Brandi Black

1
Power Trading

• Brandi Black
• Manager, Asset Optimization
• Power Trading
• October 17, 2002

2
Topics

• Overview of power trading
• Role of power trading
• NERC regions and trading hubs
• Packages and products
• Transmission
• Decision making variables
• Execution

3
Overview of Power Trading
4
Role of Power Trading

• Manage risk
• Interaction and integration
• Optimize asset value

5
Combined Cycle Hedging Example
Physical Unit Characteristics
9/5/01
2/2/01
9/26/00
39.50
54.75
57.50
NEPP
2.30
5.45
4.57
NYMEX
0.26
0.40
0.34
M3
16.58
8.8
18.13
Profit (Spark)
(421)
(358)
(391)
MW Hedge
(127,984)
(108,832)
(118,864)
MWh Hedge
895,888
761,824
832,048
MMBtu Hedge
1,659,688
326,876
Power Hedge PL
(2,399,745)
732,202
Gas Hedge PL
6
Combined Cycle Hedging

• Intrinsic on 9/26/00 2,755,760
• v.
• Hedging PL (extrinsic) 319,021
• Intrinsic on 8/29/01 2,520,160
• 2,839,181
• Difference 83,421
• 2.30 0.26 7 17.92 5.00
  22.92
• NYMEX Basis HR
  VOMSTART Cost
• 22.92 - 39.50 16.58
• Cost Sales Price Spark

7
NERC Regions
WSCC (US) MAAP (US)
NPCC (US)
MAIN ECAR
MAAC (US)
SERC
ERCOT
SPP
North American Electric Reliability Council
Region Map - (US)
8
Regional Net Capacity Growth
9
Electric Trading Hubs
10
Traders

• Hourly traders
• Next hour
• Balance of the Day
• Short-term traders
• Next Day
• Balance of the Week
• Balance of the Month
• Prompt Month
• Term traders
• Jan-Feb
• July-Aug
• Q1-Q4
• Calendar Strips

11
Peak and Off-Peak Products

• On-peak
• 5x16
• Off-peak
• 5x8 and 2x24
• Summer and winter peak
• Load following

12
Types of Power

• Firm liquidated damages (LD)
• System firm
• Unit contingent
• Non-firm
• Transmission contingent

13
Types of Transmission

• Network
• Firm
• Non-firm

14
Transmission Problems

• Market buys contract path service, but delivers
  under flow path.
• Contract path does not account for flows on
  adjacent systems (TP2) due to the grid
  configuration.
• Flow path is dynamic and changes with the path of
  least resistance, hence it is difficult to
  capture accurately.
• The flow on TP2 may cause an overload unaccounted
  for in the contract path which, may cause the
  transaction to be curtailed due to TLRs.

PJM
Contract Path (80)
Only 10MW of ATC cause deal to be curtailed
APS
VEPCO
100MW
AEP
15
Transmission Loading Relief (TLR)
2000
2001
2002
1999
1998
1997
16
Monthly TLR Trend
17
Decision Making Variables

• Demand and load
• Load growth
• Seasons
• Weather

18
Profile of a SoutheasternU.S. Load Center
19
Weather

• Operational forecasting for energy trading
  (1-180 days forward)
• Two model approaches
• Dynamic (numerical) models- next 15 days
• Analog (statistical) models- next month or season
• Statistical analysis of climate data
• Forward energy trading
• Weather derivatives

20
Weather Daily Schedule
Central Time
Actions
500 AM
Download process dynamic model data (0 Z model
runs)
Publish 2-day forecast (temperature, heat index,
wind chill, precip. probability)
Review critique early-morning forecasts from
public private sources
630 AM
Publish 10-day forecast
Brief Power Traders
730 AM
Publish 15-day forecast
Brief Gas Power Traders
830 AM
Publish additional graphical narrative forecasts
North America global interests
Atlantic hurricanes (June 1- November 30)
900 AM
Predict afternoon changes among public private
forecasters
1030 AM
Download process dynamic model data (12 Z model
runs)
Publish updated 2-day forecast
Brief Gas Power Traders
1130 AM
Review critique mid-day forecasts from public
private sources
1230 PM
Publish updated graphical narrative forecasts
Review long-lead forecast data
Conduct statistical analyses other climate
research
200 PM
Review critique National Weather Service 6-10-
and 8-14-day forecasts
Brief Gas Power Traders
300 PM
Conduct statistical analyses other climate
research
Update long-lead forecasts (30-180 days forward)
Develop new weather products for Traders
Back-up computer programs data
500 PM
End of shift
21
Weather 15-Day Temperature Forecast Guidance
22
Weather
Hourly Temperatures with Actuals 8o F Cooler Than
Forecast
23
Decision Making

• Supply and generation
• Marginal unit
• Fuel prices
• Heat rate
• Plant outages
• Fuel deliveries
• Water supply

24
Trade Execution

• Analyze weather
• Determine impact of outages
• Price fuel
• Choose package and product
• Set bias
• Measure risk
• Execute the trade

25
we generate
whats next sm