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Presentation to: Committee on Regional Electric Power Cooperation

Alberta Energy Electricity Business Unit. Presentation to: Committee on Regional Electric Power Cooperation. Scottsdale, Arizona April 2001. Larry Charach Executive Director, Electricity Business Unit Alberta Energy 5th Floor, 9945-108 Street Edmonton, Alberta T5K 2G6.

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Presentation to: Committee on Regional Electric Power Cooperation

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  1. Alberta Energy Electricity Business Unit Presentation to:Committee on Regional Electric Power Cooperation Scottsdale, Arizona April 2001 Larry Charach Executive Director, Electricity Business Unit Alberta Energy 5th Floor, 9945-108 Street Edmonton, Alberta T5K 2G6 Phone: (780) 422-9184 Fax: (780) 427-8065 E-mail: larry.charach@gov.ab.ca

  2. Situation Today

  3. 2001 framework • Based on a shared vision • Provides certainty: framework in place • Provides the right incentives

  4. Independent view of the 2001 Alberta electricity market ``Things have gone far, far better here than in most jurisdictions. There are a few challenges left, but we shouldn't underestimate the achievements to date.'' Seabron Adamson from Frontier Economics “If deregulation is so great, why are prices higher than before? An initial evaluation of Alberta’s electric power market after the PPA auction” from presentation at the 7th Annual Conference of the Independent Power Producers Society of Alberta Banff, Alberta March 2001

  5. *Alberta data converted to US$ **Prices Reflect On Peak Alberta Aug: $201 Sept: $166 Mid Columbia Aug: $219 Sept: $136 COB Aug: $220 Sept: $140 NP15 Aug: $189 Sept: $133 Palo Verde Aug: $242 Sept: $139 SP15 Aug $213 Sept: $133 Fundamental Reasons for Increased Prices - Summer 2000 • Natural Gas prices are nearly 65% higher than 1999; contributing to an increase in variable cost of $20/MWH • Actual and forecast high temperature deviations throughout the Western states: Second hottest Summer in 106 years • Generation emissions are approaching permitted levels • Hydro outflows are about 85% of normal from the Northwest • Supply shortage throughout the WSCC

  6. January 132.14 February 118.17 March 98.50 First Quarter 2001 116.30 Summary of 2001 Pool Prices Power Pool price statistics Weighted Average Pool Price ($/MW∙h) Fourth Quarter 2000 223.31

  7. Hourly Pool prices

  8. Consumers are responding to price1999-2001 AIES demand (Jan-Feb-Mar)

  9. Developers are responding to “certainty” Situational Assessment • Power producers continue showing confidence in Alberta’s new market. • More than 4,400 MW of new generation has been announced and is targeted to be in place by 2005. • An annual peak demand growth rate of 3%: 250 MW per year of new generation. • A project facilitator program has been approved. The EUB and AENV streamlined their approval processes. • Over 600 MW of new generation is expected to come on-line during 2001.

  10. New generation on-line 2001 Capacity available to system is estimated at 590 MW plus 300 MW proposed interconnection capability in the 1st Quarter of 2002.

  11. Alberta’s Total Power Supply Over Time 6000 MW INCREASE - New plants (1997-2005) 450 MW INCREASE - Import ability (1997-2005)

  12. Rules for policy makers/regulators 1. Focus on the public interest. If you don’t, who will? 2. Support competition, not competitors. It is easy to confuse the two. 3. Insist on aggressive failure analysis, before you fail. Market design flaws should be identified as soon as possible; never underestimate the ability of market participants to exploit design flaws; never accept a blithe assertion that the market will overcome the design flaws any time soon. 4. Use the market to reinforce operational reliability. Prices and the profit incentive can and should be consistent with the physical reality and the dictates of reliability. Source: William W. Hogan, Cantor Lecture Series 2000: Energy and Society The Royal Society for the Encouragement of Arts, Manufactures & Commerce, London, February 21, 2000

  13. End Goals: 2005 Low regulatory costs  Low rates  Choices Opportunities  Level playing field  Reliability Security of Supply  Strong competition Clear roles  Consumer understanding Green power  Common standards Smart technologies  Benefits to consumers Conservation  New generation Healthy marketplace  Competition Many players  New players  Direct sales Market surveillance  Spot market Market liquidity Viable businesses Open access  Innovation End Goals: 2005

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