As with the first and second annual reconfiguration auctions, a resource’s qualified capacity and commercial status determine how many megawatts it can add to its capacity supply obligation (CSO) in the third annual reconfiguration auction (ARA 3). However, ARA 3 has different rules for determining qualified capacity. Additionally, a resource may be flagged for a significant decrease in capacity during ARA 3 qualification.
The qualification process for ARA 3 begins in January when the ISO calculates the qualified capacity values for all resources that can participate in ARA 3.
The process involves the following:
If a resource that has achieved FCM commercial operation has a qualified capacity value for ARA 3 that is less than its CSO for that capacity commitment period (CCP), the resource may be flagged for a significant decrease in capacity. A significant decrease in capacity is calculated using a resource’s smallest shortfall, which is the smallest monthly difference between the resource’s CSO and its qualified capacity for the relevant CCP. A significant decrease in a resource’s capacity will be triggered if the smallest shortfall exceeds the following thresholds for the applicable CCPs:
a. Calculate the smallest shortfall of the CSO (CSO minus qualified capacity) across all 12 months.
b. For the month with the smallest shortfall, calculate the greater of 10% of the CSO or 2 MW.
c. Take the lesser value of either the result from (b) or 10 MW.
d. The result is the resource’s significant-decrease threshold.
The resource will be flagged if the smallest shortfall is greater than the significant-decrease threshold.
For details, see Market Rule 1, Section III.13.4.2.1.3, Adjustment for Significant Decreases in Capacity.
If a significant decrease in capacity is triggered, the resource can seek to avoid a mandatory demand bid by submitting a restoration plan. A restoration plan (see the deadline and instructions below) describes the physical measures to be taken so that the resource will be able to provide an amount of capacity consistent with its CSO by the start of the CCP. If a restoration plan is submitted before the deadline and is accepted by the ISO, the resource’s summer and winter qualified capacity values for that CCP will be restored.
Note that a critical path schedule (CPS) should be included as part of the detailed plan for how the resource will mitigate its shortfall. This CPS should describe the major milestones needed to solve the problems at the facility and the timeline for completing those milestones. At a minimum, the following should be included in the CPS:
A resource may also take no action, thereby triggering the ISO to enter a mandatory demand bid in ARA 3 on behalf of the resource at the relevant Forward Capacity Auction starting price (see Reconfiguration Auctions to learn more). A mandatory demand bid will be entered if the significant decrease is due to a decrease in commercial capacity only.
The restoration plan can be submitted during the 10-business-day restoration plan submission window beginning in mid-January. The ISO will notify the project sponsor of the exact window dates via an email notice. If you would like to receive these emails, as well as all other FCM notices, subscribe to the Capacity (ICAP and FCM) Announcements mailing list (hit send when the subscription email opens).
See the Reconfiguration Auctions and CSO Bilateral Periods section and the Annual and Monthly FCM Events calendars available on the FCM page for more information about the timing of the submission windows.
Once the ISO has completed the review of the restoration plan, the final qualified capacity values will be published to the Position tab in the FCTS under the published data for ARA 3. An email notice will be sent out to prompt participants to review their final resource information. (See email subscription details above.)
