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

California Independent System Operator Corporation Market Monitoring Report Jeff McDonald, Ph.D. Manager, Monitoring and Reporting Department of Market Monitoring ISO Board of Governors August 3, 2006

California Independent System Operator Corporation Two Key Issues 1. Assessment of Real Time Bid Cap ! Positive price spikes (>$250) observed in less than 2% of real- time intervals. ! Estimated Real Time Market cost impact to load of prices over $250 is negligible (approx. $3.1 million for Jan 15 – June 30) compared to total cost of serving load. ! Benefits of higher cap not captured in cost analysis - difficult to quantify but likely played a role in unprecedented generation availability during recent heat wave. ! DMM is not recommending any changes to bid cap at this time, but will continue to monitor. 2. Price Divergence and Real Time Imbalance Charge. ! High pre-dispatch exports at low prices (relative to 5-minute MCP) potentially costing $52 million over three months. ! Trend may change during Summer - DMM will continue to monitor. 2 BoG July 26, 2006 CAISO/DMM/JDMc

California Independent System Operator Corporation Real Time Energy Price Spikes 7% $70 % inc spikes % dec spikes Average Real-Time Price Average Day-Ahead Bilateral Price 6% $60 5% $50 % of Real-Time Intervals Avg. Price ($/MWh) 4% $40 3% $30 2% $20 1% $10 0% $0 Jan 15-31 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul 1-17 ! Frequency of positive spikes increased in April through mid-June due to extreme hydro conditions. ! Frequency greatly reduced in second half of June and first half of July due to higher loads and more thermal generation on-line. ! Real time and bilateral prices have been moderate and relatively comparable since March. 3 BoG July 26, 2006 CAISO/DMM/JDMc

California Independent System Operator Corporation Estimated Real Time Market Cost Impact of Price Spikes Instructed Incremental Real Time Energy (IE) Estimated Net Costs to LSEs Total Costs Cost Due to MCP > $250 Total Percent of IE Jan 15-Feb $17,981,000 $382,000 + 2.1% $357,000 + 2.0% March $12,421,00 $303,000 + 2.2% $49,000 + .4% April $26,489,000 $1,254,000 + 4.7% $787,000 + 3.0% May $21,227,00 $1,512,000 + 7.1% $694,000 + 3.3% June $20,438,000 $2,000,000 + 9.8% $1,193,000 + 5.9% Total $98,559,000 $5,451,000 + 5.5% $3,081,000 + 3.1% ! Cost analysis assumes only effect of raising bid cap was some 5-minute interval prices above $250. Potential offsetting benefits of a higher bid cap not captured in this analysis, e.g., – Less under-scheduling – Additional supply bids – Lower level of generation forced outages during critical peak periods. ! Adjusted for LSE own or controlled generation, the estimated net-cost impact for LSEs is $3.1 million (3.1% of net cost for Instructed RT Energy). 4 BoG July 26, 2006 CAISO/DMM/JDMc

California Independent System Operator Corporation Pre-Dispatched Export Bid Volumes and Prices 360,000 $120 Decremental Energy Pre-dispatched for ISO System Demand 300,000 $100 Weighted Avg. Cost of Pre-dispatched Intertie Bids Decremental Energy for ISO System Weighted Average Price at Bilateral Hourly Spot Index (Powerdex) 240,000 $80 Weighted Average Price ($/MW) Weighted Average Price at ISO Ex-Post MCP 180,000 $60 120,000 $40 60,000 $20 0 $0 -60,000 -$20 -120,000 -$40 -180,000 -$60 -240,000 -$80 -300,000 -$100 -360,000 -$120 1/7 1/14 1/21 1/28 2/4 2/11 2/18 2/25 3/4 3/11 3/18 3/25 4/1 4/8 4/15 4/22 4/29 5/6 5/13 5/20 5/27 6/3 6/10 6/17 6/24 Week Beginning ! Large volumes of pre-dispatched exports of real-time energy (as-bid) at relatively low prices (compared to real-time MCP) creates energy revenue imbalance that is allocated to load . 5 BoG July 26, 2006 CAISO/DMM/JDMc

California Independent System Operator Corporation Estimates of Potential Revenue Imbalance Charges from Price Divergence Approx. Potential Predis patched Price Difference Revenue Export Energy (As -Bid vs . MCP) Imbalance 4/1/2006 172,872 $63.96 $11,057,094 4/8/2006 175,618 $25.19 $4,423,274 4/15/2006 158,023 $21.16 $3,344,400 4/22/2006 154,262 $26.96 $4,158,303 4/29/2006 200,312 $38.04 $7,620,613 5/6/2006 127,335 $34.66 $4,413,536 5/13/2006 80,794 ($6.73) ($543,744) 5/20/2006 99,539 $14.27 $1,420,701 5/27/2006 71,477 $44.44 $3,176,674 6/3/2006 138,532 $21.21 $2,938,316 6/10/2006 99,327 $46.55 $4,623,218 6/17/2006 104,849 $41.82 $4,384,292 6/24/2006 67,425 $15.06 $1,015,707 Total 1,650,365 $52,032,383 ! For three month period April – June, potential charges (to load) resulting from lower priced pre-dispatched exports (compared to real time price) is $52 million. ! Trend may change as Summer progresses and pre-dispatch requirements shift away from export. 6 BoG July 26, 2006 CAISO/DMM/JDMc