December 12, 2014
IESO Stakeholder Engagement
Re: SE 111 – Ramp-Down Congestion Management Settlement Credits
OPG would like to thank the IESO for the opportunity to provide comments on the most
recent material presented in SE 111 Webinar held November 27, 2014.
OPG has given careful considerations to alternative approaches that would meet the IESO’s
need for ramp-down CMSC recovery while not over recovering from participants. The only
means to achieve both of these is objectives through an after-the-fact process. Moving to
an after-the-fact process may increase the complexity and erode any benefit that may be
realized.
Identifying ramp-down intervals:
The IESO presented the method of assigning ramp-down intervals by “looking back” at
consecutive intervals of decreasing output in the dispatch schedule leading to the interval
that the dispatch schedule is zero. OPG does not support any method that would include
intervals where the resource is still dispatched above its’ minimum load point (MLP). The
IESO believes that there is self-induced ramp-down CMSC incurring above MLP. The
Dispatch Schedule Optimizer’s (DSO) use of Multi-Interval Optimization (MIO) gradually
dispatches a resource to near its MLP in the hour prior to the hour in which the DSO
observes uneconomic offers. If a resource is at a dispatch level above MLP in the first
uneconomic hour this would be as a result of economic decisions made by the DSO or
through manual intervention by the IESO. In either instance the resource should receive
these market-induced CMSC payments. The IESO’s proposal to exclude CMSC for intervals
when a resource dispatch schedule is above MLP would result in an under-compensation of
costs.
The IESO presentation stated the identification of ramp-down intervals will allow for
consideration of OR activation, commitments under generator cost guarantee programs,
constrained-on intervals and dispatch deviation. OPG would appreciate greater clarity on
how these instances would be captured and compensated in light of the proposed
settlement calculation.
Determining a reference price:
The IESO proposes to use the generator’s second lamination offer price (“P2”) as a
reference price to represent its steady state cost of operating at MLP. OPG does not agree
with P2 being a representative reference price and believes this methodology to be overly
prescriptive, failing to capture the true operating costs to the generator. OPG’s concerns
include:
i)
A single reference price fails to recognize a generator’s offers may change
over time.
E.g.) the hour from which the P2 offer price is taken may represent an
offer from the day-ahead commitment process (DACP). A day-ahead
offer may exclude speed-no-load (SNL) costs (which may have been
submitted separately in three part offers). This would understate the
costs of a unit that is shut down outside of the day-ahead
commitment period. There is no ability to increase the P2 offer from
the day-ahead commitment period without disqualifying the
generator for the production cost guarantee (PCG).
While this is only one example, there are other legitimate examples as to
why a unit’s offer pattern would change over time, including fuel price, fuel
type, profiling assumptions, testing, and other strategic decisions.
ii)
A single reference price only represents an incremental running cost at a
specific loading point under specific conditions. Should the IESO persist with
recovering CMSC payments above MLP this offer substitution fails to
recognize the range of offer laminations a resource may span during rampdown.
E.g.) a resource may begin its ramp-down from a loading point priced
at P20. Depending on the generator’s ramp-down rate, there may be
several intervals before the P2 price would be valid relative to actual
cost. This is especially true in the case of a duel fuel resource where
the delta between laminations using different fuels could be
significant.
Need for a technically based ramp-down factor:
For intervals where the dispatch is less than MLP, the IESO has proposed an ‘illustrative’ 1.3
multiplier in the ramp down settlement calculation. While 1.3 was a factor used in the
Market Surveillance Panel’s (MSP) “Monitoring Document on Generator Offer Prices Used
to Signal an Intention to Come Offline”1, the MSP clarified in its October 10, 2014 comments
that the generator’s 3 hour ahead nodal price multiplied by a factor of 1.3 was never viewed
as “an appropriate price for purposes of calculating ramp down CMSC payments”2. In any
attempt to return a market participant to its operating profit, this multiplier needs to be
technically based. Once the multiplier has been developed, it should only be subject to
revision by the Market Rule Amendment process. Furthermore, based on varying
technologies, heat rates and costs, a single multiplier for the use of all market participants
may not be appropriate.
1
http://www.ontarioenergyboard.ca/oeb/_Documents/MSP/MonitoringDocument_GeneratorOfferPrices_20110819.pdf
http://www.ieso.ca/Documents/consult/se111/SE111-20141010-MSP.pdf
2
In general, OPG is not convinced the proposed ramp-down identification and settlement
method sufficiently captures the true operating costs of market participants. The IESO’s
ramp-down identification would result in disallowance of justified CMSC payments. There
are significant obstacles to overcome by using a “reference” price that varies with time. The
IESO’s use of a ramp-down factor needs to be technically based and its proposal to use a
one-size-fits-all multiplier is not representative for all participants. OPG urges the IESO to
consider a more comprehensive solution for further stakeholder consideration.
Regards
David Peterson
Senior Manager Market Affairs
Ontario Power Generation