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2009 State of the Market Report

Executive Summary

around Lake Erie being discussed by the ISOs through the Broader Regional Markets Initiative should address both efficiency and manipulation concerns with the current system.

  • 6.

    Improve the real-time operation of the system by:

    • a)

      Optimizing the use of the load offset to improve the Midwest ISO’s management of ramp capability in the near term; and

    • b)

      Reducing the system ramp consumed by interval-to-interval changes in load by improving the short-term load forecast (“STLF”) used by the real-time market.

These changes will allow the system to satisfy the fluctuating demands on the system while ramping generation up and down more smoothly. This will reduce price volatility and improve the efficiency of the dispatch of generation in the real-time market.

  • 7.

    Improve congestion pricing and FTR funding by:

    • a)

      Discontinuing its constraint relaxation procedure and use the marginal value limits to set the LMPs when a transmission constraint is unmanageable;

    • b)

      Discontinue the modeling of radial constraints in the day-ahead market; and

    • c)

      Establish criteria for determining when the Midwest ISO should accept the responsibility to secure low voltage transmission facilities.

These changes will allow prices to efficiently reflect the true congestion on the transmission network, while eliminating inefficient congestion costs.

  • 8.

    Improve the performance of the spinning reserve market by:

    • a)

      Improving the consistency between the reliability requirement for spinning reserves and the market requirement; and

    • b)

      Allowing the spinning reserve penalty price to set the price in the spinning reserve market (and be reflected in energy prices) during spinning reserve shortages by not relaxing the requirement.

Although the spinning reserve market has generally performed well in 2009, these changes will improve the dispatch and pricing of the market during shortage conditions.

9.

Evaluate the formula for the regulation penalty price to ensure that it accurately reflects the costs of committing peaking resources in the Midwest ISO.

Improved scheduling and settlement rules around Lake Erie would substantially reduce loop flows, increase efficiency, and eliminate inequitable cost transfers.

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