8 Oct 2003 Market Advisory Council of the IMO 1

Market Pricing Issues: Update Document ID #: MAC-05-07

8 Oct 2003 Market Advisory Council of the IMO 2

Agenda

• Background• Recently Introduced Initiatives

– Hour-Ahead Dispatchable Load (HADL)– Spare Generation On-Line (SGOL)– Control Action Operating Reserve

• Proposal for Additional Control Action Operating Reserve

• Next Steps

8 Oct 2003 Market Advisory Council of the IMO 3

Background• Three pricing issues

– pre-dispatch vs. real-time prices– counter-intuitive prices in times of shortage– size, content and variability of uplift

• Contributing factors not only give rise to pricing issues, but also:– reduce market efficiency– jeopardize reliability of IMO-controlled grid

8 Oct 2003 Market Advisory Council of the IMO 4

HADL and SGOL

• Hour-Ahead Dispatchable Load– 4 participants; ~240 MW registered– activity limited to date; 25 hours; <30 MW/hr– impacts negligible

• Spare Generation On-Line– ~2600 MW registered– activity started in mid-September– net market impacts not quantifiable yet, but

appears to be having intended effect

8 Oct 2003 Market Advisory Council of the IMO 5

Control Action Operating Reserve - 1

• MW relief that would be realized if control action taken e.g. voltage reduction

• Industry accepted source of Operating Reserve

• 200 MW introduced early August– 30 minute Operating Reserve price: 30 $/MW – 10 minute non-synchronized Operating Reserve

price: 30.10 $/MW– Energy price: 2000 $/MWh

8 Oct 2003 Market Advisory Council of the IMO 6

Control Action Operating Reserve - 2

• Market Impacts (results to September 22)– Increase Average HOEP: range 0.0 - 0.4 $/MWh, relative

to 49.2 $/MWh actual average HOEP (SGOL offsets)

– IOG Savings: 37 k$ (Total IOG Payments 2.5 M$)

• Reliability Impacts– No unreliable operation as a result of scheduling CAOR

– Increased risk of unreliable operation judged very small

• Displaced Market Operating Reserve– ~0.2% of total scheduled OR

8 Oct 2003 Market Advisory Council of the IMO 7

Control Action Operating Reserve - 3

• Requesting IMO Board approval for introducing additional 200 MW (Oct 3 meeting)– same prices and specifications as first 200 MW– implement mid-October– generally supported by MOSC and Technical

Panel

• Continue to monitor impacts and report to IMO Board and stakeholders

8 Oct 2003 Market Advisory Council of the IMO 8

Next Steps

• Additional Control Action Operating Reserve• Remove 200 MW Supplementary Reserve• 12x ramp rate• Pre-dispatch price bands