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2009 State of the Market Report

Market Performance

E.

Price Volatility Make-Whole Payments

The Midwest ISO introduced the PVMWP along with ASM to ensure adequate cost recovery in the real-time for resources offering dispatch flexibility. The payment ensures that suppliers responding to the Midwest ISO’s prices and following its dispatch signals in real time are not harmed by doing so. The payment should, therefore, eliminate a generator’s incentive to be inflexible. The PVMWP consists of two separate payments: a DAMAP and a Real Time Operating Revenue Sufficiency Guarantee Payment (“RTORSGP”).

The DAMAP is paid to a qualified resource committed in the day-ahead and following a real- time dispatch signal below their day-ahead schedule. If they settle at a real-time LMP or Marginal Clearing Price (“MCP”) that reduces their margin, they are eligible for a make-whole payment. This ensures that the resource will be better off by being flexible and responding to the real-time price signals. The RTORSGP is paid to a qualified resource that is dispatched above its day-ahead schedule and where the real-time hourly LMP ends up below its as-offered costs. Figure 44 shows total PVMWP payments in 2009.

Figure 44: Price Volatility Make-Whole Payment 2009

$ Millions

$10 $9 $8 $7 $6 $5 $4 $3 $2 $1 $0

Real Time Operating Revenue Sufficiency Guarantee Payment Day Ahead Margin Assurance Payment

Jan

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