APRIL 30, 2013 - RC/MC MEETING

ISO New England Staff

Winter 2013/2014

Issues and Proposed Solutions

Fuel Dependence Risk

Presentation Overview

• Review the problem to be solved and the objective

• Consolidation of submitted proposals

• ISO took feedback provided by the Participants and developed a proposal in four parts1. Procurement of Oil2. Procurement of Dual Fuel3. Procurement of Demand Response4. Market Solutions

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Review of the Problem Statement• Key issues affecting near- and long-term risks to power system

reliability and efficiency have introduced fundamental challenges that must be addressed.

• These challenges are dominated by the risks associated with the region’s steadily increasing dependence on natural gas supply and transportation infrastructure for power system operations.

• Risks are further amplified by the diminished operating performance of a portion of the fleet that, while infrequently operated, makes up over 20% of the installed capacity and provides critical fuel diversity required to respond to natural gas supply contingencies.

• Infrequently used oil-fired generation fleet held only a portion (less than a third) of potential oil storage capacity last winter.

Objective• Winter 2012/13 system conditions could have been much

worse. – Weather conditions were not as severe as must be assumed for winter

operations (it was not particularly cold, and load was well below historic system peak).

• The ISO’s objective is to obtain the incremental energy needs to secure reliable system conditions this winter if severe weather occurs, target timeframe is December, January and February.

• Based on ISO Studies, the identified gap ranges from 1.9 to 2.6 million barrels of oil (1.1 GWh to 1.5 GWh)

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Consolidation of Proposed Solutions

• 20 Proposals were originally submitted by Participants, including 1 from the ISO

• Participant led teams, generally reduced these into:

– RFP/Procurement Proposals for• Increase Fuel Oil Inventory• Demand Response

– Dual Fuel Capabilities

– Market Enhancement Proposals

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Current Proposal in Four Parts

• In consideration of Participant feedback, ISO has developed four unique elements of the current proposal and will present each in detail in the following order

1. Procurement For Single Fuel Oil Generators2. Procurement For Dual Fuel Generators 3. Procurement For Demand Response4. Market Solutions

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WINTER 2013/2014

Additional Review of the Needs Assessment

Gas Availability vs. Temperature

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02,0004,0006,0008,000

10,00012,00014,000

0 10 20 30 40 50 60

Gene

ratio

n By

Nat

ural

Gas

Fire

d (M

W)

Temperature HE1800 (Deg F)

Actual Gas Generation vs. Temp (excl Mys 8 & 9)Review of Winter 2012/13 Historical

Assumed Maximum Gas-Only at HE 1800 Jan 21 to Jan 25

TuesdayMonday

Wednesday

Thursday Friday

~ 3000 MW Gas-Capable Dual-Fueled

~ 9700 MW Gas Only

0

500

1000

1500

2000

2500

3000

Gene

ratio

n (M

W)

1/20 (Sun) 1/21 1/22 1/23 1/24 1/25 1/26 (Sat)

Generation by Dual-Fueled Units - Showing When Switched to Distillate

Total Oil Generation from Dual Fueled Total Dual-Fueled Fleet Generation

Data for Week of 1/20 – 1/26

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    Natural Gas   Distillate Temperature Actual

DateMA_natgas1

($/MBtu)MA_natgas2

($/MBtu)MA_natgas3

($/MBtu) No2 ($/MBtu)HE 1800

(Deg F)Gas Generation

(MW)1/20/2013 $12.38 $11.80 $12.68 $22.15 41 4,4071/21/2013 $12.38 $11.80 $12.68 $22.15 24 6,6931/22/2013 $12.38 $11.80 $12.68 $22.15 17 5,8451/23/2013 $21.21 $20.86 $20.76 $22.19 11 5,6611/24/2013 $31.27 $31.76 $30.62 $22.19 15 4,7051/25/2013 $34.38 $32.59 $33.63 $22.33 20 3,4881/26/2013 $14.65 $14.75 $15.25 $22.11 19 4,942

April 17th Follow Up

• 2003/2004 Temperature Assumption– Coldest winter in last 10 years– Correlates to 90/10 assumption

• Assumptions for natural gas generator reductions– Based on ICF created spreadsheet design gas day assumptions– Entry conditions based on operational observations– Linear interpolation based on simplistic approach

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Scenario 1 Gas AnalysisScenario 1 assumptions:Distrigas – 50% Canaport – 50%Sable Island -150,000 Dth/dDeep Panuke – 200,000 Dth/dTGP,AGT,IROQUOIS-100%PNGTS – 200,000 Dth/

Reference - Economic Dispatch - 90/10 Forecast 2013/14

Total Gas Pipeline and Supply Capability 5,004

(Minus) Firm Demand by Gas Utilities 4,501

(Equals) Gas Grid Capability to Serve Electric Sector Demands (Surplus or Deficiency) 503

(Minus) Electric Sector Demand (from ISO-NE Scenarios) 1,655

(Minus) Fuel Reserve Margin 0

(Minus) Pipeline Maintenance and/or Outages 0

(Equals) Remaining Gas Grid Capability (Surplus or Deficiency) (1,152)

MW Equivalent (Surplus or Deficiency) (6,000)

Scenario 2 Gas Analysis

Scenario 2 assumptionsDistrigas – 35%Deep Panuke – 0%Sable island – 200,000 Dth/dCanaport-0%TGP,AGT,IROQUOIS-100%PNGTS-200,000 Dth/d

Reference - Economic Dispatch - 90/10 Forecast 2013/14

Total Gas Pipeline and Supply Capability 4,479

(Minus) Firm Demand by Gas Utilities 4,501

(Equals) Gas Grid Capability to Serve Electric Sector Demands (Surplus or Deficiency) 58

(Minus) Electric Sector Demand (from ISO-NE Scenarios) 1,655

(Minus) Fuel Reserve Margin 0

(Minus) Pipeline Maintenance and/or Outages 0

(Equals) Remaining Gas Grid Capability (Surplus or Deficiency) (1,597)

MW Equivalent (Surplus or Deficiency) (8,320)

April 17th Follow Up

• Why Oil?– Provides a strategic fuel reserve in the event of an abnormally cold

winter– Least market impact

• Effect of market initiatives– Timely implementation for 2013-2014– Reserve initiatives address different concerns– Procuring low end of 1.9 - 2.6 million bbl scale

• Methodology two review– Focused on incremental procurement based on additional gas

reductions due to temperature differential between 2003/2004 and 2012/2013

– All non - gas supply resources assumed unchanged from 2012/2013

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