1. Alternative ICAP Proposal
NSTAR Strategy
James Daly
Director Electric and Gas Energy Supply
(781)

2. What problem are we trying to solve: Reliability
NEPOOL reliability standard is 1 day outage in 10 years
Translates to Loss Of Load Expectation (LOLE) = 0.1day/year
NEPOOL Installed Reserve is 31% of peak load in
NEPOOL Required Reserve is 12.4% of peak load in

3. NEPOOL Load Growth & LOLE
Power Year
Peak Load (MW)
ICAP Resources Summer (MW)
Summer Requirement (MW)
LOLE
25,735
33,710
28,915
0.0005
26,305
29,366
0.0010
27,740
31,104
0.0109
28,880
32,441
0.0433
Source: ISO Staff “RTEP04 Resource Adequacy Analysis” presentation 03/18/2004

4. NEPOOL Load Growth: Installed vs. Required Reserves
Installed Reserves
Required Reserves
Power Year MW %
7,975
31.0
3,180
12.4
7,405
28.2
3,061
11.6
5,970
21.5
3,364
12.1
4,830
16.7
3,561
12.3
Source: ISO Staff “RTEP04 Resource Adequacy Analysis” presentation 03/18/2004

5. Boston Area LOLE: Meets criteria over 10 Years So does CT
(Jan – Dec)
Base case using
existing transmission capabilities
2004
0.001
2005
2010
0.011
2013
0.033
Source: ISO Staff “RTEP04 Resource Adequacy Analysis” presentation 03/18/2004

6. It is not a capacity issue. We have plenty of capacity
It is not a capacity issue. We have plenty of capacity. It’s an operating reserves issue!

7. Coalition Alternative Filed at FERC 03/22/2004
Implement Locational Operating Reserve Market
Ensures that units needed for operating reserve are adequately compensated
Newly implemented region wide Forward Reserves Market cleared at $4.495/kW-month last January
Implement single region-wide ICAP market
NEPOOL historically planned for reliability on a pool wide basis
Integrates transmission planning and operating realities
Compensates all generators for comparable services
Demand curve key points set at:
100% of Objective Capability, not 106.7%
X-intercept at 112% of Objective Capability, not 118%
Same as NYISO

8. Coalition Alternative (continued)
Units compensated in the Locational Operating Reserve Market are units needed for:
2nd contingency reserve coverage
Local voltage support
Or other local operating needs
Existing units receive a transitional payment under cost-of-service type (RMR) agreements
Contract forward for new resources needed for Locational Operating Reserve Market under RFP

9. Coalition Alternative (Continued)
ISO/NEPOOL provides 3-year notice prior to changing the price signals established in the ICAP demand curve
Participating ICAP resources provide three-year commitment to remain on the system
No delisting allowed
Liquidated damages for failure to perform
ISO approval of maintenance schedule
New generation should be fully integrated into the grid

10. ISO Vs Coalition Alternative Costs
Total 5 Year
Costs $M
ISO No Cap
$2,865
ISO W/ Cap
$1,591
ISO Adjusted
$597
Coalition
Alternative
$154

11. Coalition March 22 filing in support at FERC:
Attorney General of Massachusetts
Attorney General of Rhode Island
Associated Industries of Massachusetts
Massachusetts Division of Energy Resources
New Hampshire Office of Consumer Advocate
NSTAR Electric And Gas Corporation
National Grid USA
Rhode Island Division of Public Utilities and Carriers
Strategic Energy LLC (in part)
Vermont Electric Power Company (in part)
Filed separately but supporting in part:
Connecticut Department of Public Utility Control
Connecticut Office of Consumer Counsel