Energy Markets and the Influence of Regional Transmission Organizations

Transcription

1 Energy Markets and the Influence of Regional Transmission Organizations Joanie Teofilo, President & CEO

2 Current State of Energy Markets 2

3 Pop Quiz When did the following occur... A) Dot Com Bubble, California Energy Crisis & Enron Bankruptcy B) US Financial Crisis & Commodity Bubble C) Shale Revolution D) Polar Vortex

4 High level Themes It s easy to forget how much things have changed since 2000, but... Fundamental factors remain the same and will continue to be key price drivers in the future Change in regulations & technology remain underlying factors that can disrupt markets 4

5 Renewables Growth Source: EIA 5

6 Renewables Growth Electricity generation from wind Source: EIA 6

7 Market Designs 7

8 Bilateral (non RTO) Market Vertically integrated utilities Utility serves load through owned generation Utility utilizes the bilateral market to sell excess generation or displace higher cost generation 8

9 FERC Orders 888 / 889 Why ISOs / RTOs? Non discriminatory access to transmission FERC Order 2000 Voluntary formation of RTOs to administer transmission grid on regional basis 9

10 Required Characteristics of an RTO Independence Scope and regional configuration Operational authority Short term reliability 10

11 RTO Markets 11

12 Concerns About RTO Markets How does this new market affect me? Why do I have to operate differently? Maybe if I ignore it, it will go away! Can t I just continue to run my generators to serve my load? 12

13 Difference in the Markets Bilateral Environment RTO Environment 13

14 The RTO Model Priorities First: Reliability Second: Manage cost & uncertainty Business model Vertically integrated utility vs. separate business units Generation (source) and load (sink) viewed as individual businesses 14

15 Balancing Authority The RTO Model Oversees operation of a utility s generation & load RTO Provides dispatch signals to utility Oversees transmission grid operations 15

16 The RTO Model Utility s load served through lowest cost market supplied resource Load pays the market clearing price (LMP) Utility sells generation into market Units paid market clearing price (LMP) Utility uses bilateral market to hedge market price (LMP) uncertainty Fixed price bilateral for floating LMP (fixed for floating swap) 16

17 Energy Trading in an RTO Market Real time trading & day ahead trading: all through RTO Beyond the day ahead market: in the bilateral market 17

18 Changes Due to RTO Markets Evolution in a utility s business processes Three separate and distinct markets: Financial Transmission Rights (FTR) Market Day Ahead Market (DAM) Real Time Market (RTM) Economic consequences of using your generation to follow your own load 18

19 RTO Central Unit Commitment & Economic Dispatch Utility Owned Generation Resources Spot Market Bilateral Transactions ALL energy is scheduled through RTO CUSTOMERS Industrial Commercial Residential 19

20 How to Respond 20

21 Critical Success Factors 1. Operational Excellence 2. Teamwork 3. Tools and Systems 21

22 The Most Important Part.People New skill sets are needed: Analytical Tech Savvy Collaborative Adaptable 22

23 Current Market Timelines vs. Proposed Timelines to FERC *All Times are CST FERC Order 2026 Gas Day Timeline Start of Gas Day (0900) Intra Day Nom (1000) Timely Gas Nom (1300) Intra Day Nom (1430) Evening Gas Nom (1800) Intra Day Nom (1900) Current SPP Timeline Proposed SPP Timeline DA Market (0930 to 1400) DA Market (1100 to 1600) DA RUC (1445 to 1715) DA RUC (1700 to 2000) Current MISO Timeline Proposed MISO Timeline DA Market (1000 to 1400) DA Market (1000 to 1300) DA FRAC (1400 to 1700) DA FRAC (1500 to 1900) Current PJM Timeline Proposed PJM Timeline DA Market (0930 to 1230) DA Market (1100 to 1500) DA RAC (1315 to 1715) DA RAC (1700 to 2100) 23

24 RTO Market Overview: Summary Data Volume and importance of data Complexity Multiple markets, increased market products, all load and all generation exposed to the market Flexibility RTO rules structured to encourage turning over control to market operators Financial products Used to manage risk 24

25 What Makes TEA Unique Public Power Focus Wholly owned by public power Not for profit Opportunities for shared learning among clients Operate within risk tolerances of public power Strong reputation with rating agencies Transparency No black boxes Segregation of each client s transactions Full value returned to client Full transparency of all transactions TEA s book Align Scope with Client Wants No one size fits all approach Clients retain control of their resources Ability to trade as principal or agent Align expertise and capabilities with each client s requirements People and Technology Client service is our business Nearly 200 employees Focus on best practices State of the art IT systems Depth and breadth of experience Reputation for high quality and satisfaction 25

26 TEA s Approach Client Focus Be a Strategic Partner Provide Excellent Service Best Practices Member owned Not for profit Invested in public power s success Listen first Be client centric Build a strong community Customized Integrated Goal oriented Deep experience Credit and Risk Control Robust systems and processes 26

27 Portfolio Management Approach Customized Businessoriented Integrated 27

28 Summary Enterprise Integrated Customized Goal oriented Optimize Forecast short term prices DA/RT recommendations Analyze results Transact Submit bids and offers Track position Process payments 28

29 Questions 29