[Federal Register Volume 78, Number 212 (Friday, November 1, 2013)]
[Notices]
[Pages 65632-65634]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-26090]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
[Docket No. AD13-7-000]
Centralized Capacity Markets in Regional Transmission
Organizations and Independent System Operators; Notice Allowing Post-
Technical Conference Comments
On September 25, 2013, the Federal Energy Regulatory Commission
(Commission) conducted a technical conference to consider how current
centralized capacity market rules and structures in the regions served
by ISO New England Inc. (ISO-NE), New York Independent System Operator,
Inc. (NYISO), and PJM Interconnection, L.L.C. (PJM) are supporting the
procurement and retention of resources necessary to meet future
reliability and operational needs.\1\
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\1\ While the Commission recognizes that other regions are
considering similar issues, the technical conference focused solely
on the centralized capacity markets in the ISO-NE, NYISO and PJM
regions. Thus, post-technical conference comments should be focused
on those three regions as well.
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All interested persons are invited to file post-technical
conference comments on any or all of the questions listed in the
attachment to this Notice. Commenters need not address every question.
Commenters are also invited to rely on or cite to testimony that was
previously filed in this docket and the technical conference transcript
in their comments. These comments must be filed with the Commission no
later than 5:00 p.m. Eastern Standard Time (EST) on Monday, December 9,
2013.
For more information about this Notice, please contact:
Shiv Mani (Technical Information), Office of Energy Policy and
Innovation, Federal Energy Regulatory Commission, 888 First Street NE.,
Washington, DC 20426, (202) 502-8240, [email protected]:
Kate Hoke (Legal Information), Office of the General Counsel, Federal
Energy Regulatory Commission, 888 First Street NE., Washington, DC
20426, (202) 502-8404, [email protected].
Dated: October 25, 2013.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
Post-Technical Conference Questions for Comment
1. Role of Capacity Markets and Definition of the Capacity Product
Panelists discussed the definition of the capacity product and, in
particular, the relationship between the capacity and energy and
ancillary services markets, both today and in the future as electric
system needs change. In particular, panelists addressed the importance
of properly defining the capacity product, and whether additional
capacity products should be defined to recognize future system
operational needs. Some favored retention of the current design,
procuring a single capacity product focused on meeting basic resource
adequacy requirements, with any operational attributes needed to meet
system requirements procured in the energy and ancillary services
markets. Others favored an approach that would procure differentiated
products in capacity markets, incorporating attributes that meet
specific operational needs. In addition, panelists discussed how
different categories of resources (traditional generation, new
resources vs. existing resources, demand response, energy efficiency,
distributed generation, etc.) should be valued and accounted for in
centralized capacity markets.
When procuring a single capacity product, as under current
market designs, are there certain fundamental performance standards
that capacity resources should be required to meet in the delivery year
to ensure resource adequacy? Should any such requirement change
depending on the type of resource (traditional generation, new
resources vs. existing resources, demand response, energy efficiency,
distributed generation, etc.)?
Should existing capacity products be modified to reflect
various operational characteristics needed to meet system needs? If
there is a need for additional capacity products, how should those
products be defined and procured in light of the current one day in ten
year resource adequacy approach?
Alternatively, if it is more appropriate to rely on energy
and ancillary services markets to obtain needed operational
characteristics, how can market participants and regulators be
confident that resources capable of providing such ancillary services
will be available in future periods? To what extent are the existing
categories of ancillary services adequate to meet current and future
operational needs without a forward market?
What improvements are needed in how centralized capacity
markets determine qualification as a capacity resource? Do the
requirements to participate in the centralized capacity markets
accommodate all resources (whether supply-side, demand-side, or
imports) that are technically capable of providing the traditional
forward capacity product?
As changes in technology and markets drive new system
needs, are modifications needed to existing methods for determining
resource adequacy requirements (i.e., the reserve margins centralized
capacity markets are designed to procure)?
What is the role(s) of centralized capacity markets?
Should the centralized capacity markets function as a mandatory market
for procuring capacity or a residual market that entities only need to
use to meet their resource adequacy obligations that they cannot
otherwise meet through self-supply?
2. Accommodating State Policies and Self-Supply by Load Serving
Entities
As discussed at the technical conference, States have policies to
maintain resource adequacy and procure specific resources to meet
environmental objectives. In addition, load serving entities are often
interested in supplying their own resource adequacy requirements; some
load serving entities (LSEs) have suggested that current centralized
capacity market designs do not allow them to do so effectively.
Incorporating States' policies and LSE preferences in the design of
capacity markets has raised challenges for the Commission in ensuring
the integrity of its wholesale markets.
In what ways do the current centralized capacity market
designs facilitate, or hinder, the ability of market participants to
enter into arrangements to supply their own resource adequacy
requirements? Should the Commission consider changes to the current
capacity market designs to facilitate these arrangements? How would any
potential changes impact capacity market prices paid by LSEs and the
price signals provided to capacity resources?
Some panelists suggested other potential modifications to
the existing centralized capacity markets to accommodate self-supply
and/or state policies, including limited or resource
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class-specific exemptions from buyer-side mitigation rules, or
offsetting reductions in the amount of capacity procured in the
centralized capacity market. What are the advantages or disadvantages
of such changes? Are there additional potential changes to particular
design elements that should be considered to accommodate self-supply
and/or state policies? How would any potential changes accommodate the
long-term price signals that several panelists argued are necessary for
capacity investment?
PJM offers LSEs the alternative to opt out of its capacity
auction by using the Fixed Resource Requirement (FRR) option. Should
such an alternative be offered in other eastern Regional Transmission
Organization (RTO)/Independent System Operator (ISO) centralized
capacity markets? Given that the FRR option was originally developed to
address a narrow set of circumstances facing the PJM region and its
market participants at that time, would modifications to this
alternative be appropriate to meet the needs of regions and market
participants today? For example, are there changes to the current FRR
option that could be adopted to allow increased flexibility for
entities looking to partially self-supply their capacity requirements
while preventing adverse impacts on the competitiveness of the market?
3. Market Design Elements
Throughout the technical conference, comparisons of the RTO/ISO
capacity markets and market design elements were made, including
whether there is a need for consistency in the approach to capacity
markets across the eastern RTOs/ISOs and the interaction of the
capacity market with other RTO/ISO markets. Panelists suggested that
consistent approaches with respect to some design elements could
improve the ability of market participants to participate in multiple
markets.
Slope of demand curve. A number of panelists commented
that a downward-sloping demand curve is preferable to a vertical demand
curve. What are the advantages and disadvantages of a sloped demand
curve versus a vertical demand curve? What are the key design criteria
appropriate to consider in establishing the slope of the demand curve
in each of the eastern RTO/ISO centralized capacity markets?
Derivation of Resource Adequacy Requirements. Whether
using a sloped or vertical demand curve, RTOs/ISOs must attempt to
accurately assess future capacity needs in order to ensure resource
adequacy in the delivery year. Are there improvements to the derivation
of an RTO/ISO's resource adequacy requirement that would improve the
functioning of its capacity market? How do differences in the
derivation of resource adequacy requirements across the RTOs/ISOs
impact the markets? For RTOs/ISOs with three-year forward markets,
should the RTO/ISO procure 100 percent of its resource adequacy
requirement three years in advance of the delivery year, or is there a
portion of the resource adequacy requirement that can be reliably
procured closer to the delivery year? What are the advantages and
disadvantages of procuring a portion of the resource adequacy
requirement closer to the delivery year?
Derivation of Net Cost of New Entry (CONE). Panelists did
not focus extensively on the derivation of Net CONE, although it was
discussed in the staff white paper. Are there improvements to the
derivation of Net CONE that would improve the functioning of capacity
markets? How do differences in the derivation of Net CONE across the
RTOs/ISOs impact the markets?
Length of forward period. Panelists debated the merits of
a longer or shorter forward period in centralized capacity markets.
Some argued that a longer forward period can aid in managing
retirements; others argued that a shorter forward period facilitates
bilateral contracting. What are the advantages, disadvantages and
related considerations that may support longer or shorter forward
periods? Should the length of the forward period vary for different
categories of resources (traditional generation, new resources vs.
existing resources, demand response, energy efficiency, distributed
generation, etc.)?
Length of commitment period. Commitment periods also vary
by RTO/ISO and by resource-type. Is there an ideal length of the
commitment period? Should the length of commitment period vary for
different categories of resources (traditional generation, new
resources vs. existing resources, demand response, energy efficiency,
distributed generation, etc.)? Does the length of the commitment period
impact the ability and willingness of buyers and sellers to enter into
bilateral contracts? How do differences in commitment periods across
the RTOs/ISOs impact the markets?
Zones. Some panelists at the technical conference asserted
that capacity market zones are not sufficiently granular and do not
change often enough to reflect important market and system changes. Are
there advantages or disadvantages associated with increasing the
granularity of capacity zones? If so, what are they? What are the
challenges, advantages or disadvantages of a dynamic approach to
establishing capacity zones?
Coordination of transmission planning and capacity market.
Price signals in the capacity markets also provide information to
transmission planners to the extent that transmission may substitute
for capacity resources. How can investment in capacity and transmission
planning be better coordinated? Should the capacity market planning
process and transmission planning process use common assumptions and
common planning horizons?
Retirement notice. What role do retirement and mothballing
decisions and notification play in the operation of the eastern RTO/ISO
centralized capacity markets? Is there an ideal approach to retirement
or mothballing notification? What is the impact of different retirement
or mothballing notice procedures across the eastern RTOs/ISOs on the
market, resource adequacy and reliability?
4. Regulatory Certainty
Several panelists stated the importance of regulatory certainty in
achieving capacity market stability. Regulatory certainty reduces risk
and thereby lowers barriers to entry in capacity markets. Conversely,
some panelists identified significant market design issues that, if
resolved, could improve capacity market efficacy. While recognizing
that regional differences may be necessary, some panelists suggested
that a minimum level of best practices across the three eastern RTO/ISO
centralized capacity markets also would lead to greater regulatory
certainty and provide inter-regional benefits.
How should the Commission strike a reasonable balance in
adopting market rule changes when necessary without creating undue
regulatory uncertainty?
What are the advantages and disadvantages of an RTO/ISO
regularly revisiting certain market design elements, such as NYISO's
triennial reset of its capacity demand curve?
5. Next Steps
Conference panelists indicated that further direction from the
Commission could help to inform the development of appropriate eastern
RTO/ISO centralized capacity market design elements in the future.
What Commission action would be an appropriate next step
with respect to those markets?
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Are there outstanding issues or questions raised by, but
not fully discussed at, the conference that should be considered in
this proceeding?
Are there other issues that, if addressed, would help the
centralized capacity markets ensure resource adequacy in a just and
reasonable and not unduly discriminatory manner (e.g., enhancements to
the energy and ancillary services markets) that should be considered by
the Commission in another forum?
[FR Doc. 2013-26090 Filed 10-31-13; 8:45 am]
BILLING CODE 6717-01-P