Why Electric Prices are Increasing in New England

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Why Electric Prices are Increasing in New England

• (and what is anyone doing about it ?)

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Are prices high in New England ?

• You bet !
• New England ranks first as a region for high
  electric prices, exceeded only by Alaska and
  Hawaii
• Average retail residential rate in NE is 15.85
  cents national average is 10.31 cents

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Why are prices high?

• So many factors, where to start?
• Lets cover the major factors which are driving
  New England electric prices

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The Big Five

• Fuel Costs
• Deregulation of generation
• Insufficient generation and transmission in the
  right places
• Wholesale market operations
• ISO New England

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Cost of Fuel

• No major fuel sources located in New England
• Have to import most fuels from other regions
  (gas, oil, coal)
• Natural gas is principal fuel source for new
  generating plants in NE, and is the highest cost
  fuel (also one of the cleanest)

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Deregulation in New England

• 5 NE states have deregulated electric utilities
• Generating plants now owned by private investors
  (except for municipal plants)
• Costs of transition (stranded investments)
  still being paid for
• Lots of new players in the game (marketers,
  aggregators, commodities traders, etc.)

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Insufficient generation and transmission capacity

• New England population concentrated in southern
  region
• Generation and transmission difficult to site in
  this area
• Insufficient transmission in Maine and
  Connecticut
• Congestion costs now added to electricity costs
  (LMP)

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Competitive wholesale power markets now operating

• Day-ahead and real time energy markets
• Hourly clearing prices
• New Forward Capacity Market
• Ancillary markets
• Market monitors
• Opportunities for strategic bidding and playing
  games

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ISO New England The Regional Grid Manager

• Administers markets and assures reliabilty
• Large and growing budget and staff
• Governed by independent Board
• Many stakeholders and sectors Requires
  significant commitment of staff and resources to
  participate in decision-making processes

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Last but not least, some wonderful acronyms for
you

• RTO
• ISO-NE
• PJM
• SMD
• LSE
• FERC
• LICAP
• FCM
• LMP

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Continued

• LTTR
• FTR
• ARR
• DALRP
• RGGI
• CREB

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The End

• Thats the story in 15 minutes Rockie will now
  teach us how to communicate this complex
  information to your customers, who probably dont
  want to hear it