One of the issues under consideration at the current Hydro One transmission rate hearing is the rate charged to Ontario market participants who export power to customers outside the province.
The current rate, $1 per MWh, has not been changed since market opening. During a previous OEB hearing on Hydro One’s transmission rates, the IESO was asked to look at alternative rate options and bring back a recommendation to the OEB for consideration at this year’s hearing. The IESO studied a range of options, hired experts and consulted with stakeholders in 2009 and 2010. However, in the end it concluded that the current rate remains the best option. One of the key reasons is that exports will help the IESO deal with the expected increase in variable generation.
In its evidence to the hearing, the IESO made the following observations:
“Darren Finkbeiner, Manager of Market Development for the IESO, confirmed that between commencement of the ETS tariff study in early 2009 and the IESO’s recommendation in August, system conditions changed significantly. Specifically, Mr. Finkbeiner stated that:
• The CRA (Charles River Associates, consultants hired by the IESO) quantitative analysis had relied on a load forecast for 2010 of 159 TWh. By August 2009, the IESO’s load forecast had materially dropped.
• SBG (Surplus Baseload Generation) conditions had increased to a level “never seen before by the IESO”.
During the period April – August 2009, the IESO started to see the “first major wave of surplus conditions.
• The Green Energy Act received first reading in early 2009, however, it was not until later in the year that the IESO began to appreciate the magnitude of renewable resources that were likely to be added to the system pursuant to the OPA’s FIT program. Mr. Finkbeiner stated that the IESO is currently anticipating that 6,000 or more MW of renewable resources will be added to the system over the next two to three years.”
The IESO also said that, “Surplus conditions can be mitigated by exports, which increase demand for surplus baseload generation and demand for other marginal resources (e.g., gas, hydro) that can be called upon by operators to more flexibly adapt to real-time surplus/demand variability. Conversely, by increasing the ETS tariff, export transactions become more expensive thereby dampening their ability to respond to and
alleviate surplus conditions. Mr. Finkbeiner further noted that the IESO is working on developing tools and processes to help better integrate increased intermittent resources on the system, but it will be sometime before the necessary processes/rule changes are made. ...
“Based on the foregoing, it is the IESO’s view that it would prudent to maintain the current $1.00/MWh ETS tariff until Ontario has integrated more intermittent renewable resources into the electricity system and the IESO has developed new tools/processes and has gained requisite experience operating the system under these dramatically transformed conditions. Given the anticipated in-service dates for the first major tranche of FIT intermittent generation resources, the IESO recommends that the current ETS tariff be maintained at least until the spring of 2013.”