Market Response to Winter 2013-2014Dupont Group Energy Summit

New England Power Generators AssociationCarol J. Holahan, Esq.

October 5, 2015

Who is NEPGA

• The trade association representing competitive electric generators in New England

• Our member plants represent 25,000 MW – or 80% – of all New England generating capacity

• Our core mission is to promote sound energy policies which will further economic development, jobs & balanced environmental policy

2

NEPGA is a regional trade association representing a diverse portfolio of plants, including natural gas, oil, coal, hydro, nuclear, and other renewable resources.

PAY FOR PERFORMANCE: KEY ELEMENTS

• New capacity market design that first took effect in FCA 9, corresponding to the June 1, 2018 – June 1, 2019 capacity delivery period.

• Intended to incent resources to make the capital and O&M investments necessary to improve resource performance.

• Resources that clear the base Forward Capacity Auction will be penalized if they fail to deliver during times of system stress, with no excuse for non-performance.

• A resource-neutral structure that allows all resources to compete.

MARKET RESPONSE-- INVESTMENT

• INFLUX OF INVESTMENT CAPITAL INTO THE REGION AS A RESULT OF THE OPEN, COMPETITIVE MARKET STRUCTURES IN PLACE

• CURRENTLY MORE THAN 90 MARKET-BASED PROJECTS TOTALING APPROXIMATELY 1,300 MW PENDING WITH ISO-NE

• APPROXIMATELY 8,500 MW OF NEW RESOURCES WERE QUALIFIED FOR THE MOST RECENT FORWARD CAPACITY AUCTION

Generation Investments

• Capacity Auction Responses – 1,700 MW of new plants have cleared in recent capacity auctions beginning delivery in 2017 – 16,000 MW of new plants have expressed an interest in next auction

• Interconnection Queue – Over 13,000 MW currently in ISO-NE interconnection queue, only 6,000 MW in 2014

• We’ve Done This Before – In the years following restructuring over 13,000 MW of new merchant generation was built in New England

SOME EXAMPLES OF NEW GENERATION

• EXELON—MEDWAY, MA—195 MW• FOOTPRINT—SALEM, MA—700 MW• CPV—OXFORD, CT—700 MW• LS POWER—WALLINGFORD, CT—150 MW• EMERA—TIVERTON, RI—22 MW• NRG–CANAL, SANDWICH, MA—330 MW• DEEPWATER WIND--BLOCK ISLAND, RI--30 MW• INVENERGY—BURRILLSVILLE, RI—900 MW

The Markets Today

• Tight Supply – Power plants being retired, new plants being built and concerns of natural gas supply infrastructure

• Winter Volatility – Following price spikes in 2013/2014, major influx of LNG and improved generator performance drove 2014/2015 winter price reductions

• Changing Market Design – FCM Pay-for-Performance and major energy market pricing changes

The Markets Today

• Limited Demand Growth — Increase energy efficiency and demand response programs limiting load growth

• Environmental--Carbon Mandates – State environmental regimes raising questions on future supply mix and increase in renewable energy requirements

• Siting—Regulatory Uncertainty – Protracted and expensive process for siting of any new generation facility

• Technology and Innovation Driving Market – Developments with storage and other technologies will affect market

Questions?

www.NEPGA.org Follow us on Twitter – @_NEPGA

13