Recovery of Costs of Load Shed Service for imports (LSSi) Topics

AESO 2014 Tariff Consultation
May 22, 2013
Recovery of Costs of
Load Shed Service for imports (LSSi)
Raj Sharma, Senior Tariff Analyst
May 22, 2013 — Calgary
Topics
• Introductions and background
• Nature of Load Shed Service for imports (LSSi)
• Costs associated with LSSi
• Options for cost recovery
• Recommendation for cost recovery
• Next steps
• Discussion and questions
Please ask questions during presentation
2
Recovery of Costs of LSSi — Calgary
1
AESO 2014 Tariff Consultation
May 22, 2013
What is LSSi?
• LSSi is a competitively-procured service to increase the
import capacity of the Alberta-BC intertie while protecting
system reliability
– Contributes to meeting the Transmission Regulation’s
requirement that the AESO restore interties to their path ratings
– LSSi does not affect export capacity
• Alberta-BC intertie is rated at 1,200 MW for imports. In the
absence of LSSi, intertie is generally restricted to 600 MW for
imports for reliability reasons. LSSi adds 150 MW to 200 MW
of additional import capacity across the duration curve.
• System Controller arms LSSi Provider’s load based on net
import schedule and merit order. Once LSSi Provider’s load
is armed and system frequency falls below 59.5 Hz, LSSi
Provider’s load would trip automatically.
3
Load shed service to facilitate higher
imports started in 1998
• Interruptible Load Remedial Action Scheme (ILRAS) has
been used since 1998.
• FortisAlberta was the sole ILRAS service provider.
• This ILRAS agreement with FortisAlberta was terminated in
December 2006. A subsequent agreement with FortisAlberta
permitted the AESO to use ILRAS under supply shortfall
conditions only until February 2008.
4
Recovery of Costs of LSSi — Calgary
2
AESO 2014 Tariff Consultation
May 22, 2013
How is LSSi procured?
• LSSi is procured competitively when possible.
– The AESO signed 432 MW of competitive LSSi contracts for
use in 2012
• If LSSI can not be procured competitively then the AESO
negotiates contracts with LSSi Providers.
– The AESO will sign about 132 MW of negotiated LSSi
contracts for use in 2013, partly to replace expiring contracts
and partly to procure additional volume
5
How does LSSi work?
0.2 seconds
High Imports
(1)
(2)
(3)
(4)
(5)
System
Controller arms
LSSi Provider’s
load
Intertie trips
Frequency drops
below 59.5Hz
UFR detects drop
in frequency and
trips the load off
Frequency
recovers to
stable levels
6
Recovery of Costs of LSSi — Calgary
3
AESO 2014 Tariff Consultation
May 22, 2013
How does LSSi work? (cont’d)
60.2
90
60.1
80
60
70
59.9
60
59.8
50
59.7
40
59.6
30
59.5
20
59.4
10
59.3
0
Hz
MW
Time (milliseconds)
System Frequency
LSSi Provider's Load
7
How are LSSi providers paid?
• Competitive contracts with successful bidders include a
three-part payment structure
– $/MW in every hour LSSi is offered (availability payment)
– Additional $/MW in every hour that load is armed and ready to
be tripped (arming payment)
– Additional $/MW in every hour that load is actually tripped
(tripping payment)
• Total costs for LSSi is determined by the competitive (and
negotiated, if any) $/MW rates procured for the service and
the LSSi volumes procured, armed, and tripped
8
Recovery of Costs of LSSi — Calgary
4
AESO 2014 Tariff Consultation
May 22, 2013
How much does LSSi cost?
Year
Cost ($ million) Average cost
as $/MWh
2011 Actual
Average cost as % of
Pool Price
1.8
0.03
0.04%
2012 Forecast
58.05
1.03
1.60%
2012 Actual
22.75
0.40
0.63%
68.7
1.15
1.91%
2013 Forecast
9
How could LSSi costs be recovered?
• The AESO has considered four options for the recovery of
LSSi costs
• LSSi costs could be recovered as part of the bulk system
charge (primarily as $/MW of coincident demand plus a small
$/MWh component)
• LSSi costs could be recovered as part of other system
support services (as $/MW of non-coincident peak demand)
• LSSi costs could be recovered as a percentage of pool price
• LSSi costs could be recovered by allocating hourly cost to
hourly load
10
Recovery of Costs of LSSi — Calgary
5
AESO 2014 Tariff Consultation
May 22, 2013
Recover as bulk system charge
• Bulk system charge currently recovers costs 82% on demand
at time of monthly system peak and 18% on metered energy
• Intertie costs are part of bulk system costs and LSSi allows
increased imports (similar to additional intertie capacity)
• LSSi differs from bulk system wires since it is limited to
specific time intervals, is a variable rather than fixed cost,
and has a very different cost structure
11
Recover as other system support service
• Other system support services charge recovers costs as
$/MW charge based on highest metered non-coincident
demand during month
• LSSi can be considered similar to under-frequency load shed
service (UFLS) since both mitigate risk of system frequency
collapse
• LSSi differs from UFLS since it is limited to very specific
conditions and has a very different cost structure
12
Recovery of Costs of LSSi — Calgary
6
AESO 2014 Tariff Consultation
May 22, 2013
Recover as percentage of pool price
• LSSi costs could be recovered as a percentage of pool price
in an hour multiplied by metered energy in the hour
• LSSi costs are somewhat correlated to pool price, in that
hours with high imports are somewhat correlated to hours
with high pool price
• As well, LSSi facilitates higher levels of imports at $0/MWh
and that tends to lower pool price
• However, LSSi addresses transmission reliability rather than
market-related issues and has a cost structure unrelated to
pool price
13
Recovery through allocation of hourly costs
to hourly load
• LSSi costs could be recovered similar to operating reserve
costs, by allocating costs in an hour to Rate DTS and FTS
users in the hour
• LSSi, like operating reserves, is an ancillary service that
allows the AESO to respond to transmission system
contingencies
• LSSi has a cost structure that varies hour by hour, depending
on whether LSSi load has been armed or tripped
• LSSi differs from operating reserves since it is limited to very
specific conditions
14
Recovery of Costs of LSSi — Calgary
7
AESO 2014 Tariff Consultation
May 22, 2013
Consideration for cost recovery
• Should result in full recovery of costs
– Should not result in deferral account balances
• Should provide appropriate price signal
– Market participants should be able to respond to price signal
• Should reflect cost causation to be fair and objective
– Costs should be recovered from market participants who
contribute to costs being incurred
• Should be stable and predictable
• Should be easy to understand and administer
15
Assessment of alternative approaches
No
Deferral
Balances
Price
Signal
Cost
Causation
Predictable
Simple
As bulk system
charge



?
?
As other system
support service





As percentage of
pool price

?
?

?

?

?

Recovery
Approach
Through
allocation of
hourly costs
16
Recovery of Costs of LSSi — Calgary
8
AESO 2014 Tariff Consultation
May 22, 2013
Assessment of alternative approaches
No
Deferral
Balances
Price
Signal
Cost
Causation
Predictable
Simple
As bulk system
charge



?
?
As other system
support service





As percentage of
pool price

?
?

?

?

?

Recovery
Approach
Through
allocation of
hourly costs
17
What is AESO proposal for LSSi cost
recovery?
• Recover LSSi cost through allocation in hour to Rate DTS
and FTS users in hour
– Similar to recovery of operating reserves cost
• Primarily based on cost causation considerations
– Costs incurred in hour will be allocated to users of transmission
system in that hour
– Tendency of imports to lower pool price will offset LSSi costs in
hour when both are based on metered energy in hour
• Will also avoid deferral account balance
– LSSi costs are difficult to forecast due to three-part structure
• Primary disadvantage is that price signal is not explicit
– market participants will not know charge until month-end
18
Recovery of Costs of LSSi — Calgary
9
AESO 2014 Tariff Consultation
May 22, 2013
Example hourly allocation
Total Rate DTS
and Rate FTS
Metered
LSSi Cost
Energy
per MWh
Market
Participant
Metered
Energy
Hourly LSSi
Charge to
Market
Participant
D=B/C
E
F=DxE
[$/MWh]
[MWh]
[$]
Hour
Ending
(HE)
Total
Cost of
LSSi
A
B
C
—
[$]
[MWh]
01
5,000
8,000
0.63
80
50
02
5,000
8,200
0.61
85
51.8
03
5,000
8,100
0.62
80
49.4
04
10,000
8,400
1.19
90
107.1
05
20,000
8,600
2.33
85
197.7
06
20,000
9,000
2.22
100
222.2
19
Next steps
• Address any concerns raised by stakeholders
• Include proposal in 2014 ISO tariff application
– To be filed with Commission on June 30, 2013
• New rates expected to be effective July 1, 2014
– After approval by Alberta Utilities Commission following
regulatory proceeding on tariff application
– Until then LSSi costs will be treated in the same way as Load
Shed Service (LSS) which was previously called Under
Frequency Mitigation (UFLS)
– LSSi cost will be recovered as Other System Support Services,
a $/MW charge based on highest metered non-coincident
demand during month
20
Recovery of Costs of LSSi — Calgary
10
AESO 2014 Tariff Consultation
May 22, 2013
Discussion and questions
• Please contact Raj or John if you have any questions,
comments and/or suggestions
– Raj Sharma, 403-539-2632, [email protected]
– John Martin, 403-539-2465, [email protected]
21
Thank you
Recovery of Costs of LSSi — Calgary
11