Understanding Ontario’s Electricity System

1. Understanding Ontario’s Electricity System Presentation by Robert Doyle, Communications Advisor, IESO September 13, 2010

2. Who We Are and What We Do • The IESO is a not-for-profit entity established in 1998 under the Electricity Act to manage Ontario’s power grid • The IESO: • Directs the flow of electricity across the transmission system to meet the province’s power needs • Balances demand for electricity against available supply through the wholesale market • Manages the financial operations of the $10-billion wholesale market • Oversees emergency preparedness activities for Ontario’s power system • Sends real-time price-signals to trigger demand response

3. The IESO’s Role • There are a number of different entities but all have their own set of accountabilities and defined responsibilities

4. Ontario’s Electricity Market:The Dispatch of Energy Consumers Offers/Schedules Suppliers Bids Local Distribution Companies Generators and Traders Dispatch Dispatch WholesaleConsumers Transmitters Electricity

5. Ontario at a Glance(as at August 2010) The IESO is the reliability coordinator for Ontario and works closely with other jurisdictions to ensure energy adequacy across North America.

6. Impacts on Demand – Winter Ice: can cause damage and interfere with restoration and repairs Cloud Cover/Snowfall: contributes to increased lighting load by as much as 750 MW Temperature: each degree below 10°C incrementally raises demand by 50 MW to as much as 250 MW a degree at -20°C (furnace load) Wind: a 30 km/h wind on a cold day (-10°C) can increase demand by 800 MW Lighting influences demand peaks in winter with late sunrise and early sunset

7. Impacts on Demand

8. Demand for Electricity

9. Green Energy Act (GEA) • Standard offer program for renewable generation • Conservation targets for local utilities • Streamlined processes • Foundation for a Smart Grid

10. Output by Fuel Type – Then and Now

11. Future Supply • 3,400 MW of new and refurbished supply is scheduled to come into service over the next 18 months • Nuclear, Gas and Wind, Water and Biomass • Decisions on future of existing nuclear stations • 5,000 MW of renewable generation announced • includes wind, solar, hydro, biomass, biogas and landfill gas • Coal phase out well underway with four units to be shut down this fall

12. Wind Integration • Wind generation is playing an increasingly important role in meeting Ontario’s electricity needs • Ontario leads the country with almost 1,100 MW of installed wind energy capacity on the grid • Wind’s variability can be managed • The IESO developing a centralized wind forecasting service

13. How Customers Pay for Electricity Local Distribution Company Market Price (Business/ Industry) Hourly Price (Interval Meter) Weighted Average Price (Conventional Meter) IESO Market Price RPP Tiered Prices Time of Use (Smart Meter) At any time a consumer can enter into a retail contract, regardless of the rate structure or the meter. 13

14. Post November 2009 • Since November 1, 2009, the public sector has been moved from the RPP to market pricing • Pricing structure depends on whether or not the facility has an interval meter • With an interval meter, the time at which you consume electricity will impact your bill • Most items on your bill are the same except for the commodity charge which is now split into two line items (provincial benefit and commodity charge) which were bundled together in the RPP price

15. What is the Provincial Benefit? • The Provincial Benefit ensures reliability by providing adequate generation capacity for Ontario • It reflects the difference between the market price and: • The regulated rate paid to Ontario Power Generation baseload generating stations (nuclear, large hydro) • Gas-fired facilities, wind farms, and other contracted projects through the Ontario Power Authority • Rates paid to generators who signed contracts with Ontario Hydro • The rate changes monthly and is set on the first business day of the month • It is charged to all large customers that are on a retail contract or pay market prices • It is included in the RPP charged to houses and small businesses

16. Why is the provincial benefit rising? • The market price declined significantly in 2009: • Lower demand • Increased supply • Lower fuel costs • Regional trade • Changing supply mix • Low prices mean reduced market revenues for generators which increases the need to recover costs guaranteed in their contracts through the provincial benefit

17. Global Adjustment - Provincial Benefit Renewable Energy Standard Offer Program Contributions to the Global Adjustment OPG Nuclear & Hydro Base Load Ontario Hydro Contracts OPA Contracted Generation Conservation and Demand Management

18. Recent Electricity Prices

19. Electricity Pricing Trends 6.77 6.07 5.49 5.35 5.00

20. Evaluating a Retail Contract

21. Daily Demand vs. Price

22. Demand vs. Price cont. • www.ieso.ca/demand

23. Ontario Reliability Outlook Ontario’s electricity system is becoming more participatory, distributed and sustainable – challenging the industry to respond and innovate Priority Areas: • Resource Adequacy • Integration • Transmission • Consumer Engagement

24. Consumer Engagement • Load control has the potential to provide added flexibility • The stage is being set: • Three million smart meters installed; time-of-use prices being rolling out • Technologies – smart appliances, home energy systems, PHEV’s, coming on to the market • More meaningful price signals are needed to increase responsiveness

25. Visit www.ieso.ca/publicsectorto read: Research reports Description of incentive programs A guide to electricity charges Profiles and publications to help you manage electricity costs Contact IESO Customer Relations at 1-888-448-7777 or customer.relations@ieso.ca IESO Resources www.facebook.com/OntarioIESO www.twitter.com/IESO_Tweets