Exhibit 99.463
CALIFORNIA'S NEW ELECTRICITY MARKET
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The Basics: How the PX Works
PX Primer
Version 3, March 27, 1998
PX BASICS: A PRIMER CALIFORNIA
POWER EXCHANGE
HISTORY: DEREGULATING THE CALIFORNIA ELECTRICITY MARKET
STATE LAW TO DEREGULATE CALIFORNIA UTILITIES SIGNED IN 1996
Governor Pete Wilson signed AB 1890, sponsored by Assemblyman Jim Brulte
(R-Rancho Cucamonga) into law on September 23, 1996.
AB 1890 called for the deregulation of California's investor-owned electric
utilities, opening up the state's $21 billion electricity market, and guaranteed
a 20% rate cut for residential and small business customers by 2002.
The law established an Oversight Board, an Independent System Operator (ISO),
and the Power Exchange (PX).
The legislation modified a plan passed in December 1996 by the California Public
Utilities Commission (CPUC) to lower the price of electricity and end excessive
and expensive "over-regulation."
The U.S. Congress began the process of increasing competition in the utility
industry with passage of the Public Utility Regulatory Policies Act (PURPA) of
1978, and later, with the Energy Policy Act in 1992.
NEW ELECTRICITY MARKET OPENS MARCH 31, 1998
On March 31, 1998, the electric power industry in California will begin a
four-year, phased-in process of deregulation.
Investor-owned electric utilities will create separate business units for
electric generation, transmission, and distribution.
The transmission and distribution businesses will remain regulated by the
Federal Energy Regulatory Commission (FERC) and CPUC, respectively. Generation,
on the other hand, will generally become deregulated and subject to the market
forces of competition and to market prices for their products.
Consumers from all customer classes - residential, commercial, agricultural and
industrial - will be able to buy electricity from either their current electric
utility or from alternative suppliers of electricity.
Customers will be able to choose their power supplier.
The industry will be fully competitive by 2002, except to the extent that
hydrogeneration remains with utility distribution companies.
HOW THE ELECTRIC MARKET FUNCTIONED UNTIL 1997
In California, three major investor-owned utilities - Pacific Gas and Electric
(PG&E), Southern California Edison (SCE), and San Diego Gas and Electric (SDG&E)
- - used to generate, purchase, transmit and distribute electricity to meet their
customers' demand for electricity.
These utilities are capable of buying power from and sending power to one
another, as well as to other utilities in California and the surrounding Western
states.
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Each of these major investor-owned utilities was responsible for matching load
and resources to maintain frequency, and to match scheduled and actual flows at
the tie points by which utilities are connected to other power producers.
Each of these utilities (having an obligation to serve load within its service
territory) developed its own generation and demand forecasts, operated
generating plants, and entered into long-term procurement contracts for the fuel
used to generate electricity. Each utility also participated in short- and
long-term bilateral contracts for electric power, to meet changes in demand and
demand growth, respectively.
HOW THINGS WILL WORK FROM NOW ON
|X| On March 31, 1998, operation of PG&E, SCE and SDG&E's electric transmission
facilities will be managed by an INDEPENDENT SYSTEM OPERATOR, or ISO.
Existing transmission contract holders will be given priority for using the
transmission system. The ISO will ensure that all electricity producers
have an equal opportunity to send their electricity through the
transmission system to their customers.
From March 1998 to March 2002, California's investor-owned utilities (PG&E, SCE,
and SDG&E) will buy from and sell all of their generation through the California
Power Exchange (PX), which will auction electric power demand and supply.
Beginning March 31, 1998 PG&E, SCE and SDG&E customers will be able to buy
electricity from the supplier of their choice or choose to continue to buy
electric service from their present utility.
Other market participants, such as independent power producers (IPPs), municipal
generators, and utilities located outside of California, aggregators, etc., will
have the option of buying from, or selling electricity through the PX or selling
directly to a customer without going through the PX.
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THE BASICS: ELECTRICITY GENERATION AND TRANSMISSION
|X| On March 31, 1998 the transmission and distribution businesses will remain
regulated.
GENERATION, ON THE OTHER HAND, WILL BECOME FULLY DEREGULATED.
|X| Unlike other commodities, electricity cannot be stored. Therefore, a
delicate balance must be maintained between generation and consumption - 24
hours a day, 7 days a week, 8,760 hours a year.
GENERATION BASICS
|X| Generation refers to the conversion of one form of energy into electricity.
Electric power may be generated from natural gas, coal, oil, nuclear fuel,
falling water, geothermal steam, alternative resources such as
cogeneration, and from renewable resources such as wind power, solar energy
and biomass.
|X| Within the state of California, electricity is generated by more than 1,300
power plants.
[GRAPHIC MAP]
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California's fuel mix for electric generation is among the most diverse in the
world, using virtually every commercial technology and fuel, and employing
facilities from the largest nuclear power plant to the smallest cogeneration
unit.
CALIFORNIA ELECTRICITY GENERATION
(BILLIONS KWH)
[GRAPH CHART]
Source: California Energy Commission
|X| Electricity in California is generated from natural gas, oil, nuclear,
hydro, and geothermal resources. Electricity is also imported into the
state from neighboring states, Canada and Mexico.
SOURCES OF ELECTRICITY FOR CALIFORNIA
(BILLIONS OF KWH)
[GRAPH CHART]
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Source: California Energy Commission
|X| The fuel used to generate electricity, and the related capital investment,
affects the price of that electricity.
|X| Natural gas has been the primary fuel used to generate electricity in
California during the past 10 years because of the growth in cogeneration,
the relatively low cost of gas, dry weather conditions, and the shift from
oil to natural gas to reduce air pollution.
GENERATION: PLAYERS
UTILITY-OWNED GENERATION
|X| Hydroelectric generation resources met nearly all of California's
electricity needs until the mid-1900s, when oil and natural gas generation
were added. Substantial amounts of nuclear, coal and geothermal capacity
were added between 1970 and 1990.
CALIFORNIA UTILITY-OWNED
GENERATION RESOURCES (000 OF MW)
[GRAPH CHART]
Source: California Energy Commission
|X| Until the late 1970s, most electricity in the United States was generated
by investor-owned utilities, municipalities and government agencies in
large, central generating units.
|X| In 1978, the Public Utility Regulatory Policies Act (PURPA), passed by the
U.S. Congress, started the process of competition when it created a new
class of power generators called qualifying facilities, or QFs.
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QUALIFYING FACILITIES
|X| QFs are non-utility power producers that often generate electricity using
renewable and alternative resources, such as hydro, wind, solar, geothermal
or biomass (solid waste).
|X| QFs must meet certain operating, efficiency, and fuel-use standards set
forth by the Federal Energy Regulatory Commission (FERC).
|X| If a QF meets these FERC standards, utilities must buy or wheel the
QF-generated power. QFs usually have long-term contracts for utilities'
purchase of this power.
|X| Cogenerators may also be QFs. Cogenerators use the waste heat created by
one process, for example during manufacturing, to produce steam that is
used in turn to spin a turbine and generate electricity.
|X| In restructure markets these utility obligations go away and QFs will
compete with all other generators in the market.
INDEPENDENT POWER PRODUCERS
|X| An Independent Power Producer (IPP) generates power that is purchased by an
electric utility at wholesale prices. The utility then resells this power
to end-use customers.
|X| Although IPPs generate power, they are not franchised utilities, government
agencies or QFs.
|X| IPPs usually do not own transmission lines to transmit the power that they
generate.
|X| Gas-fired cogeneration represents most of the growth in non-utility
electric generation.
NON-UTILITY POWER PLANTS
INSTALLED CAPACITY (000 OF MWH)
[GRAPH CHART]
Source: California Energy Commission
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GENERATION: SYSTEM RELIABILITY
Although the principles of generating electricity are simple, generating
electricity for a state the size of California, both in terms of geographic area
and population, is a complex balancing process. Certain requirements must be met
to ensure system reliability, such as reserve margin. Under deregulation, the
following "allowances" will be made to ensure system reliability.
GENERATION: REGULATORY REQUIREMENTS
|X| The new market will feature "must run" generation. This is generation that
utilities must produce, either to maintain system reliability, or to meet
requirements imposed by utility regulators such as the CPUC. At the outset
of the new market, must-run generation will be used to ensure that the
reliability of the ISO-controlled grid is maintained. However, the ISO's
objective will be to eliminate reliability must-run generation contracts
and replace them with the ancillary service market and other competitive
sources.
RELIABILITY MUST-RUN GENERATION
|X| The ISO will take into consideration generation that is needed to ensure
utility-system reliability. This includes generation that is:
- Required to meet the reliability criteria for interconnected systems
operation.
- Needed to meet load (demand) in constrained areas.
- Needed to provide voltage or security support of the ISO or of a local
area.
|X| In return for payment, the ISO may call upon the owner of a must-run
generating unit to run the unit when required for grid reliability.
REGULATORY MUST-TAKE GENERATION
|X| Utilities will be allowed to generate electricity from those resources -
identified by jurisdictional bodies such as the CPUC - that are subject to
specifically identified cost recovery contracts. These resources may be
scheduled with the ISO directly or through the PX. Regulatory Must-Take
Generation includes QF power, nuclear units, and pre-existing
power-purchase contracts that have minimum-take provisions.
OVER-GENERATION AND THE NEW MARKET
|X| In the deregulated energy market, over-generation occurs when the demand of
all PX participants is less than or equal to the sum of all must-take and
must-run generation.
|X| A Generation Bid is a bid into the PX indicating a quantity of energy or
ancillary service that an eligible customer wishes to sell at a particular
price. This bid will be accepted into the PX auction process only if the
market-clearing price is at or above the price of the
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generation bid. A seller may state, for each hour, a different price or
preference for each generation quantity in each location. If a bid is
submitted with a price of zero, it is assumed that the bidder is prepared
to sell at the market-clearing price.
TRANSMISSION BASICS
|X| After electricity is generated, it is transmitted over high-voltage power
lines, usually at voltages from 50,000 to 500,000 volts. Electric utilities
may transfer power to one another using their transmission system. They
also serve transmission-service customers, usually large industrial plants.
For most other customers, transmission-level electric service is "stepped
down" to lower voltages (such as 120 volts for residential customers).
|X| Presently, anyone who owns transmission facilities, or who has firm
contractual rights to use transmission facilities to be operated by the
ISO, is referred to as a Transmission Owner (TO).
|X| Electricity can be shipped for long distances over transmission lines from
one transmission system to another. For example, electricity generated by
the Bonneville Power Administration in Portland, Oregon, can be shipped to
the Department of Water and Power in Los Angeles, California.
|X| California has an extensive system of high-voltage transmission, which
provides access to supplies from the western region of the US. (See maps
following this section.)
|X| The western interconnected system represents the Western half of the US and
includes every state from the Rocky Mountains to the Pacific Ocean and
parts of Canada and Mexico.
|X| Transmission losses naturally occur between the point of receipt and the
point of delivery. The point of delivery will be at the utility
distribution company (UDC) boundary or at the ISO's Control Area boundary.
|X| Transmission lines have physical limits beyond which they cannot transmit
additional quantities of electrical power without serious damage to
transmission equipment.
MAIN GRID AND DISTRIBUTION NETWORKS
|X| Distribution networks deliver electricity to and from the ISO-controlled
grid. Distribution power lines generally include some 50 kV and all
voltages below 50 kV.
|X| The main transmission grid (backbone) consists of 500 kV, some 230 kV, and
the 500-kV DC high-voltage transmission lines.
|X| California utilities are electrically linked through an extensive network
of transmission lines. They also are members of the Western Systems
Coordinating Council (WSCC), a regional council with a charter of promoting
reliable electric service by adopting operating
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criteria and facilitating electric system support between utilities
throughout the WSCC region.
[GRAPHIC MAP]
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[GRAPHIC MAP]
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TRANSMISSION LINE LOAD LIMITS
|X| Transmission-line capacities are calculated and monitored by transmission
owners, in order to avoid line overloading and possible damage to
equipment.
VOLTAGE SUPPORT
|X| Voltage support refers to those services provided by generating units, or
other equipment, that are required to maintain established grid-voltage
criteria. These services are required under both normal and system
emergency conditions.
CONGESTION
|X| Congestion occurs when there is insufficient transfer capacity to
simultaneously implement all of the Preferred Schedules that Scheduling
Coordinators submit to the ISO.
|X| The ISO will use a zone-based approach to manage congestion. The zones are
set forth in Appendix I to the ISO tariff. The PX will publish the prices
for each zone through its web site (www.calpx.com).
|X| A zone is a portion of the ISO-controlled grid within which congestion is
expected to occur infrequently or have relatively low congestion-management
costs.
|X| "Inter-zonal" congestion occurs as a result of transmission system
constraints between two zones.
|X| "Intra-zonal" congestion occurs as a result of transmission system
constraints with a zone.
ELECTRIC DISTRIBUTION SYSTEM
|X| The electric distribution system links the transmission system with
customers who require service voltage as low as 120 volts.
|X| To serve these customers, several levels of voltage reduction are required.
The first voltage reduction usually occurs at a substation, where power
from high-voltage transmission lines is transformed to a lower voltage and
is then carried via primary distribution lines. Voltage can be further
reduced by secondary distribution transformers near the customer's home or
business.
DEMAND BASICS
|X| Demand is the amount of electricity used by a customer or the measure of
power that a customer receives or requires. It is the rate at which energy
is delivered to customers and scheduling points by generation, transmission
or distribution facilities.
|X| Wholesale and industrial customers take electricity at the highest voltage
levels, while residential customers take electricity at the lowest voltage
levels.
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|X| A Demand Bid is a bid into the PX indicating a quantity of energy that a
participant wishes to buy at a particular price. This bid will be accepted
into the PX auction process only if the market-clearing price is at or
below the price of the demand bid. A buyer may state, for each hour, a
different price or preference for each generation quantity required.
IMPORT AND EXPORT BASICS
|X| Natural gas and electricity imports are used more during periods of
drought, when hydroelectric generation is lower.
|X| The Pacific Northwest, which is winter peaking, has a large hydroelectric
generating capacity that can be exported to California during late spring
and summer. California, in turn, provides power to the Northwest to meet
winter heating loads.
|X| Coal-fired plants in the Southwest also produce excess capacity that can be
exported west.
CALIFORNIA IMPORTS OF ELECTRICITY
(BILLIONS KWH)
[GRAPH CHART]
Source: California Energy Commission
IMPORT AND EXPORT CAPABILITIES
|X| California has an extensive high-voltage transmission system that enables
access to diverse supplies from the Western region of North America. The
Western interconnected system includes all states, from the Rocky Mountains
to the Pacific Ocean, including parts of Canada and Mexico (see map on next
page).
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[GRAPH California Transmission Import and Export Capabilities]
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CALIFORNIA'S NEW ELECTRIC MARKET
TWO MAJOR PLAYERS IN THE NEW MARKET: PX AND ISO
CALIFORNIA POWER EXCHANGE (PX)
|X| The California Power Exchange (Power Exchange or PX), located in Alhambra,
California, is a non-profit corporation; its primary purpose is to provide
an efficient, competitive energy auction that meets the loads of PX
customers at market prices.
|X| The PX is open on a nondiscriminatory basis to all suppliers and purchasers.
|X| The Power Exchange's rules and service charges are regulated by the Federal
Energy Regulatory Commission (FERC).
|X| PG&E, SoCal Edison and SDG&E must buy and sell electricity through the PX
for four years. Together, these investor-owned utilities represent
approximately 80% of the electricity used in California.
|X| The PX will determine the price of electricity on an hourly basis for the
Day-Ahead and Hour-Ahead markets, according to the demand and supply bids
submitted by PX participants.
|X| The PX is located in Alhambra, California, with back-up facilities in
Folsom, California.
CALIFORNIA INDEPENDENT SYSTEM OPERATOR (ISO)
|X| Although PG&E, SCE and SDG&E will continue to own their electric
transmission facilities, operational control of these facilities will be
turned over to the Independent System Operator, (ISO).
|X| The ISO's rules and service charges are regulated by the FERC.
|X| The ISO will ensure that all electricity buyers and sellers have an
opportunity to use the transmission system,
- So that sellers of electricity may transport electricity to their
buyers, and
- So that all electricity buyers may select and receive their electric
transfers.
|X| The ISO is located in Folsom, California, with back-up facilities in
Alhambra, California.
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RESPONSIBILITIES OF THE PX AND PARTICIPANTS
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RESPONSIBILITIES OF PX RESPONSIBILITIES OF PARTICIPANTS
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o Receive demand and supply bids. o Submit demand or supply bids that are complete
and on time.
o Determine Market-Clearing Price (MCP).
o Determine Zonal prices (MCP adjusted for congestion).
o Serve as scheduling coordinator for participants.
o Settle trades in PX markets (settlement). o Comply with operational instructions provided
o Prepare and send invoices. by the PX or ISO.
o Operate funds transfers for settlement and o Provide end-user-metered data as required by
billing. the PX tariff.
o Promptly meet
all obligations -- operational and financial
-- arising from market participation.
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Because it is a clearinghouse, the PX may not participate in any market
transactions itself, or on its own behalf.
THE NEW MARKET STRUCTURE
|X| Participants that compose the new market structure include:
PARTICIPANT ROLE
Generators Generate, or create, electricity
Power Exchange Create a spot market for electricity, schedule
and settle trades
Scheduling Coordinators Submit balanced schedules to the ISO
Independent System Operator Provide grid dispatch and transmission access
services
Utility Distribution Companies Distribute, or deliver electricity
Retail Marketers Provide competitive energy services
Customers Demand and consume electricity
THE RESPECTIVE ROLES OF EACH PARTICIPANT ARE DESCRIBED MORE FULLY, BELOW.
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GENERATORS
|X| Generators are power producers.
|X| Non-investor-owned and independent power producers may bid power into the
PX or schedule power through another Scheduling Coordinator.
|X| Generators may also bid ancillary services through the PX or another
Scheduling Coordinator into the ISO.
|X| Generators must respond to instructions issued by the ISO and Scheduling
Coordinators.
POWER EXCHANGE
|X| The PX will conduct daily auctions to allow the competitive trading of
electricity in the forward Day-Ahead and Hour-Ahead markets.
|X| The PX accepts demand and generation bids (price, quantity) from its
participants, and determines the Market Clearing Price (MCP) at which
energy is bought and sold.
|X| The PX is a Scheduling Coordinator and submits balanced demand and supply
schedules for successful bidders to the ISO.
|X| The PX also submits to the ISO:
|X| Ancillary service bids to maintain system reliability.
|X| Adjustment bids, which are decremental/incremental bids to relieve or
eliminate congestion on the transmission grid.
|X| Supplemental energy bids, which are used by the ISO to match loads and
resources on a real-time basis.
|X| The PX also performs settlement functions with the ISO, PX participants
(including utility distribution companies or UDCs), marketers and
aggregators (non-utility retailers) and other Scheduling Coordinators.
"Settlement" is the process of financial settlement for energy bought and
sold.
|X| The PX bills participants based on settlements and all transaction costs
incurred with the ISO and PX.
SCHEDULING COORDINATORS
|X| Scheduling coordinators (SCs) submit balanced schedules and provide
settlement-ready meter data to the ISO.
|X| Scheduling Coordinators also:
|X| Settle with generators and retailers, the PX and the ISO
|X| Maintain a year-round, 24-hour scheduling center
|X| Provide non-emergency operating instructions to generators and
retailers
|X| The PX is a Scheduling Coordinator.
INDEPENDENT SYSTEM OPERATOR
The ISO:
|X| Provides open access to transmission
|X| Manages reliability of the transmission grid
|X| Procures ancillary services as required
|X| Manages day-ahead and hour-ahead schedules
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|X| Performs real-time balancing of load and generation
|X| Settles real-time imbalances
The ISO also administers congestion management protocols for the transmission
grid.
|X| As the control-area operator, the ISO maintains scheduled interchanges with
other control areas by balancing intertie schedules with the actual flow of
electricity across the interties.
|X| The ISO Supply -- the sum of the power output of the generating units
within the electric power system, plus energy purchases from outside the
electric power system, minus the energy sold outside the electric power
system -- must balance with demands placed upon the system.
|X| The ISO also maintains the frequency of the electric power system and
ensures that sufficient levels of power are generated.
UTILITY DISTRIBUTION COMPANIES (UDCS)
|X| PG&E, SCE and SDG&E are utility distribution companies.
|X| Utility distribution companies, or UDCs, provide distribution services to
all electric customers within their service territory.
|X| They meter the energy delivered to customers and issue bills for the
electricity consumed and for the use of transmission and distribution
facilities.
|X| They buy bulk power from the PX for their customers.
|X| They may:
|X| Offer bundled energy tariffs to their customers
|X| Offer meter reading and usage measurement services to other energy
service providers so that they can offer a bundled service to
customers
RETAILERS (ENERGY SERVICE PROVIDERS)
|X| Retailers buy power for and market power to retail customers.
|X| Retailers also serve as demand aggregators for retail loads. They bill
retail customers for energy and contracted services, schedule load and
generation through a Scheduling Coordinator such as the PX, and pay for the
energy and ancillary services they receive.
CUSTOMERS
|X| Eligible electric customers -- whether they are residential, commercial,
agricultural or industrial -- may choose their supplier via a local utility
distribution company, retailer, or power marketer.
HOW THE PX AND DAY AHEAD AND HOUR AHEAD ELECTRIC MARKETS FUNCTION
|X| In 1998, two markets will be developed and managed by the Power Exchange:
|X| Initially, the PX will open the Day-Ahead Market, where participants
can bid supply and demand for the next day's 24 hours. The Day-Ahead
Market starts at 6:00 a.m. the day ahead of the trading day, and
closes at 1:00 p.m. on the day ahead of the trading day, when the ISO
issues the final day-ahead schedule.
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|X| Later in the year, the PX will open the Hour-Ahead Market, where
participants can go through a similar bidding process that begins two
hours before the time of operation.
|X| The Hour Ahead market provides a means for participants to buy and sell so
as to adjust their day-ahead commitments based on information closer to the
transaction hour.
DAY-AHEAD MARKET
|X| A participant may trade and schedule in the day-ahead power market for
next-day delivery.
|X| Each trade incurs a mutual obligation for payment between the PX and its
market participants. Day-Ahead Market settlements are based on schedules,
and are provided within 3 days after each trade day.
|X| The trading procedures in the Day-Ahead Market are:
- For each hour of the 24-hour scheduling day, a market-clearing price
(MCP) is determined from all of the participants' supply/demand bids
submitted to the PX.
- Once the bids are received, the PX validates the bids. Validation
consists of verifying that the content of the bid complies with the
requirements of the bid format, and checking for consistency with data
contained in the master file.
- Once the bids are validated, the PX constructs aggregate supply/demand
curves and their intersection to determine the MCP.
- The PX also determines if the bids submitted could create a potential
over-generation condition.
- If a potential over-generation condition occurs, the PX must inform
the ISO.
- Bids initially submitted into the Day-Ahead Market auction need not be
attributed to any particular unit or physical scheduling plant. Such a
bid is referred to as a PORTFOLIO BID.
- Portfolio bids that are accepted into the Day-Ahead Market are then
broken down into generation-unit schedules which are submitted to the
ISO along with adjustment bids (for congestion) and ancillary service
bids.
- The ISO determines, based on all unit specific supply bids and
location specific demand bids, whether there is congestion. If there
is congestion, the ISO uses adjustment bids to submit an adjusted
schedule to the PX and other SC's.
- These adjusted schedules and ISO determined usage charges become the
foundation for zonal MCPs and the final schedule submitted to the ISO.
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HOUR-AHEAD MARKET
|X| In the Hour-Ahead Market, bids are submitted to the PX at least 2 hours
before the hour of operation. These are unit specific bids.
|X| The Hour-Ahead Market gives participants an opportunity to make adjustments
based on their Day-Ahead schedules so that they can minimize real-time
imbalances. The MCP is determined the same way as the Day-Ahead Market. The
PX communicates price and traded quantities to PX participants immediately
after the Hour-Ahead Market is closed.
All other services that are used to maintain a secure and reliable supply of
power (ancillary services) are submitted to the PX and selected by the
Independent System Operator (ISO).
REAL-TIME MARKET
|X| Real-time operations are managed by the ISO, which also determines the
real-time market price after the fact based on actual metered data (ex-post
price).
IN A NUTSHELL
|X| The PX and other Scheduling Coordinators actively participate in the
forward market for electric power when the timeframe is one hour or more
from the time of actual delivery.
|X| The ISO manages the real-time electric power market. The ISO arranges for
sources of energy for potential use in real time. These sources include
ancillary service energy and supplemental energy bids received from the PX
and other SC's.
FINANCIAL AND SETTLEMENT PROCEDURES
PARTICIPATION AGREEMENTS
|X| To participate in the PX market, a prospective participant must meet a
number of eligibility requirements, sign a participant agreement, comply
with the PX's legal requirements, and comply with the PX's system
requirements.
ELIGIBILITY REQUIREMENTS
|X| The PX participant must be able to identify the metered entities and meter
locations (including its own) for whom it proposes to trade both energy and
ancillary services.
|X| The PX participant must be able to apply the relevant distribution loss
factors approved by the local regulatory authority for any direct-access
end users connected to a distribution system.
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|X| The participant must provide the PX with satisfactory evidence that it is
capable of trading on behalf of its customers.
|X| The participant must provide the PX with satisfactory evidence of
creditworthiness.
|X| If the participant owns or controls transmission capacity that is subject
to FERC jurisdiction outside the ISO-controlled grid, the FERC must have
accepted for filing an open-access transmission tariff for the participant
(refer to FERC Order 888).
|X| The participant shall notify the PX of any changes that could affect its
eligibility status.
PX APPLICATION
|X| The written application must be submitted 60 days prior to trading.
|X| The written application must be accompanied by an application fee.
|X| The application must specify projected generation and load units.
|X| The application must supply the appropriate credit and security information
|X| Any appeals may be made to the PX Governing Board within 28 days after
denial.
|X| Alternative Dispute Resolution (ADR) is available if the appeal is
unsuccessful.
|X| A PX participant may voluntarily terminate participation at any time.
CREDIT REQUIREMENTS
|X| If the participant has an approved credit rating (A1, P1), he or she does
not need to post a guarantee of credit.
|X| If the participant does not have an approved credit rating, he or she must
provide guarantees of credit support.
SETTLEMENTS AND BILLING
|X| Settlement refers to the process of financial settlement for energy bought
and sold under the PX tariff. Each settlement will involve a price and a
quantity.
|X| The day-ahead and hour-ahead schedules become financially binding at the
close of each market.
SETTLEMENT: DAY- AND HOUR-AHEAD MARKETS
|X| The trade week is from Sunday at midnight to Sunday at midnight.
|X| A preliminary settlement statement is sent to market participants within 3
days after each trade day.
|X| Market participants have 5 days after each trade day in which to dispute
settlement statements.
|X| Invoices are issued 7 days after the end of each trading period or calendar
month. Invoices include all PX and ISO administrative charges as well as
settlements for energy trades.
|X| Payments from participants are required 15 days after the end of the trade
period.
|X| Payments to participants will be made 17 days after the end of the trade
period.
PX PARTICIPANT MINIMUM REQUIREMENTS
|X| Submit application form with application fee at least 60 days before
commencement of service.
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|X| Executed PX Participation Agreement, Meter Service Agreement (where
applicable) and Software License Agreement.
|X| Executed escrow agreement, letter of credit or guarantee at least fourteen
(14) days prior to the date of commencement of service (where applicable).
THE CALIFORNIA POWER EXCHANGE OFFERS MANY BENEFITS TO MARKET PARTICIPANTS
WHAT YOU SEE IS WHAT YOU GET
|X| The Power Exchange provides an open, visible market price. For consumers,
this translates to a benchmarked price for other transactions or
market-priced power procured on their behalf through their UDC or other
service provider. For financial traders and other buyers and sellers, this
translates to a reference price. For investor-owned utilities in
California, this translates to prices that adequately capture, or
determine, the Competitive Transition Charge (CTC) collection.
|X| The Power Exchange also establishes a credible marketplace with no hidden
margins or hidden price mark-ups. The rules under which the Power Exchange
operates, and the prices it generates, are open to public scrutiny and are
regulated by the federal government (the FERC).
|X| The Power Exchange monitors the market to ensure fair trading.
ONE-STOP SHOPPING
In your single transaction with the PX, the PX accomplishes all of the
following:
o Schedule coordination
o Settlement and credit handling
o Physical delivery
o Market priced power, every hour, any size bid
REDUCED RISK
|X| For buyers and sellers alike, the Power Exchange minimizes risk. This is
because when you trade with the PX you trade with a deep and liquid pool of
buyers and sellers. For buyers, this means significantly reduced risk of
delivery failure. For sellers, it means significantly reduced risk of
non-payment.
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Glossary
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The information below is provided for ready reference by the reader. For a more
thorough discussion of these terms, please refer to the Power Exchange and
Independent System Operator tariffs.
ADJUSTMENT BID
A bid that is used by the ISO to adjust supply or demand when congestion is
anticipated.
ANCILLARY SERVICES
Services required by the Independent System Operator to ensure reliability and
to support the transmission of energy from generation sites to customer loads.
Such services may include: regulation, spinning reserve, non-spinning reserve,
replacement reserve, voltage support, and black start.
BALANCED SCHEDULE
A Scheduling Coordinator's schedule is balanced when generation, adjusted for
transmission losses, equals demand.
CONGESTION
A condition that occurs when insufficient transfer capacity is available to
implement all of the preferred schedules simultaneously.
CONGESTION MANAGEMENT
Alleviation of congestion by the ISO through selection of adjustment bids.
CONTROL AREA
An electric power system, or a combination of electric power systems, to which a
common automatic generation control (AGC) is applied to match the power output
of generating units within the area to demand. The control area of the ISO is
the state of California.
COGENERATOR
Cogenerators use the waste heat created by one process, for example during
manufacturing, to produce steam which is used, in turn, to spin a turbine and
generate electricity. Cogenerators may also be QFs.
CPUC
California Public Utilities Commission.
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DAY-AHEAD MARKET
The forward and pre-scheduled market for energy and ancillary services to be
supplied during the settlement period of a particular trading day. It is
administered by the ISO based on schedules submitted by the PX and other
Scheduling Coordinators. This market closes with the ISO's acceptance of a final
schedule one day-ahead of trading.
DAY-AHEAD SCHEDULE
A schedule prepared by a Scheduling Coordinator and accepted by the ISO before
the beginning of a trading day. This schedule indicates the levels of generation
and demand scheduled for each of the 24 settlement periods of that trading day.
DEMAND
The rate at which energy is delivered to loads and scheduling points by
generation, transmission or distribution facilities.
DEMAND BID
A bid into the PX indicating a quantity of energy or an ancillary service that
an eligible customer is willing to purchase and the maximum price that the
customer is willing to pay.
ELIGIBLE TRADER
Any customer who has met the PX criteria for trading.
ENERGY BID
The at or above price for which a generator has agreed to produce the next
increment of energy.
EX POST PRICE OR 5-MINUTE EX POST PRICE
The price at which participating generators are compensated for providing
imbalance energy in each zone.
FERC
Federal Energy Regulatory Commission.
HYDRO SPILL GENERATION
Hydroelectric generation in existence, prior to the market's opening, that has
no storage capacity and that, if backed down, would spill. This term also refers
to a hydro resource that has exceeded or has inadequate storage capacity and is
spilling, even though generators are operating at full capacity.
IMBALANCE ENERGY
The real-time change in generation output or demand requested by the ISO to
maintain reliability of the ISO-controlled grid. Sources of imbalance energy
include regulation,
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spinning and non-spinning reserves, replacement reserve, and energy from other
generating units that are able to respond to the ISO's request for more or less
energy real-time.
INDEPENDENT POWER PRODUCER
An Independent Power Producer (IPP) generates power that is purchased by an
electric utility at wholesale prices. The utility then resells this power to
end-use customers. Although IPPs generate power, they are not franchised
utilities, government agencies or QFs. IPPs usually do not own transmission
lines to transmit the power that they generate.
IOU
Investor-owned utility.
ISO
Independent System Operator.
LOAD
An end-use device or an end-use customer that consumes power. Load should not be
confused with demand, which is the measure of power that a load receives or
requires.
MARKET-CLEARING PRICE
The price at which supply equals demand. The Day-Ahead (adjusted for congestion)
and Hour-Ahead Markets.
MARKET PARTICIPANT
An entity, including a Scheduling Coordinator, who participates in the energy
marketplace through the buying, selling, transmission, or distribution of energy
or ancillary services into, out of, or through the ISO-controlled grid.
MASTER FILE
A file maintained by the PX for use in bidding that contains information on
generating units, loads, and other resources eligible to bid into the PX.
OVER-GENERATION
A condition that occurs when total PX participant demand is less than or equal
to the sum of regulatory must-take generation, regulatory must-run generation,
and reliability must-run generation.
PX
The California Power Exchange Corporation, a state chartered, non-profit public
benefits corporation charged with providing Day-Ahead and Hour-Ahead markets for
energy and ancillary services, if it chooses to self-provide, in accordance with
the PX tariff. The PX is a Scheduling Coordinator, and is independent of both
the ISO and all other market participants.
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PX GENERATION
Generation being scheduled by the PX.
PX LOAD
Load that has been scheduled by the PX which is delivered through transmission
and distribution facilities.
PX PARTICIPANT
An entity that is authorized to buy or sell energy or ancillary services through
the PX, and any agent authorized to act on behalf of such an entity.
PREFERRED DAY-AHEAD SCHEDULE
A Scheduling Coordinator's preferred schedule for the ISO day-ahead scheduling
process.
PREFERRED HOUR-AHEAD SCHEDULE
A Scheduling Coordinator's preferred schedule for the ISO hour-ahead scheduling
process.
PREFERRED SCHEDULE
The initial schedule produced by a Scheduling Coordinator that represents its
preferred mix of generation to meet demand. The schedule includes the quantity
of output (generators) and consumption (loads), details of any adjustment bids,
and the location of each generator and load. The schedule also specifies the
quantities and location of trades between the Scheduling Coordinator and all
other Scheduling Coordinators, and is balanced with respect to generation,
transmission losses, load, and trades.
QUALIFYING FACILITY
QFs are non-utility power producers that often generate electricity using
renewable and alternative resources, such as hydro, wind, solar, geothermal or
biomass (solid waste). QFs must meet certain operating, efficiency, and fuel-use
standards set forth by the Federal Energy Regulatory Commission (FERC). If they
meet these FERC standards, utilities must buy power from them. QFs usually have
long-term contracts with utilities for the purchase of this power, which is
among the utility's highest-priced resources.
REAL-TIME MARKET
The competitive generation market controlled and coordinated by the ISO for
arranging real-time imbalance energy.
REGULATION
The service provided by generating units equipped and operating with automatic
generation controls that enable the units to respond to the ISO's direct digital
control signals to match real-time demand and resources, consistent with
established operating criteria.
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REGULATORY MUST-RUN GENERATION
Utilities will be allowed to generate electricity when hydro resources are
spilled for fish releases, irrigation, and agricultural purposes, and to
generate power that is required by federal or state laws, regulations, or
jurisdictional authorities. Such requirements include hydrological flow
requirements, irrigation and water supply, solid-waste generation, or other
generation contracts in effect on December 20, 1995.
REGULATORY MUST-TAKE GENERATION
Utilities will be allowed to schedule and maximize output from certain resources
identified by the CPUC. These resources will be scheduled on a must-take basis.
Regulatory Must-Take Generation includes QF generating units, certain existing
nuclear units and pre-existing power-purchase contracts that have minimum-take
provisions.
RELIABILITY MUST-RUN GENERATION
The ISO will allow utilities to generate power that is needed to ensure system
reliability. This includes generation:
- - Required to meet the reliability criteria for interconnected systems
operation.
- - Needed to meet load (demand) in constrained areas
- - Needed to provide voltage or security support of the ISO or of a local
area.
RELIABILITY MUST-RUN UNIT
In return for payment, the ISO may call upon the owner of a generating unit to
run the unit when required for grid reliability.
RESERVE MARGIN
The differences between the dependable capacity of a utility's system and the
anticipated peak load for a specified period.
SCHEDULING COORDINATOR
Scheduling Coordinators (SC's) submit balanced schedules and provide
settlement-ready meter data to the ISO. Scheduling Coordinators may also:
- Settle with generators and retailers, the PX and the ISO
- Maintain a year-round, 24-hour scheduling center
- Provide non-emergency operating instructions to generators and
retailers
The PX is considered a Scheduling Coordinator and also provides the spot market
into which other SC's can buy or sell to balance their schedules.
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SETTLEMENT
The process of financial settlement for purchased and sold through the PX or the
ISO.
SUPPLY BID
A bid into the PX indicating a price at which a seller is prepared to sell
energy or ancillary services.
TAKE-OUT POINT
The metering points at which a metered entity takes delivery of energy.
TRANSMISSION OWNER
An entity that owns transmission facilities or has firm contractual right to use
transmission facilities.
TRADING DAY
The 24-hour period beginning at midnight and ending at the following midnight.
UDC
Utility distribution company. An entity that owns a distribution system for the
delivery of energy to and from the ISO-controlled grid, and that provides
regulated, retail service to eligible end-use customers who choose not to
arrange services through another retailer.
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