Market Surveillance Panel
Consultation on CMSC
Issues Related to Constrained off Payments
to Generators and Imports
Market Operations Standing Committee
March 5, 2003
Public
Contents
• Purpose & Context of Consultation
• CMSC Payments - Background
• Constrained off Payments
– Various Rationale Noted
• Implications of Retaining Constrained off
Payments
• Issues for Discussion
• Request for Additional Comments
Public
Purpose & Context of Consultation
• Ongoing issue for MSP signaled earlier
– constrained off payments do not seem necessary or
appropriate and have the potential for abuse
• MSP Report: May-August 2002
• MSP Backgrounder paper April, 2002
– experience from the operation of the market
• MSP invites input
– to focus discussion, reconsider constrained off
payments for energy to generators and imports
– if not eliminated, may need additional safeguards
against abuse
Public
Purpose & Context of Consultation (cont.)
• Timetable
– Feb 21:
Posting of discussion paper
– Mar 31:
Final date for submission of comments
– early May: MSP conclusions and recommendations
to IMO Board
• MOSC Consultation
– to introduce issues
– to promote some initial discussion of issues
– to encourage subsequent written comments
Public
CMSC Payments - Background
• Design alternative to locational pricing
– CMSC payments based on difference between offers
(bids) and MCP
– intended for transmission / reliability limits
– but also induced by non-transmission causes
• Mitigation framework limited to transmission
• Weight of the recent evidence in other markets
– constrained-off payments are not regarded as
necessary in spot markets
Public
CMSC Payments for Energy
- May to Dec 2002
Constrained on Constrained off
($million)
($million)
Generation
32.7
47.3
Imports
83.6
15.8
Other
0.4
16.2
Total
116.7
79.3
Public
Constrained off Payments
- Various Rationale Noted
• Keep wholesale prices lower than otherwise
• Enhance reliability
– by maintaining critical plant in the marketplace
• Information about transmission bottlenecks
– helpful in identifying areas for investment
• Operational benefits to the marketplace
– encourages compliance; selection rule
• Compensates for departures from optimality
– existing generation and transmission endowment
Public
Implications of Retaining
Constrained off Payments
• Constrained off payments may interfere with
appropriate signaling in the market
– no incentive for generators to seek enhancements
– siting of new generation is indifferent to
transmission conditions
• Potential to affect CMSC with offer price
– treatment of negative offer prices
– some aspects of the local market power mitigation
framework need to be reviewed
Public
Issues for Discussion
• Primary Discussion Issues
– Implications for efficiency
– Implications for reliability
– Implications for coordinating transmission &
generation
• Additional or Optional issues (selected subset)
–
–
–
–
Implications for local market power mitigation
Implications for investment decisions
Audience identified issues
Discussion of one or two issues as time permits
Public
Implications for Efficiency
• What are the implications of keeping or
removing constrained off payments?
–
–
–
–
Impact on market price
Total payments
Signals for suppliers or consumers
Etc.
Public
Implications for Reliability
• What are the implications of keeping or
removing constrained off payments?
– Is it necessary or desirable to compensate a market
participant to comply with a dispatch instruction?
– Do payments help maintain critical plant in the
market place?
• Are constrained off payments the right vehicle?
– etc.
Public
Implications for Coordinating
Transmission & Generation
• What are the implications of keeping or
removing constrained off payments?
– Are CMSC payments providing good transmission
investment signals?
• Are there other more effective drivers or signals?
• What else is needed for transmission investment?
– Are generator siting signals being blunted?
– Is there a basis for treating new generation
differently from earlier existing generation?
– etc.
Public
Additional Issues for Discussion
• To be determined
– local market power mitigation framework?
– investment decisions?
– other identified issues?
Public
Request for Additional Comments
• See Consultation page and Discussion Paper
http://www.theimo.com/imoweb/consult/consult_cmsc.asp
• Provide written comments for posting on web
site
– send to [email protected]
• For background information on CMSC
– see links from Consultation page
Public