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2009 State of the Market Report

II.

Prices and Revenues

The Midwest ISO has operated competitive wholesale electricity markets since April 2005. The Midwest ISO operates markets for day-ahead and real-time energy and for financial transmission rights. New ancillary services markets were introduced in January 2009 and a monthly capacity auction was launched in July 2009. These markets have improved the efficiency of the Midwest ISO’s use of its generation and transmission assets in the short-term. They have also improved the long-term price signals governing investment decisions. In this section, we evaluate prices and revenues associated with each of the Midwest ISO’s day-ahead and real-time markets.

A. Prices

Our first analysis is an overview of electricity and fuel prices for the Midwest ISO markets. Figure 1 shows the “all-in” price of wholesale electricity, which represents the costs of serving load from the Midwest ISO’s real-time markets, and the price of natural gas. The all-in price includes the load-weighted average real-time energy price, uplift (the average real-time RSG costs), average real-time ASM costs, and monthly capacity costs per MWh of real-time load.

Figure 1: All-In Price of Wholesale Electricity 2007 – 2009

$80

$16.00

All-In Price ($/MWh)

$70

$60

$50

$40

$30

$20

Capacity Uplift Ancillary services Energy Gas Price

$14.00

$12.00

$10.00

$8.00

$6.00

$4.00

Natural Gas Price ($/MMBtu)

$10

$2.00

$0

$0.00

070809 J FMAM J J A S O N D J FMAM J J A S O N D J FMAM J J A S O ND

2007 2008 2009

Page 1

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