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

Slide 2

Highlights from 2008 Annual Report on Market Issues and Performance

Markets & Costs Generation Investment Significant Events

Slide 3

Wholesale markets were stable and competitive.

• A. Monthly price-to-cost mark-ups were less than $4/MWh.
• B. 12-month competitive index was below $3/MWh.

$0 $1 $2 $3 $4 $5 $6 $7 $8 $9 $10 $11 $12 $13 $14 $15

Feb-03 Apr-03 Jun-03 Aug-03 Oct-03 Dec-03 Feb-04 Apr-04 Jun-04 Aug-04 Oct-04 Dec-04 Feb-05 Apr-05 Jun-05 Aug-05 Oct-05 Dec-05 Feb-06 Apr-06 Jun-06 Aug-06 Oct-06 Dec-06 Feb-07 Apr-07 Jun-07 Aug-07 Oct-07 Dec-07 2004 2005 2006 2007 2008

Average Price-Cost Markup ($/MWh)

$5 - $10 Threshold Average Markup 12-Month Competitive Index

Updated methodology for calculating markup

A B

Slide 4

$0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 2004 2005 2006 2007 2008 Costs ($ Millions) Forward Costs Real Time + Reliability Costs Ancillary Services Costs Total Nominal Wholesale Cost

Total wholesale costs increased slightly.

• 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.

A B

Slide 5

ISO reliability costs increased in 2008.

! 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.

• 89%

$3 RCST/TCPM 5% $232 Total Reliability Costs

• 44%

$55 Total RMR (excluding RT RMR) 81% $174 Intra-zonal (including RT RMR) %∆ from 2007 2008 Cost ($MM) Reliability Cost Type

Slide 6

! $176 Million in 2008 ! $85 Million in 2007

NP NP15 15 SP SP15 15 ZP2 ZP26 NOB: $36.9 million $12.2 million COI/PACI: $37.8 million $15.4 million Eldorado: $15.5 million $9.4 million Palo Verde: $26.5 million $21.6 million Path 26: $43,826 $1.3 million Path 15: $26.0 million $2.2 million

2008 Congestion Revenue 2007 Congestion Revenue

Inter-Zonal congestion costs increased significantly in 2008.

Slide 7

Cumulative new generation investment is significant but little net-gain in the south.

System-wide New generation in southern California largely offset by retirements and load growth. Major gains in central & northern California.

Cumulative (2001-2008) Southern Zone New Generation 7,449 Retirements (4,280) Forecasted Load Growth* 4,212 Net Change (1,042) Northern Zone New Generation 7,544 Retirements (1,235) Forecasted Load Growth* 3,342 Net Change 2,967 CAISO System New Generation 14,994 Retirements (5,515) Forecasted Load Growth* 7,554 Net Change 1,925 * Based on 2% annual load growth.

Slide 8

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 9

Markets and grid operation performed well during June California wildfires and heat wave.

! Spring 2008 – driest on record ! 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

July 11, 2008 Pacific AC

Slide 10

Annual peak load occurred on June 20, and loads were relatively moderate the rest of summer.

10,000 20,000 30,000 40,000 50,000 1 3 5 7 9 1 1 1 3 1 5 1 7 1 9 2 1 2 3 2 5 2 7 2 9 Peak Load (MW)

2006 2007 2008

Daily Peak Loads -June 2006-2008

June 20, 2008 Annual Peak = 46,897

Slide 11

Rise and fall of natural gas prices were a big driver in 2008 market performance.

$- $2 $4 $6 $8 $10 $12 $14 30-Dec 20-Jan 10-Feb 02-Mar 23-Mar 13-Apr 04-May 25-May 15-Jun 06-Jul 27-Jul 17-Aug 07-Sep 28-Sep 19-Oct 09-Nov 30-Nov 21-Dec Week Beginning Price ($/mmBtu) PG&E Citygate (Northern CA) SoCal Border (Southern CA) Henry Hub (National)

Slide 12

Two consecutive years of below normal California snowpacks limited hydroelectric supplies.

2006 2007 2008

Slide 13

Low Reservoirs = Limited Hydro Power

Shasta Reservoir – August 12, 2008

Shasta Lake Reservoir Levels 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Million Acre Feet Average (1956-2005) 2008 Levels

Seventh lowest level in the last 48 years

Slide 14

ISO hydroelectric production in 2008 was the lowest in the past eight years.

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Average Hydro Generation (MW) 2004 2005 2006 2007 2008

2008