Office ofMarket OversightAnd Investigations

Summer 2002 Assessment Report 

SummaryOffice of Market Oversight and Investigations

July 17, 2002

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Office ofMarket OversightAnd Investigations

Introduction

• Recent OMOI internal analysis of energy market 

• Regional/National Markets– Improvements– Concerns

• Action Items For OMOI

• Future: seasonal assessments before the relevant cooling or heating season

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Office ofMarket OversightAnd Investigations

National OverviewOverall electricity markets fair to good

Market Improvements:• Regional reserve margins adequate• Demand responsiveness increased but disappointing• New electric transmission infrastructure development• Closer to large regional energy markets; much work remains• Significant market design improvements

Key Concerns:• Financial health of market participants• Potential for extreme weather• Security threats• Generator availability• Possibility of unintended consequences from new market design and rules• Transmission constraints and service quality

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Office ofMarket OversightAnd Investigations

National Overview Cont.

Current OMOI Approach:

• Monitor factors that may affect market performance this summer.

• Coordinate monitoring with others.

• Provide periodic updates to the Commission.

• Provide the Commission with real-time information on major market developments and make recommendations as necessary.

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Office ofMarket OversightAnd Investigations

West

More favorable supply and demand conditions.  Serious market problems.

Concerns:• Market friction for trades among sub-regions• Supply/demand balance• Declining demand response• Competition for gas capacity• Electric transmission infrastructure• Forecast for above normal temperatures

OMOI Actions:• Actively monitor electricity markets.• Recommend that the Commission establish a staff presence with the 

CAISO MMU.• Propose a technical conference.

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Office ofMarket OversightAnd Investigations

Southeast

Increased merchant presence and improved generation and transmission infrastructure. Competition issues.

Concerns:• Lack of broad regional markets• Transmission service quality issues• Transmission constraints• Forecast for above normal temperatures

OMOI Actions:• Monitor progress of Dominion integration into PJM.• Monitor compliance with the Commission policies.• Examine patterns of reported negative behavior.• Develop plan to inform market participants about complaint procedures.

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Office ofMarket OversightAnd Investigations

Northeast

Improved generation capacity, transmission infrastructure, and market rules.  Load pockets remain.

Concerns:• Load pockets• Low margins in Ontario• Fossil plant availability in New England• Drought

OMOI Actions (in coordination with NE MMUs):• Focus on load pockets.• Monitor possible market power.• Discern effect of market mitigation on new investment.• Evaluate market rule changes.• Examine seams. 

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Office ofMarket OversightAnd Investigations

Midwest

Strong market fundamentals and active RTO and independent transmission company formation.

Concerns:• RTO transition• Transmission schedule curtailments• MISO export fee

OMOI Actions:• Monitor impact of utility decisions to join particular RTOs.• Monitor seams.• Examine TLRs.• Focus on the effect of export fees.