1. 1 Progress of Market Integration in North America W. Scott Miller, III Executive Director, Market Applications PJM Interconnection, L.L.C.

2. 2 CAISO 45,900 ERCOT 60,157 PJM 63,726 NYISO 30,983 ISONE 25,158 IMO 25,269 PJM is currently the largest centrally dispatched Control Area in North America AESO 7,800

3. 3 The Law and The Rules in the U.S. The Law:  Title VII of Energy Policy Act of 1992  “to promote greater competition in bulk power markets...” The Rules:  1996: Order 888  “put in place the foundation necessary for competitive wholesale power markets in this country - open access...”  1999: Order No. 2000  “ensure that customers have the benefit of competitively priced generation...”

4. 4 Standard Market Design (SMD)  FERC proposes “standard” market rules for all wholesale markets in US (July 2002)  Opposition from states in Southeast and Northwest  South: dominated by a few, large utilities  Northwest: subsidized hydro power  Opponents are attempting to slow through legislation in Congress  Outcome uncertain but should more clear by November.

5. 5 Significant Canadian Events  Significant interconnection between Ontario and US (as demonstrated on August 14).  Provincial government capped retail prices shortly after restructuring  Sought wholesale “middle man” to buy on behalf of retail load  Significant issues with regard to incentives to meet future load needs.  Unclear future of Ontario but interaction between US and IMO markets requires greater integration.

6. 6 Progress toward Integration of Markets  Work on PJM-MISO “common market” proceeding  Virtual signal dispatch  PJM-MISO working with TVA to “coordinate” market information/dispatch  SPP (lower Midwest) and portions of the South (Carolinas) may be next.  Possible that majority of Eastern Interconnect could be highly integrated by 2006-07 regardless of new market rules  Recent events in California provide hope for West.

7. 7 Competitive Wholesale Markets

8. 8 Conclusion  Opposition to integrated markets may delay progress to ultimate goal (highly integrated markets across whole interconnections).  However, events of August 14 blackout put focus on the regional nature of electricity  Markets may succeed as a result of responding to reliability concerns.  Integration is moving forward.