2003 Annual Report on Market Issues and Performance

Transcription

1 2003 Annual Report on Market Issues and Performance Board of Governors Meeting April 22, 2004 Greg Cook Manager of Market Monitoring

2 Issues in CALIFORNIA ISO and FERC: Continue to work through hurdles regarding MD02 design and implementation, O&I, transmission methodology Short-term Energy markets competitive due to strong supply conditions; RT markets mostly decremental Approx. 4% Load growth since mid-2003 Bid insufficiency in A/S and RT decremental balancing energy markets System AMP has not mitigated any bids since 10/30/02 implementation Intrazonal Congestion was the most significant problem in the ISO markets during 2003 Celilo, OR Path 15 Vincent Substation Pacific DC Intertie Path 26 Sylmar Substation Miguel Substation PACIFIC DC INTERTIE: Will be out for much of 2004, constraining imports from Pacific Northwest Palo Verde Intertie SWPL Palo Verde, AZ Mexicali, BC, Mex. SYLMAR, VINCENT SUBSTATIONS: Each partially out for much of Resulted in significant intrazonal congestion costs PALO VERDE / SOUTHWEST POWER LINK: In July 2003, Northern Mexico generation began supplying energy into insufficient transmission at Miguel. This new energy combined with imported energy from Palo Verde resulted in high intrazonal congestion redispatch costs. Newly increased DEC reference levels have resulted in lower intrazonal redispatch premiums. drb/iso dma 2 BOG April 22, 2004

3 Total Cost $12.1 Billion in 2003, v. $10.1 Billion in 2002; Increase in costs affected by natural gas prices Wholesale Energy and Ancillary Service Costs, Costs (Millions of Dollars) $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 Ancillary Services Real-Time Energy Forward Energy Costs (Bilateral) $ (9mo) Year drb/iso dma 3 BOG April 22, 2004

4 Estimating Forward Costs Forward-scheduled (non-iso) costs not visible to ISO, estimated as follows: Cost of energy delivered under State Long-Term Contracts estimated based upon 2002 dispatch patterns, since 2003 information not available; adjusted for 2003 natural gas prices Cost of energy from utility-retained generation based on estimated production costs Cost of energy from other bilateral purchased estimated at hour-ahead California hub prices from Powerdex survey information service drb/iso dma 4 BOG April 22, 2004

5 2003 Average Monthly Cost of Energy and A/S between $49 and $58/MWh 2002 and 2003 Average Monthly Wholesale Energy and Ancillary Service Costs $70 $60 $50 $/MWh $40 $30 $20 $10 $- Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec drb/iso dma 5 BOG April 22, 2004

6 All-In Price Index was $54.92/MWh in 2003, compared to $45.06/MWh in 2002; increase due largely to change in gas prices $60 $50 All-In Price Index 2003 by Cost Contribution $40 $30 $20 $10 $49.9 ISO costs $5.00 DEC Savings $(0.29) $0.1 $0.5 $0.63 $1.9 $0.8 $0.1 $1.0 $ Total 2003 Total 2002 Total 2003 Total Growth Rate Est Forward-Scheduled Energy Costs excl. Cong. And GMC ($/MWh load) $ $ % Interzonal Cong. Costs ($/MWh load) $ 0.18 $ % GMC ($/MWh load, all charge types, including RT) $ 1.00 $ % In-Sequence Incremental RT Energy Costs ($/MWh load) $ 0.49 $ % Explicit MLCC Costs (Uplift) ($/MWh load) $ 0.26 $ % Out-of-Sequence RT Energy Premium Costs ($/MWh load) $ 0.02 $ % RMR Costs ($/MWh load, include adjustments from prior periods) $ 1.60 $ % Less In-Sequence Decremental RT Energy Savings ($/MWh load) $ (0.08) $ (0.29) 246% Total Energy Costs ($/MWh load) $ $ % A/S Costs ($/MWh load, self-provided A/S valued at ISO market costs) $ 0.68 $ % Total Costs of Energy and A/S ($/MWh load) $ $ % A/S % of All-In Price 1.5% 1.6% drb/iso dma 6 BOG April 22, 2004

7 2003 Supply and Demand Conditions drb/iso dma 7 BOG April 22, 2004

8 2003 Loads increased in second half of the year over 2002 levels due to recovering California Economy Load Duration Curves 50,000 Year ending 31-Dec-03 Actual Load Year ending 31-Dec-02 Actual Load, adjusted for SMUD exit Year ending 31-Dec-01 Actual Load, adjusted for SMUD exit 40,000 30,000 20,000 10, Load (MW) Hours Year Avg. Load % Chg. Annual Total % Chg. Annual Peak (MW) Energy (GWh) Load (MW) , ,905 38,975 % Chg , % % 42, % , % 230, % 42, % drb/iso dma 8 BOG April 22, 2004

9 Generation Availability Increased in 2003 Compared to 2002 Levels 2002 and 2003 Outage Comparison Jan-02 Jan-03 Feb-02 Feb-03 Mar-02 Mar-03 Apr-02 Apr-03 May-02 May-03 Jun-02 Jun-03 Jul-02 Jul-03 Aug-02 Aug-03 Sep-02 Sep-03 Oct-02 Oct-03 Nov-02 Nov-03 Dec-02 Dec-03 Millions MWh Scheduled Forced drb/iso dma 9 BOG April 22, 2004

10 Third straight year of net generation additions greater than 2,500 MM Generation additions and retirements by zone Congestion Zone Generation Additions (MW) Generation Reductions (MW) Net Change NP SP-15 2,247-1,171 1,075 ZP-26 1, ,387 ISO Control Area 4,829-2,151 2,678 drb/iso dma 10 BOG April 22, 2004

11 Net imports strong for second year in a row 2001 through 2003 Average Annual Net Imports annual imports annual adj exports annual adj net imports MW Year drb/iso dma 11 BOG April 22, 2004

12 Peak reserve margin increased in 2003 due to strong supply conditions, indicating greater availability of resources during peak periods than in previous years, due largely to new thermal units Reserve Margin During Annual Peak Load Hour MW % 6.1% 6.0% 22.8% % % 20% 15% 10% 5% 0% Available Generation MW Net Interchange MW Load MW Reserve Margin % drb/iso dma 12 BOG April 22, 2004

13 Market Performance drb/iso dma 13 BOG April 22, 2004

14 2003 Real-time Market Volume DEC:INC volume ratio 5:2 Monthly Average ISO Real-Time Volume: 2003 and Q MW procured BEEP INC MW h BEEP DEC MW h OOM INC MWh OOM DEC MWh BEEP INC Price BEEP DEC Price $150 $140 $130 $120 $110 $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 -$10 -$20 -$30 -$40 -$50 -$60 -$70 -$80 Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 Jan-04 Average Price ($/MWh) Feb-04 Mar-04 Month drb/iso dma 14 BOG April 22, 2004

15 2003 Est. short-term price-to-cost markups 7% in NP15, 8% in SP15 Short-Term Markup Indices: SP15 (top) and NP15 (bottom) $60 $50 SP15 Estimated Short-Term Markup SP15 Estimated Short-Term Competitive Price Markup Index 30% 25% $40 20% $/MWh $30 15% $20 10% $10 5% $0 Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 0% $60 $50 NP15 Estimated Short-Term Markup NP15 Estimated Short-Term Competitive Price Markup Index 30% 25% $40 20% $/MWh $30 15% $20 10% $10 5% $0 Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 0% drb/iso dma 15 BOG April 22, 2004

16 High RSI levels in 2003 indicate a healthy market with suppliers pivotal in fewer than 0.5% of the hours of the year Hourly Residual Supplier Index RSI_Duration_Curve RSI Index rsi_1999 rsi_2000 rsi_2001 rsi_2002 rsi_2003 drb/iso dma 16 BOG April 22, 2004

17 Profits for a new typical combined cycle generation unit fell 30 percent in 2003, combustion turbine unit profits stable* Net Revenue Analysis, 2002 and 2003 SP15 CC Net Revenue and Cost SP15 CT Net Revenue and Cost $/kw-year $/kw-year $90.00 $80.00 $70.00 $60.00 $50.00 $40.00 $30.00 $20.00 $ $ CC Cost CC Net Revenue CT Cost CT Net Revenue *Net revenue analysis based on units selling solely into ISO imbalance energy and ancillary service markets. Typically, a significant portion of fixed cost recovery would covered by a long-term bilateral contract. drb/iso dma 17 BOG April 22, 2004

18 Ancillary service supply dropped 25% in 2003 from 2002 levels Average Hourly Net A/S Supply by Month, Monthly Annual Hourly Average Net A/S Supply (MW) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Frequency of Bid Insufficiency RU RD SP NS % 4.9% 0.8% 0.3% % 3.3% 3.3% 0.8% drb/iso dma 18 BOG April 22, 2004

19 Reduced ancillary service capacity resulted in higher prices and increased bid insufficiency in 2003 compared to 2002 Monthly Weighted Average Ancillary Service Prices, $40 RU RD SP NS RP $35 $30 $25 $20 $15 $10 $5 $0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Weighted Average Price ($/MWh) drb/iso dma 19 BOG April 22, 2004

20 Interzonal congestion costs dropped 33% in 2003 v levels 2002 and 2003 Monthly Interzonal Congestion Costs $Millions/MWh Dec Nov Oct Sep Aug Jul Jun May Apr Mar Feb Jan Month drb/iso dma 20 BOG April 22, 2004

21 Majority of interzonal congestion costs incurred on Path Interzonal Congestion Revenues on Selected Paths NW Capt. Jack Malin COI Nob COI: $3.5 Million NP15 NOB: $1.5 Million Path 26: $ 12 Million SF Los Banos Nob (PATH 15) Gates ZP26 (PATH 26) Vincent Sylmar LADWP Midway SP15 Mccullgh Inyo Victvl IID IID-SCE II1 IID-SDGE CFE El Dorado: Merchant $1.9 Million MEX II2 Eldorado Imperial Valley Tijuanna Palo Verde Mead Blyth Parker Palo Verde: $3.4 Million drb/iso dma 21 BOG April 22, 2004

22 Intrazonal congestion costs surged in August as new generation came online in Northern Mexico and Arizona, and overwhelmed local transmission facilities 2003 Monthly Total Intrazonal Congestion Costs $35 $30 $25 Intrazonal Re-dispatch Premium RMR Payments MLCC $20 Millions $15 $10 $5 $0 Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 drb/iso dma 22 BOG April 22, 2004

23 Intrazonal congestion costs became very expensive due to congestion at Miguel, Sylmar, and Lugo substations Intrazonal Congestion Redispatch Premiums and Volume through Feb-04 Thousands of MWH Decremental MWh (Left Axis) Incremental MWh (Left Axis) Decremental Avg Premium (Right Axis) Incremental Avg Premium (Right Axis) $/MWh 0 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 Jan-04 Feb-04 0 drb/iso dma 23 BOG April 22, 2004