
[Federal Register Volume 79, Number 206 (Friday, October 24, 2014)]
[Notices]
[Pages 63619-63621]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-25322]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket. No. AD14-14-000]


Price Formation in Energy and Ancillary Services, Markets 
Operated by Regional Transmission, Organizations and Independent System 
Operators: Supplemental Notice of Workshop on Price Formation: Scarcity 
and Shortage Pricing, Offer Mitigation, and Offer Caps in RTO and ISO 
Markets

    As announced in a Notice issued on September 5, 2014, the Federal 
Energy Regulatory Commission (Commission) will hold a workshop on 
Tuesday, October 28, 2014 to commence a discussion with industry on 
scarcity and shortage pricing, offer mitigation, and offer caps in 
energy and ancillary service markets operated by the Regional 
Transmission Organizations and Independent System Operators (RTOs/
ISOs). The workshop will commence at 8:45 a.m. and conclude at 5 p.m. 
and will be held at the Federal Energy Regulatory Commission, 888 First 
Street NE., Washington, DC 20426. This workshop is free of charge and 
open to the public. Commission members may participate in the workshop.
    The agenda and a list of participants for this workshop are 
attached. Those who plan to attend the workshop are encouraged to 
complete the registration form located at https://www.ferc.gov/whats-new/registration/10-28-14-form.aspx. There is no registration deadline.
    The workshop will be transcribed. Transcripts of the workshop will 
be available for a fee from Ace-Federal Reporters, Inc. (202-347-3700 
or 1-800-336-6646). Additionally, there will be a free webcast of the 
workshop. The webcast will allow persons to listen to the workshop but 
not participate. Anyone with Internet access who wants to listen to the 
workshop can do so by navigating to the Calendar of Events at 
www.ferc.gov, locating the technical workshop in the Calendar, and 
clicking on the webcast link. The Capitol Connection provides technical 
support for the webcast and offers the option of listening to the 
meeting via phone-bridge for a fee. If you have any questions, visit 
www.CapitolConnection.org or call 703-993-3100.
    While this workshop is not for the purpose of discussing specific 
cases, the workshop may address matters at issue in the following 
Commission proceedings that are pending: Astoria Generating Company 
L.P. v. New York Independent System Operator, Inc., Docket Nos. EL11-42 
and EL11-50; California Independent System Operator Corporation, Docket 
No. ER14-1386 and ER14-2484; Hudson Transmission Partners, LLC v. New 
York Independent System Operator, Inc., Docket No. EL12-98; Independent 
Power Producers of New York, Inc. v. New York Independent System 
Operator, Inc., Docket No. EL13-62; ISO New England, Inc. and New 
England Power Pool, Docket Nos. EL14-52, ER 14-1050, ER14-2419, and 
ER14-2929; Midcontinent Independent System Operator, Inc., Docket Nos. 
ER14-2156, and ER11-4081; PJM Interconnection, L.L.C., Docket Nos. 
ER14-1144 and ER14-1145; New York Independent System Operator, Inc., 
Docket No. EL07-39; Old Dominion Electric Cooperative, Docket No. ER14-
2242; Seneca Power Partners, L.P. v. New York Independent System 
Operator, Inc., Docket No. EL12-6; and Southwest Power Pool, Inc., 
Docket No. ER15-21.
    Commission workshops are accessible under section 508 of the 
Rehabilitation Act of 1973. For accessibility accommodations please 
send an email to accessibility@ferc.gov or call toll free (866) 208-
3372 (voice) or (202) 502-8659 (TTY), or send a fax to (202) 208-2106 
with the requested accommodations.
    For more information about the workshop, please contact:
    Logistical information: Sarah McKinley, Office of External Affairs, 
Federal Energy Regulatory Commission, 888 First Street NE., Washington, 
DC 20426, (202) 502-8368, sarah.mckinley@ferc.gov.

    Scarcity/shortage pricing: Bob Hellrich-Dawson, Office of Energy 
Policy and Innovation, Federal Energy Regulatory Commission, 888 First 
Street NE., Washington, DC 20426, (202) 502-6360, bob.hellrich-dawson@ferc.gov.


[[Page 63620]]


    Offer mitigation and offer caps: Emma Nicholson, Office of Energy 
Policy and Innovation, Federal Energy Regulatory Commission, 888 First 
Street NE., Washington, DC 20426, (202) 502-8846, 
emma.nicholson@ferc.gov.

    Dated: October 10, 2014.
Kimberly D. Bose,
Secretary.
[GRAPHIC] [TIFF OMITTED] TN24OC14.018

Price Formation in Energy and Ancillary Services Markets Operated by 
Regional Transmission Organizations and Independent System Operators

Scarcity and Shortage Pricing, Offer Mitigation, and Offer Caps 
Workshop

Docket No. AD14-14-000

    October 28, 2014

Agenda

    On October 28, 2014 a second conference will be held to address 
matters of price formation in the energy and ancillary services markets 
administered by the Regional Transmission Organizations (RTOs) and 
Independent System Operators (ISOs).\1\ It will have three areas of 
focus: Scarcity and shortage pricing, offer mitigation and offer caps 
in the RTO/ISO markets. The RTO/ISO markets rely on security 
constrained economic dispatch and locational marginal pricing to ensure 
efficient dispatch of, and compensation to, resources. Ideally, RTO/ISO 
market designs would rely on competitive pressure to ensure that 
resource offers reflect marginal cost. Because the markets are 
imperfect at times (e.g., structural issues, inelastic demand), the 
RTO/ISO tariffs include specific rules to ensure prices remain just and 
reasonable. These rules take the form of market power mitigation, offer 
caps and scarcity pricing. Working together, these rules are intended 
to protect against the exercise of market power while allowing prices 
in the markets to rise in response to predetermined triggers (e.g., an 
operating reserve deficiency) to elicit a market response (e.g., 
generator performance, load response) to support the reliable and 
efficient operation of the market. These rules would ideally reflect 
the value to load of maintaining reliability and avoiding involuntary 
load curtailments.
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    \1\ Price Formation in Energy and Ancillary Services Markets 
Operated by Regional Transmission Organizations and Independent 
System Operators, Notice of Workshop, Docket No. AD14-14-000 (Sept. 
4, 2014).
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    Through this conference and any papers Commission staff may release 
in advance, Commission staff will explore the technical, operational 
and market issues related to shortage pricing, offer mitigation, and 
offer caps.

8:45 a.m.-9 a.m.--Welcome and Opening Remarks
9 a.m.-10:30 a.m.--Panel 1: Goals of Scarcity and Shortage Pricing and 
Performance of Existing Pricing Rules

    Generally speaking, shortage pricing is the method RTOs/ISOs employ 
to price energy and operating reserves during scarcity and shortage 
conditions. Scarcity and shortage prices are intended to achieve two 
primary goals. The first goal of scarcity and shortage pricing is to 
send a short-term price signal to incentivize operation of existing 
resources to help maintain reliability. In the short term, these prices 
should be high enough to induce existing resources to be available to 
the maximum extent possible and to induce imports to offer from 
neighboring areas. The high prices should also signal consumers to 
reduce demand.
    The second goal of scarcity and shortage pricing is to contribute 
to efficient long-term economic entry and exit. When scarcity and 
shortage prices accurately reflect consumers' valuation of avoidance of 
an involuntary load curtailment, the resulting energy and ancillary 
services prices can contribute to efficient long-run market 
participation (entry and exit) by addressing part of the ``missing 
money'' problem.\2\
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    \2\ See, e.g., Johannes P. Pfeifenberger and Kathleen Spees, The 
Brattle Group, and Kevin Carden and Nick Wintermantel, Astrape 
Consulting, Resource Adequacy Requirements: Reliability and Economic 
Implications at 83-84 (Sept. 2013), available at http://www.brattle.com/system/publications/pdfs/000/004/984/original/Resource_Adequacy_Requirements_Pfeifenberger_Spees_FERC_Sept_2013.pdf?1392303166.
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    While scarcity and shortage pricing rules are designed to achieve 
these two goals, in practice, system operator practices and experiences 
may influence how the rules are administered and thus their efficacy.
    Panel 1 will explore how the goals of scarcity and shortage pricing 
are balanced against the operational realities of employing 
administrative pricing rules. The discussion will also focus on the 
following:
    [ssquf] How the definition of a scarcity or shortage event and the 
pricing triggers compare across RTO and ISO markets;
    [ssquf] The frequency and duration of scarcity or shortage events;
    [ssquf] To what extent the frequency and duration of scarcity or 
shortage events support efficient entry and exit;
    [ssquf] How the actions system operators take to avert a scarcity 
or shortage event are reflected in energy and ancillary service prices;
    [ssquf] Whether scarcity and shortage pricing rules and import/
export timing are sufficiently coordinated such that market 
participants can schedule exports and imports efficiently to respond to 
shortage conditions.
    Panelists:
     Matthew White, ISO New England Inc.
     Todd Ramey, Midcontinent Independent System Operator, Inc.
     Robert Pike, New York Independent System Operator, Inc.
     Adam Keech, PJM Interconnection, L.L.C.
     Richard Dillon, Southwest Power Pool, Inc.

10:30 a.m.-10:45 a.m.--Break
10:45 a.m.-12:30 p.m.--Panel 2: Lessons Learned from Existing Scarcity 
and Shortage Pricing Rules

    Panel 2 will explore lessons learned from existing scarcity and 
shortage pricing rules. Possible discussion items could include the 
topics discussed in Panel 1 in addition to any other concerns panelists 
may have. The RTOs/ISOs and the RTO/ISO market monitoring units will be 
given an opportunity to discuss any issues raised by panelists.
    Panelists:
     Joseph Cavicchi, Compass Lexecon, speaking on behalf of 
Electric Power Supply Association.
     Erica Bowman, America's Natural Gas Alliance.
     John Citrolo, PSEG Power.
     Charlie Bayless, North Carolina Electric Membership 
Corporation.
     Joseph Bowring, Monitoring Analytics.

12:30 p.m.-1:30 p.m.--Lunch
1:30 p.m.-3:30 p.m.--Panel 3: Goals of Offer Caps and Market Power 
Mitigation

    Panel 3 will provide the RTO/ISO Market Monitors an opportunity to 
discuss the goals of the current incremental energy offer cap and 
market power mitigation provisions in their respective markets, and to 
provide a performance assessment with respect to those goals. The 
market monitors will be asked to discuss the role the $1,000/MWh offer 
cap plays in both the

[[Page 63621]]

mitigation rules and the shortage pricing rules. The market monitors 
will also be asked to discuss whether: (1) Market power mitigation 
provisions have a material impact on the price formation process; (2) 
the short-run marginal costs estimates that underlie market power 
mitigation provisions sufficiently account for all resource supply 
costs, including opportunity costs; (3) RTO/ISO offer rules provide 
sufficient flexibility for resources to reflect cost changes that occur 
between day-ahead and real-time and across hours in real-time; and (4) 
RTO/ISO rules provide sufficient protection against the exercise of 
market power.
    Panelists:
     Eric Hildebrandt, California Independent System Operator 
Corporation.
     Jeffrey McDonald, ISO New England Inc.
     Shaun Johnson, New York Independent System Operator, Inc.
     Joseph Bowring, Monitoring Analytics.
     Catherine Mooney, Southwest Power Pool, Inc.
     David Patton, Potomac Economics.

3:30 p.m.-3:45 p.m.--Break
3:45p.m.-4:45p.m.--Panel 4: Impacts of Offer Caps and Market Power 
Mitigation

    Panel 4 will focus on the impacts that offer caps and offer 
mitigation have on both buyers and sellers in wholesale markets. 
Discussion will include comments from resource owners about whether the 
current $1,000/MWh offer cap permits them to reflect their costs fully 
in supply bids. Resource owners will also be asked to discuss: (1) 
Whether the RTOs/ISOs permit all of the relevant costs, including 
opportunity costs, to be included in the marginal cost estimates that 
underlie market power mitigation provisions; and (2) whether RTO/ISO 
offer rules permit resources to reflect changes in resource supply 
costs that occur between day-ahead and real-time and across hours in 
real-time. Panelists will be asked to comment on the role that offer 
caps and market power mitigation procedures play in ensuring just and 
reasonable rates. Of particular interest will be the extent to which 
offers capped at some value (like the current $1000/MWh cap) play a 
meaningful role in consumer protection. The RTOs/ISOs and the RTO/ISO 
market monitoring units will be given an opportunity to discuss any 
issues raised by panelists.
    Panelists:
     Joseph Cavicchi, Compass Lexecon, speaking on behalf of 
Electric Power Supply Association.
     Abraham Silverman, NRG Energy, Inc.
     Edward Tatum, Old Dominion Electric Cooperative.
     Jeffrey Nelson, Southern California Edison.
     Charlie Bayless, North Carolina Electric Membership 
Corporation.
     Patrick Connors, WPPI Energy, speaking on behalf of 
Transmission Access Policy Study Group.

4:45 p.m.-5 p.m.--Closing

[FR Doc. 2014-25322 Filed 10-23-14; 8:45 am]
BILLING CODE 6717-01-P


