NEXT
Regulation Market
Automatic Generation Control (AGC) is necessary to balance supply levels against second-to-second variations in demand. In an ideal setting where supply and demand are equal, the optimal frequency, or the number of cycles the alternating electrical (AC) current moves through each second on the system, is 60 Hertz (Hz).
When an imbalance between supply and demand occurs for a sustained period, this frequency can shift either below, called "under-generation," or above, called "overgeneration," the desired 60 Hz. To account for these slight changes on the system, generators are called upon to increase or decrease generation output. This action helps to bring balance back to the system and maintain the 60 Hz frequency. Additionally, this maintains proper powerflows into and out of the New England control area.
The regulation market compensates generators that are able to provide to the ISO these instantaneous responses in generation. The ISO designates a set of generators to provide AGC and an hourly clearing price is calculated based on submitted offers for the generators providing AGC in that hour.
The ISO then issues appropriate dispatch instructions to the selected generators. Only those generators who receive a dispatch instruction from the ISO as being designated to provide AGC are eligible for regulation credits; load pays based on real-time load obligation. A market participant may satisfy their share of the regulating reserve requirements by providing its own resources, through internal bilateral transactions for regulation, or by purchasing regulation from the market.
