FERC approves change to five-minute settlement of real-time markets
Aligning the financial settlement interval with the real-time pricing interval will bolster incentives for resources to respond to ISO dispatch instructions
On June 2, ISO New England, joined by the New England Power Pool (NEPOOL), filed a proposal with the Federal Energy Regulatory Commission (FERC) to change the interval at which the ISO settles the real-time energy and reserves markets from every hour to every five minutes. FERC accepted the proposal on July 26; the ISO will implement the new settlement interval in March 2017.
As administrator of the region’s wholesale electricity markets, ISO New England oversees the financial settlement of all market transactions. Currently, the ISO settles real-time markets hourly, even though real-time market prices are calculated every five minutes. This means that resources are compensated based on an average of real-time prices over the hour, and some resources, particularly those that are flexible and respond quickly to system conditions, lack the necessary financial incentives to respond quickly to price fluctuations within the hour.
By settling the real-time markets every five minutes, resources will have the financial incentive to respond to real-time ISO dispatch instructions. The changes are also an important precursor to the implementation of the pay-for-performance capacity market changes that go into effect June 2018, since it will evaluate performance on a five minute basis.
These changes affect all generation resources, external transactions, and demand-response resources in the real-time markets, and will require substantial changes to both ISO and market participant IT systems. It also Market Participants should keep an eye on the Customer Readiness 12-Month Outlook webpage information on actions they may need to take to prepare for this revised settlement system.
To learn more, visit the Subhourly Real-Time Settlement Key Project page.