Vendor Definition of DAM

CommitmentShams Siddiqi, Ph.D.

shams@crescentpower.net(512) 263-0653

October 8, 2007

October 8, 2007 2

Outline of Presentation Problems with Vendor definition of “DAM

Commitment” and its Solution Serious problem but Easy to fix – does not

require any change to the Protocols Problems with using a single FIP/FOP

percentage for both Startup and Minimum Energy caps Minor problem but may require a Protocol

change to fix Missing FOP in Energy Offer Curve cap

Minor problem requiring Protocol change

October 8, 2007 3

Definition of “DAM Commitment” Vendor definition is “any award of Energy

Offer Curve even if that offer is not part of a Three-part Offer”

Correct definition is “award of Three-part Offer (eligible for Make-whole Payment)” Not defined explicitly anywhere, but correct

definition implied in Protocols No change in Protocols or Requirements docs

required for correct definition – however, may want to add as note in Requirements doc

October 8, 2007 4

Protocols on “DAM Commitment” 4.4.9.1 (3) A QSE may submit an Energy Offer Curve

without also submitting a Startup Offer and a Minimum-Energy Offer for the DAM and during the Adjustment Period, but only Three-Part Supply Offers are used in the RUC process. A QSE that submits an Energy Offer Curve without also submitting a Startup Offer and a Minimum-Energy Offer is considered not to be offering the Resource into the RUC, but that does not prevent the Resource from being committed in the RUC process like any other Resource that does not submit an offer in the RUC.

4.4.9.3 (5) For any hour that is a RUC-Committed Interval or a DAM-Committed Interval for a Resource, a QSE for that Resource may not change an Energy Offer Curve, except as specified in (a) and (b) below:

Linked Energy and Ancillary Service offers are only allowed with Energy Offer Curves (and not with DAM Energy-only Offers)

October 8, 2007 5

Problems of Vendor definition Say a unit is in the money and you want the DAM

to choose the last 50MW as either Energy or AS (whichever is more profitable)

If QSE submits Energy Offer Curve (EOC) with linked AS offers and QSE is awarded in DAM, QSE cannot change the EOC (so QSE’s 500MW unit would be offered at cap)

Only way around this is to offer entire unit in DAM and buy back 450MW This is problematic because – (1) it has large credit

implications; (2) may be perceived as a “wash trade”; and (3) may have tax implications for some

October 8, 2007 6

Solution to “Commitment” Issue Adopt the correct definition of DAM

Commitment: “Award of Three-part Offer that is eligible for Make-whole Payment”

October 8, 2007 7

Single FIP/FOP % Problem 4.4.9.2.1 Startup Offer and Minimum-

Energy Offer Criteria (f) Percentage of FIP to the extent that the

startup and minimum energy will be supplied by gas to determine the offer cap; and

(g) Percentage of FOP to the extent that the startup and minimum energy will be supplied by oil to determine the offer cap.

Coal unit could startup using Oil but run using coal

Solution: Separate FIP/FOP percentages for Startup and Minimum Energy

October 8, 2007 8

Missing FOP in Energy Offer Cap 4.4.9.3.3Energy Offer Curve Caps for

Make-Whole Calculation Purposes Only has FIP in calculating Caps; but

FIP/FOP percentage specified when submitting Energy Offer Curves

Solution: Include “Fuel Index Price (FIP) or Fuel Oil Price (FOP), as specified in the Energy Offer Curve” language in 4.4.9.3.3 similar to language in Mitigated Offer Cap 4.4.9.4.1