New England’s Energy Markets,
Policies and Politics
American Nuclear Society
CT Section
April 4, 2012
Dominion’s Footprint
New Generating Stations
Planned/Under Development
~28,000 MW of electric generation
6,300 miles of electric transmission
Coal/Biomass
Natural Gas
Wind
Solar
11,000 miles of natural gas transmission,
gathering and storage pipeline
947 billion cubic feet of natural gas storage
operated
Cove Point LNG Facility
2.4 million electric customers in VA and NC
1.3 million natural gas customers in OH & WV
2.1 million non-regulated retail customers in
15 states
Generating
Stations
in Operation
Coal
Natural Gas/Oil
Nuclear
Hydro
Biomass
Wind
Coal/Oil/Gas
Coal/Biomass
Pending Sale
Dominion New England
Generation Assets: 4,751 MW
Salem Harbor
150 Mw Coal (1 Unit)
431 Mw Oil (1 Unit)
Dominion is the largest supplier and
provides the most balanced
generation portfolio in New England
Brayton Point
Manchester Street
465 Mw Gas CC (3 Units)
Millstone
2,116 Mw Nuclear (2 Units)
1,154 Mw Coal (3 Units)
435 Mw Oil/gas (1 Unit)
ISO New England Wholesale
Electricity Markets
The New England wholesale electricity markets are
comprised of three markets:
1. Energy Market - System for purchasing and selling
electricity using supply and demand to set the price
2. Capacity Market - Market where resources receive
compensation for having invested in capacity to
deliver in the capacity commitment period(s)
3. Ancillary Services Market - Services that ensure the
reliable production and transmission of electricity
Energy Markets
Day-Ahead Energy Markets
•Produces financially binding schedules for the production and
consumption of electricity the day before the operating day
•Allows Load Serving Entities (LSE’s) and Generators to lock in
price day-ahead and avoid volatility of Real-time prices.
Real-Time Energy Markets
•Balances differences between the Day-Ahead scheduled
amounts of electricity and the actual real-time requirements
oFluctuations in load
oTransmission and Generation outages
Energy Market
Clearing Mechanism
“Bid Stack” Allows ISO to Compare Resource Offers; Establishes Single Price for
Resources Used to Meet Demand on the System
Supply Stack Bid
Each resource
submits an offer that
specifies its
incremental cost of
producing energy
and represents the
price at which it is
willing to run. These
offers are stacked
from lowest to
highest.
$100/MWh
System Demand
$80/MWh
Energy Clearing Price
$60/MWh
$40/MWh
$20/MWh
Regional
Electricity Use
(MWs)
The energy clearing
price for the region
is set at the point
where the offers
from supply
intersect with the
demand levels to
serve the next
expected megawatt
of electricity use.
Energy Markets – Locational
Marginal Price (LMP)
While there is a single System Clearing Price, prices across the region actually vary by
location based on the amount of congestion and losses experienced on the
transmission system. This localized price is called the Locational Marginal Price (LMP)
and it is what LSEs pay for energy in their area and what generators are paid for their
electricity in that area.
LMP
=
Generation
Marginal
Cost
Transmission
+ Congestion +
Cost
Cost of
Marginal
Losses
System energy
price for entire
region ignoring
congestion and
losses.
The Cost impact,
due to transmission
constraints, to
operate one or
more expensive,
local resources to
meet local
demands.
The added cost
due to the energy
that is lost as
power flows across
the transmission
system .
Capacity Markets
Forward Capacity Markets
• The ISO-NE’s Forward Capacity Market (FCM) is a locational
capacity market whereby the ISO will project the needs of the
power system three years in advance and then hold an annual
auction to purchase capacity resources to satisfy the region's
future needs
Objectives of a Forward Capacity Market
• Procure enough capacity to meet forecasted Demand
approximately three years in advance
• Provide compensation for the capacity cost of an existing
Generation, Import of external gen, or Demand Resource
• Incentivize new resource construction to constrained regions
through an additional source of income
• Implement a penalize-for-non-performance approach for not
providing capacity during a capacity deficiency
Ancillary Services
Markets
In addition to Energy and Capacity, RTOs operate Ancillary Services Markets to acquire
particular generator services that are needed for the reliable transmission of
electricity to serve load. Some ancillary services provided by generators are simply
tariff rates and not market-based.
Operating Reserves
Regulation Service
• Reserves needed to
cover for the sudden
loss of a large generator
or a major transmission
line.
• Types of operating
reserve vary based on
time to respond (10
minutes or 30 minutes),
and whether the
reserves are
synchronized (already
online) or not.
• Compensation varies by
RTO but generally will
pay a reserve clearing
price or a make-whole
payment to cover the
difference between a
resources offer price and
the LMP.
• Also known as automatic
generation control (AGC).
Allows the system
operator to physically
balance supply and
demand and maintain
frequency as close to 60
Hz as possible.
• Approved generators
submit offers to provide
regulation similar to
energy offers.
• If accepted in the
market, units are paid a
regulation clearing price
and are eligible for Lost
Opportunity Costs as a
result of not being able
to sell energy.
Voltage Support
• Volt Ampere Reactive
(VAR) support which
allows the system
operator to maintain
transmission voltages.
• Payment is usually a
cost-based rate in
addition to a Lost
Opportunity Cost
Payment.
Black Start
• Payment to generators
interconnected to the
transmission or
distribution system that
supports the restarting
of the transmission
system following a
system-wide or partial
blackout.
• Payment is a cost-ofservice based rate to
compensate for the
incremental costs to
provide this service.
Competitive Market
is Working
18,000,000
16,000,000
16,072,918
15,958,349
14,000,000
12,000,000
Net Gen
(mwh)
10,000,000
8,000,000
M1 - Retired
870
M1 M2
- Retired
M2 M3
- 877.7
- 1170
M3 - 1218.0
-----------------Total 2040
M1 - 660
M2 - 870
M3 - 1154
-----------------Total 2684
Total 2095.7
6,000,000
4,000,000
2,000,000
0
1986-1995
Timeframes
2000-2010
Electric Generation: New
England Market Hub Prices (*)
* Average energy price provided by ISO-NE
Transmission: Regional
Network Service (RNS) Rate
Actual and Projected (*)
ISO-NE Pool Transmission Facilities (PTF) investment has grown from $2.6 billion in
2005 to $6.7 billion in 2010. The forecast assumes $6 billion in new additions by 2015.
* Forecast by the Participating Transmission Owners Administrative Committee
Rates Working Group
State Electricity
Residential Prices
(as of January 2012)
Cents/Kwh
Hawaii
Alaska
Connecticut
New York
Vermont
New Hampshire
New Jersey
California
Maine
Massachusetts
Rhode Island
Michigan
Delaware
Pennsylvania
Wisconsin
Maryland
D.C.
Florida
U.S. Average
36.25
17.98
17.33
16.83
16.65
16.19
16.09
15.5
15.21
15.21
14.75
13.48
13.07
12.92
12.77
12.59
11.77
11.59
11.43
0
5
10
15
20
Cents/Kwh
25
30
35
40
13
DOE/ EIA: http://www.eia.gov/electricity/monthly/pdf/epm.pdf
Electric
Generators Tax
• To our knowledge, no state has imposed a tax on electric generators – until now.
• Connecticut adopted an electric generators tax as part of its biennial budget last
spring.
•The tax went into effect July 1, 2011.
•The tax applies to all coal, oil, natural gas and nuclear generating facilities in
Connecticut. Each facility is taxed $2.50 per Mwh of production.
•The tax is expected to generate approximately $70 million annually:
oApproximately $40 million from Dominion’s Millstone Power Plant
oMillstone’s new state and local tax liability are almost $80 million a year, or
$1.5 million a week
•The tax is scheduled to expire on June 30, 2013 via a “Sunset” provision
•This production tax is a consumer issue that will raise Connecticut’ already high
electric rates if it remains in effect.
Contact
Information
Kevin Hennessy
Director – Federal, State & Local Affairs – New England
Dominion Resources, Inc.
Rope Ferry Road
Waterford, CT 06385
860.444.5656 (office)
860.912.5124 (mobile)
[email protected]
Conclusion
• Our value keeps growing
• Our creativity is rising
• Our business skills are
sharpening
Questions?
For additional information, visit us at
www.dom.com