Toronto: The Market Surveillance Panel (MSP) of the Ontario Energy Board is recommending changes that could have significant impacts on both consumers and generators in the Ontario Market. In its most recent report, which again found that on the whole the Ontario electricity market is reasonably efficient and free from abuse, some deficiencies were brought to light. It said, for example, “the Panel has observed numerous complications associated with the use of two schedules (“market” and “constrained”) and related aspects of the market design that have undermined efficiency or increased costs to customers with little or no apparent benefit. To this end, the Panel is recommending that the IESO change some of its procedures or Market Rules related to congestion management settlement credits (CMSC) and transmission rights payments.”
In particular it said, “The Panel recommends that the IESO proceed with development work on those recommendations of the Electricity Market Forum that are directed at improving market efficiency, including the consideration of options to replace the two-schedule structure of the current market design.”
It highlighted a concern about the new methodology for collecting Global Adjustment (GA): "The Panel believes that the GA methodology can create a windfall for those Class A customers who are already being paid to reduce output under OPA demand response contracts.” It addressed this concern with Recommendation 3-3: “The Panel recommends that the Government of Ontario and the OPA work together to ensure that Class A customers are not compensated by both the Global Adjustment allocation methodology and an OPA demand response contract for the same MW of load shedding or shifting."
It also commented on CMSC payments to generators: "The Panel continues to be concerned that unwarranted CMSC payments are being made to generators during self-induced ramp downs. The Panel believes that the most effective and efficient way to eliminate such payments is a market rule change.” Recommendation 3-2 read as follows: “The Panel recommends that the IESO implement a permanent, rule-based solution to eliminate self-induced CMSC payments to ramping-down generators."
The report, covering the period May – October 2011, looked at a number of operating characteristics of the market. The only major additions to the province's supply resources during the period came from large scale wind projects. Between May and October 2011 approximately 315 MW of wind capacity was added to the supply mix, while there were no significant reductions made to Ontario's generation supply during the period.
The average Hourly Ontario Energy Price (HOEP) was $30.68/MWh during the 2011 summer period, representing a decrease of 22.3 percent from $39.47/MWh in the summer of 2010. The lowest monthly average HOEP occurred in May 2011 at $24.42/MWh; the highest monthly average HOEP was experienced in July at $35.29/MWh. All months during the summer of 2011 experienced lower average HOEPs than their monthly counterparts in 2010.
This is the first Summer Report where all months of the reporting period were subject to the new Class A and Class B Global Adjustment (GA) allocation. From May to October 2011, the effective GA cost averaged $24.93/MWh for Class A customers and $39.62/MWh for Class B customers. Accordingly, the effective total wholesale price (HOEP, plus GA, plus uplift charges) for electricity in the summer of 2011 was $57.34/MWh for Class A customers and $72.07/MWh for Class B customers, compared to $65.61/MWh in the summer of 2010 for all customers.
There were six hours in the summer period in which the HOEP exceeded $200/MWh. All instances were consistent with normal supply/demand variation or explainable by the way in which the two-schedule market design operates.
There were 711 hours in which the HOEP was less than $20/MWh, including 96 hours where the HOEP was negative. The number of hours when the HOEP was less than $20/MWh or negative increased substantially in the summer of 2011 (compared to 2010 in which there were 361 hours with a HOEP less than $20/MWh and 19 hours with a negative HOEP). Surplus baseload generation (SBG) and other factors previously identified by the Panel continue to explain the low and negative prices. SBG is exacerbated by wind resources that are not dispatched off during such periods, the report said.
There were five hours where the Panel's anomalous uplift screening criteria were met. All five instances involved Operating Reserve (OR) payments greater than $100,000 in a given hour. There were no instances when Congestion Management Settlement Credit (CMSC) payments or Intertie Offer Guarantee (IOG) payments were greater than $500,000 in a single hour, or when CMSC payments at an intertie group exceeded $1 million for a day.
Beginning in January 2011, the method of allocating the GA changed for large customers (i.e. “Class A” customers with average peak demand exceeding 5 MW). Significant demand reductions were observed during the highest demand days in the summer of 2011. This report also examines the impact of the GA allocation methodology for the two classes of customers (“Class A” and “Class B”), and estimates that participants who were compensated for curtailing or shifting under the DR3 and DR2 demand response programs avoided as much as $39 million of GA charges in the summer of 2011.
The report is available at www.ontarioenergyboard.ca > About the OEB > Electricity Market Surveillance.