Massive restructuring of Dynegy’s exposure in wholesale markets

Matt Phillips
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Dynegy: A promising turnaround after bankrupcty (Part 6 of 14)

(Continued from Part 5)

Wholesale electricity markets

Unregulated power companies auction their generation capacity at major regional electricity trading hubs across the United States. There are multiple ISOs (independent system operators) and RTOs (regional transmission organizations) in the United States. They facilitate buying and selling of electricity among energy companies.

Below are some of the major wholesale markets:

  • MISO – based in Illinois

  • CAISO – based in California

  • PJM – based in the East North Central region of the United States

  • NYISO – based in New York

  • ERCOT – based in Texas

  • Mass Hub – based in the New England region

Exposure to markets

Currently, Dynegy’s (DYN) operating capacity is skewed toward the MISO trading hub. More than half its capacity is linked to the MISO markets. After MISO, the CAISO and PJM markets are Dynegy’s next largest markets in terms of capacity. Dynegy has 20% and 14% of its generation capacity in the CAISO and PJM markets, respectively.

Pacific Gas and Electric Company (PCG) has a presence in the CAISO markets, while Exelon Corporation (EXC) has significant exposure in the PJM markets. The two companies are part of the Utilities Select Sector SPDR (XLU).

Major restructuring

In the earlier parts of this series, we looked at Dynegy’s deals with Duke Energy (DUK) and Energy Capital Partners. These deals will restructure Dynegy’s exposure in major electricity trading hubs in a big way.

Once the deals are closed, Dynegy will have the highest exposure in the PJM markets. The PJM market will account for 45% of Dynegy’s total generation capacity. Sensitivities and power price fluctuations in the PJM market will thus affect Dynegy’s operations significantly.

The addition of 3,400 megawatts of generation capacity for Dynegy in the New England markets as part of the deal will mean the Mass Hub trading hub will comprise 10% of Dynegy’s total generation capacity.

Continue to Part 7

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