Review of Control Zone for 2003

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Continuous costs arrived at the midpoint of $70/MWh (inc dispatches). Utility booked burden inside of 1-2 % of real load bringing about low dependence on ongoing awkwardness market ...

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2003 State of the California ISO Markets Report Federal Energy Regulatory Commission May 5, 2004 Anjali Sheffrin, Ph.D. Executive, Market Analysis California ISO

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Overview of Control Area for 2003 COI 10.5 million family units served in PG&E, SCE, and SDG&E 25,000 circuit miles of system transmission.CA some portion of western interconnection (WECC) 42,581 MW top load in July, 2003 * 230,668 GWh yearly vitality 42,000 MW of accessible era limit at top after derates for hydro and blackouts 5,670 MW net imports on pinnacle Pac DC NP15 SF SP15 Path 15 ZP26 Mead Market Place McCullough LA4 LA2 Eldorado Path 26 Lugo Vincent Mohave Sylmar AZ3 Palo Devers Verde N.Gila *Integrated hourly pinnacle Imperial Valley Miguel AYS Mexico

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Current Markets Operated by CAISO Real Time Imbalance Energy Market Day Ahead and Hour Ahead Congestion Management (Zonal) Ancillary administration markets: direction, turn, non-turn, substitution Soft value top at $250/MWh Automated Mitigation Procedures (AMP) set up Conduct test, offer no less than 200% or $100/MWh above reference level for framework AMP Impact test – offer has no less than 200% or $50/MWh affect on market clearing value No day ahead vitality showcase, Investor-claimed utilities continued acquiring vitality for their own particular necessities in Jan 2003 AYS

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Ample supply and direct loads yielded advertise results near aggressive levels. No moderation of costs happened utilizing framework AMP Average load up 1% in 2003, however second 50% of year up 3.7% due climate and a recuperating economy Energy costs expanded because of higher regular gas costs Real-time costs found the middle value of $70/MWh (inc dispatches). Utility planned load inside 1-2 % of real load bringing about low dependence on ongoing unevenness advertise Ancillary save benefit costs arrived at the midpoint of $9.85/MWh, increment of 38% ; a few occasions of offer inadequacy Increases continuously intrazonal clog Long blackouts at Vincent and Sylmar substations, and lacking transmission at Miguel because of new era augmentations in Northern Mexico and Arizona Market Highlights for 2003 AYS

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Total discount cost of serving burden $12.1 Billion in 2003, v. $10.1 Billion in 2002; Increase in costs influenced by common gas costs Wholesale Energy and Ancillary Service Costs, 1998-2003 AYS

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All-in cost was $55/MWh in 2003 contrasted with $45/MWh in 2002; increment due to a great extent to increment in gas costs All-In Price Index incorporates assessed respective , genuine time,A/S 2002-2003 AYS

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Real-time incremental vitality costs expanded from 2002, after regular gas costs; higher in Southern Calif. Month to month Averages, 2002-03 AYS

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Peak ongoing incremental costs higher in 2003 than in 2002 Top 5% * of costs , 2001-2003 At slightest At minimum At minimum Number of Hours: $249/MWh $149/MWh $91//MWh 2001 8 2353 3194 2002 0 69 2003 0 25 309 The California ISO's market posts isolate incremental and decremental costs. Most noteworthy 325 value hours are appeared. AYS

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Load became around 1% in 2003 versus 2002 Load Duration Curves, 2001-2003 AYS

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Improved Forced Outage Rates of Existing Generation Equivalent Forced Outage Rate 1999-2003 AYS

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New Transmission Projects Generating Capacity Net Additions AYS

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Net imports solid for second year consecutively 2001 through 2003 Average Annual Net Imports AYS

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Competitive Market Outcomes in 2003 Price-to-cost markups 7% in NP15, 8% in SP15 Short-Term Markup Indices: SP15 (top) and NP15 (base) AYS

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High RSI levels in 2003 show a sound market with providers critical in less than 22 hours in the year Residual Supply Index = Total Supply – Largest Supplier Demand RSI_Duration Curve 1999 - 2003_ 2.4 2.3 2.2 2.1 2 rsi_1999 1.9 1.8 rsi_2000 1.7 RSI Index 1.6 rsi_2001 1.5 rsi_2002 1.4 1.3 rsi_2003 1.2 1.1 1 0.9 0.8 1 619 1237 1855 2473 3091 3709 4327 4945 5563 6181 6799 7417 8035 8653 AYS

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SP15 Combined Cycle Net Revenue and Cost SP15 Combustion Turbine Net Revenue and Cost 100.00 $90.00 90.00 $80.00 80.00 $70.00 70.00 $60.00 60.00 $50.00 $/kW-year $/kW-year 50.00 $40.00 40.00 $30.00 30.00 $20.00 20.00 $10.00 10.00 0.00 $0.00 2002 2003 2002 2003 CC Cost CC Net Revenue CT Cost CT Net Revenue Net Revenue Analysis, 2002 and 2003 - Profits from ISO spot markets for another run of the mill consolidated cycle era unit fell 30 percent in 2003, burning turbine unit benefits stable* - A noteworthy part of settled cost recuperation would be from long haul two-sided contract. *Net income examination in light of units offering exclusively into ISO irregularity vitality and subordinate administration markets. AYS

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Reduced auxiliary administration limit brought about higher costs and expanded offer inadequacy in 2003 contrasted with 2002 Monthly Weighted Average Ancillary Service Prices, 2002-2003 AYS

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Interzonal blockage costs dropped 33% in 2003 v. 2002 levels 2002 and 2003 Monthly Interzonal Congestion Costs AYS

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Major ways with interzonal clog costs 2003 Interzonal Congestion Revenues on Selected Paths AYS

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Real-time intrazonal blockage surged in August as new era came online in Northern Mexico and Arizona, and overpowered nearby transmission offices 2003 Monthly Total Intrazonal Congestion Costs AYS

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Effective Real Time Congestion Management Must-Offer Waiver Process Redesign Resource Adequacy Requirement Economic Evaluation of Transmission Expansion Major Market Issues AYS