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2009 State of the Market Report

Market Performance

Figure 32: Spinning and Supplemental Reserves Offers and Commitments 2009

7,000

Not Offered

6,000

Ltd. by Dispatch Level

Ancillary Service Capability (MW)

5,000

Spin Qty Derated

Greater than $20

4,000

Between $10 and $20

J FMAMJ J ASOND

J FMAMJ J ASOND

Spinning Reserve

Offline Supplemental

3,000

2,000

1,000

0

Between $5 and $10

Between $2 and $5

Between $1 and $2

Less than $1/MWh

Requirement / Amount Cleared

There were generally sufficient supplemental reserve offers at less than $1 per MWh to satisfy the supplemental reserve requirements, which explains why the clearing price for supplemental reserves averaged $0.51 per MWh. The figure also shows that a substantial amount of the supplemental reserves are not offered into the market. This amount grew from a low of about one third of the total capability in March 2009 to more than half of the capability later in the year.

We have been investigating this reduction in supplemental reserve offers. In general, the decrease in supplemental reserve offers occurred as concerns arose that some of the units holding supplemental reserves were unable to provide their energy within the required 10-minute timeframe when deployed. This reduction in offers contributed to the shortages in the August to October timeframe discussed above. Since no offline supplemental reserves can deploy with 100 percent reliability, it will be important to establish a guideline for suppliers to determine a minimum level of deployment reliability to justify offering their resources. Suppliers with resources that exceed the minimum level of expected deployment reliability may be deemed to

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