Primer on Electric Power Industry RegulationIndependent System Operators (ISOs)

North America Electric Reliability Corp (NERC)Federal Energy Regulatory Commission (FERC)

Robert SerenaFebruary 2012

1

About the author

Bob has over 25 years of Risk Management experience across the Manufacturing (Defense contractor), Insurance (Mutual and Stock

insurers, Reinsurance, Consulting), Commercial and Investment Banking, and Energy industries (Independent Power Producers,

Regulated Utilities, Integrated Oil & Gas).

Additionally, he has broad experience across a range of functional areas, including quality assurance, software engineering, system

design and implementation, claims, financial and medical underwriting, financial reporting, product development, asset/liability

management, retirement planning, and risk management – Enterprise Risk, Strategic Risk, Market Risk, Credit Risk, Insurable Risk,

Regulatory/Compliance Risk, and Operational Risk.

Bob is a native of Connecticut, and holds a BS degree in Electrical Engineering from Rice University and a MS degree in Operations

Research from the University of New Haven. He also holds several professional designations, including Fellow in the Society of

Actuaries (FSA), Chartered Financial Analyst (CFA), Financial Risk Manager (FRM), and Chartered Property Casualty Underwriter

(CPCU).

Bob is a resident of Boerne, Texas with his wife and two children.

2

Robert Serena, FSA, CFA, FRM, CPCU

Agenda – List of Regulatory Bodies

• ISO’s

– NYISO

– ISO-NE

– ERCOT

• NERC

• FERC

3

4

NY ISO

• Roles

• Evolution

• Transmission

• DAM vs RTM

• Resources

• External Flows

• Benefits

• Wholesale Energy Costs

5

6

7

8

9

10

11

12

13

14

15

ISO New England

• Summer Capacity 2011

• Peak Generation 7/22/11 Example

• Evolution of Generation Fleet

• Reliance on Natural Gas

• Retirements

• Net Importer of Power

16

17

18

19

20

21

22

23

24

ERCOT• The Electric Reliability Council of Texas (ERCOT) manages the flow

of electric power to 23 million Texas customers - representing 85 percent of the state's electric load.

• As the independent system operator for the region, ERCOT schedules power on an electric grid that connects 40,500 miles of transmission lines and more than 550 generation units.

• ERCOT also performs financial settlement for the competitive wholesale bulk-power market and administers retail switching for 6.6 million premises in competitive choice areas.

• ERCOT is a membership-based 501(c)(4) nonprofit corporation, governed by a board of directors and subject to oversight by the Public Utility Commission of Texas and the Texas Legislature.

• ERCOT's members include consumers, cooperatives, generators, power marketers, retail electric providers, investor-owned electric utilities (transmission and distribution providers), and municipal-owned electric utilities.

25

ERCOT’s Vision & Mission• Vision

– To be innovative in providing a world-class, cost-effective, reliable electric grid and efficient electricity markets.

• Mission– ERCOT serves the public interest by:

– Ensuring open access to transmission and distribution systems;

– Maintaining system reliability and operations;

– Enabling retail choice;

– Operating fair and competitive wholesale markets;

– Maintaining the renewable energy credits registry;

– Providing leadership and independent expertise to improve system reliability and market efficiency.

26

ERCOT Website

27

ERCOT’s Pricing on Website

28

NERC = North American Electric

Reliability Corportation

• NERC Regions & BPEC Activity

• Overview

• The Grid

• Load Loss & Disturbances

• Risk Control Reduction Cycle

• Regional Entities

29

NERC Regions & BPEC Activity

30

31

32

33

34

35

36

FERC = Federal Energy Regulatory

Commission

• What FERC does?

• Organization Chart

• Historical Pricing

– Natural Gas

– Electricity

37

38

39

40

41

42

43