In order to maintain continuous real-time supply-demand balance, ISO-NE needs to be able to compensate for rapid changes in system conditions by having fast-acting, flexible resources at its disposal. To ensure it has enough of the right kinds of flexible resources available at every moment, ISO-NE sets a hierarchy of different types of ancillary services, including: regulation (the fastest-responding, able to ramp quickly up and down); ten-minute spinning reserve; ten- minute non-spinning reserves; thirty-minute operating reserves; and replacement reserves (essentially, additional thirty-minute reserves).57
57 See “ISO New England Operating Procedure No. 8: Operating Reserve and Regulation, located at:
http://www.iso-ne.com/rules_proceds/operating/isone/op8/op8_rto_final.pdf.
ISO-NE also procures non-spinning reserves on a semi-annual basis through the Forward Reserve Market to ensure that it will have enough fast-starting resources available to meet its daily ten-minute non-spinning reserves (TMNSR) and thirty-minute operating reserves (TMOR) requirements. Resources providing forward reserves agree to remain offline and available to provide reserves whenever asked by ISO-NE. In exchange, they receive a Forward Reserve Market payment in addition to any payments received from the capacity market and any payments received on a daily basis from the energy or reserves markets.58 ISO-NE then procures in the real-time market ancillary services to meet its operational needs including any non- spinning reserve not coverd by the forward reserve purchase.
Connecticut’s Locational Forward Reserve Market requirement is set equal to the 95th percentile daily local thirty-minute operating reserve requirement over the prior two like-season periods adjusted for known system condition changes. In the past, the lack of economic generation and fast-start capability in Connecticut resulted in limiting energy imports into Connecticut so that spare import capability could serve as reserves. Through a series of state-sponsored capacity procurements Connecticut has increased quick start resources by about 600 MW and increased generally economic generation by about another 600 MW.
With these resources, other existing resources, and new transmission, the 2014 IRP projects more than adequate resources to meet Connecticut’s Locational Forward Reserve Market requirement over the study horizon. ISO-NE’s 2013 Regional System Plan indicates that Greater Connecticut may have a need of up to 900 MW through 2016. This need declines to about 600 MW in 2017 following the expected commissioning of the 345 kV Lake Road-Card transmission line (part of the Interstate Reliability Project), which would bring the Lake Road generating facility electrically into Connecticut and reduce the need for local reserves.59 The resulting demand is substantially less than the 1,470 MW of quick-start capable generation now available in Greater Connecticut.
It should be noted that in 2013, to address quick-response resources’ performances during regionally-stressed conditions in 2010 and 2011, ISO-NE undertook a number of changes in the forward reserve market to improve reliability.60 On the requirement side, ISO-NE increased the
58 The Forward Reserve Market purchases ahead of time pool wide and locational operating reserve requirements.
It purchases pool-wide ten minute non-spinning reserve (TNMNSR) and thirty-minute operating reserve (TMOR) and also purchases TMOR on a locational basis. Pool wide forward reserve requirements are patterned on real-time operating reserve requirements and are specified in memo ISO-NE issues prior to each forward reserve market auction. See http://www.iso-
ne.com/markets/othrmkts_data/res_mkt/cal_assump/2013/index.html. Auctions are held twice a year; in April
for the delivery period June through September (the summer period) and in August for the delivery period October through the following May (the winter period).
59 See http://www.iso-ne.com/trans/rsp/2013/rsp13_final.docx p.54.
60 In the following linked filing, among other topics, ISO-NE explains the history leading to the filing's specific
request to increase TMNSR)to be purchased in the forward reserve market. Subsequent filings were made to change 1) how resources establish the amount of capacity available for TMNSR and thirty minute reserve (TMOR), and 2) the failure to reserve penalty rate and when penalties are triggered. Lastly ISO-NE increased the amount of replacement reserves, a form of TMOR, to be procured in the forward reserve market.
http://www.iso-ne.com/regulatory/ferc/filings/2012/nov/er13-465-000_11-27-2012_proc_ten-min_rule.pdf.
amount of pool wide TMNSR and TMOR purchased in the forward reserve market. On the supply side, ISO-NE changed the method for determining the amount of capacity a resource can claim to meet TMNSR and TMOR. These latter changes have resulted in resources being less confident in how many megawatts can be offered into the market. Thus the requirements are up and the supply is down, driving up forward reserve market prices. TMNSR prices have gone from $0.35/kW-mo net of the capacity price for winter 2012/13 to $5.50/kW-mo net of the capacity price for winter 13/14 and TMOR has gone from $0.35/kW-mo net of the capacity price for winter 2012/13 to $3.34/kW-mo net of the capacity price for winter 2013/14. Until offered supply increases and requirements decrease, forward reserve market prices will remain higher than seen in the past. Due to the small volume of capacity receiving these payments, the cost contributes a very small amount to customer rates.