SPP CWG Integrated Marketplace Implementation Phase Kick-off - PowerPoint PPT Presentation

SPP CWG Integrated Marketplace Implementation Phase Kick-off Meeting Brett Kruse Calpine Corporation June 22-23, 2011

Calpine: At a Glance • Largest IPP in U.S . by megawatt hours produced • The fleet: - 28,081 MW of capacity from 92 plants in 20 S tates and Canada - Primarily natural gas-fired plants Hay Road Energy Center (Wilmington, DE) - S mallest greenhouse gas footprint among our peers - Nation’ s largest: - Operator of natural-gas fired and combined-cycle plants - Fleet of highly efficient CHP plants - Baseload renewable generator with 15 geothermal plants at The Geysers in northern California Pastoria Energy Center (Lebec, CA) 1

National Portfolio of More Than 28,000 MW Geographic Diversity Dispatch Flexibility 2

Most Recent ISO/RTO Market Launches and Major Design Changes • PJM Nodal Market launch (1998) • California IS O Market launch (1998) • NYIS O Market launch (1999) • Nepool Market launch via IS O-NE (1999) • ERCOT Zonal Market launch (2001) • Nepool Nodal Market launch via IS O-NE (2003) • MIS O Energy Markets launch (2005) • MIS O Ancillary S ervice Markets launch (2009) • California IS O Nodal Market launch (2009) • ERCOT Nodal Market launch (2010) 3

Lessons Learned from Our Experiences • Put together a Proj ect Team that fits your company’ s business and is based on: - Experience with other markets - Commercial exposure to S PP markets - Degree of out-sourcing your company will utilize 1. Full out-source via services contract 2. Out-source some functions (shadow settlement, dispatch tool design, etc.) 3. Build all tools in-house - New opportunities with implementation of the new markets • Get ready to experience a complete change in transaction thinking - Financial transactions instead of physical transactions - Asset optimization DA and RT - Flexibility matters - Must be able to react to RT - Forecasting is MUCH more important!!! - Your positions - Everyone else’ s positions 4

Lessons Learned from Our Experiences • S ettlements take on a whole new meaning - Must be able to shadow-settle effectively - Identify and resolve areas of dispute – OR OVERPAY - S PP will utilize 5-minute settlement (NYIS O!!!) • Asset modeling needs to be exact and precise • UNDERSTAND YOUR RISK!!! - Will be different with each Market Participant - May not be apparent - Other Market Participants will capitalize on those that do not understand their risk exposure (banks and speculative shops) 5

Lessons Learned from Our Experiences • LMP prices during testing should not be expected to reflect reality - No incentive to offer real pricing - some want to use proposed prices to see how system reacts (stress- testing the system) - S elf-scheduling definitely will affect LMP prices - S PP already has a RT LMP-type system, so that may help provide more “ accurate” LMP prices during testing • IMM interaction and relationship - Role will change greatly - Will evolve over time - Must understand your assets and their physical abilities and limitations, and accompanying financial costs - S taff must be drilled on proper communication – who is allowed to speak with IMM staff? - Poor relationship can have devastating cost 6

Lessons Learned from Our Experiences • Outage coordination is usually a challenge - What is the role of the TO? GO? RTO? - What ability does the RTO have to ask generators to move approved outages? - What kind of look-ahead outage schedules are needed? • Dispatching DA and RT can sometimes be problematic - Modeling of unit start-up times and required down times - Modeling of ramping limitations - Transmission and validation of OOM deployments and other “ special requests” - S ettlement of system uplift – did OOM dispatches get paid as required? 7

Lessons Learned from Our Experiences • You need to find all system integration issues during testing - Vendors have plenty of experience, but interfaces can sometimes be unique - Integration of RTO systems to Market Participants’ systems - Very important everything is testing prior to market launch • Prepare for the market to launch on time, but don’ t be surprised and depressed if launch is delayed more than once – history is very consistent for unique designs - S ince 2001, only one market has launched on time and under budget - Market Participants need to be ready, and S PP/ MPs need to be able to discern MPs important to success and those who are not 8

Lessons Learned from Our Experiences • Determine staffing needs for your company - How much outsourcing? - How many vendors? - How much in-house development? - Market interaction strategy? - Advocacy/ Governance? - Advocacy group participation? • Don’ t expect other market participants to have the same priorities as your company – in other words, don’ t let their actions or lack thereof frustrate you – note earlier caution regarding 9

“ They always say time changes things, but you actually have to change them yourself.” The Philosophy of Andy Warhol Andy Warhol (1928 - 1987) 10