation payments (less Congestion Component portion)

Surplus, if any, is allocated in proportion to total Electrical Load (Nodal + Zonal +External Node).

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FCR Settlements – Target FCR Payments

Section 6.12 FCR Auction to be developed Payments to FCR Holders made if:

Congestion Component of Locational Price of specified destination Location is greater than Congestion Component of Locational Price of specified origin Location

Payment based on MW amount of FCR and difference in Congestion Components of Locational Prices.

Payments from FCR Holders collected if: Congestion Component of Locational Price of specified destination

Location is less than Congestion Component of Locational Price of specified origin Location

Payment collected based on MW amount of FCR and difference in Congestion Components of Locational Prices

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Actual FCR Payments – Revenue Adequacy

Section 6.13.2 Actual FCR Payments equal Target FCR

Payments if Congestion Revenue is adequate

Revenue adequacy calculated on a monthly basis by calculating Congestion Revenue collected in Real-Time

If Revenue Collected >= Target FCR Payments, Revenue is adequate, excess added to Congestion Revenue Fund

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FCR Settlements – Revenue Adequacy – Cont.

If Revenue Collected + Congestion Revenue Fund balance < Target FCR Payments, then Ratio down Target Payments to match

Congestion Revenue Fund balance at end of year used to make FCR Holders whole if Actual FCR Payments less than Target

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Inadvertent

Section 6.14

Inadvertent Settlements remain the same as today except: Inadvertent Mwhrs are priced out for each

Trading interval at each External Nodes at the External Node Price.