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Seams Issues

Seams Issues. Raymond DePillo Vice-President – Power Operations and Asset Management PSEG Energy Resources & Trade LLC October 7, 2013 2013 OPSI Annual Meeting. PSEG Energy Resources & Trade LLC. Manages portfolio of PSEG generation fleet Owns generating assets in 4 states

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Seams Issues

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  1. Seams Issues Raymond DePillo Vice-President – Power Operations and Asset Management PSEG Energy Resources & Trade LLC October 7, 2013 2013 OPSI Annual Meeting

  2. PSEG Energy Resources & Trade LLC • Manages portfolio of PSEG generation fleet • Owns generating assets in 4 states • 11,500 MWs in New Jersey and Pennsylvania (PJM) • 750 MWs in New York (NYISO) • 850 MWs in Connecticut (ISO-NE) • Commercial arm of PSEG Power LLC • ER&T is one of the first and most successful trading organizations in the US, consistently top tier with over 60 million MWhs traded annually • Acquires and hedges fuel and sells power • Major supplier of “provider of last resort” service in New Jersey • Manages large portfolio of gas transportation and storage contracts • Majority of generation assets located in close proximity to PJM/NYISO seam

  3. What Are We Trying to Achieve Through Seams Management? • Efficiency and cost savings in adjoining markets through coordinated dispatch for constraint control • Lower production costs across multiple markets • Transparency for market participants • Better overall control of the transmission system

  4. Our Experience with Seams Management Efforts …. • Significant cash payments by PJM to other pools • Over $150M in M2M Balancing Congestion and Payments in 2012 • Production cost savings (if any) are hard to discern • Lack of transparency for market participants • PJM/MISO congestion management has distorted FTR market • PJM FTR Underfunding $290M in PY 2012-2013 • No meaningful decrease in the amount or severity of Transmission Loading Relief (TLR) events • Total Significant TLRs (3a or greater) called by PJM and MISO declined 5% from 2011 to 2012 • Thru June of 2013 they have more TLRs had been issued then for either full year (2012 and 2011)

  5. On the Horizon - PJM/NYISO Coordinated Transaction Scheduling (CTS) • Goal of increasing efficiency of dispatch in vicinity of PJM/NYSO interface • Market participants submit CTS Interface “spread bids” based on difference between PJM and NYISO projected prices above which they want the transaction to flow • Bids evaluated based on PJM’s Intermediate Term Security Constrained Economic Dispatch (“IT SCED”) which looks ahead 2 hours in advance of real-time • In real-time: • NYISO will incorporate IT SCED prices into NYISO schedules • PJM will incorporate NYISO advisory schedules into IT SCED • Claimed to improve current PJM/NYISO interchange because price differences projected by PJM and NYISO are presumed to be superior to projections by market participants

  6. Value of CTS Will be Difficult to Realize • Scenarios run by PJM show modest production cost savings for January though December 2012: • Maximum of about $16 M for PJM • Maximum of about $11 M for NYISO • Studies do not take account of: • Risk premiums required by market participants • Fees imposed on transactions • Impact on uplift payments • Value of multi hour look ahead of prices in each RTO is unproven.

  7. Interchange Optimization May have Benefits ….. • But markets need to be cautious in implementation • Risk of unintended consequences • Lack of transparency • Unproven value • Market rule differences • Given the relatively small benefits ….. • Interchange Optimization should remain a low priority while existing issues and larger issues affecting seams are resolved.

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