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2009 State of the Market Report

Prices and Revenues

Figure 2: Real-Time Energy Price-Duration Curve 2009: All Hours

$200

Real-Time LMP ($/MWh)

2007

> $20

0 > $100

0.3%

6.0%

0.5%

6.9%

1.5%

10.2%

1.1%

10.6%

< $0

> $200

> $100

< $0

> $200 > $100

< $0

0.1%

0.5%

9.1%

0.0%

0.1%

0.6%

0.9%

0.1%

0.6%

9.8%

0.1%

0.1%

1.0%

1.3%

1.7%

0.6%

9.3%

2.1%

0.1%

0.7%

4.8%

0.2%

0.6% 10.7%

2.0%

0.1%

0.7%

5.0%

$150

$100

Share of All

Hours w ith LMP

Cinergy Hub Michigan Hub

Minnesota Hub W UMS Area

2008

2009

$50

$0

  • -

    $50

0

1,000

2,000

3,000

4,000 Hours

5,000

6,000

7,000

8,000

The differences between these curves are due to congestion and losses that cause energy prices to vary by location. In 2009, prices were more closely aligned across the Midwest ISO hubs than in prior years. The exception was in low-priced hours when there was substantial divergence between western hubs and eastern hubs, indicating a pattern of west-to-east congestion. Prices were below zero in approximately five percent of hours at the Minnesota Hub and Wisconsin- Upper Michigan System (“WUMS”), up from two percent of hours in 2008. This congestion pattern is in contrast to prior years when there was frequent congestion into WUMS and Minnesota that resulted in higher LMPs in those areas. The number of hours with price exceeding $200 per MWh and $100 per MWh were comparable for all hubs and were substantially lower than prior years as a result of lower peak loads, lower fuel prices and considerable transmission improvements since 2008. Congestion into Michigan resulted in slightly more high-priced hours than the other hubs.

We focus particular attention on energy prices during these peak hours because they play a critical role in sending the economic signals that govern investment and retirement decisions. In particular, high prices during shortage conditions are needed to support investment in the region.

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