# Presentation: 263049

## FERC - Benchmarking  and Market Monitoring Latvian Conference – September 9, 2004

- FERC - Benchmarking  and Market Monitoring **Latvian Conference – September 9, 2004**

## Why Benchmarking

- Wide array of uses for Benchmarking
- Benchmarking in the Regulatory Environment is used as a substitute for Competitive Markets
- Where there is not Competition – use Benchmarking to achieve better Performance
- Where there is or is not Competition – use Benchmarking to identify Bad Behavior or alter Behavior
- Where there is Competition – use Benchmarking to indicate level of Performance and as a way to track Performance
- If implemented Performance Based Ratemaking, Benchmarking would play a significant role

## Overview of Benchmarking

- Expect competitive markets to determine Winners & Losers
- Classic Benchmarking
- RTO  – Operations Report Card
- NERC – Reliability Standards
- EISG – Market Monitors Sharing Best Practices
- FERC Limited Command and Control
- Market Power Assessment
- Mitigation
- Creditworthiness
- Common Metrics (RTOs)

- RTO: Regional Transmission Organization
- NERC: North American Reliability Council
- EISG: Electricity Intermarket Surveillance Group

## Competitive Market Determinations

- Generators compete in Bid-Based Markets
- Generators identify & employ Best Practices
- Efficient investment
- Efficient operation
- Operational procedures
- Maintenance
- New technology
- Most efficient generators will run

## Why RTO Report Card

- The FERC Staff will issue an annual report on the business performance of RTOs
- Non-profit entities can benefit from a business success assessment
- Assessing critical aspects of their business can help focus management and Boards on areas needing attention
- Being able to compare assessments across RTOs encourages the use of best practices
- Publishing easy to understand measures based on meaningful criteria allows consumers, market participants, state commissions and FERC to hold RTOs accountable for their performance

- RTO: Regional Transmission Organization

## RTO Performance Categories

- Cost Management
- Business Processes
- Market Operations
- System Operations
- Corporate Governance/Stakeholder Processes
- Corporate Strategy/Performance Measurement
- Stakeholder Satisfaction

## Example - Length of Settlement

## NERC - Reliability Standards

- Established in 1968 in response to 1965 Northeast Blackout
- Non-governmental entity; ten-member Board of Trustees; Voluntary membership
- Members from all segments of the electric industry
- Developed reliability standards & good utility practices
- 2003 Blackout – Joint US and Canadian Task Force
- Reevaluated reliability standards
- Accelerate adoption of enforceable standards
- Develop better real-time tools for operators and reliability coordinators

- NERC : North American Electricity Reliability Council

## EISG

- International Market Monitors meet semi-annually
- Present recent activities and rule and operating changes
- Discuss “best practices”
- Take best practices home

- EISG: Electricity Intermarket Surveillance Group

## Market Power Screens

- Market-based rate authority standards/benchmarks
- Generation Market Power
- Transmission Market Power
- Barriers to Entry
- Affiliated Company Issues
- Generation market power
- Pivotal Supplier
- Compare to control area’s annual peak supply and demand
- Market Share
- Compare on seasonal basis to total available market size

## Price Capping

- Automated mitigation procedures
- California
- Reference price (established through benchmarking)
- Percent increase
- Dollar increase
- New York, New England and PJM use other methods based on reference prices and market power

## Credit Worthiness Standards

- FERC proposed rule on interstate natural gas pipeline companies to follow standardized procedures for determining shipper creditworthiness
- Promote consistent practices
- Provide shippers with objective and transparent creditworthiness evaluation
- 10 standards developed by North American Energy Standards Board

## Establishing Common Metrics

- Requiring the reporting of similar data/analysis
- Ability to compare across regions/markets
- Provides means to Benchmark

## Common Market Metrics – MMUs 

| Category | Metric | NYISO | PJM | ISO-NE | CAISO | MISO | Total |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Energy
Market
Metrics | DA and RT Prices |  |  |  |  |  | 1 |
|  | Price Duration Curve |  |  |  |  |  | 4 |
|  | All-in Price |  |  |  |  |  | 4 |
|  | Volatility |  |  |  |  |  |  |
|  | Congestion Costs |  |  |  |  |  | 3 |
| Secondary Market Metrics | Capacity Market
Volume and Price |  |  |  |  |  | 2 |
| Load
Metrics | Load Duration Curve |  |  |  |  |  | 5 |
|  | Imports and Exports |  |  |  |  |  | 5 |
|  | Offer Sufficiency |  |  |  |  |  | 2 |
| Generation
Metrics | Outages and Deratings |  |  |  |  |  | 5 |
|  | Generation by Fuel |  |  |  |  |  | 2 |
| Additional Market Metrics
 | Virtual Transactions |  |  |  |  |  | 2 |
|  | Spot Market Activity |  |  |  |  |  | 1 |
|  | RSI Duration Curve |  |  |  |  |  | 4 |
|  | Reserve Margin | OMOI and Market Monitors agreed to add this metric at June 22 MMU meeting. |  |  |  |  |  |
|  | Net Revenue Analysis |  |  |  |  |  | 4 |
| Total |  | 10 | 8 | 10 | 9 | 7 |  |

**Status of MMU Common Metrics from State of the Market Presentations**

**Notes:**
Presenter = Bill Hederman