ISO-NE moves ahead with plan for 5-minute settlement
Sub-hourly approach originally suggested by FERC NOPR
ISO-NE and the New England Power Pool asked FERC last week to approve sub-hourly settlements for the ISO's real-time energy market, saying the change would align settlement with the current five-minute energy and reserve pricing intervals. The changes would boost the incentives for market participants to follow dispatch instructions and enhance the accuracy of real-time energy and reserves compensation, the ISO said.
Both of those were goals of a NOPR on five-minute settlements FERC issued last year, it added. While the markets are run and priced in five-minute intervals, settlement happens on an hourly basis, it reminded.
Hourly settlement means the fluctuating value of energy and reserves throughout an hour is not necessarily reflected in the amounts paid to participants for providing those products. When the value of energy in a five-minute interval is not reflected in the compensation, then the participants might lack sufficient economic incentive to increase output and provide more energy when needed, the ISO said.
Under a worst-case scenario, that could impact reliability. If a generator is paid in those five-minute intervals, it will definitely have the incentive to respond to the ISO's instructions, it added.
ISO-NE wants to make the change now, before the NOPR becomes a final rule, due to the priority it and stakeholders put on improving overall price formation, it said.
And implementing the changes before the pay-for-performance rules go into effect in June 2018 is also important, it added, as suppliers' responses during capacity-scarcity conditions will be measured on a five-minute basis using the energy quantities calculated for use in the five-minute, real-time energy market settlement.
The ISO asked FERC to make the sub-hourly settlement rules effective March 1, 2017. It asked the commission to issue an order on the filing by Aug 2.
While the rules will not be implemented until next year, they require significant changes to the ISO's settlements software and hardware and the organization needs as much as time as possible to get that work done after FERC issues an order. The changes also could require upgrades from market participants as they will have to receive more granular information from the ISO.
ISO-NE already started working on its software and hardware updates but the effort will take a long time and employees, both internal and at stakeholders, need to be trained.
No changes to the pricing method used by the ISO would be needed as it already calculates them for every five-minute interval but the rules would include new quantity inputs for the real-time energy market. The real-time reserves already have an equivalent rule in place so no changes would be needed there, the ISO said.
Two basic methods would be used to calculate the five-minute energy quantities for real-time market settlement: "telemetry profiling" and "flat profiling." Telemetry profiling would be used in the settlement for resources that telemeter output and use data to the ISO in real time, which includes most generators and "dispatchable asset related demand."
The values would be adjusted in the settlement to make sure the sum of the five-minute energy quantity values is equal to the revenue quality meter value for that hour.
Resources that do not telemeter output and congestion to the ISO in real time – load assets, a small amount of generation and external transactions – would have to use flat profiling. The hourly-revenue, quality-meter value for the resource would be equally apportioned over the five-minute intervals for the hour under flat profiling, it added.
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