ISO New England Load Response Update

1
ISO New EnglandLoad Response Update
Craig Kazin ISO New England Inc. Massachusetts
Electricity Restructuring Roundtable March 23,
2001
2
2001 Summer Capacity Situation

• ISO New England forecasts adequate generating
  capacity to meet summer 2001 projected peak load
  and operating reserve requirements
• NEPOOL Reference Forecast Peak Load is 23,650 MW
• Projected net generating capacity is about 27,100
  MW at summer peak

3
Need for Market-Based Initiative

• Although there is adequate generating capacity
  for this summer, the need to provide incentives
  to reduce consumption remains.
• Growing consumption causing spikes in demand
• Air quality a continuing challenge
• Possible Winter 2003 natural gas pipeline
  capacity problems
• Developed the Load Response initiative, voluntary
  effort to promote conservation through price
  incentives
• Initiative focuses on large industrial and
  commercial users

4
Objectives

• Reduce energy demand by 300-600 MW
• Equivalent to 50,000-100,000 homes
• Enhance system reliability during peak periods
• Make New Englands energy market more robust by
  giving large users more control over their energy
  use and costs
• Save money for participants Minimum 30 million
  annually
• Help control wholesale market price fluctuations
• Cut air pollution by reducing use of older, less
  efficient plants
• 280 tons nitrogen oxide (NOx)
• 200 tons sulfuric oxide (SOx)
• 230 Ktons carbon dioxide (CO2)

5
How the Pilot Program Works

• NEPOOL members to enter into agreements with
  large users, subject to state regulatory policy,
  no matter who their current supplier is
• Users would be equipped with Web-based software
  enabling them to monitor the hourly price of
  electricity users can reduce their consumption
  if the price rises
• Users are compensated for the energy they do not
  use paid by the NEPOOL member that provides
  their service
• Energy savings will enable ISO New England to
  reduce the reserve capacity it currently requires
  (about 3,500 MW), producing cost savings

6
Reliability Component Details

• Enrolling entity receives daily compensation for
  availability based on Thirty-Minute Operating
  Reserve (TMOR) prices
• If called, enrolling entity will receive
  compensation based on Energy Clearing Price (ECP)
  for actual reduction in load
• Consumer compensated based on contract with
  enrolling entity
• Reduces overall burden on the generating system

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Market Component Details

• Consumer chooses when to reduce load based on
  forecast/actual ECPs
• Enrolling entity receives compensation based on
  ECP for the hours in which reduction occurs
• Consumer is compensated based on contract with
  enrolling entity
• Reduced demand will restrain the overall markets
  prices

8
Funding for Compensation

• Payments occur outside of Market Settlement
  System for simplicity now, and with future CMS
  changes
• Total of payments made will be assessed to NEPOOL
  participants based on electrical load share

9
Other Details of the Program

• No adjustments to asset meter reads
• No reallocation of load
• No calculation of lost revenues necessary
• No other payments
• Supplier(s) either avoid purchase at ECP or get
  credit for sale at ECP

10
Winter Pilot Program

• Six NEPOOL participants
• 14 enrolled customers
• Anticipate initial test in late March
• Customer response times lt 30 minutes
• Customer load reduction measured
• Communications systems
• Pilot program will determine systems technical
  capability

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Full-Scale Program This Summer

• Reliability component approved by NEPOOL on
  February 1
• Market component approved by NEPOOL March 2
• NEPOOL filed March 19
• FERC has 60 days to review proposal
• Planned June 1 start

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Future Enhancements

• Commitment to review program after summer season
• Identify types of interruptions
• Identify frequency of interruptions
• Analyze air quality impacts
• Solicit comments from all participants
• Discuss options for increasing participation in
  program

13
Conclusions

• Load Response program an effective and
  cost-efficient way to promote voluntary energy
  conservation
• Potentially a national model for demand-side
  steps
• Harbinger of further demand-side participation