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2009 State of the Market Report

Market Performance

D.

RSG Cost Study

We conducted a study of RSG cost to quantify the contributions of various factors to real-time RSG costs. The study sought to determine the various causes of RSG commitments and then to compare these cost causation results to actual RSG allocations under the Interim Rate. The study is based on a detailed analysis of individual real-time unit commitments that resulted in RSG

Make-Whole Payments.15 section of the report.

The methodology and results of this study are summarized in this

We first determined whether each individual commitment was made to satisfy system capacity needs or to manage a transmission constraint. Hence, we analyzed two types of commitments: those for “Capacity” and those for “Constraint.” Within these two types of commitments, we then estimated the amount of RSG that may be attributed to 17 types of deviations and the amount that was not attributable to deviations. The cost-causation links are grouped into the following three classes:

  • RSG cost attributed to commitments whose need was not apparent (23 percent). These are labeled as “Need Unknown”. This does not mean the commitment should not have been made. Uncertainties regarding load, unit availability, loop flows, and other issues may have justified these commitments, but we did not have this information.

  • RSG cost attributed to needed commitments that were not deviation-related (19 percent). These commitments may be related to issues such as loop flow or line deratings that require capacity commitment in real time.

  • RSG cost attributed to day-ahead-to-real-time deviations (58 percent), including:

    • 1.

      Eight types of generation and load deviations that currently incur all RSG cost under the Interim Rate allocation (51 percent);

    • 2.

      Seven types of deviations that are explicitly exempt from paying RSG costs under the Interim Rate allocation (6 percent); and

    • 3.

      The two types of deviations that are not explicitly exempt, but that do not incur RSG costs under the Interim Rate allocation – virtual load and wheeled transactions (1 percent).

15

We estimated only the direct effects of various generation and load deviations on real-time RSG costs. Indirect effects were not included in the study.

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