Market Pricing Issues Update

1. Market Pricing Issues Update John MacKenzie Market Operations Standing Committee of the IMO

2. Agenda • Review Implementation Progress • Rules • Procedures • Schedule • Discuss IMO Board Conditions • Ongoing Monitoring of Control Action OR Impacts and Mechanism to Address Adverse Impacts • Stakeholdering Process: impact of initiatives and introduction of additional initiatives Market Operations Standing Committee of the IMO

3. Market Rule Amendments • MR-00235-R00-05: Market Pricing Issues Initiatives • Spare Generation On-line, and • Including Control Action Operating Reserve in the Market. • Approved by IMO Board 3 Jul 03, with conditions • This rule amendment is effective 12:00 p.m. EST August 6, 2003. Market Operations Standing Committee of the IMO

4. Spare Generation On-Line - 1 • Voluntary program with following eligibility criteria: • MP submits minimum run-time and its minimum loading point • Facility must be scheduled 3, 2 or 1 hours ahead of the given dispatch hour • MP notifies IMO of intent to synchronize and to be eligible for cost guarantee • Facility synchronizes and runs for at least minimum run-time • MP submits start-up and minimum generation costs • The IMO will constrain on the facility at its minimum loading point for the submitted minimum run-time • Some restrictions on dispatch data submissions and revisions Market Operations Standing Committee of the IMO

5. Spare Generation On-Line -2 • Every month the following market revenues are compared to the submitted costs for each facility on a per-start basis: • energy and CMSC payments earned between synchronization and end of minimum run-time for energy injected up to and including the minimum loading point; and • all operating reserve payments received between synchronization and the end of the minimum run-time. • If the submitted costs exceed these revenues the difference is paid to the generator; costs for the guarantee payments collected from other market participants as monthly uplift • If a guarantee payment is made the IMO may audit the submitted costs Market Operations Standing Committee of the IMO

6. Spare Generation On-Line Procedures and Forms • Following interim market procedures posted for stakeholder review and feedback • IMO_IMDC_0042: Facility Registration • IMO_IMDC_0043: Settlements • IMO_IMDC_0044: Submission of Dispatch Data • IMO_IMDC_0045: Real-Time Scheduling • Following new forms posted for stakeholder review and feedback • IMO_FORM_1551: Submission of Combined Guarantee Cost • IMO_FORM_1552: Facility Registration Information Market Operations Standing Committee of the IMO

7. Control Action Operating Reserve (OR) • Offering Control Action OR will begin with a first tranche of 200 MW to gauge the impact before proceeding with additional quantities • The initial 200 MW will be offered at the following prices: • $30 for 30 minute reserve; $30.10 for 10 minute NS reserve (10 cent difference is required for proper allocation in a tie-break situation); and • $2000 for energy • The IMO will publish when these offers are scheduled Market Operations Standing Committee of the IMO

8. Control Action OR Procedures • Following interim market procedures posted for stakeholder review and feedback • IMO_IMDC_0035: Submission of Dispatch Data and Real-time Scheduling • IMO_IMDC_0041: IMO Controlled Grid Operating Policies Market Operations Standing Committee of the IMO

9. IMO Board Conditions - 1 • IMO Board set two conditions when approving MR-00235 in recognition of stakeholder concerns regarding potential impacts of initiatives: • ongoing monitoring/analysis of Control Action OR impacts and mechanism for addressing adverse impacts • stakeholder review of initiative impacts and proposals for additional initiatives Market Operations Standing Committee of the IMO

10. IMO Board Conditions - 2 • Ongoing monitoring/analysis of Control Action OR impact and mechanism for addressing adverse impacts • IMO to monitor/assess impacts and keep IMO Board advised of impacts • Based on the experience with the first tranche, any IMO Board member who believes that the introduction of the Control Action OR is having a significant and unexpected adverse impact can request that the Urgent Rule Amendment Committee review the situation • The Committee would have the authority to take appropriate action (e.g. adjusting the quantity or price or withdrawing the offer) Market Operations Standing Committee of the IMO

11. IMO Board Conditions - 3 • Stakeholder review of initiative impacts and proposals for additional initiatives • Stakeholdering will take place with the Market Operations Standing Committee and the IMO Board to review experience and receive advice on subsequent steps • The Market Pricing Issues Team will also be holding an information session for AMPCO to discuss the pricing initiatives as a result of a request from this group Market Operations Standing Committee of the IMO

12. Proposal to Stakeholder Results with MOSC • “Special” MOSC meeting on August 26th • review results of first three weeks of use of Control Action OR and other initiatives • discuss proposed price and quantity for next tranche of Control Action OR Market Operations Standing Committee of the IMO

13. Initiative Impact Analysis • IMO will provide the following analysis for the period from August 6 - 25: • Frequency the 200 MW of Control Action OR is scheduled in Pre-dispatch and Real-time • Frequency the remaining “out of market” OR (above the first 200 MW tranche) is used in Real-time • Frequency the Control Action OR is scheduled and displaces other offers to provide Operating Reserve • Estimate shifts in other Operating Reserve offers in response to the Control Action OR offers • Estimate the impact of the Control Action OR offers on Pre-dispatch and Real-time energy prices, IOG payments and CMSC payments Market Operations Standing Committee of the IMO

14. Implementation and Stakeholdering Schedule Market Operations Standing Committee of the IMO