Electricity Deregulation Next Stop, Transmission

1
Electricity Deregulation Next Stop,
Transmission

• Cheryl L. Runge
• Director, Market Development
• Economics Society of Calgary
• October 24, 2003

2
Market Evolution Timeline
3
NOT just different shades of grey!
4
Why Restructure?

• One small step for man,
• one giant leap for mankind.

markets
the economy.
5
Industry Model Post-Restructuring
Vertically Integrated Utility
Functional Separation
competitive forces
Generation
natural monopoly
Transmission
natural monopoly
Distribution
competitive forces
Retail
6
Benefits
7
Competitive Generation

• Incentive to build more efficient generation
  costs lower than marginal unit
• Options to build will weigh political risk (e.g.
  Kyoto)
• Options to build will consider consumer
  wants/needs (e.g. consumer reliability
  requirements, increasing demand for wind power)
• Encourages innovation

8
Generation Additions in 2003

• 570 MW of gas and 32 MW of Hydro were added go
  the grid in the first half of 2003
• An additional 184 MW of gas and 76 MW of other
  are expected by year end
• 174 MWs are expected to be decommissioned by year
  end
• Net to grid total generation is expected to
  increase to 11,202 MWs by end of year

9
Alberta Generation Capacity
10
Increase in AESO Participants
Groups
Aug 2003
Jan 2000
A (under 1MW) B (1-10 MW) C (over 10 MW and
Marketers) D (Retailer/ Self-Retailer)
38 21 62 110
9 12 21 6
Total
Date August 2003
11
Load Response

• Consumers have demonstrated a response to prices
• Will choose to reduce consumption during tight
  supply situations

12
(No Transcript)
13
Wholesale Market Prices
14
Ancillary Services

• Compete to provide reserves to the AESO for
  system reliability
• Additional management schemes added to promote
  efficiency while ensuring system security
• AESO accountability to reduce costs

15
Other Markets

• Forward Trading (Watt-ex)
• Bilaterals
• Net Settlement Instructions through AESO
• Contracts for Differences
• NGX swap

16
Next Stop Transmission
17
Albertas Electric Industry

• 20,000 km transmission
• Single control area of 660,000 km²
• B.C. Sask. Connections
• (785MW)
• over 130 generating units
• 8,570 MW system peak
• Over 200 market participants
• 10,515 MW internal capacity net to grid
• 600 MW added 1st half 2003

BC
Alta
Sask
18
Transmission

• Backdrop
• New Transmission Policy
• Transmission infrastructure within Alberta to
  support expanding economy
• Stronger backbone grid
• Managed Congestion
• Transmission aligns to and supports inter
  regional trade

19
Transmission

• Design Considerations
• Sufficient to meet Alberta needs
• Sufficient to support new generation
• Supports imports and exports

20
Transmission Planning Process

• Previous Planning Process
• 10 year transmission development plan
• Projects pursued once firm contracts are signed
  with generators
• Current Planning Process
• 20 Year conceptual transmission plan
• Navigant is assisting in the development of the
  plan
• paints the long term outlook for system
  development
• 10 Year transmission development plan
• refinement of the 20 year plan
• identifies projects that we will move towards
  commitment for
• Projects implemented in anticipation of
  generation development

21
Study Objectives

• 20 year outlook for system development
• primary focus on 500 kV development
• Better understanding the implications of
  alternative generation and export scenarios on
  the development of the transmission system
• Preliminary evaluation of the impact on the
  overall costs of generation and transmission
  costs of the alternative generation and export
  scenarios

22
Generation Scenario Definition

• Scenario 1
• Heavy Fort McMurray development
• Scenario 2
• Heavy Edmonton area coal development
• Scenario 3
• Heavy southern Alberta area generation
• Brooks
• Combined-cycle near Calgary
• Wind

23
Export/Load ForecastScenario Definition

• Exports
• Low -- opportunity service
• Medium -- 1,000 MW export to the Pacific
  Northwest
• High -- 2,000 MW export to the Pacific Northwest
• Load Forecasts
• Expected
• High

24
(No Transcript)
25
Navigant Conceptual Planning Study Preliminary
Conclusions

• Building transmission to facilitate the
  competitive market for electricity is in the
  long-term interest of consumers as it is expected
  to lower the overall delivered cost of energy
  within Alberta
• Fort McMurray cogeneration and/or Edmonton Area
  coal development is expected to result in lower
  long term generation and transmission costs
• The export of 1,000 MW, when combined with Fort
  McMurray co-generation and/or Edmonton coal
  generation development, results in lower long
  term generation and transmission costs compared
  to southern generation development without
  exports

26
Navigant Conceptual Planning Study Preliminary
Conclusions (Contd.)

• Market simulations of the western interconnection
  indicates that there is the potential for about
  1,000 MW export from Alberta to the Pacific
  North West and California
• Alberta exports are more economical than gas
  fired generation in the Pacific Northwest
• Export of 2,000 MW would require further detailed
  technical and market analysis within Alberta and
  in the Western Interconnection

27
Transmission

• Seams Considerations
• Inter-Regional Co-ordination
• FERC 888 Tariff terms are different than
  Albertas injection - withdrawal model
• Business Practices at the border could be better
  aligned
• Releasing on unused transmission

28
In Summary

• Not just another shade of grey
• Competition in Generation
• Planning in Transmission
• Integrated Markets
• You can get there from here

29
Contact Us
Current Prices and Market Statistics Historical
Reports News, Announcements Market and
Transmission Access www.aeso.ca
30
(No Transcript)