Immediately following the completion of the primary auction for the Forward Capacity Market (FCM), a substitution auction is held. (See FCM Substitution Auction Overview and Timeline.) Existing generators and import capacity resources willing to permanently retire from ISO markets can participate as demand in the substitution auction.
Participating resources must be one of the following:
- An existing generating capacity resource with a capacity network resource capability (CNRC) or equivalent
- An existing generating capacity resource associated with a repowering project that did not clear as a new resource in the primary auction
- An import capacity resource associated with an elective transmission upgrade (ETU) and with capacity network import capability interconnection service (CNIIS)
Participating resources must have reached FCM commercial-operation status by the deadline for the auction’s critical-path schedule. (Learn how to access the auction calendars.)
The IMM will calculate a test price for each resource electing to participate in the substitution auction. The test price will serve as a screen to determine whether the resource’s demand bid can enter the substitution auction. Participating resources may not be a demand capacity resource or designated as self-supply. They also may not participate in a composite offer or have been retained for reliability (see Market Rule I, Section III.126.96.36.199.5, Reliability Review).
The test price will reflect the IMM’s estimate of the competitive price below which a participant would retire its capacity from the market rather than acquire a CSO, excluding the impact of a potential severance payment from the substitution auction.
- If the existing resource acquires a CSO at a primary auction clearing price at or above its test price, its demand bid will be entered into the substitution auction.
- If the primary auction clearing price is below the resource’s test price, the resource’s demand bid will be excluded from the substitution auction.
The primary components of the mechanism are contained in Section III.188.8.131.52.1A of Market Rule 1, and the consequences of bidding below the test price are addressed in Section III.184.108.40.206.3.
Test Price Election Types
- Track 1 resources (resources that have submitted a retirement delist bid) will already have provided this cost information to support their delist price.
- Track 2 resources (resources without a retirement delist bid) will also need to provide this information.
To Prepare and Calculate a Test Price
Please refer to the “How to Submit a Delist Bid” section under Qualification Process for Existing Generators. All test-price submissions will require the completion of the IMM’s Priced Retirement Model. Download Delist Models and User Guides on the FCM webpage.
Submitting a Test Price
All test prices and supporting documentation must be submitted during the demand election and test-price window for the existing resource substitution auction. For further information, please reference the FCM Delisting Customer Training Webinar.
Demand Bid Rules
In the substitution auction, resources participating as demand enter sealed demand bids into the auction system. Demand bid features are as follows:
- They must have at least one and up to five price-quantity pairs in descending-price order, not to exceed the capacity supply obligation (CSO) obtained in the primary auction.
- Bid prices may differ from the primary auction but cannot be greater than the primary auction’s starting price or lower than that starting price multiplied by negative one; demand bid quantities with no price specified will be assigned the primary auction starting price multiplied by negative one.
- They are nonrationable and cannot partially clear (some limitations apply when a proxy delist bid exists in the primary auction).
- The election to participate must be made in March during the demand-election window of the existing resource substitution auction.
- Demand bid prices can be submitted five business days after the composite offer submittal window closes in October.
Learn how to access the auction calendars.
How to Submit a Demand Bid
Retirement delist bids submitted for the primary auction will have a demand bid automatically entered into the substitution auction. All other eligible resources may elect to have a demand bid entered in the substitution auction.
- Use the Forward Capacity Tracking System (FCTS) to elect to participate as demand in the substitution auction.
- For five business days after the composite offer submittal window closes in October, project sponsors can submit demand bid prices via the FCTS. (Learn how to access the auction calendars.) Resources on CPS monitoring during this period must meet all CPS milestones within seven days after the ISO issues the qualification determination notification to be qualified as demand in the substitution auction.
- Details regarding the substitution auction can be found in Market Rule 1, Section III.13.2.8, Capacity Substitution Auctions.
- The “FCM Substitution Auction” module available on the Training Materials webpage provides more detailed information on auction mechanics.