Diapositiva 1

1
ENERGY INTERMARKET SURVEILLANCE
GROUP COLOMBIAN WHOLESALE ENERGY MARKET MAIN
ISSUES AND ACTIONS
ELECTRICITY MARKET FOLLOW-UP COMMITTEE COLOMBIAN
PUBLIC SERVICES AGENCY - SSPD ARGEMIRO
AGUILAR PABLO RODA GABRIEL SANCHEZ-SIERRA Monter
ey, CA, SPRING2009 MEETING
2
AGENDA

• Update of the Colombian Electricity Market
• Main Power System Characteristics
• Wholesale Energy Market
• Main Issues and Actions on the Energy Market
• Spot Prices
• Offer Prices Behavior
• Gas for Electricity
• Market Power
• Startup and Stop Costs of Thermal Plants
• Secondary Frequency Regulation Service
• Bilateral Contracts

3
MAIN POWER SYSTEM CHARACTERISTICS

• Hydro-Thermal System
• Installed Capacity 13.457 MW
• 63 Hydro
• 32 Thermal ( Gas and Coal)
• Tropical Hydrology 6 years Waiting for a Niño
  (Extremely Dry Condition)
• Power System Demand - 2008
• 53.869 GWh
• 9.089 MW Maximum Peak Demand
• Interchanges with Ecuador and Venezuela
• 69 Regulated and 31 Non-Regulated Demand

4
WHOLESALE ENERGY MARKET

• Spot Market
• Unique bus price Ideal Dispatch with no
  transmission constraints
• Hourly Resolution
• Price Generation Offers
• Bilateral Contracts - Financial
• Firm Energy Auctions
• Reliability Mechanism
• Free Generation Participation
• Firm Energy Obligations honored by generators in
  critical conditions

5
SPOT MARKET PRICE PERFORMANCE
6
GENERATION OLIGOPOLY3 AGENTS DEFINE SPOT PRICE
MORE THAN 80 OF TIME
7
SPOT PRICES
ISSUES
PROPOSALS

• High volatility due to stochastic hydrology
  behavior and dispatch highly dependent on
  reservoir levels
• Daily hydro price defined by the generator agent
  according to water opportunity cost and risks
  valuation. This allows any offer price with no
  bounder as contrary to thermal generation

• Use of a hydro-thermal simulation model with
  historical data to estimate markup

8
OFFER PRICES BEHAVIOR
ISSUES
PROPOSALS

• Force agents to sustain offer prices based on
  their own calculations of marginal costs
• Definition of a maximum offer price change for
  next day through the Regulatory Board - CREG

• Radical changes up and down of hydro offer prices
  in daily or weekly periods
• A tandem offer strategy oriented to maintain a
  high spot price
• Extremely high offer prices of thermal plants
  justified by fuel and startup-stop costs

ACTIONS TAKEN

• The Regulatory Board ordered that starting
  February 2009, the offer prices must be kept
  confidential for three months.

9
GAS FOR ELECTRICITY
ISSUES
PROPOSALS

• Gas Market Supply and transportation based only
  on bilateral contracts
• Transportation bottle necks and shortages of
  supply prevent dispatch of some thermal plants
• Uncertainty generates increasing expectations of
  future prices
• Informal coordination of gas and electricity
  dispatch

• A government integral gas policy and
  implementation is required until reaching a solid
  gas development
• To speed-up the building of gas treatment plants.
• A formal entity in charge of gas and electricity
  dispatch coordination is required

10
STARTUP AND STOP COSTS OF THERMAL PLANTS
ISSUES
PROPOSALS

• Split offers of thermal units into
• energy price
• startup and stop price
• Determine ideal dispatch by minimizing energy
  offer prices during whole day, including startup
  and stop prices and international exchange
  offers.
• Determine spot hourly prices considering startup
  and stop prices required in the hour and the
  energy offers of dispatched units/plants

• Actually, by regulation, startup and stop costs
  are included in energy offer prices.
• Agents consider that their units may be
  dispatched only one or a few hours, then offer
  prices are highly increased to recover all costs
  in such period time.
• Hourly spot prices are defined by minimizing
  offer prices that satisfy hourly demand.

11
SECONDARY FREQUENCY REGULATION
ISSUES
PROPOSALS

• A unique offer price is used for both energy
  supply and Secondary Frequency Regulation Service
  - SFRS. This allows strategic offers behavior.
• Price of SFRS is determined based on individual
  offers (no marginal). When price is above spot
  price, in addition it implies out of merit energy
  supply.
• Shortage of enabled regulation capacity that
  increases in winter periods

• Increase enabled regulation capacity, specially
  allowing new thermal plants.
• Create a new market to supply SFRS with price
  offers independent from energy supply.

12
BILATERAL CONTRACTS
ISSUES
PROPOSALS

• Seller Market due to
• Gap between supply and demand is being reduced
• Sellers impose clients and quantities
• Geographical splitting of the market
• Vertical integration
• Prices for regulated demand are higher than for
  non-regulated

• Organized Market for the Demand
• Centralized and standardized auction.
• Amount of regulated demand to be bought is
  defined by the Regulator
• Commercializers must participate and generators
  are free to do it
• Same conditions for all buyers