1

Market Operations Standing Committee Meeting

April 23, 2003

Market Evolution Program

2

Overview

• Consultation • Initiative Status

3

Overview

Day Ahead Market

Multi-Interval Optimization

Short Term Resource Adequacy

Long Term Resource Adequacy

Wholesale/Retail Integration

Environmental Tracking

Locational Marginal Pricing

4

5

6

Working Groups/Consultation

StakeholdersIMO

notify

post

access

Email IMO.consultation@theimo.com

Phone 905-403-6931

input/dialog

Working Groups

7

Working Groups

Working Groups were formed after an initial fact-finding period for initiatives that were mature enough to benefit: Multi-Interval Optimization Day Ahead Market Long Term Resource Adequacy

Advisory process to help IMO make informed recommendations, particularly with respect to stakeholder perspective on issues

8

Next Steps

Stakeholder workshops planned for May/June on the Long Term Resource Adequacy and Day Ahead Market initiatives

Dates announced by the end of this week

Format: Face - to - Face Webcast

Each consists of an educational component and an opportunity for questions/input

Presentations will be made available in PowerPoint and as a Media Player file with audio

9

Locational Marginal Pricing

Nodal pricing behaviour since market opening is being assessed

Expect decision in the next few weeks on priority of continuing this work

Environmental Information Tracking

RFP for system prepared based on draft regulations

Early stages of assessing training and education needs of consumers/participants

10

Day Ahead Market

Leonard Kula

11

Day Ahead Market

DAM discussion paper Examined and ruled-out simple DAM for summer 2003 Formed DAM Working Group following Feb 18 MAC Developed DAM Objectives and Key Principles Prepared Feasibility Study - Mar 28 IMO Board accepted DAM

direction and approved commencement of design phase Staged approach - high level design to be completed by July at

which time an assessment will be made whether to proceed further

12

Day Ahead Market

Assessment of high level design: How well it addresses some of the problems evident in current market design and operation Appropriate linkages to long term resource adequacy initiative Broad stakeholder consensus on the benefits of implementing the proposed design Appropriate cost recovery mechanism

Working Group is engaged in identifying design issues and potential solutions

Stakeholder workshops planned for early June on proposed high level design

13

Day Ahead Market

DAM Working Group: Principles and Objectives DAM and impact on Market Participant Classes Reviewed other DAM Options Working Group consensus to proceed with SMD-style DAM Commencing discussions of high-level design features

14

Day Ahead Market Design

User Requirements WHAT the DAM will look like - complete September 2003 Split into high level design and detailed design:

• High level design - present to MAC June 11, IMO Board July 3• Detailed design

Significant portion of participant-facing elements

System Requirements HOW the DAM will work - complete November 2003 Fewer participant-facing elements

15

Multi-Interval Optimization

Mark Wilson

16

Multi-Interval Optimization - What have we done?

Feb 18 MAC Breakout sessions

Working Group

Formed with representation from generators and loads

Meets either via conference call or face-to-face sessions on a weekly basis

Focussed on three key issues: • Optimization Function• Optimization Time Period• Dispatch Advisories (How,What,When)

17

Multi-Interval Optimization Objectives

Improved Operational Reliability

Resources will automatically be scheduled in advance to allow ramp rate capability to be utilized to solve future reliability concerns

Operational Stability

Reduced Unit Cycling - The number of start/stop sequences for resources will be reduced relative to current operation

Improved Compliance - Non-compliance with dispatch instructions will be reduced

Improved Market Transparency

IMO manual intervention in the dispatch solution will be reduced

Improve Market Efficiencies

Constraint payments caused by limited ramp capability will be reduced compared to present dispatch

18

ABB Proposal

– Runs every 5 minutes

– Optimizes dispatch over next full hour using same objectives as currently used for five minutes

– Results applied to next 5 minute dispatch

– Dispatch advisory notices issued for 15,30, 45 and 60 minutes out

– Currently being developed for NY

IMO Proposal

– Runs every 15 minutes– Optimizes for critical intervals

over the next 60 minutes ( i.e. peak load, low load)

– Less complicated approach to optimization (solution will be optimal approx. 80% of the time)

– Utilizes a modified Look Ahead sequence

– Provides maximum and minimum requirements to real time sequence

– Dispatch Advisory notices issued for critical intervals

Two Proposals

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Issues/Recommendation

Issues ABB Solution

Calculation time

Potential hardware upgrade costs

IMO Solution

Solution may not always be optimal

Recommendation

Implement IMO solution

IMO Board approved design stage funds

Will go back in July for build phase funding

20

Next Steps

Stage 1

4/1 – 4/30Requirement

Definition

Stage 2

5/1 – 5/31Detailed Design

Stage 3

6/1 – 8/31Build / Test

Stage 4

9/1 – 10/15Commissioning

Stage 5

10/16 – 12/9Market Trials

December 10, 2003ImplementationBaseline R 8.1

21

Resource Adequacy

Jason Chee-Aloy

22

Short Term Resource Adequacy

Options reviewed, recommended mechanisms being implemented:• Emergency Demand Response• Hour Ahead Dispatchable Load• Replacement Energy

23

Long Term Resource Adequacy

Discussion paper Working Group formed Performing feasibility assessment with recommendation targeted for July, design to be completed by year end Six options currently under investigation LECG consultants engaged Working Group is engaged in identifying issues and potential solutions

Stakeholder workshops planned for early to mid-May on draft feasibility assessment

24

Long Term Resource Adequacy

LTRA Working Group: Objectives Evaluation Criteria Draft Feasibility Study

25

Wholesale/Retail Integration

Edward Arlitt

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What is a Wholesale/Retail Issue?

No formal definition, but generally these issues all display four common characteristics:

Both the wholesale and retail markets are affected

It is in the long-term interest of both markets to resolve them

No single governing/regulatory authority has full rule-making powers or responsibility over the issue

They are generally complicated by the fact that they span the wholesale/retail market boundary - particularly in areas such as issue ownership, computer systems, business processes and financial risk management activities

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Wholesale/Retail Integration

Issue Areas: Financial Stresses across the market boundary Opening the door to future demand response products that retail customers can participate in while providing a

reliability benefit Ensuring that the wholesale/retail market boundary keeps pace with emerging technologies such as retail-level

metering and microgeneration

Developments: Wholesale/Retail Integration discussion paper soliciting stakeholder feedback to be released shortly Upcoming Pilot Projects

28

Wholesale/Retail Integration

The Approach:

Avoid overlap with topics being addressed in existing stakeholder forums

Use of Pilot Projects to look ahead to future logistical challenges

Ensure that future solutions do not conflict with the evolving role of various market participants and retail entities

Ensure alignment with other MEP initiatives