Market Monitoring Report Jeff McDonald, Ph.D. Manager, Monitoring - PowerPoint PPT Presentation

Market Monitoring Report Jeff McDonald, Ph.D. Manager, Monitoring and Reporting ISO Board of Governors Meeting General Session May 18, 2009

Highlights from 2008 Annual Report on Market Issues and Performance Markets & Costs Generation Investment Significant Events Slide 2

Wholesale markets were stable and competitive. $15 $5 - $10 Threshold Average Markup 12-Month Competitive Index $14 Average Price-Cost Markup ($/MWh) $13 Updated methodology for $12 calculating markup $11 $10 $9 $8 $7 $6 $5 B $4 $3 $2 $1 A $0 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Feb-03 Apr-03 Aug-03 Oct-03 Dec-03 Feb-04 Apr-04 Aug-04 Oct-04 Dec-04 Feb-05 Apr-05 Aug-05 Oct-05 Dec-05 Feb-06 Apr-06 Aug-06 Oct-06 Dec-06 Feb-07 Apr-07 Aug-07 Oct-07 Dec-07 2004 2005 2006 2007 2008 A. Monthly price-to-cost mark-ups were less than $4/MWh. B. 12-month competitive index was below $3/MWh. Slide 3

Total wholesale costs increased slightly. $18,000 Forward Costs Real Time + Reliability Costs $16,000 Ancillary Services Costs Total Nominal Wholesale Cost $14,000 A Costs ($ Millions) $12,000 B $10,000 $8,000 $6,000 $4,000 $2,000 $0 2004 2005 2006 2007 2008 A. Total wholesale cost increased 9.4% in 2008 to $12.8 billion. B. Adjusted for changes in natural gas prices, total wholesale costs were slightly lower than in 2007. Slide 4

ISO reliability costs increased in 2008. % ∆ from 2007 Reliability Cost Type 2008 Cost ($MM) Intra-zonal $174 81% (including RT RMR) Total RMR $55 -44% (excluding RT RMR) RCST/TCPM $3 -89% Total Reliability Costs $232 5% ! Includes costs of non-market costs associated with ISO actions taken to manage reliability. ! Does not include cost of capacity under Resource Adequacy (RA) contracts. Slide 5

Inter-Zonal congestion costs increased significantly in 2008. 2008 Congestion Revenue 2007 Congestion Revenue NOB: $36.9 million $12.2 million ! $176 Million in 2008 COI/PACI: $37.8 million $15.4 million ! $85 Million in 2007 NP15 NP 15 Path 15: $26.0 million $2.2 million ZP26 ZP2 Palo Verde: $26.5 million $21.6 million Eldorado: Path 26: $15.5 million $43,826 $9.4 million $1.3 million SP SP15 15 Slide 6

Cumulative new generation investment is significant but little net-gain in the south. Cumulative (2001-2008) Southern Zone New generation in southern New Generation 7,449 Retirements (4,280) California largely offset by Forecasted Load Growth * 4,212 retirements and load growth. Net Change (1,042) Northern Zone New Generation 7,544 Major gains in central & Retirements (1,235) northern California. Forecasted Load Growth * 3,342 Net Change 2,967 CAISO System New Generation 14,994 System-wide Retirements (5,515) Forecasted Load Growth * 7,554 Net Change 1,925 * Based on 2% annual load growth. Slide 7

Major Market & Grid Operation Events in 2008 ! June Wildfires & Heat Wave – managed without any major grid or market impacts. ! Natural Gas Prices – Large swings in natural gas prices drove market activity, particularly congestion costs. ! Limited California hydroelectric production – increased dependence on thermal generation and imports. Slide 8

Markets and grid operation performed well during June California wildfires and heat wave. ! Spring 2008 – driest on record July 11, 2008 Pacific AC ! June 20-21 – 5,000-6,000 dry lightning strikes across northern & central California ! Over 2,000 wildfires ! Over 1.3 million acres burned ! Operational impacts: ! Periodic de-rates of major transmission to the northwest (Pacific AC) ! Out-of-merit dispatch to unload various other paths Slide 9

Annual peak load occurred on June 20, and loads were relatively moderate the rest of summer. Daily Peak Loads -June 2006-2008 50,000 June 20, 2008 Annual Peak = 46,897 40,000 Peak Load (MW) 30,000 20,000 2006 2007 10,000 2008 0 1 3 5 7 9 1 3 5 7 9 1 3 5 7 9 1 1 1 1 1 2 2 2 2 2 Slide 10

Rise and fall of natural gas prices were a big driver in 2008 market performance. $14 $12 $10 Price ($/mmBtu) $8 $6 $4 PG&E Citygate (Northern CA) SoCal Border (Southern CA) $2 Henry Hub (National) $- 09-Nov 30-Nov 20-Jan 15-Jun 06-Jul 27-Jul 10-Feb 02-Mar 23-Mar 13-Apr 17-Aug 07-Sep 28-Sep 19-Oct 30-Dec 04-May 25-May 21-Dec Week Beginning Slide 11

Two consecutive years of below normal California snowpacks limited hydroelectric supplies. 2006 2007 2008 Slide 12

Low Reservoirs = Limited Hydro Power Shasta Lake Reservoir Levels 4.5 4.0 Average (1956-2005) 2008 Levels 3.5 Million Acre Feet 3.0 2.5 2.0 Seventh lowest level in 1.5 the last 48 years 1.0 0.5 0.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Shasta Reservoir – August 12, 2008 Slide 13

ISO hydroelectric production in 2008 was the lowest in the past eight years. 6,000 2004 5,500 2005 Average Hydro Generation (MW) 5,000 2006 2007 4,500 2008 4,000 3,500 3,000 2,500 2,000 2008 1,500 1,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Slide 14