Usa electricity markets monitoring from omoi s perspective
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USA Electricity Markets Monitoring From OMOI’s Perspective. George Godding Director, Mgmt. & Comm. Office of Market Oversight and Investigations. Brazilian Partnership Conference - Thursday, August 19, 2004. Presentation Outline. Background of Energy Market Electric Sector Overview FERC

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Usa electricity markets monitoring from omoi s perspective

USA Electricity MarketsMonitoring From OMOI’s Perspective

George Godding

Director, Mgmt. & Comm.

Office of Market Oversight and Investigations

Brazilian Partnership Conference - Thursday, August 19, 2004


Presentation outline

Presentation Outline

  • Background of Energy Market

    • Electric Sector Overview

    • FERC

    • RTOs

    • NERC

  • Electricity Market Monitoring

    • Major Players

    • OMOI

    • Oversight Process

    • Market Power & Mitigation

    • Surveillance Process

  • Indices and Reports

  • Market Monitoring Center

2


Usa electricity markets monitoring from omoi s perspective

Brief Background

on Electricity Markets and

its Regulation and Oversight

3


Overview of u s electricity sector most recent data available 2002 03

Generation:

Capacity (2002) – 914,123 MW

Total net generation (2002) – 3,858 billion KWh

Coal – 1,933 billion KWh

Natural gas – 691 billion KWh

Nuclear – 790 billion KWh

Petroleum – 94 billion KWh

Hydroelectric – 264 billion KWh

Other renewable – 86 billion KWh

Overview of U.S. Electricity Sector (most recent data available – 2002/03)

Generation Capacity

Ownership:

  • Investor-owned utilities – 398,112 MW

  • Public-owned utilities – 92,696 MW

  • Cooperatives – 37,825 MW

  • Federal Power – 70,220 MW

  • Non-utilities – 315,271 MW

Expected Demand Growth:

  • 3,639 billion KWh (2002)

  • 3,674 billion KWh (2003) (1%)

  • 3,718 billion KWh (2004) est. (1.2%)

Transmission:

  • High-Voltage Circuit Miles (230-kV and above) – 158,605 (255,250 km)

4


Ferc s goals

FERC’s Goals

  • FERC Strategic Plan

    • Promote a Secure, High-Quality, Environmentally Responsible Infrastructure through Consistent Policies

    • Foster Nationwide Competitive Energy Markets as a Substitute for Traditional Regulation.

    • Protect Customers and Market Participants through Vigilant and Fair Oversight of the Transitioning Energy Markets.

  • Plan Transparency

  • Plan Stability (minimize market uncertainty)

  • Open participation in implementation decisions by interested parties

5


Ferc organization chart

FERC Organization Chart

6


Ferc infrastructure regulation

FERC Infrastructure Regulation

  • Approve Hydro facilities (many others involved)

  • Approve rate design for generation and transmission (states approve siting – legislation may change for tx)

  • Approve pipeline siting and transmission rates

  • OASIS (Open Access Same-time Information System for transmission availability)

  • FERC set interconnection rate design and rules

  • FERC & DOE review transmission issues and generation adequacy – bully pulpit (possible legislation)

    • DOE – SP-15 & Cross Channel Cable

    • DOE issued July 22, 2004 – Notice of Inquiry on National Interest Electric Transmission Bottlenecks (NIETB)

      • Publicly identify and designate NIETBs

      • To classify NIETBs (national security, reliability, risk of cost increases)

      • How DOE facilitate & monitor mitigation

7


Electric market planning and design rtos

Electric Market Planning and Design - RTOs

  • RTOs – SMD

    • Centralized dispatch

    • Resource adequacy

    • Long-range planning

    • Day ahead and real-time markets

    • Locational Marginal Pricing

    • Transmission rights

  • Natural Trading Markets

  • Large as Possible

  • Recognize Regional Differences

8


Rto map

RTO Map

9


Reliability nerc

Reliability - NERC

  • Established in 1968 in response to 1965 Northeast Blackout

  • Non-governmental entity; ten-member Board of Trustees

  • Voluntary membership with 10 regional reliability councils

  • Members from all segments of the electric industry

  • Developed reliability standards and established good utility practices

  • Developed technical services, tools and databases to enable industry to monitor and evaluate system and equipment reliability, manage grid congestion and facilitate communication

  • 2003 Blackout

    • Reevaluate reliability standards

    • Accelerate adoption of enforceable standards

    • Develop better real-time tools for operators and reliability coordinators

10


Nerc map

NERC Map

11


Usa electricity markets monitoring from omoi s perspective

Electricity Market Monitoring

12


Market monitoring major players

Market Monitoring – Major Players

NERC

(Reliability

Standards)

FERC

(Wholesale)

Generation

Transmission

MMUs

(Defined RTOs)

States

(Retail)

Distribution

Other Federal

Agencies

13


Omoi s mission

Guide the evolution and operation of energy markets to ensure effective regulation and protect customers through understanding markets and their regulation, timely identification and remediation of market problems, and assured compliance with Commission rules and regulations.

OMOI’s Mission

14


Omoi s vision

OMOI’s Vision

  • Vigilant oversight and vigorous enforcement of proper market rules ensure dependable, affordable, competitive markets to benefit end use customers and other participants.

15


Usa electricity markets monitoring from omoi s perspective

Office of Market Oversight and Investigations (OMOI) – Knowledge/Skillsets

Planning

Perf. Mgmt.

Budgeting

Facilitation

Speaking

Knowledge of industry

Partnering

  • Career Dev.

  • HR

  • Recruiting

  • Contracting

  • Writing/Editing

  • Web design

  • Graphics

  • Presentation

    development

Division of

Management &

Communication

Director

Deputy Director

Market Oversight

& Assessment

Deputy Director

Investigations

& Enforcement

Hotline

Market

Scanning

Public Speaking

ADR

Phone Response

Strategic Analysts

Library Science

Division of

Energy Market

Oversight

Division of

Financial

Market

Assessment

Division of

Integrated

Market

Assessment

Division of

Information

Development

Division of

Enforcement

Division of

Operational

Investigations

Division of

Technical

Investigations

Financial Analysts

Accountants

Understanding of Investment

Derivatives Markets

Energy Trading

Engineers

Economists

Broad Industry Experience (Cross-Industry, Scenario, Regulatory Analysis; Market Microstructure Issues)

Operations Research

Writing/Presentation Skills

Policy Analysts

Information Analysis

Energy Industry Expertise

Software Applications (Large databases, Data Analysis, Statistical, Presentations (including Mapping)

Web Experience

Questionnaire & Survey Design

Statistical Analysis

  • Attorneys

  • Litigation

  • Investigation

  • Knowledge of

    financial markets

  • Enforcement

  • ADR Training

  • Paralegal

Electrical Engineers

Pipeline Engineers

Economists

Deep Industry Expertise

Information Analysis

Modeling

Operations Research

Market Design & Operation

Forensic Auditors

Analytic ability

Statistical sampling

Documentation

Industry experience

Investigators

Examiners

Gas Engineer

Electric Engineer

Mechanical Engineer

Quantitative Economist

16


Flow chart of oversight process

Flow Chart of Oversight Process

  • OMOI takes advantage of information technology and updated resources for monitoring electric market stresses.

Investigations & Audits

Push

Emergency

Emergency

Team

Market

Market Oversight

Commission

8:30 AM

Discussions

In-Depth Study

Surveillance

Report

Oversight

Meeting

Regular

Pull

Feedback

17


How we regulate market oversight

How We Regulate – Market Oversight

  • Set Rules (open rulemaking process)

  • Provide Oversight

  • Conduct Audits

  • Conduct Investigations

  • Ensure Compliance

  • Enforce Rules

  • Feedback on effectiveness of above

18


Surveillance ferc

Surveillance - FERC

  • Data/Data/Data – direct reporting and 3rd party

  • Real time

  • 8:30 meetings

  • Alerts

  • Daily information on Intranet – from web scraping

  • Weekly surveillance meetings

  • Hot Line and complaints

  • Building partnerships (see next page)

  • Analyzing anomalies

  • Reporting to Commission (anomalies, scheduled briefings, special reports)

  • Building Reliability Group

19


Coordinating surveillance

Coordinating Surveillance

  • RTO Market Monitors (report anomalies to FERC, standard reports, Ex Parte rule, etc.)

  • States (NARUC, Snapshot Report, etc.)

  • Other Federal agencies (CFTC, FTC, DOJ, DOE, SEC, etc.)

  • NERC

20


Relationship with market monitors

Relationship with Market Monitors

  • Joint Mission Statement

  • Clear market monitoring plans

  • Contact list & monthly conference calls

  • Triggers for reporting to OMOI

  • Information access

  • Coordinating investigations

21


Market power mitigation

Market Power & Mitigation

  • Market-based rates vs. Cost-based rates

  • Generation Market Power Screens

    • Pivotal supplier analysis based on control area’s annual peak supply and demand

    • Market share analysis applied on a seasonal basis in relation to other’s market share

  • Behavioral Rules

    • Not undertake actions that purposefully lead to market manipulation or would be expected to

    • Specific prohibitions (wash trades, false information, artificial congestion, collusion)

22


Market power mitigation continued

Market Power & Mitigation (continued)

  • Code of Conduct

    • Separate generation from marketing and transmission

    • Treat affiliates as do non-affiliates

    • If deal with affiliates (transparent, defined product, standard criteria, independent design & solicitation review)

  • Mitigation schemes at RTO level

    • Caps

    • Bidding controls

      • AMP – conduct and impact

      • Cost-based restrictions when congestion (market power & RMR)

  • Merger approval may require mitigation

23


Electric market efficiency

Electric Market Efficiency

  • Shared objective with States and other Federal agencies

  • Market-based drives efficiency and “just and reasonable” rates

  • No specific requirements

    • Economic and physical withholding

    • Maintenance

  • Cost-based if market power & not mitigated

  • Dispatch studies

  • Looking for: lowest cost power into the market & to customers

24


Usa electricity markets monitoring from omoi s perspective

Indices and Reports

Market Monitoring Center

25


Indicies and reports

Indicies and Reports

  • Alerts

  • Daily Energy Reports

  • Market Surveillance Report

  • Seasonal Assessments

  • Anomaly Reports

  • Annual State of the Markets Report

  • Annual Behavioral Rules Report

  • MMU Annual Reports

  • Common Metrics

26


Common market metrics mmus

Common Market Metrics – MMUs

Status of MMU Common Metrics from State of the Market Presentations

27


Market monitoring center information examples

Market Monitoring Center(Information Examples)

  • Screens from:

    • Bloomberg, ICE and DOW (data and traders comments)

    • Friedwire (flows, LMP, nuclears, etc.)

    • Genscape

    • PJM

28


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