Understanding Ontario’s Electricity SystemPresentation by Robert Doyle, Communications Advisor, IESOSeptember 13, 2010

2

Who We Are and What We Do

• The IESO is a not-for-profit entity established in 1998 under the Electricity Act to manage Ontario’s power grid

• The IESO:– Directs the flow of electricity

across the transmission system to meet the province’s power needs

– Balances demand for electricity against available supply through the wholesale market

– Manages the financial operations of the $10-billion wholesale market

– Oversees emergency preparedness activities for Ontario’s power system

– Sends real-time price-signals to trigger demand response

3

The IESO’s Role

• There are a number of different entities but all have their own set of accountabilities and defined responsibilities

4

Ontario’s Electricity Market:The Dispatch of Energy

Dispatch Dispatch

Offers/Schedules BidsSuppliers Consumers

Local Distribution Companies

WholesaleConsumers

Transmitters

Electricity

Generators and Traders

5

Ontario at a Glance(as at August 2010)

Installed Capacity 35,781 MWRecord Summer Peak

27,005 MW (August 1, 2006)

Record Winter Peak 24,979 MW (December 20, 2004)

Total Annual Energy Consumed

139 TWh (2009)

Customers 4.5 millionOntario Import Capability

4,600 MW

Transmission Lines 30,000 km (18,600 miles)

Average Price plus Adjustments

6.77¢/kWh The IESO is the reliability coordinator for Ontario and works closely with other jurisdictions to ensure energy adequacy across North America.

6

Impacts on Demand – Winter

Cloud Cover/Snowfall: contributes to increased lighting load by as much as 750 MW

Temperature: each degree below 10°C incrementally raises demand by 50 MW to as much as 250 MW a degree at -20°C (furnace load)

Ice: can cause damage and interfere with restoration and repairs

Wind: a 30 km/h wind on a cold day (-10°C) can increase demand by 800 MW

Lighting influences demand peaks in winter with late sunrise and early sunset

7

Impacts on Demand

8

Demand for Electricity

2004 2005 2006 2007 2008 2009 2010 2011130

135

140

145

150

155

160

Fore

cast

Fore

cast

Ontario Energy Demand 2004-2011

Year

Ontario Energy

Demand (TWh)

Green Energy Act (GEA)

• Standard offer program for renewable generation

• Conservation targets for local utilities

• Streamlined processes

• Foundation for a Smart Grid

9

Output by Fuel Type – Then and Now

10

Nuclear55.2%

Hydro25.5%

Coal6.6%

Gas10.3%

Wind1.6% Other0.8%2009

Nuclear42.5%

Hydro22.8%

Coal 25.8%

Gas8.1%

Other0.8%

2003

11

Future Supply

• 3,400 MW of new and refurbished supply is scheduled to come into service over the next 18 months– Nuclear, Gas and Wind, Water and Biomass

• Decisions on future of existing nuclear stations• 5,000 MW of renewable generation announced

– includes wind, solar, hydro, biomass, biogas and landfill gas

• Coal phase out well underway with four units to be shut down this fall

Wind Integration

• Wind generation is playing an increasingly important role in meeting Ontario’s electricity needs

• Ontario leads the country with almost 1,100 MW of installed wind energy capacity on the grid

• Wind’s variability can be managed

• The IESO developing a centralized wind forecasting service 12

1313

How Customers Pay for Electricity

IESOMarketPrice

LocalDistribution

Company

Market Price

(Business/Industry)

RPP

Weighted Average Price(Conventional Meter)

Hourly Price (Interval Meter)

Tiered Prices

Time of Use (Smart Meter)

At any time a consumer can enter into a retail contract, regardless of the rate structure or the meter.

14

Post November 2009

• Since November 1, 2009, the public sector has been moved from the RPP to market pricing

• Pricing structure depends on whether or not the facility has an interval meter– With an interval meter, the time at which you consume

electricity will impact your bill• Most items on your bill are the same except for

the commodity charge which is now split into two line items (provincial benefit and commodity charge) which were bundled together in the RPP price

15

What is the Provincial Benefit?

• The Provincial Benefit ensures reliability by providing adequate generation capacity for Ontario

• It reflects the difference between the market price and:– The regulated rate paid to Ontario Power Generation

baseload generating stations (nuclear, large hydro)– Gas-fired facilities, wind farms, and other contracted

projects through the Ontario Power Authority– Rates paid to generators who signed contracts with

Ontario Hydro• The rate changes monthly and is set on the first

business day of the month• It is charged to all large customers that are on a

retail contract or pay market prices– It is included in the RPP charged to houses and small

businesses

16

Why is the provincial benefit rising?

• The market price declined significantly in 2009:– Lower demand– Increased supply– Lower fuel costs– Regional trade– Changing supply mix

• Low prices mean reduced market revenues for generators which increases the need to recover costs guaranteed in their contracts through the provincial benefit

17

Global Adjustment - Provincial Benefit

OntarioHydro

Contracts

OPG Nuclear

&Hydro

Base Load

Renewable EnergyStandard Offer

Program

Conservation and Demand Management

OPAContractedGeneration

Contributions to the Global Adjustment

18

Recent Electricity Prices

Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-100

1

2

3

4

5

6

7

8

9

Market Price Provincial Benefit

Cen

ts/k

Wh

19

2006 2007 2008 2009 Jan-Aug 100

1

2

3

4

5

6

7

8

Average Hourly Ontario Energy Price Adjustments

¢/kW

h

Electricity Pricing Trends

5.00

5.35

5.49

6.07

6.77

20

Evaluating a Retail Contract

Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec YTD

Fixed Retail Contract Price Provincial Benefit

21

Daily Demand vs. Price

1 3 5 7 9 11 13 15 17 19 21 230

5000

10000

15000

20000

25000

30000

0

2

4

6

8

10

12

14July 6 Demand and Price

Ontario Demand

Ont

ario

Dem

and

(MW

)

Pric

e (c

ents

/kW

h)

22

Demand vs. Price cont.

• www.ieso.ca/demand

23

Ontario Reliability Outlook

Priority Areas:• Resource Adequacy• Integration• Transmission• Consumer Engagement

Ontario’s electricity system is becoming more participatory, distributed and sustainable – challenging the industry to respond and innovate

24

Consumer Engagement

• Load control has the potential to provide added flexibility

• The stage is being set:– Three million smart meters

installed; time-of-use prices being rolling out

– Technologies – smart appliances, home energy systems, PHEV’s, coming on to the market

• More meaningful price signals are needed to increase responsiveness

24

IESO Resources

• Visit www.ieso.ca/publicsectorto read:– Research reports– Description of incentive

programs– A guide to electricity charges– Profiles and publications to

help you manage electricity costs

• Contact IESO Customer Relations at 1-888-448-7777 or customer.relations@ieso.ca

25

www.facebook.com/OntarioIESO

www.twitter.com/IESO_Tweets