Ontario Electricity Supply Forum PEO Mississauga Chapter - September 6, 2007

1. Ontario Electricity Supply ForumPEO Mississauga Chapter - September 6, 2007 Rhonda Wright-Hilbig, P.Eng Market Analysis - IESO

2. The IESO’s Role Within the Industry • There are a number of different entities but all of them have their own set of accountabilities and defined responsibilities • The IESO manages Ontario's electricity grid - directing the flow of electricity across the transmission system to meet the province's power needs • We balance this demand for electricity against available supply through the wholesale market

3. The Electricity Markets

4. Ontario’s Electricity Market • Approximately: • 30,000 MW installed capacity • 28,000 km high voltage transmission system • 250 authorized market participants • Anyone connected to high voltage grid must become an IESO market participant • Anyone connected to a Local Distribution Company (LDC) has a choice to become an IESO market participant or participate retail market

5. The Markets IESO - Administered Markets Financial Physical Real-time Operating Reserve Energy Procurement Transmission Rights Ancillary Services

6. Electricity Sector Participants Participants Outside Ontario Transmitters Directly Connected Large Consumer Retailers Directly Connected Generator Low Volume End-use Consumer Embedded Large Customer Wholesale Price RPP EmbeddedGenerator Designated Consumer Local Distribution Company Network

7. Types of Market Participants DISPATCHABLE NON-DISPATCHABLE Submit bids/offers Do not submit bids/offers – accept market price Adjust operations based on dispatch instructions received from the IESO Consume or produce as desired – no dispatch instructions

8. Bid and Offer Basics Generators and Imports Loads and Exports IESO - Administered Markets Offers Bids Real-time Energy

9. Price/Quantity Pairs - Offers (20.5,0) (20.5,20) (21.6,40) (22,60) (23,80) (24,100) (24.5,120) Price ($/MWh) $26.00 $24.00 $22.00 $20.00 $18.00 120 100 60 80 20 40 0 Quantity (MW)

10. Setting the Market Clearing Price

11. Supply and Demand Determines Price Supply Demand Optimum Selling Price Quantity Price

12. Demand Varies Considerably Timeof Day Weekend vs. Weekday Ontario Demand by Day of the Week for typical October Week Sun. Mon. Tues. Wed. Thurs. Fri. Sat.

13. Move to a Summer Peaking Jurisdiction

14. Setting the Market Clearing Price Generator 1 Generator 3 150 MW - $38/MWh 100 MW - $15/MWh 50 MW - $25/MWh Generator 2 50 MW - $20/MWh

15. Offers Are Selected Economically 250 MW $38 / MWh 200 MW $25 / MWh 150 MW $20 / MWh Quantity 100 MW 50 MW $15 / MWh 20:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 Time Generator 1 Generator 2 Generator 3

16. Demand and Price Demand $38 $25 $15 250 MW $38 / MWh 200 MW $25 / MWh 150 MW $20 / MWh Quantity 100 MW 50 MW $15 / MWh 20:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 Time Generator 1 Generator 2 Generator 3

17. Offers and Demand - 5 Minute Intervals MCP $ / MWh $25 $25 $25 $25 $25 $25 $25 $38 $38 $38 $38 $38 250 MW $38 / MWh 200 MW $25 / MWh 150 MW $20 / MWh 100 MW 50 MW $15 / MWh 16:55 16:00 16:05 16:10 16:15 16:20 16:25 16:30 16:35 16:40 16:45 16:50 17:00 Time Generator 1 Generator 2 Generator 3 Hourly Ontario Energy Price = $30.42

18. Determining Dispatch Instructions

19. Balancing Ensure that supply meets demand within system limits 60 Hz Supply Demand Generators + Imports Loads + Losses + Exports

20. Security Limits • Security limits are the reliability envelope in which the market operates; they protect our grid and our neighbours’ grids from disturbances • Energy will take all available paths to get from supply point to consumption point • Transmission lines do not control or limit the amount of energy they convey • Energy flows are managed by dispatching generator output • Different limits are used under different operating conditions

21. Prices and Schedules • Dispatch follows economics as closely as possible • Can’t dispatch based purely on economics • The unconstrained mode of the dispatch algorithm determines market clearing prices and “market schedules” in the absence of transmission constraints • “copper plate” model of the grid • Assumes resources can ramp at three times their offered ramp rates (September 12, 2007) • The constrainedmode of the dispatch algorithm determines dispatch schedules (i.e., dispatch instructions) • Respects transmission losses, transmission system limits, ramp restrictions on resources • When a difference in MW occurs between the economic “market schedule” and the practical “constrained schedule” market participants are held whole through Congestion Management Settlement Credits (CMSC) • The cost of CMSC is recovered through the IESO uplift to loads

22. Dispatch instructions • Dispatch instructions: • Primary method for controlling the balance of supply with demand • Indicate operating point at the end of a 5-minute interval • Are sent only if there is a required change in operating point • Can be refused for reasons of public or worker safety, equipment damage, or legal requirements

23. Imports and Exports

24. Imports and Exports

25. Scheduling Imports and Exports • Imports and exports are scheduled based on economics compared to internal bids/offers • Scheduled an hour in advance, scheduled for a one hour block • Participants must navigate with other jurisdictions, including transmission access • Electricity interchange improves Ontario reliability, • Imports reduce the price of electricity in Ontario, effectively add supply • Exports effectively increase demand; exports can be curtailed in the event of Ontario shortages

26. Contact us • IESO website provides up to date prices • IESO publications available to help businesses understand the market • IESO • 1 (888) 448-7777 or • (905) 403-6900 • customer.relations@ieso.ca

27. Ontario Electricity Supply ForumPEO Mississauga Chapter - September 6, 2007 Rhonda Wright-Hilbig Section Head, Market Analysis September 6, 2007