How does SMD impact the installed capacity market?
Under SMD, the original capacity market will be replaced by an installed capacity market (ICAP) that is based primarily upon the New York ISO rules and that reflects best practices from the three Northeastern ISOs. Under ICAP, generators receive compensation for units in New England. Load serving entities (LSEs), the participants that are responsible for serving demand, make this payment to generators across New England. LSEs are told their estimated ICAP obligation at the beginning of each month and are responsible for procuring that ICAP requirement by month’s end. A number of options exist for LSEs to secure ICAP early in the month, including bilateral contracts and a supply auction sponsored by the ISO that takes place mid-month.
