Capacity zones are a key input into Forward Capacity Auctions (FCAs). They are specific geographic subregions of the New England Control Area designated before each FCA. They represent load zones (aggregations of pricing nodes in specific areas) that are one of the following:
- Export-constrained (having a maximum capacity limit)
- Import-constrained (having a local sourcing requirement)
- “Rest-of-system” or contiguous—the remainder of New England that is neither export- nor import-constrained
Capacity zones ensure that local areas secure sufficient capacity during the auction to maintain reliability when transmission constraints prevent the system from delivering needed electric energy to the area.
Capacity Zone Triggers
In preparation for each FCA, objective criteria calculations are used to determine whether zones should be modeled. The trigger calculations are based on the quantity of resources in the zone. If a zone is modeled, the zone’s price in the auction is used to identify which existing resources (or replacement new resources) are selected in that zone.
- An import-constrained zone will be modeled when the surplus of existing qualified capacity above the zone’s Transmission Security Analysis (TSA) requirement, calculated with the two largest transmission lines are out of service (i.e., line-line contingency), is insufficient to allow for the loss of the zone’s largest generating station. The surplus is important because even though a zone may start out with sufficient resources, retirement delists and permanent delists may reduce existing capacity in the zone. Therefore, modeling the zone allows the auction process to prevent the zone from becoming short and reduces the need to reject delist bids for reliability.
- An export-constrained zone will be modeled when the maximum amount of resources that can be purchased in the zone (the maximum capacity limit) is less than the total of the existing and proposed new resources in the zone.
The ISO determines constrained zones on the basis of the existing system network topology and transmission system upgrades certified by transmissions owners to be in service by the first day (June 1) of the relevant capacity commitment period (CCP). Transmission projects projected to go in service during the CCP are not included in the FCM auction assumption. Transmission owners provide models and contingency definitions for all projects being certified. The main aspects of the process to determine constraints are as follows:
- The ISO’s annual FCM transmission certification process occurs during the fourth quarter each year in accordance with North American Electric Reliability Corporation (NERC) requirements and the procedures found in Market Rule 1 of the ISO Tariff and Planning Procedure No. 10—Planning Procedure to Support the Forward Capacity Market. The process is initiated in conjunction with the October Regional System Plan Project List update and is part of the ISO’s annual assessment to identify potential future transmission system weaknesses and limiting facilities that could impact the bulk electric system’s ability to reliably transfer energy in the near-term planning horizon, which covers years one through five of the 10-year regional transmission planning period.
- By mid-January, the ISO completes the review of this information and makes a determination to accept or reject transmission certifications. The list of certified projects is presented at the January Reliability Committee (RC) meeting and becomes an input to the FCM network model used for all the transmission studies performed for that specific CCP. This network model is used for transfer limit analysis, qualification analysis of new resource proposals, and the reliability reviews of delist bids.
- Using these transmission certifications, the ISO determines the appropriate capacity zones for the upcoming FCA. Generally, capacity zone determinations are discussed with the Reliability Committee and Power Supply Planning Committee (PSPC) in the March–May timeframe each year. If new capacity zones are warranted, the ISO submits a filing to the Federal Energy Regulatory Commission (FERC) during this timeframe.
Determining Zone Boundaries
A primary purpose of the RSP review of transmission interface transfer capabilities is to identify the potential zonal boundaries and associated transfer limits be tested for modeling in the FCM. Each annual assessment will:
- Identify those portions of the New England system, along with the associated interface boundaries, that should be considered in the assessment of capacity zones to be modeled in the FCM
- Model as out-of-service all retirement and permanent delist bid requests from the most recent FCA, as well as static and dynamic delist requests rejected for reliability
Once the transfer limit is calculated and the associated proposed zonal boundaries determined, they are presented to the Planning Advisory Committee (PAC) and are voted on at the Reliability Committee.
- If the zonal boundaries are consistent with the existing boundaries for both the load zones and the capacity zones used in a preceding FCA, they will be filed as part of the ISO’s Installed Capacity Requirement (ICR) filing to FERC in November.
- If they are different, in addition to the above, the proposed new capacity zones will be filed at FERC early in the FCA qualification process to ensure that qualification and requirements calculations are based on FERC-approved zones.
Installed Capacity Requirement Calculations
Before each FCA, the ISO calculates the Installed Capacity Requirement to support the development of the sloped demand curves, accounting for relevant transmission interface limits for each modeled capacity zone and for each upcoming capacity commitment period through the CCP associated with that FCA. The zonal modeling objective criteria calculations and the regional and zonal requirements calculations are:
Any capacity zone modeled in the FCA is also modeled in the reconfiguration auctions and capacity supply obligation bilateral periods for that capacity commitment period.