Ontario Electricity Supply Forum PEO Mississauga Chapter - September 6, 2007 Rhonda Wright-Hilbig, P.Eng Market Analysis - IESO

The IESO’s Role Within the Industry There are a number of different entities but all of them have their own set of accountabilities and defined responsibilities The IESO manages Ontario's electricity grid - directing the flow of electricity across the transmission system to meet the province's power needs We balance this demand for electricity against available supply through the wholesale market

The Electricity Markets

Approximately: –30,000 MW installed capacity –28,000 km high voltage transmission system –250 authorized market participants Anyone connected to high voltage grid must become an IESO market participant Anyone connected to a Local Distribution Company (LDC) has a choice to become an IESO market participant or participate retail market Ontario’s Electricity Market

Real-time Energy Operating Reserve Transmission Rights Ancillary Services Procurement FinancialPhysical IESO - Administered Markets The Markets

Electricity Sector Participants Participants Outside Ontario Local Distribution Company Network Embedded Large Customer Embedded Generator Wholesale Price Low Volume End-use Consumer Designated Consumer RPP Directly Connected Generator Directly Connected Large Consumer Transmitters Retailers

Types of Market Participants Adjust operations based on dispatch instructions received from the IESO Submit bids/offers DISPATCHABLE Consume or produce as desired – no dispatch instructions Do not submit bids/offers – accept market price NON-DISPATCHABLE

Generators and Imports Offers Loads and Exports Bids IESO - Administered Markets Real-time Energy Bid and Offer Basics

Price ($/ MW h) Quantity ( MW ) $18.00 $ $ $24.00 $ (20.5,20)(22,60)(21.6,40)(24,100)(23,80)(24.5,120)(20.5,0) Price/Quantity Pairs - Offers

Setting the Market Clearing Price

Supply and Demand Determines Price Optimum Selling Price Price Quantity Supply Demand

Demand Varies Considerably Sun. Mon.Tues.Wed.Thurs.Fri.Sat. Time of Day Weekend vs. Weekday Ontario Demand by Day of the Week for typical October Week

Move to a Summer Peaking Jurisdiction

Generator 3 50 MW - $25/MWh Generator MW - $38/MWh 100 MW - $15/MWh Generator 2 50 MW - $20/MWh Setting the Market Clearing Price

Offers Are Selected Economically 50 MW 100 MW 150 MW 200 MW $15 / MWh $20 / MWh $25 / MWh $38 / MWh 12:0013:0014:0015:0016:0017:0018:0019:00 Quantity Time Generator 1Generator 2Generator 3 20: MW

Demand and Price 50 MW 100 MW 150 MW 200 MW $15 / MWh $20 / MWh $25 / MWh $38 / MWh 12:0013:0014:0015:0016:0017:0018:0019:00 Generator 1Generator 2Generator 3 20: MW Demand $38 $15 $25 Quantity Time

50 MW$15 / MWh $20 / MWh $25 / MWh $38 / MWh 16:0016:0516:1016:1516:3016:3516:4016:45 Time 17:0016:2016:2516:50 16:55 MCP $ / MWh 100 MW 150 MW 200 MW 250 MW Offers and Demand - 5 Minute Intervals Generator 1Generator 2Generator 3 Hourly Ontario Energy Price = $30.42 $25 $38

Determining Dispatch Instructions

BalancingDemandSupply 60 Hz Generators + ImportsLoads + Losses + Exports Ensure that supply meets demand within system limits

Security Limits Security limits are the reliability envelope in which the market operates; they protect our grid and our neighbours’ grids from disturbances Energy will take all available paths to get from supply point to consumption point Transmission lines do not control or limit the amount of energy they convey Energy flows are managed by dispatching generator output Different limits are used under different operating conditions

Prices and Schedules Dispatch follows economics as closely as possible Can’t dispatch based purely on economics –The unconstrained mode of the dispatch algorithm determines market clearing prices and “market schedules” in the absence of transmission constraints “copper plate” model of the grid Assumes resources can ramp at three times their offered ramp rates (September 12, 2007) –The constrained mode of the dispatch algorithm determines dispatch schedules (i.e., dispatch instructions) Respects transmission losses, transmission system limits, ramp restrictions on resources When a difference in MW occurs between the economic “market schedule” and the practical “constrained schedule” market participants are held whole through Congestion Management Settlement Credits (CMSC) The cost of CMSC is recovered through the IESO uplift to loads

Dispatch instructions Dispatch instructions: –Primary method for controlling the balance of supply with demand –Indicate operating point at the end of a 5-minute interval –Are sent only if there is a required change in operating point –Can be refused for reasons of public or worker safety, equipment damage, or legal requirements

Imports and Exports

Scheduling Imports and Exports Imports and exports are scheduled based on economics  compared to internal bids/offers Scheduled an hour in advance, scheduled for a one hour block Participants must navigate with other jurisdictions, including transmission access Electricity interchange improves Ontario reliability, –Imports reduce the price of electricity in Ontario, effectively add supply –Exports effectively increase demand; exports can be curtailed in the event of Ontario shortages

Contact us IESO website provides up to date prices IESO publications available to help businesses understand the market IESO 1 (888) or (905)

Ontario Electricity Supply Forum PEO Mississauga Chapter - September 6, 2007 Rhonda Wright-Hilbig Section Head, Market Analysis September 6, 2007