Attachment M

EPI: Electricity Price Index Calculation

M Electricity Price Index

M.1 Introduction

As provided in tariff section 30.4.1.1, the proxy start-up cost includes the cost of auxiliary power calculated as the MWh quantity of auxiliary power used to start the resource multiplied by a resource-specific electricity price. This component is calculated for all generating resources.[1] The cost is calculated as the product of the electricity required for start-up (as registered in Master File) and the electricity price index (EPI). The purpose of this appendix is to describe the calculation of the resource-specific EPI.

The EPI for EIM resources is calculated using the formula used for CAISO resources choosing the registered cost option. This formula is described in section G.1.1 of the Market Instruments BPM as an estimated electricity price calculated by multiplying the projected monthly future gas price multiplied by a factor of 10.

For CAISO resources, the EPI is calculated daily for each resource as the maximum of a retail rate and an estimated wholesale rate. Each is described in further detail below.

M.2 Retail Electricity Price

Each resource is mapped to the retail electricity provider according to the fuel region assigned to the generator’s pricing node. The EPI is a daily value. The retail price on any day including a peak hour, as defined below, is assigned a peak retail price. All days without a peak hour are assigned an off-peak price. The electricity price for each retail provider is updated semi-monthly, on the 5th business day and the last business day of each month, from the sources listed below:

PG&E:

PG&E Standby Service Rate Transmission Voltage. This is sourced from ‘Electric Schedule S Standby Service[2]’, Total Energy Rates ($ per kWh) under Transmission Voltage. Select appropriate season and peak status from the following as defined in the schedule:

SUMMER (May 1 through October 31):

§  Peak: 12:00 noon to 6:00 p.m. Monday through Friday (except holidays)

§  Partial-Peak: 8:30 a.m. to 12:00 noon AND 6:00 p.m. to 9:30 p.m. Monday through Friday (except holidays)

§  Off-Peak: 9:30 p.m. to 8:30 a.m. Monday through Friday All Day Saturday, Sunday, and holidays

WINTER (November 1 through April 30):

§  Partial-Peak: 8:30 a.m. to 9:30 p.m. Monday through Friday (except holidays)

§  Off-Peak: 9:30 p.m. to 8:30 a.m. Monday through Friday (except holidays) All Day Saturday, Sunday and holidays

SCE:

The Southern California Edison Standby Service Rate is sourced from Schedule TOU-8-RBU[3] time of use general service large reliability back up service for service metered and delivered at voltages above 50kv Generation UG. Select appropriate season and peak status from the following as defined in the schedule:

SUMMER (June 1 through September 30):

§  Peak: 12:00 noon to 6:00 p.m. Monday through Friday (except holidays)

§  Mid-Peak: 8:00 a.m. to 12:00 noon AND 6:00 p.m. to 11:00 p.m. Monday through Friday (except holidays)

§  Off-Peak: 11:00 p.m. to 8:00 a.m. Monday through Friday All Day Saturday, Sunday, and holidays

WINTER (October 1 through May 31):

§  Mid-Peak: 8:00 a.m. to 9:00 p.m. Monday through Friday (except holidays)

§  Off-Peak: 9:00 p.m. to 8:00 a.m. Monday through Friday (except holidays) All Day Saturday, Sunday and holidays

SDG&E: resources located in SDG1 and SDG2 fuel areas are assigned SCE rates.

M.3 Wholesale Electricity Price

The wholesale electricity price for each resource is the projected real-time electricity price at the resource node calculated using the algorithm described below.

First, a forward electricity-adjusted price is created for each pricing node and hour. Then, hours are categorized as summer on-peak, summer off-peak, winter-peak, or winter off-peak. In the final step, adjusted prices for the relevant season and peak status category are averaged to produce a projected wholesale price for the resource.

Forward Electricity-Adjusted Prices

The forward electricity-adjusted price calculation relies on the following data inputs:

  1. Historic real-time prices (LMP): Price-corrected LMPs from the five-minute real-time market are collected for each interval for the 12 prior months prior to the month of the calculation date. These values are then averaged to create an hourly real-time price for each hour.
  1. Forward Electricity Price Index (EF): Forward electricity price data are sourced from the DMR IFED Futures for Day-Ahead Peak and Off-Peak Fixed Price Futures.. NP-15 prices are used for PGE1 and PGE2; SP-15 prices are used for all other regions. The indices used for NP-15 are NPM and ONP for peak and off-peak futures, respectively. The indices for SP-15 are SPM and OFP for peak and off-peak futures, respectively.

The forward electricity-adjusted prices are then calculated as follows:

  1. Categorize real-time price data as on-peak or off-peak for comparison to electricity forwards. For this purpose, hours are categorized as follows:
  2. Peak - non-holiday weekdays from hour end 7 to 22
  3. Off-Peak - All remaining hours
  1. Calculate market-wide average monthly peak and off-peak historic real-time electricity price. This simple average equally weights all pricing nodes to approximate the historical market-wide energy price.
  1. Calculate a monthly forward conversion factor for each region in the 12 prior months by dividing the forward electricity price for the same month of the next year by the average price in the historic month. This ratio is bounded between 1 and 1.5. Therefore if the forward electricity price is less than the historic electricity price, the conversion factor is set equal to one.
  1. Multiply the historical LMP at each generator location by the monthly forward conversion factor applicable to the relevant fuel region, month and hour category. The forward electricity-adjusted prices are recalculated monthly.

Wholesale Hour Categorization:

Hourly adjusted prices are then re-categorized in accordance with the retail rate hour classifications detailed in section M.2. Three distinct time periods of summer on-peak, winter on-peak and off-peak are mapped to retail rate categories subject to the following conditions:

·  Summer and winter off-peak retail rate hours on weekends and holidays[4] are combined together and classified as off-peak.

·  Summer on-peak hours map to retail hour designations for summer peak and exclude summer partial-peak (PG&E) and summer mid-peak (SCE) in M.2.

·  Winter on-peak hours map to retail hour designations for winter partial-peak (PG&E) or winter mid-peak (SCE) in M.2.

·  For retail rate periods that change mid-hour, the rate applicable for the beginning of hour will determine the categorization for that hour in the wholesale rate calculation.

·  Only the 8 highest-priced on-peak hours (as defined by the market-wide simple average calculated in step 2 above) on a given day are included in the summer and winter on-peak calculations. This condition limits on-peak hours to a maximum of 40 hours per week when unit starts are most frequent.

Average Wholesale Energy Price Index Calculation:

Adjusted LMPs are then averaged within each of the three season and period categories. The resultant averages at each pricing node are the seasonal wholesale prices for on-peak summer and winter days. The off-peak result is mapped to both summer off-peak and winter off-peak categories for combination with the retail prices in M.4.

M.4 Resource-specific EPI Calculation

EPI values are evaluated daily as the maximum of the retail price and the estimated wholesale price in the relevant category. As described above, summer includes all months between June and September. Additionally, resources in PGE fuel regions receive summer rates for May and October in accordance with the season definitions in the PG&E Electric Schedule S. The remaining months are classified as winter months. If the market day contains any peak hours, the day is considered an on-peak day. All remaining days are considered off-peak.

[1] The inclusion of auxiliary power costs is explicit in section 30.4.1.1 1 (gas fired resources). If non gas fired resources can demonstrate that they have such costs, then they can also recovery auxiliary power costs.

[2] The PG&E Electric Schedule S can be found at http://www.pge.com/nots/rates/tariffs/tm2/pdf/ELEC_SCHEDS_S.pdf.

[3] The Southern California Edison TOU-8_RBU can be found at http://www.sce.com/NR/sc3/tm2/pdf/CE187-12.pdf.

[4] Off-peak hours on non-holiday weekdays are excluded since the EPI is a daily value and non-holiday weekdays are classified as peak days