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2009 State of the Market Report

Executive Summary

satisfy the system’s demands with less price volatility. Volatility in the Midwest ISO remained substantially higher than in neighboring RTOs because the Midwest ISO runs a true five-minute real-time market that produces a new dispatch and prices every five minutes.4 Since the real- time market software is limited in its ability to look ahead, the system is frequently “ramp- constrained” (i.e., generators are moving as quickly as they can up or down). This results in transitory spikes in prices up or down. Ramp constraints can also bind and cause price volatility when large changes in the Net Scheduled Interchange (“NSI”) occur or when several generators are either started or shutdown. This report includes recommendations to improve the management of ramp capability.


Ancillary Services Markets

The Midwest ISO introduced ASM markets in January 2009, which have performed as expected with no significant issues. ASM markets have led to improved system flexibility, lower price volatility, and have set more efficient prices that reflect the economic trade-offs between energy and operating reserves. ASM prices have been consistent with expectations and with ASM results in similar RTO markets.

Figure E-4 shows the monthly average prices for regulation, spinning reserves, and supplemental reserves. It also shows the portion of the intervals that exhibited a shortage in each respective product. Regulation prices decreased over the course of 2009, dropping from $22 per MWh in January to less than $11 per MWh in November. Much of this decline is attributable to reductions in reserve requirements during the first half of the year and increased commitment of regulating resources available for scheduling. Spinning reserve prices averaged approximately $3 per MWh in 2009, and were very stable at levels consistent with our expectations based on the costs of providing spinning reserves and prices in other RTO markets. Spinning reserve prices were slightly higher in the spring of 2009 due to higher levels of shortages.


A number of other RTOs produce a new dispatch approximately every 15 minutes with a 15-minute time horizon.

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