Market Monitoring of AEP

ByDouglas R. Bohi

Charles River AssociatesWashington, DC

June 25, 2002

CHARLES RIVER ASSOCIATES

Origin and Purpose of Monitoring of AEP

Origin

• Requirement imposed on the merger of AEP and CSW.

• Interim market monitoring is required until AEP joins a FERC accepted RTO.

Purpose

• To determine whether AEP creates transmission congestion in order to limit competition in the wholesale market.

• Respond to complaints and requests for additional studies.

CHARLES RIVER ASSOCIATES

Measures of Transmission Congestion

• TLRs, with special attention to periods when curtailments of existing service occur.

• Refusals of new service.

CHARLES RIVER ASSOCIATES

Where has congestion occurred?

CHARLES RIVER ASSOCIATES

How does AEP transmission access compare with others?

Comparative Refusal Rates of AEP East and Other Transmission Customers

June 15, 2000 to June 14, 2002Ratio of Refusals to the sum of Refused and Confirmed (%)

From/To CPL DUKE TVA VAPAEP EastHourly Refusal Rate 0.6 5.1 0.3 3.3 Daily Refusal Rate 32.4 47.2 39.5 37.9 Both 8.6 15.7 7.1 12.9

Other Transmission CustomersHourly Refusal Rate 3.2 6.5 1.5 5.9 Daily Refusal Rate 80.4 74.0 86.8 61.7 Both 61.7 41.4 35.2 24.4

Ratio of Refusals to the sum of Refused, Confirmed, Retracted, and Withdrawn (%)

From/To CPL DUKE TVA VAPAEP EastHourly Refusal Rate 0.6 5.1 0.3 3.3 Daily Refusal Rate 23.4 33.7 26.7 29.3 Both 7.8 14.2 6.5 11.9

Other Transmission CustomersHourly Refusal Rate 3.2 6.1 1.4 5.7 Daily Refusal Rate 35.2 31.6 44.7 34.4 Both 31.2 24.0 25.1 18.9 Source: AEP East OASIS Website.

CHARLES RIVER ASSOCIATES

AEP wholesale prices in markets affected by congestion.

• Do they rise when flowgates are congested?

• Do they rise more than market hub indexes (from Power Markets Week).

• Identify specific time periods for further examination.

CHARLES RIVER ASSOCIATES

Effect of AEP generation dispatch on congestion

• Use generation shift response factors (GSRFs) to measure the contribution of each generating unit to congestion.

• Correlate rank order of operating rates by unit to rank order of GSRFs during periods of congestion.

• Is the rank order of operating rates consistent with economic merit order?

CHARLES RIVER ASSOCIATES

Effect of transmission outages on congestion

• Are there outages that coincide with periods of congestion?

• Are the outages that do coincide important to congestion (using outage transfer distribution factors)?

CHARLES RIVER ASSOCIATES

Response to complaints or requests for additional studies.

• None