Practical Aspects Of Participating In The Ontario Power Markets

CERT ConferencePat Concessi, Partner – Global Energy Markets May 31, 2005

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Agenda

•Net Capacity Changes

•New Ontario Market Structure

•Physical Settlement Payments

•Market Entry Requirements

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Net Capacity Additions 2005 -2009: -730 MW

Coal Capacity Retirement (-6416 MW)

2007

Pickering A – Unit # 1 (515)

RFP Wind Projects (10.8)

Loblaws Demand Management (10)2005

GTAA Power Project (90)

RFP Wind Projects (24.8)2006

Calpine/Mitsui Power Project (1005)

St. Clair Power Project (570)

RFP Wind Projects (38.5)2007

2008

Pickering A – Unit # 2 or 3 (515)

Niagara Tunnel Power Project (250)

Bruce A – Unit #1,2 (1540)

Pickering A – Unit 2 or 3 (515)

RFP Renewables II (300)

Small Hydro RFP (300)

2009

+ 536 MW

+ 115 MW

+ 1614 MW

+ 2655 MW

+ 765 MW

NOTE: Capacity values for Wind Projects reflect an assumed 10% capacity value. Capacity values for RFP Renewable II represent a 30% capacity value due to the uncertainty of the generation mix.

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New Ontario Market Structure

OPG Baseload Nuclear and

Hydro

OPG Baseload Nuclear and

Hydro

Non-Utility Generators

(NUGs)

Non-Utility Generators

(NUGs)

Other OPG Price Capped

Generation

Other OPG Price Capped

Generation

Market-priced Generation &

Wholesale Participants

Market-priced Generation &

Wholesale Participants

RFP’s (Clean Energy &

Renewables)

RFP’s (Clean Energy &

Renewables)

IESOIESO

RegulatedRate

ContractPrice

Market Price

Mark

et

Pri

ce

OPA

Fees

OEFCOEFC

Market + NRR

CappedRate

Incentives (WPPI, etc)

Vari

ance

s

OPAOPA

Vari

ance

Acc

ou

nt

Vari

ance

Acc

ou

nt

Payment Flow

BlendedPrice

Global AdjustmentProvincial Benefit

Commercial & Industrial

Customers

Commercial & Industrial

Customers

Residential & Eligible

Commercial

Residential & Eligible

Commercial

Retailers & WholesalersRetailers & Wholesalers

LDC’sLDC’s

Regulated Price

Contract

MarketPrice

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Physical Settlement Payments

Trade Day

T T+10 BD T+14 BD T+20 BD

Preliminary Settlement

Statements Issued

Notice of Disagreement Filing

Deadline

Final Settlement Statement

T+35 BD

IESO Payment Date for June 1-

30, 2005

June 1 June 1 June 15 June 15 June 21 June 21 June 29 June 29 July 21 July 21

NOTE: These are actual settlement dates for trade date June 1, and for month end June/05. Monthly payments from the IESO can be up to 14 business days after month end.

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Market Entry Requirements

•Project Approval (Government)

– Land Rights, Design, Municipal Zoning, Provincial EA, Federal EA

•Participant Authorization (IESO)

– Various Licenses/Permits (OEB, GST, NEB)

– Participation Agreements (Prudential, Emergency)

•Connection Assessment (IESO, Hydro One, LDC’s)

– Feasibility Study, System Impact Assessment

•Facilities & Meter Registration (IESO, MSP, Hydro One, LDC’s)

– Transmission Connection Agreements

– Meter Service Provider

– Dispatch Work Station & Frame Relays

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Deloitte Contact Information

• Global Energy Markets practice

– Leader in business advisory and transformation services across the energy value chain

– Focus on commodity transacting, risk management and market operations

– Deep understanding of Ontario and North American energy markets

• Financial Advisory Services practice:

– Optimal project delivery mechanism (e.g. public private partnerships)

– Business case preparation and analysis for optimal risk allocation

– Project financing and capital structure optimization

• Tax practice:

– Project and Tax structuring for maximum benefit

– Scientific Research & Experimental Development tax credits

– Maximizing tax and non-tax benefits and incentives

– Cross border tax structuring.

Pat ConcessiPartnerGlobal Energy Markets

416-601-6251pconcessi@deloitte.ca

Michael BadhamPartnerFinancial Advisory Services

416-601-4664mbadham@deloitte.ca

Jay PonFirm DirectorTax

416-643-8982jpon@deloitte.ca

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