iso new england regional update wholesale electricity markets & state energy policy seminar...
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ISO New England Regional Update
Wholesale Electricity Markets & State Energy Policy SeminarConnecticut Business & Industry Association
December 14, 2010
About ISO New England
• Not-for-profit corporation created in 1997 to oversee New England’s restructured electric power system– Regulated by the Federal Energy
Regulatory Commission (FERC)
• Independent System Operator– Independent of companies doing
business in the market
– No financial interest in companies participating in the market
• Major responsibilities:– Reliable operation of the electric grid
– Administer wholesale electricity markets
– Plan for future system needs
2CBIA Seminar – December 14, 2010
© 2010 ISO New England Inc.
New England’s Electric Power Grid at a Glance
• 6.5 million households and businesses; population 14 million
• More than 300 generators
• Over 8,000 miles of high-voltage transmission lines
• 13 interconnections to electricity systems in New York and Canada
• Approx. 32,000 megawatts of total supply and 2,500 megawatts of demand resources
• All-time peak demand of 28,130 megawatts, set on August 2, 2006
• More than 400 participants in the marketplace
• $5-11 billion annual energy market value
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© 2010 ISO New England Inc.
ISO New England and Stakeholders
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© 2010 ISO New England Inc.
Federal Energy Regulatory Commission (FERC)
North American Electric Reliability
Corp. (NERC),Electric Reliability
Organization (ERO)
ISO New England,Regional Transmission
Organization (RTO)
New England Stakeholders
Policymakers and Regulators
New England Power Pool (NEPOOL)Participants
Committee, and Technical
Committees
Six Sectors:Generation,
Transmission,Supplier,
Publicly-Owned Entity,
End User,Alternative Resources
States
Governors/NESCOE
Northeast Power Coordinating
Council (NPCC)
Market Participants
Consumer Advocates,
Attorneys General
Environmental Regulators
Energy Boards and Commissions
Operate Bulk Electric Power
System
Administer Regional Transmission Tariff
Administer Wholesale ElectricityMarkets
Public Utility Commissions
Independent Board of Directors
Market MonitoringInternal and
External Market Monitors
Comprehensive planning process with stakeholder
input through Planning Advisory
Committee
Dispatch Resources,
Oversee Six Local Control Centers,Coordinate with Three External Control Areas
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Transmission Projects to Maintain Reliability are Progressing• Major transmission upgrades
completed or underway in all six New England states
• Investments have reduced congestion and reliability costs
– U.S. Department of Energy dropped New England from its transmission congestion report, citing success in developing transmission, generation and demand-side resources
– Congestion costs dropped nearly 80% (~$100 million) from 2008–09
– The need to commit uneconomic generation for reliability dropped 90% (more than $165 million) from 2008–09 • Largely because of transmission
upgrades completed in Southeast Mass (SEMA) and Southwest Connecticut
4
5
12
7
9
8b
3
6
10
In service
Under construction
Under study
8a
1. Southwest CT Phase I2. Southwest CT Phase II3. NSTAR 345 kV Project4. Northwest Vermont5. Northeast Reliability Interconnect6. Monadnock Area7. New England East-West Solution8. Southeast Massachusetts
a. Short-term upgradesb. Long-term Lower SEMA
9. Maine Power Reliability Program10. Vermont Southern Loop
CBIA Seminar – December 14, 2010© 2010 ISO New England Inc.
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New England’s Fuel Mix has Shifted
• New highly efficient natural-gas-fired generators have displaced use of fuel oil
• Generator emissions rates have declined over the past decade
– SO2 rate 67%
– NOX rate 62%
– CO2 rate 12%
• Environmental regulations will further challenge carbon-heavy resources 2000 2009
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
22%
42%
14.8%
0.7%
31%30%
18%12%
Sources of Energy
OtherHydroPumped storageCoalNuclearOilNat. Gas
CBIA Seminar – December 14, 2010© 2010 ISO New England Inc.
Region has Developed DR to Support ReliabilityAdditional DR could be realized by offering dynamic pricing to retail customers
Pre-SMD
2003 2004 2005 2006 2007 2008 2009 May 2010
2010/11
2011/12
2012/13
2013/14
0
500
1,000
1,500
2,000
2,500
3,000
3,500
CT 771 CT 930
VT 81VT 148
MA 679
MA 1,379
NH 105
NH 129
ME 522
ME 444
RI 141
RI 231
Capacity(MW)
FCM
2010/11–2013/14: Total DR cleared in FCAs 1–4 (New and Existing); Real-Time Emergency Generation capped at 600 MW.
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Enrollment in ISO programs prior to start of FCM
CBIA Seminar – December 14, 2010© 2010 ISO New England Inc.
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Wholesale Electricity Prices Track Natural Gas Prices
Jan-
05
Mar
-05
May
-05
Jul-0
5
Sep-0
5
Nov-0
5
Jan-
06
Mar
-06
May
-06
Jul-0
6
Sep-0
6
Nov-0
6
Jan-
07
Mar
-07
May
-07
Jul-0
7
Sep-0
7
Nov-0
7
Jan-
08
Mar
-08
May
-08
Jul-0
8
Sep-0
8
Nov-0
8
Jan-
09
Mar
-09
May
-09
Jul-0
9
Sep-0
9
Nov-0
9
Jan-
10
Mar
-10
May
-10
Jul-1
0
0
20
40
60
80
100
120
0
2
4
6
8
10
12
14
16
18
20
Wholesale Electricity at New England Hub (RT LMP) Natural Gas
Oil Coal
Electric Energy$/MWh
Fuel$/MMBtu
Prices spike when hur-ricanes hit Gulf
Demand drops with recession;Electric energy costs fell 50% from 2008–09; and congestion costs fell ~80%
Natural gas prices typi-cally peak in winter
CBIA Seminar – December 14, 2010© 2010 ISO New England Inc.
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Forward Capacity Market: Results
• Significant new supply and demand resources committed to be online in New England over the next four years*– New supply: 3,600 MW in New England (1,555 MW in CT)– New DR: 2,500 MW in New England (600 MW in CT)
• FCM resources eliminated need for costly reliability agreements with older, less efficient resources– In 2007, Connecticut paid $300 million for 3,200 MW of capacity
operating under reliability agreements– Reliability agreements ended June 1, 2010
• Capacity prices trending down due to excess supply– Forward Capacity Auction clearing at the floor price
* Resources committed in Forward Capacity Auctions 1–4
CBIA Seminar – December 14, 2010© 2010 ISO New England Inc.
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ISO’s Activities Important to Consumers
• 24/7 Reliable electric service throughout the region for residents and businesses
• Operation and development of electric system infrastructure is expensive – and consumers ultimately pay for it
• Opportunities exist to participate in the process that decides the details of how operation and development of infrastructure will occur – Significant transparent information
• For certain consumers, opportunity to participate in the markets, earn revenues
CBIA Seminar – December 14, 2010© 2010 ISO New England Inc.
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Consumer Liaison Group
• Purpose– Inform consumers about complex and important electricity issues– Facilitate consumer involvement on regional electricity issues
and their participation in the process to consider electricity market changes
– Create a forum for dialogue between consumers and ISO New England
• Connecticut has active role– Kevin Hennessy (CBIA) and Richard Steeves (OCC) serve on
CLG Coordinating Committee– Additional participation in CLG activities is welcome
CBIA Seminar – December 14, 2010© 2010 ISO New England Inc.
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Consumer Liaison Group
• Topics– Wholesale electricity pricing– Differences between wholesale and
retail costs – Options for consumer participation
in wholesale electricity markets– Transmission costs and cost
allocation– Issues and challenges associated
with integrating renewable resources
– Discussions with FERC Commissioners Moeller and Spitzer
CBIA Seminar – December 14, 2010© 2010 ISO New England Inc.