March 23, 2007
Judith Whitney
Deputy Clerk of the Board
Vermont Public Service Board
112 State Street, Drawer 20
Montpelier, VT 05620-2701
Re:
Forward Capacity Market Issues
Dear Ms. Whitney:
In a letter to the EEU Service List on March 5, 2007, the Board requested comments on
“two issues left unresolved regarding Vermont’s participation in the Forward Capacity
Market.” VEIC offers here our response to the first of these two issues. We have no
comment at this time on the second issue, regarding the disposition of excess
Transition Period funds.
With respect to the role of VEIC representing demand resources acquired through
Efficiency Vermont in the Forward Capacity Market (FCM) after the Transition Period,
VEIC offers the following comments:

VEIC has unique capabilities to perform this role. It is a member of NEPOOL,
and an Other Demand Resources Market Participant in ISO New England. VEIC
has an established record of participating in ISO New England’s (ISO-NE)
capacity market, having successfully submitted and received Transition Period
capacity payments for Efficiency Vermont capacity savings since these became
available in December 2006.

As an active participant in the development and adoption of rules for the FCM,
VEIC has a thorough understanding of the issues that will need to be addressed
to bid Vermont’s demand resources in the FCM and secure the maximum
resulting value for Vermont ratepayers.

VEIC has already taken the required steps to participate in the FCM following the
expiration of Transition Period. Specifically, we have successfully submitted the
required “Show of Interest” application in time to meet ISO-NE deadline for
participating in the first Forward Capacity Auction (FCA) for the FCM. We would
note that participants who did not register a show of interest by the February 28
deadline will not have an opportunity to participate until the second Forward
Capacity Auction, scheduled approximately 10 months later, and thus will not be
able to obtain capacity payments for that period.

Assuming another entity did qualify as an Other Demand Resources Market
Participant to submit capacity claims on new demand resources provided by
255 S. Champlain Street, Suite 7 Burlington, VT 05401-4894
T: (802) 658-6060 (800) 639-6069 F: (802) 658-1643 www.veic.org
Efficiency Vermont, that entity would be required to submit a qualifications
package, including a Measurement & Verification Plan, under ISO New
England’s new requirements. Those new requirements are already fully
understood by VEIC, because a member of the VEIC management staff was
integral to the design and content of the M & V Plan’s Standards.

Successful completion of the Qualifications Package and the M & V Plan would
be dependent upon working closely with VEIC in obtaining the information
necessary to state accurately the expected New Demand Reduction Values; and
to describe the measurement of savings via direct and indirect methods,
statistical sampling, independent verification, auditing and testing. The
development of an acceptable Qualifications Package by another entity working
with VEIC would involve increased costs and would be inefficient.

VEIC has calculated and is planning to be able to meet the ISO-NE financial
assurance requirements associated with bidding in the FCA.

VEIC recognizes and is planning to be able to take responsibility for penalties
associated with non-performance in delivery of future demand resource capacity
obligations in the FCM.

VEIC appreciates the difficult issues raised by the term of the current Efficiency
Vermont contract (ending 12/31/2008) and the need for bidders in the FCM to
make advance commitments to capacity reductions in subsequent years. We
suggest this problem could certainly be addressed by changes in the term of
appointment for Energy Efficiency Utility entities (e.g., VEIC), as are currently
being discussed by the Vermont Legislature (S. 94). Within the context of the
current short-term contract structure, VEIC would be pleased to work with the
Board and ISO-NE to determine if there is some kind of acceptable assurance
mechanisms to back FCP obligations incurred by VEIC to deliver capacity
beyond the current contract.
Sincerely,
L. Blair Hamilton
Policy Director