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Presented to:Eastern RTO/ISO Conference
Washington, DCMay 11, 2005
The Importance of Teamwork in Multi-JurisdictionalEnergy Market Monitoring
William F. Hederman, DirectorOffice of Market Oversight and Investigations
Federal Energy Regulatory Commission
WH-5/11/05
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Outline
• FERC Strategy• OMOI Organization• Delineation of Responsibilities• Diversity of MMU Models• Markets Overview• Program and Policy Options
(Views expressed are Hederman’s, not the Commission’s.)
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FERC has 3-prong strategy.
Effective Rules
Infrastructure
Rules
Enforcement
CompetitiveMarkets
Just & ReasonableOutcomes
StrategicApproach
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Energy Market Progress Requires: Integrity AND Public Confidence In That Integrity
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OMOI has 3 essential processes to “Trust and Verify”.
• Professionally skeptical
• Diverse (private/public sectors, disciplines)• Highly skilled• Team-oriented
C
O
I
OutsIde
FERC
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*Report to Board *Discuss Emerging*Report to PUCs Issues/Trends*Regional State of Market *Watch for Anomalous or *Mitigation Inappropriate Market Behavior*Supply Detailed Market Data *Confer on Market Developments Evaluations *Analyze Markets*Contribution to Market Design
*Report to Commission *Coordinate with all MMUs *National State of the Markets *Seasonal Look-Aheads *Audit -Market Participants -RTO/ISOs *Enforce Regulations *Monitor Non-RTO Areas and Fuels (esp., Natural Gas) *Market Surveillance Reports/Market Snapshots *Order Development *EQR Implementation *Coordinate With Other Federal Agencies
RTO/ISOMarket Monitors
FERC OMOI
Feds and Monitors share tasks and have distinct tasks.
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Common Market Metrics - MMUS
Category Metric NYISO PJM ISO-NE CAISO MISO Total
EnergyMarketMetrics
DA and RT Prices 1
Price Duration Curve 4
All-in Price 4
Volatility
Congestion Costs 3
Secondary Market Metrics
Capacity MarketVolume and Price 2
LoadMetrics
Load Duration Curve 5
Imports and Exports 5
Offer Sufficiency 2
GenerationMetrics
Outages and Deratings 5
Generation by Fuel 2
Additional Market Metrics
Virtual Transactions 2
Spot Market Activity 1
RSI Duration Curve 4
Reserve Margin OMOI and Market Monitors agreed to add this metric at June 22 MMU meeting.
Net Revenue Analysis 4
Total 10 8 10 9 7
Status of MMU Common Metrics from State of the Market Presentations
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There is no dominant market monitoring model
PJM ISO-NE NYISO CAISO MISO SPP ERCOT
Internal
Monitor
Reports to:
Employees
President and Board of Managers
Employees
ISO CEO & Markets Committee of ISO Board of Directors
Employees
(Note 1)
Director, Corp. and Market Risk Management
Employees
General Counsel
(Note 2) Employees
(Note 3)
CEO
External
Monitor
Reports to:
Contractor
Markets Committee of ISO Board of Directors
Contractor
(Note 4)
Markets Committee of NYISO Board
Contractor
(Note 5)
FERC and ISO
Contractor
Markets Committee of the MISO Board
Contractor
Compliance Committee of Board of Directors
Texas PUC employees (Note 6)
Texas PUC
Other
Monitor
Reports to:
NYPSC staff
NYPSC
Market Surveillance Committee
CEO and Board of Governors
Contractor
Texas PUC
Notes: (1) Lead for: real time, physical audits; (2) No Internal Monitor, staff liaison to the External Monitor; (3) Skeletal staff now, change likely; (4) Lead for: longer term, analytics; (5) Limited role setting DEC reference prices; (6) Pending legislation would require ERCOT to Fund, through administrative fees, an independent market monitor (contractor) that would be hired by the PUC and would report directly tothe PUC
The relevant markets and jurisdictions are complex. Natural Gas & Electric Market Space
Gas Supply
Trading Venues
Futures (NYMEX)
Electronic Platforms
Bilateral Trading
Voice Brokers
Pipelines&
Storage
Players
Delivered Market
Physical Nat Gas
Generation
Transmission&
Pumped Storage
Delivered Market
Phys Electric Power
Gas to fuel power generation
RTO’s & ISO’s
Price Contributors-Fixed price buyers & sellers-Speculators
Price Takers-Indexed price buyers & sellers
Source: FERC-OMTR&OMOI 9
Nat Gas & Electric Derivatives
Nat Gas & Electric Clearing
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There are many dimensions to crafting Market Monitoring programs and policies.
• Monitor Qualifications (none/independent judgment/minimum/certification)
• Monitor Reporting Requirements- FERC - RTO Board- PUCs - RTO Management
• Monitor Independence/Incentives
• Monitor Confidentiality Restrictions
• Inter-monitor/Agency Interaction
• Responses: Timeliness/QA-QC
Just a few examples:
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There is lots to discuss.
Questions and Answers
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