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Losses and Ancillary Services: Volume Analysis2007 Budget Review Process

August 28, 2007

Operations Planning

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2007 GTA, Losses and Ancillary Services

Presentation and Agenda:

• Overview

• Forecast the volumes and costs of losses in 2008

• Forecast the volumes ancillary services in 2008

• Year-to-date Actual vs. Forecast Comparison

• Methodology of forecasting Losses and AS – evolving process

• Summary Discussion

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Overview – 2008 Business Review Process

Costs for Losses and Ancillary Services (AS) are based on a volume forecast using:

• Latest 2008 Alberta Internal Load forecast (includes behind the fence loads (BTF) and new DTS contracts)

• 2008 grid facility profile (existing, new, decommissioned)

• Latest TMR forecast as per OPP’s

• Updated generation stacking order based on latest 12 months actual dispatch behavior of generators, and Import/Export

• A north/south model includes export ATC based on SOK transfer limit

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2008 Forecast of Losses – Cost and Volume Analysis

• Hourly forecasted loss volumes calculated based on:– Historical actual loss volumes from the AESO settlement system

– A forecasting model using the historical data

• The losses volumes are re-calculated three additional times per year (to fulfill the calibration factor process)

• Annual forecasted loss volume can be computed by summing hourly forecasted loss volumes

• Hourly forecasted loss cost is:

Σ (forecasted loss volume X forecasted pool price) hourly

• Estimated cost for 2008 = $251.4 M, based on 2.9101 TWH– 2007 Forecast: $196.1 M @ 2.897 TWH

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• Based on the 2007 GTA losses forecast submission

• Actual data is settled as: Initial, Interim, and Final

2007 YTD – Loss Comparison

Forecasted vs Actual Monthly Loss Volumes (MWH)

0

50000

100000

150000

200000

250000

300000

Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07

Months of 2007

Mo

nth

ly L

os

s V

olu

me

(M

WH

)

Actual

Forecasted

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2007 YTD – Loss Comparison (…2)

2008 F/C2007 (F/C and

Updated F/C)

Variance Under (Over)

2006 Actual

2006Approved

F/C

Variance Under(Over)

Total Losses Costs($M)

251.4196.1/208.5

(Q3 CF)42.9 222.4 131.0 91.4

Total Volumes (GWh)

2,9102,897/2,840

(Q3 CF)70 2,843 3,180 (337)

Average Hourly Volume (MWh)

331 330.1/324 7 325 363 38

•The overall summary is estimated below (losses update in June 2007, price forecast from August 20 2007):

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2008 Forecast of AS (Operating Reserves and TMR) – Volume Analysis

• AESO carries operating reserves to ensure reliability during loss of generation. Requirements set by WECC and NWPP

• Operating reserves include regulating, spinning and supplemental reserve

• Described in OPP-401 and OPP-402, AESO procures each type of operating reserve in two portfolios: Active (normal), Standby (used when Active portfolio is insufficient due to forecast accuracy issues/forced outages)

• Not included in the forecast:– Frequency Responsive Reserves

– Wind Variability

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2008 Forecast of AS – Volume Analysis (…2)

• Volume of reserves procured based on load forecast, with no consideration given to resource mix

• Transmission Must Run (TMR) based on hourly load forecast (Rainbow and northwest) and OPP 501, 510 (Calgary Operation)

• AS cost analysis by Commercial Services

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Ancillary Services: Forecast vs. Historical

AS Type

2008 Forecast

(MW) 2007 January – July

(Actual) (MW)

2006(Actual)

(MW)

2005 (Actual) (MW)

Reg Active 160 164 163 164

SR Active 248 258 248 241

SUP Active 248 262 248 244

Reg Standby 127 126 131 129

SR Standby 109 114 110 108

SUP Standby 45 45 48 45

Reg Activation 2.6 0.8 2.2 2.3

SR Activation 5.6 4.6 4.3 5.3

SUP Activation 5.1 1.7 2 5.6

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Methodology of Forecasting Losses and Ancillary Services

• The AESO reviews it’s tools and data sources continuously and makes improvements to achieve better forecasts and more efficient use of time

– More data for historical analysis is utilized

– Improved database techniques

• In 2007, the Losses and Ancillary Service volume forecast appears on track to be within 1-2% of actual levels

• The AESO will use the same process in the 2008 GTA submission – better data and tools will be used where warranted

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Summary: Losses

• The 2007 forecast and 2007 actual loss results (YTD) are similar

• The loss volumes from 2007 to 2008 are similar (2.897 TWH vs. 2.910 TWH). The result makes sense because there are no major system changes expected

• The major cause of the change from ~$196M to ~$251M is the pool price (beginning of year forecast average moves from ~$66 in 2007 to ~$84/MWH in 2008)

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Summary: Ancillary Services

• The forecast for 2008 is similar to actual levels from the past several years

• The slightly higher values in the active market in 2007 is likely the result of a mid-year view.

• FRR has not yet been determined. Regulation Reserve implementation for wind has not yet been decided. AS will be modified as these items are addressed and implemented