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1 Presentation to the Wisconsin Industrial Energy Group (WIEG) T. Graham Edwards President & CEO August 9, 2007.

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Presentation on theme: "1 Presentation to the Wisconsin Industrial Energy Group (WIEG) T. Graham Edwards President & CEO August 9, 2007."— Presentation transcript:

1 1 Presentation to the Wisconsin Industrial Energy Group (WIEG) T. Graham Edwards President & CEO August 9, 2007

2 2 Value of the Midwest ISO

3 3 Independent Market Monitor (IMM) 2006 State of the Market Report IMM stated that the Midwest ISO market has been operating as excellent and continues to improve IMM specifically pointed to specific areas of performance: Daily generation commitment – RSG costs decreased by 62% Generation dispatch and congestion management Reliability – Prices on Midwest ISO seams are well arbitraged Midwest ISO/PJM coordination – effectively managed constraints Price signals – total congestion costs of $550 million in 2006 vs. $1.07 billion in 2005 (9 months annualized)

4 4 Reliability Real Time Operations “Scorecard” NERC Audit Awarded 6 “Examples of Excellence” Provided 13 Positive Observations Contingency Reserve Sharing Group Started 1/1/07 Has resulted in a 39% reduction in reserve obligation Projected annual savings between $59-118 million

5 5 Direct Quotes from Wisconsin Market Participants Midwest ISO’s system of dispatch has been very beneficial, especially when not all of our generation resources were available Our company is now on a level playing ground with other WI utilities now that the Midwest ISO market is in operation Midwest ISO market provides our company access to lower cost wholesale energy supply and increased flexibility to manage fuel cost increases We have the ability to import three times as many MW during stress conditions than prior to the market – much more liquid The Midwest ISO LMP market is more efficient at implementing re-dispatch to address an overloaded transmission line than the NERC TLR system

6 6 Steps to Improve Services Annual Stakeholders Meeting Market Operating Committee IT System Improvements Ancillary Services Market (ASM) Improvements to Generator Interconnection Queue

7 7 ISO/RTO Cost Comparison Cost per megawatt-hour of Load Served ($/MWh) ($/MWh) CAISO ERCOT MISO NYISOPJM ISO-NE 0.20 0.40 0.60 0.80 1.00 1.20 19992000200120022003200420052006 0.00

8 8 Looking Ahead Short-Term Priorities Improving Operational Performance Implementation of ASM Moving forward with Resource Adequacy Maintaining the Midwest ISO’s credit rating Long-Term Vision Strategic Plan - Direction to be adopted by our Board next week Plan emphasis –Operational Performance –Value Creation –Positioning for Growth

9 9 Midwest ISO Aspirations

10 10 Midwest ISO’s Role in Regional Planning Coordination of Regional Planning Midwest Transmission Expansion Plan (MTEP) Progress What it’s NOT Challenges

11 11 Demand Response Board of Directors adopted guiding principals “The Midwest ISO strives to have an open wholesale market where energy can be bought or sold in fair, efficient and non-discriminatory markets, while providing for reliable grid operations”

12 12 Demand Response – Action Items 2007 Remove disincentives to provide demand response in Real Time Remove RSG penalty – Complete Provide compensation for demand reductions when called during emergency conditions – Stakeholder discussion complete and filing being prepared Increase accountability and availability of demand response relied upon to satisfy resource adequacy requirements Module E update filing in December 2007

13 13 Demand Response – Action Items 2008 Expand opportunities for demand participation New products tailored to demand resources – ASM Improve price signals to better reflect supply and demand conditions –ASM –Modified LMP calculation to reflect marginal resource under development Resolve market design and technical barriers to provide opportunities for direct market participation from dispersed demand response

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