EPSA REGULATORY EPSA REGULATORY

AFFAIR CONFERENCEAFFAIR CONFERENCE 20062006

Washington, DCWashington, DC

October 25, 2006October 25, 2006

Garry BrownGarry BrownVice President, External AffairsVice President, External Affairs

New York ISONew York ISO

2

NYISO OverviewNYISO Overview

NYISO was formed December 1, 1999.

Utility generation divestiture rate makes it one of the most divested markets in nation.

NYISO market volume - $11 billion in 2005 and over $40 billion since inception.

Unique challenge: New York City is one of the world’s biggest and most complex load pockets. It is also a world finance and communications capital.

3

Ontario IESO

27,005 MW*

Hydro Quebec34,850 MW*

ISO - New England28,021 MW*

New York ISO33,939 MW*

PJM / PJM West131,330 MW*

PJM144,796 MW* * = Peak load

Located at a CrossroadsLocated at a Crossroads

4

NYISO’s MarketsNYISO’s Markets♦ Energy: Real-Time and Day-Ahead (based on LBMP)♦ Ancillary Services: RT and DA

♦ Co-optimized with energy in both RT and DA♦ Spinning and non-spinning reserves with scarcity pricing♦ Regulation

♦ Installed Capacity (ICAP) – locational markets♦ Transmission Congestion Contracts (TCCs)♦ Virtual trading for both supply and demand♦ Demand Side Resources may participate in the energy and

capacity markets (ancillary services under development)

NYISO also offers several Cost-Based Products: Voltage Support Black Start

5

Megawatts of New Generation*Megawatts of New Generation* by NYISO Zone 1999 thru 2005by NYISO Zone 1999 thru 2005

* Built or Under Construction

A C

33 MW

D

210 MW

F

IJ

H

B

E

G

K

43 MW

7 MW1,715 MW

2,143 MW 801 MW

6

TransmissionTransmissionNew Transmission Lines (Proposed or Operational)

Con Ed Upgrades

CSC(330 MW)

(660 MW)

Neptune

7

.

.

EFORd 1994-2005*

0

2

4

6

8

10

12

14

16

1994 1995 1996 1997 1998 1999 2000 * 2001 2002 2003 2004 2005

EF

OR

d %

EFORd

*NOTE: All units were not required to provide GADS data prior to 2000. 1999 Reporting Capacity - 22,190 MWH vs. 2004 Reporting Capacity - 34,011 MWH

EFORdEFORd

8

Managing Higher PeaksManaging Higher PeaksIncreased Regional Communication and Generation AvailabilityIncreased Regional Communication and Generation Availability

NY Historic Peak Loads

Year Peak Load (MW’s)

1996 25,578

1997 28,700

1998 28,166

1999 30,311

2000 28,136

2001 30,983

2002 30,664

2003 30,333

2004 28,433

2005 32,075

2006 33,295 forecasted

2006 33,939 actual

9

Load/Demand Response ProgramsLoad/Demand Response ProgramsSpecial Case Resources & Emergency Demand Response ProgramsSpecial Case Resources & Emergency Demand Response Programs

Estimated performance by Zone:

A – 328 MW (300 MW SCR, 28 MW EDRP)

B – 60 MW ( 59 MW SCR, 1 MW EDRP)

C – 94 MW ( 80 MW SCR, 14 MW EDRP)

J – 429 MW (334 MW SCR, 95 MW EDRP)

K – 261 MW (174 MW SCR, 87 MW EDRP)

1172 MW Total Load Reduction

August 2, 2006 - SCR and EDRP resources were activated in Zones J&K 1 pm to 7 pm, and Zones A, B &C 2 pm to 7 pm.

10

28000

29000

30000

31000

32000

33000

34000

35000

36000

12:0

012

:10

12:2

012

:25

12:3

612

:50

13:0

013

:10

13:2

013

:22

13:3

513

:45

13:5

514

:05

14:1

514

:20

14:2

614

:29

14:4

014

:50

15:0

015

:10

15:2

015

:30

15:4

015

:50

16:0

016

:10

16:1

316

:25

16:3

516

:45

16:5

517

:05

17:1

517

:25

17:3

517

:45

17:5

518

:05

18:1

518

:25

18:3

518

:45

18:5

519

:05

19:1

519

:25

19:3

519

:45

19:5

520

:05

20:1

5

MW

8/2 NYCA 8/2 NYCA no DR

8/2 NYCA Load8/2 NYCA LoadEffect of Demand Response Added BackEffect of Demand Response Added Back

Total 1172 MW

11

< 6

=> 6 to <8

=> 8 to <10

=>10 to <12

=>12 to <14

=>14

Retail ¢/kWh and Percent Coal GenerationRetail ¢/kWh and Percent Coal Generation

¢ ¢ = average retail price ¢¢/kWh 1/06 – 7/06

% = percent coal generation 1/06 – 7/06

Source: Energy Information Administration

8.5¢¢39%39%

7.0¢¢55%55%

7.7¢¢64%64%

10.2¢¢36%36%

7.4¢¢87%87%

5.2¢¢95%95%

6.7¢¢57%57%

8.4¢¢41%41%

9.2¢¢24%24% 6.0¢¢

93%93%7.8¢¢72%72%

5.9¢5.9¢61%61%

6.4¢¢45%45%

5.9¢¢94%94%

5.8¢5.8¢4%4%

6.4¢¢41%41%

12.6¢12.6¢ 1%1%

5.0¢¢ 1%1%

6.9¢6.9¢70%70%

7.3¢¢49%49% 4.5¢¢

46%46%

6.3¢¢85%85%

7.6¢¢76%76%

6.9¢6.9¢62%62%

8.0¢¢66%66%

7.0¢¢47%47%

6.5¢¢95%95%

7.7¢¢86%86%

6.8¢6.8¢48%48%

7.5¢¢60%60%

7.0¢ 64%¢ 64%

5.3¢¢92%92%

6.9¢¢39%39%

10.4¢¢ 29%29%

8.6¢¢55%55%

13.5¢¢ 16%16%

10.9¢¢ 2%2%

MA 15.4¢¢ 24%24% CT 14.3¢¢ 12%12%NH 14.2¢¢ 17%17%RI 14.1¢¢ 0% 0%VT 11.5¢ ¢ 0% 0%NJ 11.3¢¢ 17%17%MD 8.9¢¢ 60%60%DE 8.8¢¢ 71%71%8.2¢¢

25%25%

5.0¢¢98%98%

8.3¢¢61%61%

12

Competitive MarketsCompetitive Markets Efficiency

Innovation

Risk Shifting