1. Day Ahead Market Working Group April 7, 2003

2. 2 Agenda March 31 minutes DAM Feasibility Study - Questions? Coral Proposal - Discussion Generators and DAM

3. 3 Two Pass DA Algorithm Optimizes energy and start-up costs Multi-part offers - energy cost, start-up costs, minimum load, minimum run time, minimum shutdown time Start-up costs held whole where profits not covered - Bid Production Cost Guarantee (BPCG) DA unit commitment decisions are passed to pre-dispatch and real-time - sequences must consider that these units will be at least operating at their minimum output DA financial commitment and unit commitment drives RT behaviour Generators in DAM

4. 4 Pass 1 Financial commitment to satisfy Bid Load Sets DA MCP Pass 2 Units committed to satisfy Forecast Load Security constrained No price set Units selected in Pass 1 have priority

5. 5 Interaction between Day Ahead and Real Time Markets Forecast load - 4000MW Generators offer - 5000MW Gen A 2000MW - $25/MW - 100MW Minimum - $1000 Start-up Gen B 1500MW - $30/MW - 0MW Minimum - $2000 Start-up Gen C 1500MW - $40/MW - 50MW Minimum - $1000 Start-up Scenario 1 - 3000MW load bid DA Relatively inexpensive energy will get selected in both Pass 1&2 Scenario 2 - 1000MW load bid DA Relatively expensive energy likely only selected in Pass 2

6. 6 Interaction between Day Ahead and Real Time Markets Scenario 1: Pass 1 - Bid Load - 3000Mw Gen A selected for 2000MW (Offer $25) Next 500MW Gen B 1000 x $30 + $2000(S/U) = $32,000 Gen C 1000 x $40 + $1000(S/U) = $41,000 Gen B selected for 1000MW Gen A and Gen B financially committed - DA MCP $30 Pass 2 - Forecast Load - 4000MW Generators are optimized on start-up costs DAM results published Gen A - Financial commitment - 2000MW Gen B - Financial commitment - 1000MW Gen C - Unit Commitment - 50MW

7. 7 Interaction between Day Ahead and Real Time Markets Scenario 1: Real-time results assuming no changes to offer behaviour... Gen A scheduled for 2000MW Gen B scheduled for 1500MWRT MCP = $40 Gen C scheduled for 500MW Energy Settlement… (Q DA (P DA -P RT ) + Q RT P RT ) Gen A 2000($30 - $40) + 2000 x $40 = $70000 Gen B 1000($30 - $40) + 1500 x $40 = $50000 Gen C 0($30 - $40) + 500 x $40 = $ 2000 Bid Production Cost Guarantee - generators are held whole for start-up costs: E.g. Gen C start-up costs are: $40(DA Offer) x 50MW + $1000(S/U) = $3000 which is greater than $2000 energy settlement - receives additional $1000

8. 8 Interaction between Day Ahead and Real Time Markets Scenario 2: Pass 1 - Bid Load - 1000Mw Gen A selected for 1000MW (Offer $25) Gen A financially committed -- DA MCP $25 Pass 2 - Forecast Load - 4000MW Generators are optimized on start-up costs DAM results published Gen A - Financial commitment - 1000MW Gen B - Unit commitment - 0MW Gen C - Unit commitment - 50MW

9. 9 Interaction between Day Ahead and Real Time Markets Scenario 2: Real-time results... Gen A scheduled for 2000MW Gen B scheduled for 1500MWRT MCP = $40 Gen C scheduled for 500MW Energy Settlement… (Q DA (P DA -P RT ) + Q RT P RT ) Gen A 1000($25 - $40) + 2000 x $40 = $65000 Gen B 0($25 - $40) + 1500 x $40 = $60000 Gen C 0($25 - $40) + 500 x $40 = $ 2000 BPCG - Gen C start-up cost $3000 > $2000 energy settlement -- receives additional $1000

10. 10 Discussion Points - Generators Unit Commitment -- Required to show up?? De-Committing Units Ramp Rate consideration Alteration of offers after Financial or Unit Commitment

11. 11 Next Meetings Importers/Exporters - April 14 TBD