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2009 State of the Market Report

External Transactions

B.

Lake Erie Loop Flow

The issues surrounding “contract path” transaction scheduling by the four RTOs around Lake Erie persisted throughout 2009. The adverse affects of this scheduling was primarily related to the congestion it caused in the New York ISO market. The underlying problem in each of the cases was that settlements occur based upon the scheduled path (i.e., the “contract path”), but the actual power flows also occur on other paths (the flows that result from the schedule that are not part of the contract path are generally referred to as “loop flows”). The scheduling path does not alter the physical flow of the power between generation and load. The extents to which the physical flows differ from scheduled flows are loop flows that must be accounted for by the RTO operators. Furthermore, inconsistencies between the physical flows that result from a transaction and the scheduled path of the transaction can distort participants’ incentives and can lead to inefficient scheduling.

Figure 92: Actual Flows Around Lake Erie IESO to PJM Schedules, 2008 – 2009

Average Hourly MW

1,500 1,200 900 600 300 0

$25 $20 $15 $10 $5 $0

Profitability ($/MWh)

07 08 09 J F M A M J J A S O N D J F M A M J J A S O N D

2008

2009

Circuitous schedules were banned by NYISO in July 2008. Schedules from the IESO to PJM (across the Midwest ISO) increased thereafter. Figure 92 shows the quantity and profitability of these transactions from 2006 to early 2009. Relatively high volumes of circuitous transactions

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