by Burhan Koc, Portfolio Manager, NYISO & ISO-NE, GDF SUEZ Energy Resources NA
The results of the Summer 2011 Forward Reserve Market (FRM) auction are summarized as follows:
A few key points to highlight:
Costs allocated to load across the system = (TMOR proxy price less capacity clearing price) * TMOR system wide requirement (750 MW for this auction) + (TMNSR proxy price less capacity clearing price) * TMNSR system-wide requirement (800 MW for this auction)
Costs allocated to zones with local requirements (Connecticut) = costs remaining after Step 1 above (note that for this auction there will be zero costs to allocate in this step)
Since there was no price separation in this auction and no MWs above the system-wide requirements were purchased, the allocation will be straightforward; the costs will be spread to all load. On a monthly basis, costs (net of penalties) will be spread across the peak hours in the month and allocated to load in each peak hour based on its share of the total system load in that hour.
The bottom line is that the Forward Reserve cost to customers will go down and, given the recent supply-demand trends in FRM auctions, this cost is expected to remain low compared to historical levels.