Overview of the North American and Canadian Markets

2008 APEX Conference in Sydney, AustraliaOctober 13, 2008

Hung-po ChaoDirector, Market Strategy and Analysis

2

                                                                                                                                                                             

Key Industry Issues in North America

• Infrastructure investments: generation and transmission

• Renewable resources and green power

• Demand response, energy efficiency and advanced metering infrastructure

• Wholesale and retail market developments

© 2005 ISO New England Inc.

Wind Power Needs Transmission and Storage

4

California ISO

• Peak Load 50,270 MWs

• Zonal energy market with redispatch to manage congestion within zones

• Comprehensive market redesign – expect to move to nodal pricing in 2009

• No capacity market

6

Alberta Electric System Operator

Peak load 9,710 MWh

Wholesale generation market opened in 1996

Retail competition opened in 2001

Wholesale real time energy market with a single market clearing price

7

SPP

• Peak Load ~48,000 MWs

• Full nodal energy imbalance energy market operational in Feb 2007

• Transmission Services market with physical transmission rights

• No retail open access in footprint

• Cost/Benefit study underway for Day-Ahead Market with Unit Commitment and Ancillary Service Markets

8

ERCOT

• Peak Load 61,080 MWs

• 85% of Texas; Not subject to FERC; 3 DC Ties

• Generation capacity: 77,000+ MW

• 37,000 miles of Transmission

• Centralized registry for 5.9 million retail choice customers

• Competitive wholesale markets with nodal pricing

• No capacity market

• Demand response policy and deployment of advanced metering technology

9

Midwest ISO RTO

• Peak load 116,000 MWs

• Full nodal real-time and day-ahead energy markets

• No capacity market

• Territory encompasses fifteen states and one Canadian province

10

Ontario at a Glance (year-end 2007)

Installed Capacity

31,000 MW

Record Summer Peak

27,005 MW (August 1, 2006)

Record Winter Peak

24,979 MW (December 20, 2004)

Total Annual Energy Consumed

152 TWh

Customers 4.5 million

Ontario Import Capability

4,000 MW

Transmission Lines

30,000 km (18,600 miles)

Average Price(2008 to date)

5.23¢/kWh

11

Ontario’s Electricity Market

$ $

BillingPayments

Dispatch Dispatch

Offers/Schedules Bids

Suppliers

Generators45

(e.g. Shell, Constellation)

Wholesale Sellers

68(e.g. Shell,

Constellation)

Consumers

Local Distribution Companies

78(e.g. Toronto Hydro, Hydro Ottawa, Hydro

One)

WholesaleConsumers

98(e.g. Dofasco,

Norampac, De Beers)

Transmitters(Hydro One, Great Lakes Power, Canadian

Niagara Power, Five Nations Energy)

Tariffs $

Contracted/Regulated Prices$

Electricity

Direction

12

Fixed or Capped Prices in Ontario

• More than 75 percent of the generation in Ontario has a contract or fixed price for example:– Non utility generator (NUG) contracts– Contracts for new (selected under RFP) and existing plants based on

market price– Fixed rates for ‘heritage’ generation owned by the monopoly generator

(nuclear and 85% of baseload hydro)– 85% of coal and peaking hydro output from monopoly generator pays a

rebate if market price exceeds a set rate– Fixed rates for renewable generation – Standard Offer Program for small-

scale renewable

• In addition, Ontario is initiating a large volume of conservation and demand response contracts

• All Ontario consumers pay an adjustment to the Hourly Ontario Energy Price to cover these contracts– Adjustment fluctuates between a credit and debit depending on the

market price

13

Major Initiatives in the Ontario Market

• Government RFP for new nuclear• Smart Meters for all Ontarians by 2010 (4 million customers)

– 1.3 million installed to date– 27,000 customers now billed on time-of-use rates

• Day-ahead mechanisms planned for 2010– Assessing an energy forward market

• Day-ahead price forecast implemented this summer• Ontario’s target for renewables is over 10,400 MW by 2010 • Coal replacement strategy being implemented, with

shutdown complete in 2014• Significant conservation and demand response programs

launched and under development– Target 6,300 MW reduction through CDM by 2025

14

PJM• Peak load = 144,796 MW

• Generation Capacity = 167,303 MW

• 1307 Generating Units

• 52,650 miles of transmission lines

• Annual energy delivery = 729 Million MWh

• 600+ member companies

• Annual Market Settlements exceed $31 Billion (US)

• Market covers 14 state jurisdictions

15

PJM

• Energy Markets - Full nodal (real-time & day-ahead), operated as a single control area

• Ancillary Services Markets – Regulation, Synchronized Reserve (10 min) and Scheduling reserve (30 min)

• Financial Transmission Rights markets (monthly, quarterly, annual and three year)

• Capacity market – three year forward

16

New York ISO• Peak Load 34,000 MWs

• Full nodal pricing with real time and day-ahead energy markets

• Ancillary services fully co-optimized with energy markets in real-time and day-ahead

• Locational Installed capacity market with a demand curve

• Financial hedges for congestion (Transmission Congestion Contracts)

17

ISO New England• Peak Load 28,130 MW

• Implemented wholesale markets in 1999

• Implemented nodal pricing in 2003

• Local Forward and real-time reserve markets

• New forward capacity market auction in February 2008 for capacity in June 2010

• More than $1.0 billion in transmission investment made for reliability since 2002; another $4.0 to $7.0 billion planned over the next 10 years

18

North American Markets

Peak Load Nodal pricing Retail Markets

Capacity market

California ISO 50,270 1 yr+ Yes No

Grid West (NWPP Area) 58,000 3 yrs + No No

Alberta Electric System Operator

9,710 No Yes No

SPP 48,000 2007 No No

ERCOT 61,000 Yes Yes No

MISO 110,000 2005 Partial No

Ontario Market Operator 27,005 No Yes No

PJM 144,796 1998 Yes Yes

NYISO 34,000 1999 Yes Yes

ISO-NE 28,000 2003 Yes Yes

Questions?