FEBRUARY 24, 2015 | NEPOOL MARKETS COMMITTEE
Increasing the Dynamic De-list
Bid Threshold
Jeff McDonald
VICE PRESIDENT, MARKET MONITORING
Background
• The Dynamic Delist Threshold Price (DDT Price) establishes a value
below which existing resources that have chosen to be price takers
in the FCA can opt to leave the auction.
• The DDT Price serves as a threshold below which
– there is sufficient supply relative to the requirement, and
– there is adequate competition that remaining existing resources are not
beholden to a mitigated price or a true “price taker” price.
• Resources that wish to leave the auction at a price below the DDT
Price do not have to submit a delist bid for IMM review.
• Target clearing quantities will price in the FCA near Net CONE,
which is considerably higher than the existing DDT Price.
• Raising the existing DDT Price will reduce the burden of delist bid
submission for those resources already willing to stay in the auction
well beyond the target clearing quantity.
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Existing DDT Price and Progression
• The current DDT Price is $3.94 / kW-mo. and was set using a
formula that reflected the cost of a representative fossil steam
units. This is the type of existing resource most likely to leave
the auction and therefore could be the marginal unit.
• DDT Price will increase over time as the Performance Payment
Rate (PPR) increases
– PPR is $2,000 / MWh until FCA 12, increases to $3,500 for FCA 12 to
FCA 15, and then increases to $5,455 for FCA 15 forward.
– The calculated DDT prices corresponding to these PPR values* are
$3.94, $4.83, and $6.96
* Keeping all other terms constant
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Existing Dynamic Delist Threshold Price
Formula
• Dynamic Delist Threshold Price = Net Going Forward Cost +
Expected Capacity Performance Charge
• Where:
• Net Going Forward Cost is based on a representative fossil
steam unit reviewed by the IMM for FCA8
• Expected Capacity Performance Charge is based on the
expected performance of the fossil steam unit during capacity
scarcity condition hours, relative to their share of system
obligation.
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Proposal
• The DDT Price will be the greater of
– A value between $5.00 / kW-month and $6.00 / kW-month (tbd), or
– The risk-adjusted going forward cost and capacity performance charge
for a characteristic fossil steam unit (as is done today) with system and
market parameters updated as new data become available.
• The PPR value used in the calculation will reflect the
established progression over time.
• Other values used in the calculation will be based on
the original values and updated as necessary to
reflect additional and more recent market data.
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