EXHIBIT 99.263
Default Usage Charge
[GRAPH]
o Paths A -> B and C -> B are congested.
- All generators give adjustment bids.
- ISO must dec generation in Zones A and C.
- ISO must inc generation in Zone B.
PX Adj. Bids and IPSs
[GRAPH]
PX values Path A -> B at $30/MWh - $20/MWh = $10/MWh
PX values Path C -> B at $30/MWh - $25/MWh = $5/MWh
SC Adj. Bids and IPSs
[GRAPH]
SC does not bid to use Path A -> B
SC values Path C -> B at $20/MWh - $5/MWh = $15/MWh
Transmission Allocation and
Final Schedules
o Path A -> B
- PX values at $10/MWh, SC does not bid to use.
- PX gets to use all of Path A -> B.
o Path C -> B
- PX values at $5/MWh, SC values at $15/MWh.
- SC gets first priority on Path C -> B.
o Insufficient inc bids in Zone B
- ISO increases [FORMULA OMITTED] to max of adj. bid range.
- ISO increases [FORMULA OMITTED] above max of adj. bid range.
SC Final Schedules
[GRAPH]
To relieve congestion on Path C -> B
ISO increases [FORMULA OMITTED] to max of adj. bid range.
ISO decreases [FORMULA OMITTED] below IPS.
PX Final Schedules
[GRAPH]
To relieve congestion
ISO decreases [FORMULA OMITTED] below IPS.
ISO increases [FORMULA OMITTED] above the max of its adj. bid range.
ISO decreases [FORMULA OMITTED] below IPS.
The True Zonal Marginal Costs
[GRAPH]
[FORMULA [FORMULA [FORMULA
OMITTED] = $20/MWh OMITTED] = Undefined OMITTED] = $25/MWh
PX will use the ISO's Default Usage Charges to define [FORMULA OMITTED]
ISO's Approach to DUCs
o Path's DUC = highest inc used on import side minus lowest dec used on
export side.
o Path A -> B:
- Highest inc used in B = $30/MWh (from PX)
- Lowest dec used in A = $20/MWh (from PX)
- DUC on Path A -> B = $10/MWh
o Path C -> B:
- Highest inc used in B = $30/MWh (from PX)
- Lowest dec used in C = $5/MWh (from SC)
- DUC on Path C -> B = $25/MWh
ZONAL MARKET CLEARING PRICES
(ZMCPS) FROM ISO'S DUCS
[GRAPH]
Zone A Zone B Zone C
[FORMULA [FORMULA [FORMULA
OMITTED] = $40/MWh OMITTED] = $50/MWh OMITTED] = $25/MWh
By PX Tariff and market design:
o Difference in ZMPCs must be equal to the ISO's Usage Charge
between the zones.
o ZMPCs in a zone must cover the cost of most expensive energy
produced in the zone.
Using the DUCs calculated by ISO:
o [FORMULA OMITTED] exceeds the true marginal cost in Zone A by $20/MWh.
o Doubles the costs to PX consumers in Zone A.
PX's Approach to DUCs...
o If ISO runs out of adj. bids, it will schedule resources outside the ranges
given in their adj. bids.
- In this case, ISO uses penalty prices to allocate transmission and produce
schedules.
o What is the lowest penalty price that the ISO could use when pulling a
resource outside its adj. bid range without altering the Final Schedules?
...PX's Approach to DUCs
o Lowest possible penalty price is $40/MWh. Use penalty in valuing paths.
o PX has highest value for use of Path A->B
- Highest PX inc in B = $40/MWh
- Lowest PX dec in A = $20/MWh
- DUC on Path A->B = $20/MWh
o PX has highest value for use of Path C->B
- Highest PX inc in B = $40/MWh
- Lowest PX dec in C = $25/MWh
- DUC on Path C->B = $15/MWh
ZMCPS FORM PX'S DUCS
[GRAPH]
Zone A Zone B Zone C
[FORMULA [FORMULA [FORMULA
OMITTED] = $20/MWh OMITTED] = $40/MWh OMITTED] = $25/MWh
Using the DUCs calculated by PX:
o [FORMULA OMITTED] and [FORMULA OMITTED] are equal to the true zonal marginal
costs of energy.
o [FORMULA OMITTED] is consistent with the DUCs and ZMPCs in other zones.
o Zonal prices are lower. PX consumers do not overpay in any zone.