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2. Safe Harbor Statement. This presentation contains forward-looking statements, including the Company's beliefs about its business prospects and future results of operations. These statements involve risks and uncertainties. Among the important additional factors that could cause actual results to
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2. Safe Harbor Statement This presentation contains forward-looking statements, including the Company's beliefs about its business prospects and future results of operations. These statements involve risks and uncertainties. Among the important additional factors that could cause actual results to differ materially from those forward-looking statements are risks associated with the overall economic environment, the successful execution of the Company's plan of operation, changes in the Company's anticipated earnings, continuation of current contracts, changes in energy and other applicable regulations, and other factors detailed in the company's filings with the Securities and Exchange Commission, including its most recent Forms 10-K and 10-Q. In addition, the factors underlying Company forecasts are dynamic and subject to change and therefore those forecasts speak only as of the date they are given. The Company does not undertake to update them; however, it may choose from time to time to update them and if it should do so, it will disseminate the updates to the investing public.
3. Background Emergence of new technologies (such as batteries, flywheels, V2G, demand-side resources) capable of responding more quickly and accurately than traditional Regulation resources prompted the Commission to evaluate Regulation market rules
May 26, 2010: FERC held Technical conference
System benefits of faster-ramping resources
Whether the compensation mechanism reflects the value of the service provided
February 17, 2011: FERC issued a Notice of Proposed Rulemaking (NOPR) on Frequency Regulation Compensation in the Organized Wholesale Power Markets
Proposing to require regional RTOs and ISOs to adopt a two-part payment structure
May 2, 2011: Comments due (60 days)
4. FERC NOPR: Need for Reform
5. Specific Proposal Compensation should take into account the amount of service (ACE Correction) that is being provided by each resource
All RTOs/ISOs must implement a two-part payment
Capacity Payment (what most RTOs have today)
Compensates resources for setting aside a certain amount of capacity to provide regulation service
Payment should use a uniform clearing price per MW based on marginal resource’s marginal cost, including opportunity cost
Performance Payment (new*)
Payment that recognizes contribution to ACE Correction
Sum of resources up and down movement in response to a dispatch signal multiplied by a price-per-MW of ACE correction
In addition payment should reflect the resource’s accuracy in following the system operator’s dispatch signal
6. Potential Cost and Reliability Benefits “Use of faster-ramping resources for frequency regulation has the potential to improve operational and economic efficiency and, in turn, lower costs to consumers in the organized markets”
Allows RTOs and ISOs to use less regulation capacity to meet current NERC standards, thus lowering regulation costs
PNNL Study: 1 MW of a fast-ramping resource with limited energy could replace 1.2 MW of the current generation mix providing regulation
Example: ISO-NE, has a “fast-first” priority dispatch and a performance payment, procures least amount of Regulation as % of load
On average 60% less than other ISO/RTOs
Commission anticipates secondary effect of lowering Energy prices
Frees slower-ramping resources to operate at stable output levels and, therefore, at more efficient heat rates
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