In response to a proposed work plan for stakeholder engagement on the design of a capacity auction process for Ontario, APPrO has expressed reservations and proposed an alternative approach. APPrO President Dave Butters said, “[T]he IESO is proceeding too far, too quickly toward the design and implementation of a very complex capacity auction without in-depth discussion of issues.”
In an October 9 letter to the IESO, Butters recommended “that a new process be established which will encourage robust discussion and dialogue among individuals and organizations, and provide them with ‘the opportunity and forum to provide input and feedback about proposed decisions or market rule changes that affect their business.’ This would mean a revised timetable in which the IESO would put forward its views and stakeholders would respond in detail after an appropriate period of time.”
Butters, who serves as a member of the IESO’s Stakeholder Advisory Committee, identified a series of concerns surrounding the development of capacity markets. Although many of the examples on which capacity auctions are based are US examples, “US-style capacity markets are not only complex: discussions about critical elements have resulted in ‘lengthy and contentious stakeholder proceedings and litigation at the Commission (FERC).’ Additionally many observers have questioned their success in meeting the objectives for which they have been designed.” Further, it can be argued that key regulatory and market conditions on which US-style auctions are predicated do not exist in Ontario.
He cited several issues as examples of the kind of considerations that will need to be addressed in the design of appropriate stakeholdering:
• Clear objectives for a capacity auction;
• Robust demonstration of its efficacy as compared to other options;
• The relationship of capacity auctions to current procurements such as FIT, LRP,
LRRP, CHP or other programs;
• The relationship of capacity auctions to government directive powers in respect of
supply mix and in respect of specific procurements;
• The relationship of capacity auctions to integrated regional resource planning;
• The relationship of capacity auctions to the capability to export capacity products;
• Meaningful consideration of the important governance issues.
Butters noted that, “It should be an important signal that the vast majority of market participants including those who would be expected to invest in capacity have expressed serious reservations about this initiative and its pace. We do not think that the current timetable or work organization is satisfactory.”
“Our recommendation is that the IESO spend more time with stakeholders to resolve these concerns before advancing prematurely toward design.”
The full text of the letter is available from APPrO.