Market Pricing Issues: Update Document ID #: MAC-05-07 8 Oct 2003 Market Advisory Council of the IMO

Market Advisory Council of the IMO 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

Market Advisory Council of the IMO 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

Market Advisory Council of the IMO 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

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

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

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

Market Advisory Council of the IMO Next Steps Additional Control Action Operating Reserve Remove 200 MW Supplementary Reserve 12x ramp rate Pre-dispatch price bands 8 Oct 2003 Market Advisory Council of the IMO