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HEADLINES FROM THE 2009 STATE OF THE MARKET REPORT SOUTHWEST POWER POOL, INC. Presented To: SPP Board of Directors/Members Committee Presented By: Craig R. Roach, Ph.D. Boston Pacific Company, Inc. April 27, 2010. 2009 STATE OF THE MARKET: MAJOR HEADLINES.

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headlines from the 2009 state of the market report southwest power pool inc

HEADLINES FROM THE 2009 STATE OF THE MARKET REPORTSOUTHWEST POWER POOL, INC.

Presented To:

SPP Board of Directors/Members Committee

Presented By:

Craig R. Roach, Ph.D.

Boston Pacific Company, Inc.

April 27, 2010

2009 state of the market major headlines
2009 STATE OF THE MARKET: MAJOR HEADLINES

I. NEW ENTITIES EXPAND AND DIVERSIFY THE SPP FOOTPRINT

II. DEMAND DECREASES IN THE ORIGINAL FOOTPRINT

  • EIS PRICES FALL DRAMATICALLY
  • NO EVIDENCE OF MARKET POWER

V. TOTAL TRANSMISSION CONGESTION UP; MORE SERIOUS TYPES OF CONGESTION DOWN

VI. TRANSMISSION OUTAGES ARE UP AGAIN

  • BROADER POLICY ISSUES STILL CAN BE GAME CHANGERS
  • RECOMMENDATIONS
new entities expand and diversify the spp footprint
NEW ENTITIES EXPAND AND DIVERSIFY THE SPP FOOTPRINT
  • Adds Three New Entities
    • Nebraska Public Power District
    • Omaha Public Power District
    • Lincoln Electric System
  • Impact
    • Peak demand 14% higher
    • Consumption 11% higher
    • Miles of transmission 16% higher
    • Adds fuel diversity
2009 state of the market major headlines5
2009 STATE OF THE MARKET: MAJOR HEADLINES

I. NEW ENTITIES EXPAND AND DIVERSIFY THE SPP FOOTPRINT

II. DEMAND DECREASES IN THE ORIGINAL FOOTPRINT

EIS PRICES FALL DRAMATICALLY

NO EVIDENCE OF MARKET POWER

V. TOTAL TRANSMISSION CONGESTION UP; MORE SERIOUS TYPES OF CONGESTION DOWN

VI. TRANSMISSION OUTAGES ARE UP AGAIN

BROADER POLICY ISSUES STILL CAN BE GAME CHANGERS

RECOMMENDATIONS

2009 state of the market major headlines8
2009 STATE OF THE MARKET: MAJOR HEADLINES

I. NEW ENTITIES EXPAND AND DIVERSIFY THE SPP FOOTPRINT

II. DEMAND DECREASES IN THE ORIGINAL FOOTPRINT

EIS PRICES FALL DRAMATICALLY

NO EVIDENCE OF MARKET POWER

V. TOTAL TRANSMISSION CONGESTION UP; MORE SERIOUS TYPES OF CONGESTION DOWN

VI. TRANSMISSION OUTAGES ARE UP AGAIN

BROADER POLICY ISSUES STILL CAN BE GAME CHANGERS

RECOMMENDATIONS

electricity prices compared with neighboring regions
ELECTRICITY PRICES COMPARED WITH NEIGHBORING REGIONS

ELECTRICITY PRICES COMPARED WITH NEIGHBORING REGIONS FOR 2009

2009 state of the market major headlines12
2009 STATE OF THE MARKET: MAJOR HEADLINES

I. NEW ENTITIES EXPAND AND DIVERSIFY THE SPP FOOTPRINT

II. DEMAND DECREASES IN THE ORIGINAL FOOTPRINT

EIS PRICES FALL DRAMATICALLY

NO EVIDENCE OF MARKET POWER

V. TOTAL TRANSMISSION CONGESTION UP; MORE SERIOUS TYPES OF CONGESTION DOWN

VI. TRANSMISSION OUTAGES ARE UP AGAIN

BROADER POLICY ISSUES STILL CAN BE GAME CHANGERS

RECOMMENDATIONS

2009 state of the market major headlines15
2009 STATE OF THE MARKET: MAJOR HEADLINES

I. NEW ENTITIES EXPAND AND DIVERSIFY THE SPP FOOTPRINT

II. DEMAND DECREASES IN THE ORIGINAL FOOTPRINT

EIS PRICES FALL DRAMATICALLY

NO EVIDENCE OF MARKET POWER

V. TOTAL TRANSMISSION CONGESTION UP; MORE SERIOUS TYPES OF CONGESTION DOWN

VI. TRANSMISSION OUTAGES ARE UP AGAIN

BROADER POLICY ISSUES STILL CAN BE GAME CHANGERS

RECOMMENDATIONS

2009 state of the market major headlines20
2009 STATE OF THE MARKET: MAJOR HEADLINES

I. NEW ENTITIES EXPAND AND DIVERSIFY THE SPP FOOTPRINT

II. DEMAND DECREASES IN THE ORIGINAL FOOTPRINT

EIS PRICES FALL DRAMATICALLY

NO EVIDENCE OF MARKET POWER

V. TOTAL TRANSMISSION CONGESTION UP; MORE SERIOUS TYPES OF CONGESTION DOWN

VI. TRANSMISSION OUTAGES ARE UP AGAIN

BROADER POLICY ISSUES STILL CAN BE GAME CHANGERS

RECOMMENDATIONS

2009 state of the market major headlines22
2009 STATE OF THE MARKET: MAJOR HEADLINES

I. NEW ENTITIES EXPAND AND DIVERSIFY THE SPP FOOTPRINT

II. DEMAND DECREASES IN THE ORIGINAL FOOTPRINT

EIS PRICES FALL DRAMATICALLY

NO EVIDENCE OF MARKET POWER

V. TOTAL TRANSMISSION CONGESTION UP; MORE SERIOUS TYPES OF CONGESTION DOWN

VI. TRANSMISSION OUTAGES ARE UP AGAIN

BROADER POLICY ISSUES STILL CAN BE GAME CHANGERS

RECOMMENDATIONS

climate change policy
CLIMATE CHANGE POLICY
  • Set Backs, and Persistence
  • Copenhagen Negotiations
    • High expectations/disappointment
  • Federal Legislation or Regulation
    • Waxman-Markey
    • Kerry-Graham-Lieberman (sectoral)
    • Cantwell (Cap-and-Dividend)
    • EPA regulations (under Supreme Court Order)
climate change policy continued
CLIMATE CHANGE POLICY (Continued)
  • State and Regional Action
    • Regional Greenhouse Gas Initiative (RGGI)
    • Western Climate Initiative
    • Midwestern Greenhouse Gas Reduction Program
  • Impact of Recession
    • RGGI: Prices at minimum
    • Europe: Prices fall to €14 from €30
clean air act regulations or legislation
CLEAN AIR ACT REGULATIONS OR LEGISLATION
  • A Flood of Proposed Actions (and Acronyms)
    • NAAQS, MACT, CAIR, CAMR,…
    • For same pollutants (SO2, NOx, Mercury)
  • Courts Push Back; Issue is Command-and-Control vs. Cap-and-Trade
  • To Some, an All-out Assault on Coal-Fired Power
    • Retrofit or shut down
    • 64% of SPP generation from coal-fired units
natural gas prices
NATURAL GAS PRICES
  • Natural Gas Prices Drive EIS Market Prices
    • EIS prices down 48% (2009 vs. 2008)
    • Average natural gas prices down 54% ($3.32/MMBtu in 2009, $7.14/MMBtu in 2008)
    • Natural gas at margin in EIS market (61% in 2009, 70% in 2008)
natural gas prices continued
NATURAL GAS PRICES (Continued)
  • Causes of Natural Gas Price Decline
    • No precise explanation
    • Recession
    • Liquefied natural gas (LNG) surplus
    • “Revolution” in shale-gas technology
natural gas prices continued28
NATURAL GAS PRICES (Continued)

C. Price Expectation

2009 state of the market major headlines29
2009 STATE OF THE MARKET: MAJOR HEADLINES

I. NEW ENTITIES EXPAND AND DIVERSIFY THE SPP FOOTPRINT

II. DEMAND DECREASES IN THE ORIGINAL FOOTPRINT

EIS PRICES FALL DRAMATICALLY

NO EVIDENCE OF MARKET POWER

V. TOTAL TRANSMISSION CONGESTION UP; MORE SERIOUS TYPES OF CONGESTION DOWN

VI. TRANSMISSION OUTAGES ARE UP AGAIN

BROADER POLICY ISSUES STILL CAN BE GAME CHANGERS

RECOMMENDATIONS

recommendations
RECOMMENDATIONS
  • Create Standardized Categories of Transmission Outages and Record Data by Year End
  • Monitor and Report Trends in Transmission Congestion and Use of Temporary Flowgates
  • Congestion on Temporary Flowgates Should be Included in the Calculation and Activation of Offer Caps
  • Continue expedient implementation of New Market Development to Achieve Consumer Benefits
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