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Technical Conference June 28, 2010

Technical Conference June 28, 2010. Southern Company Energy Auction Technical Conference Agenda. Welcome and Introductions Energy Auction Overview Auction Emphasis Week Survey Results Enhancements Under Consideration Clearing Logic Discussion Next Steps. Energy Auction Overview.

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Technical Conference June 28, 2010

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  1. Technical ConferenceJune 28, 2010

  2. Southern Company Energy AuctionTechnical Conference Agenda Welcome and Introductions Energy Auction Overview Auction Emphasis Week Survey Results Enhancements Under Consideration Clearing Logic Discussion Next Steps

  3. Energy Auction Overview

  4. Southern Company Energy AuctionWhat Is It? • A bid-based and offer-based auction of electrical energy for delivery into the Southern Balancing Authority Area (SBAA) • Two Day-Ahead energy auctions (recallable and firm-LD) • Hour-Ahead energy auctions • Auction participants can offer to sell energy into or bid to buy energy from any or all of the energy auctions • Open to all entities doing business in the SBAA who have completed the registration process

  5. Southern Company Energy AuctionWhat is its Purpose? • To mitigate potential concerns about Southern Company’s alleged generation dominance in the SBAA • Mitigates physical withholding • By requiring Southern Company to offer all of its available capacity • Mitigates economic withholding • By placing a seller offer price cap on Southern Company’s mandatory offers

  6. Southern Company Energy Auction Other Attributes • Southern Company’s compliance with the auction rules is monitored by an Independent Auction Monitor • The Brattle Group • Day-to-day administration of the energy auction is now conducted by an Independent Auction Administrator • TranServ • Other auction participants are not governed by the mitigation measures of Southern Company

  7. Southern Company Energy AuctionDay-Ahead Energy Auctions Firm-LD (16 hours) and recallable energy (16 hours) “Into SoCo” Bid period opens at 12N two days prior to Delivery Day Bid period closes and auction evaluated at 6:45 AM one day prior to Delivery Day Auctions held every business day except for NERC holidays

  8. The Southern Company Energy AuctionHour-Ahead Energy Auctions Non-firm energy for the upcoming hour “Into SoCo” Bid period open 75 minutes prior to Delivery Hour Bid period closes and auction is evaluated 60 minutes prior to Delivery Hour Auctions held every hour including weekends and NERC holidays

  9. Energy Auction History and TimelinePhase I • Initial Phase I FERC filing (10/17/08) • Southern Company only seller; other participants can only bid to buy • DAE auction closed at 6:30 AM • HAE auction ran from 60-45 minutes prior to Delivery Hour • FERC conditionally accepts filing (12/18/08) • Conditioned upon allowing third-party sellers within one year (Phase II) • Phase I implemented (4/23/09) 10

  10. Energy Auction History and TimelinePhase II • Phase II Technical Conference held (8/3/09) • Sent out survey prior to Technical Conference to solicit industry feedback • Proposed adjustments to timing as result of survey • Discussed complexities of clearing logic with multiple sellers • Phase II FERC filing (10/19/09) • Implemented ability for third parties to sell • Day-Ahead auction closing shifted from 6:30 AM to 6:45 AM • Hour -Ahead bid period moved: opens at 75 minutes prior; closes at 60 minutes prior • FERC accepts filing (12/17/09) • Phase II implemented (1/4/10)

  11. Energy Auction History and TimelineRecent Events • IAM filed annual report (4/23/10) • Auction Emphasis Week (AEW) (5/17/10-5/21/10) • Sent out survey at the end of AEW • Technical Conference (6/28/2010)

  12. Auction Training Materials Available Set up new users and roles Entering bids and offers Setting up counterparty credit limits General webMarket system tutorials Market clearing process tutorial

  13. http://www.southerncompany.com/energyauction/trainingTools.aspxhttp://www.southerncompany.com/energyauction/trainingTools.aspx • Phase II training tools (Effective 12/4/10) • New Buyer and New Seller Instructions (PDF 243 KB) • Making a Bid in webMarket (PDF 181 KB) • Making an Offer in webMarket (PDF 172 KB) • Energy Auction Clearing Methodology (Phase II-Third Party Sellers) (PDF 51 KB)

  14. TranServ Contacts and Training Material • Questions on auction registration, adding users, setting up credit, other general questions contact : • TranServ International Support desk: 763-205-7099 • E-mail: Support@TranServInternational.net • Detailed training materials can be found on the Southern Company Energy Auction website: http://www.southerncompany.com/energyauction/trainingTools.aspx

  15. Questions?

  16. Auction Emphasis Week

  17. Auction Emphasis Week • May 17-21, 2010 • Day-Ahead energy auctions • Tues, May 18 for delivery Wednesday, May 19 • Wednesday, May 19 for delivery Thursday, May 20 • Thursday, May 20 for delivery Friday, May 21 • Hour-Ahead energy auctions • HE 12 through HE 22, Tuesday, May 18 • HE 12 through HE 22, Wednesday, May 19 • HE 12 through HE 22, Thursday, May 20 • Participation • Nine third-party participants 18 Dreamland picture used by permission

  18. Survey Results 11 completed responses

  19. Question #1

  20. Question #2

  21. Question #3

  22. Question #4

  23. Question #5

  24. Question #6

  25. Question #7

  26. Question #8

  27. Question #9

  28. Question #10

  29. Question #11

  30. Question #12

  31. Question #13

  32. Question #14

  33. Question #15

  34. Question #16

  35. Question #17 What primary factors have caused your company to not participate (or to not regularly participate) in the Southern Company Energy Auction?

  36. Questions #18-20 Southern Company is open to considering enhancements to the webMarket system. Please indicate how each of the following enhancements would affect your likelihood of participating in the energy auction:

  37. Question #18

  38. Question #19

  39. Question #20

  40. Question 21 Are there other enhancements to the webMarket software or to the energy auction process that would increase the likelihood of your participation in the Southern Company Energy Auction? If so, please list and provide a brief explanation.

  41. Questions?

  42. Enhancements Under Consideration

  43. Enhancements Under Consideration • Allowing submission of bids prior to opening of bid period (but bids are not “effective” until bid period) • Primarily needed for the Hour-Ahead energy auction • Bid period is only “open” for 15 minutes • Several auction participants have requested the ability to submit bids multiple hours in advance

  44. Enhancements Under Consideration • Making the bid/offer spread available in real time during the bid period • Could be posted as either the spread (e.g., $5) or the lowest bid/highest offer (e.g., 30/35) • Creates additional transparency during the bid period

  45. Enhancements Under Consideration • Posting the bid/offer spread after the fact • Currently, price is only posted if a transaction clears • Bid/offer spread would be posted whenever a transaction does not clear • Would be posted on the same schedule as the clearing price • Provides a trend of indicative prices every hour and every day regardless of whether a transaction clears • Could be posted as either the lowest bid/highest offer (e.g., 30/35) or the median between the lowest bid and highest offer (e.g., $32.50)

  46. Enhancements Under Consideration • Limited transmission modeling • Incorporate transmission modeling similar to the Florida brokerage system for intra-balancing authority transactions • Would facilitate “Into GTC” and “Into MEAG” delivery points • Could also incorporate automated tagging for intra-balancing authority tags

  47. Enhancements Under Consideration • Complex transmission modeling • Incorporate transmission modeling, including first-tier markets (similar to the Florida brokerage system) • Would facilitate selling into the auction from sources outside the Southern Balancing Authority Area • Could also incorporate automated tagging

  48. Revised Clearing Logic

  49. Auction Clearing Protocol Discussion • Phase I clearing protocol • One seller; multiple buyers • Determined the economic crossover of the supply and demand curves • Maximized buyer-seller surplus • Greatest complexity was treatment of linked bids and offers • Phase II introduced additional complexities • Assignment constraints • No enabling contract • Credit constraints • Statutory limitations • Linked bids and offers • Options for Phase II logic • Modify Phase I logic to handle additional complexities • Develop new, optimization-oriented clearing logic

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