What are the key features of SMD?
The three most prominent features of ISO New England’s SMD are the introduction of locational prices for energy, a multi-settlement system and expanded risk management opportunities. SMD eliminates the absorption of congestion costs across the six-state region. Instead, locational marginal pricing (LMP) will set energy prices by location and will include the cost of congestion. LMP will reveal the true cost of serving demand at particular locations throughout the bulk power grid and indicate where investment in the system is needed. SMD also introduces dual energy markets in New England: the day-ahead market and the realtime market. The first settlement relates to the day-ahead market’s costs and payments while the second settles the difference between energy scheduled day-ahead and that which is actually delivered in real-time. The multi-settlement system provides mechanisms to hedge against the volatility of real-time prices and provides the correct price signals to influence economi
