SPP Integrated Marketplace Day 2 Market Lessons Learned & Project Approach Bill Clarke Tyler Wolford Jon Sunneberg June 22, 2011
Agenda Introduction � Day 2 Market Lessons Learned � Operations � Trading � Tools & Systems � Analytics � Settlement & Credit � Personnel � SPP Integrated Marketplace – Member Program Approach � Project Framework � Kickoff Meeting � Budgetary Impacts � Detailed Analysis � Next Steps � Questions � 2
Introduction � Bill Clarke, TEA Executive Director, RTO Services � � Tyler Wolford, TEA RTO Project Manager � � Jon Sunneberg, NPPD Market Strategies Manager � 3
Introduction Today’s Purpose Share lessons learned from TEA’s Day 2 market startups � Outline key differences between the current SPP market and Day 2 � markets Review TEA & NPPD’s initial program approach for the SPP Integrated � Marketplace project Provide an outline of potential milestones and next steps for MPs � Encourage discussion and idea sharing am ongst MPs � 4
Introduction The Energy Authority ( TEA) A stand-alone Risk Management and Energy Marketing � Company wholly owned by Public Power Vision – TEA will be the strategic partner of choice in providing � energy solutions to public power Mission – Maximize the value of member and partner assets in � wholesale energy markets Strategic partner to and staff extension of our members � 5
6 Our Mem bers Introduction
Introduction TEA - Mem bers TEA has 35 members nationwide � Equity Members (7) � Nebraska Public Power District (SPP) � City Utilities of Springfield (SPP) � JEA � MEAG � Santee Cooper � Cowlitz, WA PUD � Gainesville Regional Utilities � Contract Members (28) � 7
Introduction TEA - Active RTO/ I SO Custom ers MISO � AMP � City Water & Light, Springfield, Illinois � City of Fulton, Missouri � City of Rochester, Minnesota � City of Columbia, Missouri � Prairie States Generating Station � Southern Minnesota Municipal Power Authority (SMMPA) � University of Missouri � SPP � Nebraska Public Power District � City of Springfield, Missouri � City of Lafayette, Louisiana � Louisiana Electric Power Agency (LEPA) � PJM � AMP � City of Dover, Delaware � 8
Agenda Introduction � Day 2 Market Lessons Learned � Operations � Trading � Tools & Systems � Analytics � Settlement & Credit � Personnel � SPP Integrated Marketplace – Member Program Approach � Project Framework � Kickoff Meeting � Budgetary Impacts � Detailed Analysis � Next Steps � Questions � 9
Day 2 Market Lessons Learned High Level Sum m ary Data - Data and information exchange requirements are significantly � greater under an RTO than the traditional market Com plexity – Dual clearing markets are much more complex due to � the multiple markets to operate within (DA & RT), more products to utilize, additional settlement charge types, and overall greater market risks from uncertainty Flexibility – Operational flexibility of resources is more often � rewarded in dual clearing markets Personnel – Roles and positions within the organization will change � 10
Agenda Introduction � Day 2 Market Lessons Learned � Operations � Trading � Tools & Systems � Analytics � Settlement & Credit � Personnel � SPP Integrated Marketplace – Member Program Approach � Project Framework � Kickoff Meeting � Budgetary Impacts � Detailed Analysis � Next Steps � Questions � 11
Day 2 Market Lessons Learned Operations From a strategic point of view, think of your generation and your � loads separately Generation resources are revenue producers – generation is sold to the � market Generating plant staff incentives changed from maximizing run time to optimized around � market prices Load is essentially a cost center – fully purchased from market � System Operators will need to interact with & verify data more � frequently Review of data accuracy & timeliness is critical � Assure data is properly entered into RTO systems � Operational flexibility is rewarded � RTO rules & charge types provide incentive to hand over as much control � as possible Knowledge of your system needs to be “translated” into data � submissions 12
Agenda Introduction � Day 2 Market Lessons Learned � Operations � Trading � Tools & Systems � Analytics � Settlement & Credit � Personnel � SPP Integrated Marketplace – Member Program Approach � Project Framework � Kickoff Meeting � Budgetary Impacts � Detailed Analysis � Next Steps � Questions � 13
Day 2 Market Lessons Learned Trading Hourly trading is virtually non-existent in an RTO market � RTO market serves this role � Physical bilateral transactions decrease � Financial bilateral transactions increase � Increased optimization of assets � Day ahead vs. real time � Fixed vs. price sensitive demand bids � Transactions with liquid trading hubs � Utilization of virtuals � Analysis of trades to evaluate P&L � Load & price (LMP) forecasting is beneficial � Strategies to Offer Units to Market � Recovery of start-up, no load, & energy costs � Optimize around three markets – DA, RTBM, & RUC � 14
Agenda Introduction � Day 2 Market Lessons Learned � Operations � Trading � Tools & Systems � Analytics � Settlement & Credit � Personnel � SPP Integrated Marketplace – Member Program Approach � Project Framework � Kickoff Meeting � Budgetary Impacts � Detailed Analysis � Next Steps � Questions � 15
Day 2 Market Lessons Learned Tools & System s It is easy to underestimate the volume of data moving � between the utility and the RTO Significant increase in IT infrastructure needs � Servers, data storage, bandwidth � Interaction with SPP systems � Consider what tools you will need � Submitting data to the RTO � Verifying data was received by the RTO � Verifying unit offers meet market monitor limits � Retrieving settlement statements � Reconciling the settlement statements to your expectations (shadow � settlements) Well Defined Audit Trails � 16
Day 2 Market Lessons Learned Tools & System s Data, Data, Data � Large increase in amount of data to be transferred, analyzed, and stored � Granularity of data: five-minute, hourly, daily � Budgets have to account for storage of this data � Be cautious with use of spreadsheets � The markets change frequently, requiring constant monitoring and � updating of software and processes Structured approach to software implementations � Involvement of business users and technical staff key to understanding � impacts and implementing systems Vendor dependence increases � Push vendors to communicate with RTO staff early for specification changes � Seen as many as 8-12 software patches a year due to market changes, � commercial model changes, and software enhancements Plan for multiple environments – Production, QA, Testing, & Disaster Recovery � 17
Agenda Introduction � Day 2 Market Lessons Learned � Operations � Trading � Tools & Systems � Analytics � Settlement & Credit � Personnel � SPP Integrated Marketplace – Member Program Approach � Project Framework � Kickoff Meeting � Budgetary Impacts � Detailed Analysis � Next Steps � Questions � 18
Day 2 Market Lessons Learned Analytics Analytical tools & personnel will become integral to success � More reporting requirements � Forecasting ARR/ FTR LMP analysis (nodal tool) � Historical FTR valuation models � Yearly, Seasonal, Monthly, Other � Forecasting & Historical reporting of daily/ hourly LMPs � Position Reports � FTRs, Day Ahead, Real Time, Financial Schedules, Physical Schedules � Data Warehouse Reports � Results Reports – Evaluate strategy effectiveness � Documentation requirements and their impact on tools/ systems � increase (registration, resource adequacy, GADs, ARR/ FTR allocations, FTR auctions) Risk management studies should take into account increased � uncertainty, multiple markets, congestion, & alternative strategies 19
Agenda Introduction � Day 2 Market Lessons Learned � Operations � Trading � Tools & Systems � Analytics � Settlement & Credit � Personnel � SPP Integrated Marketplace – Member Program Approach � Project Framework � Kickoff Meeting � Budgetary Impacts � Detailed Analysis � Next Steps � Questions � 20
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