trading hubs hub discussion recap 20150917.pdfagenda 1) focus group meeting attendees 2) recap of...
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Trading Hubs- Follow Up and Next Steps
From Trading Hubs Focus Group Meeting on 9/17/2015
Nick Parker nparker@spp.orgValerie Weigel - vweigel@bepc.com
Agenda
1) Focus Group Meeting Attendees
2) Recap of Face-to-Face Meeting on 9/17/2015
3) Idea Generation*
4) Next Steps
*The ideas included in this presentation were gathered from the Trading Hubs Focus Group meeting attendees, and do not necessarily reflect SPP’s position.
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Company Last Name First Name Email Attending
Cargill Power Markets LLC A Al alex_azanov@cargill.com Net Conference
Hoekman Austin austin.hoekman@mrenergy.com Net Conference
Municipal Energy Agency of Nebraska Cutsor Billy bjcutsor@nmppenergy.org Net Conference
Unrein Chad Unrein‐c.unrein@kcc.ks.gov Net Conference
Kansas City Power and Light Standifer Christopher chris.standifer@kcpl.com Net Conference
Daily‐mo@moe.com Net Conference
Municipal Energy Agency of Nebraska Beard Dave dbeard@nmppenergy.org Net Conference
Southern Company Services Olsen Erik elolsen@southernco.com Net Conference
Southwest Power Pool Guney Esat eguney@spp.org Net Conference
gsec‐tboatler@gsec.coop Net Conference
Hpanchamia Harsh Harsh‐hpanchamia@gsec.coop Net Conference
American Electric Power Lao Hongmou hlao@aep.com Net Conference
Lewis James Lewis‐lewisj@noblepower.com Net Conference
Genscape Verga Jarret jverga@genscape.com Net Conference
Kansas City Power & Light Company Flucke Jim jim.flucke@kcpl.com Net Conference
Customized Energy Solutions, LTD Krajecki Jim jkrajecki@ces‐ltd.com Net Conference
Southwest Power Pool Hyatt John jhyatt@spp.org Net Conference
Western Farmers Electric Cooperative Sullivan Kim k_sullivan@wfec.com Net Conference
Golden Spread Electric Cooperative, Inc. Nemoede Kristen knemoede@gsec.coop Net Conference
Lincoln Electric System Anderson Lee landerson@les.com Net Conference
Frisk‐Thompson Lorie lorift@bepc.com Net Conference
Southwest Power Pool Choate Marisa mchoate@spp.org Net Conference
Golden Spread Electric Cooperative, Inc. Moore Matt mmoore@gsec.coop Net Conference
Servera Max Servera‐max.servera@denverenergygroup.com Net Conference
Southwest Power Pool Bailey Micha mcbailey@spp.org Net Conference
Western Farmers Electric Cooperative Brown Natasha natasha.brown@wfec.com Net Conference
Mehta Neil Mehta‐neil.mehta@morganstanley.com Net Conference
Denver Energy, LLC Nagarsheth Raj raj.nagarsheth@denverenergygroup.com Net Conference
Powerex Corp Richard Randy randy.richard@powerex.com Net Conference
American Electric Power Garza Rene rfgarza@aep.com Net Conference
Seide Richard rseide@cinci.rr.com Net Conference
Nebraska Public Power District Pick Robert J. rjpick@nppd.com Net Conference
Sunflower Electric Power Corporation Chartier Ronald rchartier@sunflower.net Net Conference
ACES Power True Roy royt@acespower.com Net Conference
Cochran Seth cochran‐seth.cochran@dc‐energy.com Net Conference
Beach Scott Beach‐scott.beach@kcpl.com Net Conference
Boston Energy Trading and Marketing, LLC Maestranzi Stephen stephen.maestranzi@betm.com Net Conference
Enbridge Allen Travis travis.allen@enbridge.com Net Conference
Southwest Power Pool Sharp Zachary zsharp@spp.org Net Conference
Trading Hubs Focus Group Meeting - 9/17/15
Topics Discussed:1) Integrated System History and Makeup2) Makeup of SPP3) Background and Basin Electric 4) History of Existing Hubs & Protocol Requirements for New
Hubs5) Lack of SPP Trading Hub Liquidity and Brattle Study6) Trading Hub Survey Results7) Influences of Hedging & Dodd-Frank 8) Criteria for Successful Trading Hubs9) Idea Generation
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Trading Hubs Focus Group Meeting – (cont’d)Primary Objectives and Focus Group Response
• Is there a Trading Hub problem in SPP? - YES
• Does SPP need a new Trading Hub that would be more liquid? -MAYBE
• Does SPP need to make any market construct changes to facilitate more activity at existing Trading Hubs?- YES
• Does SPP need to redefine existing Trading Hubs to increase liquidity? - MAYBE
• Does SPP need to facilitate Dodd-Frank in a different manner to increase liquidity at existing Trading Hubs?
• What can market participants do to encourage more liquidity at existing hubs or a new hub? - SEE NEXT SLIDES
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Current North Hub and South Hub
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North Hub (496 pnodes)---LES (58), NPPD (191), OPPD (247)South Hub (537 pnodes)---AEP(102), OKGE (309), WFEC (125), GRDA (1)
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IDEA GENERATION
The Issue ….
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Chicken/Egg Problem … How do you attract new market participants that could provide liquidity, when you need liquidity to attract them in the first
place?
Brainstorm - Causes of Low Liquidity at Trading HubsMarket Make Up Issues:• Over capacity
– Generation is long which leads to lower volatility
• SPP is small in relation to other markets
• Make up of participants
– Some utilities can’t hedge loads
• Need more financial participants in SPP
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Brainstorm - Causes of Low Liquidity at Trading Hubs Market Construct Issues from the Focus Group:• RUC - when units are RUC’d for reliability it doesn’t allow
true price formation to occur in the real time
• SPP holds a 35% reserve margin … but, not all is economic
• Not enough transparency in the market
– Other markets provide far more transparency
• Scarcity Pricing
– SPP relaxes reserve requirement
• Cost of transmission service to drive out of SPP is very high compared to other markets
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Brainstorm - Causes of Low Liquidity at Trading HubsMarket End Results:
• Difficult to get in and out of positions
• Not that market isn’t liquid … just the cost of that liquidity is too high
• No retail choice
• ICE related products are lacking
– No real-time North Hub product
– Minimum transaction blocks are too high
• Ability to hedge basis with entities willing to take that risk
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Brainstorm - Ideas to Create More Liquidity
• Create a joint MISO/SPP Trading Hub
• Create a “Super” Hub
• Put positions out on ICE
• Virtual blocking – On-peak and off-peak virtual block products
• More data transparency
• Use basis products to hedge around illiquid Trading Hubs
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| brattle.com15
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ICE Products
ICE Financial Structure exists for• Financial North Hub DA• Financial South Hub DA• Financial South Hub RT
ICE does not have a real time product for North Hub
ICE does not have a physical market for SPP
ICE only trades in 50MW blocks for SPP
Market Transparency• Other markets provide far more transparency than SPP does
• Provide information more readily to participants
• Need more transparency
– RUC Which units are being RUC’d?
What is cause for each units RUC?
– Wind/load forecasts by zones
– Reserves
• Example of ERCOT transparency:http://mis.ercot.com/misapp/GetReports.do?reportTypeId=11460&reportTitle=ERCOT%20Market%20Information%20List&showHTMLView=&mimicKey
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Next Steps1. SPP to provide list of registered Market Participants
– This information is provided on the SPP Marketplace Portal
2. Create list of Market Transparency desired by Market Participants
3. Schedule discussion with MWG and Financial participants to gain better insight financial perspective and to gain comparison of market constructs
4. Work with ICE to create:– North Hub Real Time product– 25MW transaction blocks– Physical products
5. Support RUC process improvements
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THANK YOU!
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