December 7, 2016.

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Presentation transcript:

December 7, 2016

Heartland Snapshot 2 Hecla NSU Langford McLaughlin Groton Grove City Miller Bryant Estelline White Volga SDSU Arlington New Ulm Wessington Springs Aurora Tyler Madison Lake Crystal Madelia Howard Colman Truman Plankinton Sioux Falls Parker Tyndall USD Akron NIMECA Stanhope Garden City Auburn 2

Heartland Snapshot Midcontinent Independent System Operator (MISO) Customer Diesels Customer Diesels LRS1 WSWEC Customers Customers Midcontinent Independent System Operator (MISO) Southwest Power Pool (SPP) WEC2 3

1. Administrative 2. Market Access 3. WAPA Position 4. Coordination

Administrative 5

Small entities must absorb additional workload and lean on outside services. No new staff (12) Heartland contracts for its market services Prior to: Leaned on WAPA to administer the Joint Marketing Program for small nominal fee Additional Outside Service costs increased by an amount equivalent to 1 FTE Heartland wasn’t in the position size-wise to perform all functions in-house Increased responsibility on existing staff Maintained heavy involvement in daily operations Operate in 2 regional marketplaces Additional scheduling/forecasting requirements More data required and scrutiny from market monitor Settlement work has increased Compliance duties have changed 6

Increased opportunity, interest, and scrutiny Compliance/Regulatory WAPA used to perform Heartland’s TP functionality With integration, functional control of system was turned over to SPP; thus, WAPA no longer performs as don’t want to risk losing Federal Service Exemption Continually increasing costs for Heartland = 0.5 FTE Billing Changes More transparency in marketplace Unbundled transmission expense Ongoing education process with Customer base Legal Formal transmission process with more interest footprint wide SPP is a member driven organization Many more opportunities to get involved 7

Market Access 8

Economic Dispatch has Enhanced Market Purchase Opportunities Purchase market energy vs self generating Substantial savings in many cases if own marginal unit Heartland’s overall power supply cost YTD is 4% under budget Generation costs consistently under budget 9

Is there a downfall to saving money? Marginal units have likely seen lower running plant capacity factors Pre-Integration: Heartland generation = > 90% Post-Integration: Heartland generation = < 80%, 70% Unit Cycling could have long term affects Heartland’s units designed for constant load levels Any load change causes the plant components to experience temperature, pressure, and metal stress changes. Thermal and pressure cycles cause damage which accumulates over time and causes metal fatigue Jointly owned unit increased offer curve 10-15% to compensate 10

Cycling examples 11

Where did the sales opportunities go? SPP Market will consume all surplus energy, but at what cost? Surplus is sold at each generating unit’s Locational Marginal Price Sub $20 on average for most locations in UGP Counter party sales are essentially non-existent Prior to SPP IM start March 2014, Heartland was transacting daily with counter parties SPP footprint wide Today, SPP North HUB has no liquidity Today, SPP South HUB pricing much stronger 12

WAPA Position 13

Supplemental supplier must schedule each customer’s WAPA Contract Rate of Delivery Heartland forecasts and schedules WAPA’s demand and energy supplies for all our customers CROD allocations month ahead Must be individually scheduled, but can be rolled up If not, lose 7% of CROD Supplemental supplier responsible for all real time deviations Vulnerable to increased transmission charges Which are passed along to customers since Heartland implemented unbundled rates WAPA pays for service, but only based on CROD schedule at time of system peak (Coincident Peak) 14

Non-Coincident vs Coincident Non-Coincident Peak ** Maximum Demand Wheeling Charge Basis Heartland Demand Coincident Peak ** Demand at System Peak SPP Transmission Basis 15

Cost shift example xxxx xxxx zzzz yyyy yyyy 16

Coordination 17

Jointly owned units demand polished communication efforts amongst owners Heartland’s 2 baseload resources are jointly owned Offer curves, fuel costs, economic decisions and outage schedules require extensive coordination between partners and market monitor Outage Schedules Timing and communication of each outage is critical cause real time market fluctuations can be costly In the following example, unit went into outage HE17 so the Day Ahead market is 0 beyond To meet load requirements in Day Ahead, SPP dispatches resources to make up for outage The unit continued to generate MWhs while ramping down beyond HE17 Market uses price signals to discourage generation 18

Outage Example 19

In summary, the integration into SPP has been a positive one both operationally and financially. 20

Thank you! 21 @HeartlandPower Heartland Consumers Power District