SEPTEMBER 20, 2013 | MARKETS COMMITTEE

Christopher A. ParentCPARENT@ISO-NE.COM | 413.540.4599

Response to FERC compliance obligation on cost allocation for the Winter 2013-14 Reliability Program

Winter 2013-14 Reliability Program Cost Allocation

FERC Order on the Winter Reliability Program requires modifications to cost allocation

“[FERC] find[s] that allocating costs to Real-Time Load Obligation is appropriate in this case, and we will therefore condition our acceptance of the Winter Reliability Program on ISO-NE submitting revised tariff records in a compliance filing that allocate costs to Real-Time Load Obligation. Long-standing cost-causation and benefits/burdens principles provide that costs should be allocated to those who benefit from the incurrence of the costs. As discussed below, ISO-NE proposed the Winter Reliability Program to address generation-related reliability concerns, not transmission-related concerns, through an interim program designed to ensure sufficient energy supply to meet real-time load during the coming winter. Because real-time load is the primary beneficiary, and the primary cost-driver, of the Winter Reliability Program, we find that costs of the Program should be allocated to Real-Time Load Obligation.”

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Cost allocation will change from Regional Network Load to Real-Time Load Obligation

• All costs will be allocated to the sum of Participant’s pro-rata share of the Real-Time Load Obligation (RTLO) minus any RTLO associated to the Dispatchable Asset Related Demand (DARD) pumps– Consistent with RTLO cost allocation for a number of other services,

load from DARD pumps is being excluded

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Proposed changes to cost allocation require settlement and billing timing changes

• Original proposal allocated all Appendix K related costs to monthly Regional Network Load– Regional Network Load are provided to the ISO after each month requiring

payments charged to Regional Network Load to be billed on a one month lag (e.g., January would be billed in March)

• FERC order requires Appendix K related costs (and refunds through penalties) be allocated to Real-Time Load Obligation– Hourly meter data that is used to calculation Real-Time Load Obligation is

received on a two business day lag

• Using Real-Time Load Obligation for cost allocation allows for more accelerated settlement and billing of Appendix K provisions– All items will be billed in the month following the obligation month, rather

than on a one month lag (e.g., January will be billed in February, rather than in March)

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Cost Allocation Charge and Billing Intervals

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* Non-Hourly Service Bill** Hourly Services Bill

• The allocation of any “credits” associated with non-performance will use the same charge interval and billing interval as the associated payment

Payment Category Tariff Reference

Charge Interval

Billing Interval

Oil Inventory Services III.K.8 (a) Monthly Monthly*

Dual Fuel Testing (NCPC) III.K.8 (b) Daily Weekly**

Demand Response Program III.K.8 (c) (i) (ii) Monthly Monthly*

Demand Response Energy III.K.8 (c) (iii) (iv) (v) Hourly Monthly*