NPRR700  Utilizing Actual Fuel Costs in Startup Offer Caps

Just before the implementation of the Nodal Market, it was discovered that the Real-Time revenues earned by a Resource while ramping from breaker close to the Lowest Sustained Limit (LSL) were not included in the calculation of Reliability Unit Commitment (RUC) Make-Whole Payments. To mitigate this problem, it was decided to reduce the Startup Costs in RUC guarantee by an amount that approximates the Real-Time revenues (heat rate proxy “H”) to ensure a balanced equation (total cost versus total revenues). The reduction in Startup Costs affects both Day-Ahead Market (DAM) and RUC procurement given that both use the same cost structure in the calculation of Startup Offer caps, even though reducing Startup Costs in DAM by the heat rate proxy “H” is not desirable since it’s a financial market and generators do not earn additional revenues while ramping to the LSL. This Nodal Protocol Revision Request (NPRR) tries to rectify this problem by incorporating the actual fuel costs into the DAM and RUC procurement process and DAM Make-Whole Payment calculation. However, for RUC Make-Whole Payment calculations the Startup Costs should still be reduced by the heat rate proxy “H” to ensure a balanced equation. If approved, this NPRR should be implemented with NPRR 617, Energy Offer Flexibility.