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FERC - Benchmarking and Market Monitoring Latvian Conference – September 9, 2004

FERC - Benchmarking and Market Monitoring Latvian Conference – September 9, 2004. Why Benchmarking. Wide array of uses for Benchmarking Benchmarking in the Regulatory Environment is used as a substitute for Competitive Markets

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FERC - Benchmarking and Market Monitoring Latvian Conference – September 9, 2004

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  1. FERC - Benchmarking and Market Monitoring Latvian Conference – September 9, 2004

  2. Why Benchmarking • Wide array of uses for Benchmarking • Benchmarking in the Regulatory Environment is used as a substitute for Competitive Markets • Where there is not Competition – use Benchmarking to achieve better Performance • Where there is or is not Competition – use Benchmarking to identify Bad Behavior or alter Behavior • Where there is Competition – use Benchmarking to indicate level of Performance and as a way to track Performance • If implemented Performance Based Ratemaking, Benchmarking would play a significant role 2

  3. Overview of Benchmarking • Expect competitive markets to determine Winners & Losers • Classic Benchmarking • RTO – Operations Report Card • NERC – Reliability Standards • EISG – Market Monitors Sharing Best Practices • FERC Limited Command and Control • Market Power Assessment • Mitigation • Creditworthiness • Common Metrics (RTOs) RTO: Regional Transmission Organization NERC: North American Reliability Council EISG: Electricity Intermarket Surveillance Group 3

  4. Competitive Market Determinations • Generators compete in Bid-Based Markets • Generators identify & employ Best Practices • Efficient investment • Efficient operation • Operational procedures • Maintenance • New technology • Most efficient generators will run 4

  5. Why RTO Report Card • The FERC Staff will issue an annual report on the business performance of RTOs • Non-profit entities can benefit from a business success assessment • Assessing critical aspects of their business can help focus management and Boards on areas needing attention • Being able to compare assessments across RTOs encourages the use of best practices • Publishing easy to understand measures based on meaningful criteria allows consumers, market participants, state commissions and FERC to hold RTOs accountable for their performance RTO: Regional Transmission Organization 5

  6. RTO Performance Categories • Cost Management • Business Processes • Market Operations • System Operations • Corporate Governance/Stakeholder Processes • Corporate Strategy/Performance Measurement • Stakeholder Satisfaction 6

  7. Example - Length of Settlement 7

  8. NERC - Reliability Standards • Established in 1968 in response to 1965 Northeast Blackout • Non-governmental entity; ten-member Board of Trustees; Voluntary membership • Members from all segments of the electric industry • Developed reliability standards & good utility practices • 2003 Blackout – Joint US and Canadian Task Force • Reevaluated reliability standards • Accelerate adoption of enforceable standards • Develop better real-time tools for operators and reliability coordinators NERC : North American Electricity Reliability Council 8

  9. EISG • International Market Monitors meet semi-annually • Present recent activities and rule and operating changes • Discuss “best practices” • Take best practices home EISG: Electricity Intermarket Surveillance Group 9

  10. Market Power Screens • Market-based rate authority standards/benchmarks • Generation Market Power • Transmission Market Power • Barriers to Entry • Affiliated Company Issues • Generation market power • Pivotal Supplier • Compare to control area’s annual peak supply and demand • Market Share • Compare on seasonal basis to total available market size 10

  11. Price Capping • Automated mitigation procedures • California • Reference price (established through benchmarking) • Percent increase • Dollar increase • New York, New England and PJM use other methods based on reference prices and market power 11

  12. Credit Worthiness Standards • FERC proposed rule on interstate natural gas pipeline companies to follow standardized procedures for determining shipper creditworthiness • Promote consistent practices • Provide shippers with objective and transparent creditworthiness evaluation • 10 standards developed by North American Energy Standards Board 12

  13. Establishing Common Metrics • Requiring the reporting of similar data/analysis • Ability to compare across regions/markets • Provides means to Benchmark 13

  14. Common Market Metrics – MMUs Status of MMU Common Metrics from State of the Market Presentations 14

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