Price Restatement Period Review DISCUSSION PAPER Date:

Price Restatement Period Review
DISCUSSION PAPER
Date:
Prepared by:
January 24, 2012
Hameed Zaman
Senior Analyst, Market Operations
Table of Contents
1 Executive Summary ............................................................................................................................. 3 2 Purpose ................................................................................................................................................. 3 3 Terms of Reference .............................................................................................................................. 3 3.1 3.2 3.3 Principles ...................................................................................................................................................... 3 Scope ........................................................................................................................................................... 4 Potentially Affected Market Participants ....................................................................................................... 4 4 Background and Policy Coherence .................................................................................................... 4 5 Analysis ................................................................................................................................................. 5 5.1 5.2 5.3 Current Market Timeline ............................................................................................................................... 5 Current Restatement Activity ........................................................................................................................ 6 Areas Impacted .......................................................................................................................................... 12 5.3.1 System Operation ........................................................................................................................ 12 5.3.2 Adequacy Assessments ............................................................................................................... 12 5.3.3 Long Lead Time Energy Assets ................................................................................................... 12 5.3.4 Energy Market Merit Order Stability ............................................................................................. 12 5.3.5 Price Forecasting ......................................................................................................................... 13 5.3.6 Intertie Scheduling ....................................................................................................................... 13 5.3.7 Wind Power Integration ................................................................................................................ 14 5.3.8 Transmission Constraints Management ....................................................................................... 14 5.3.9 Demand Response ...................................................................................................................... 14 5.3.10 Operating Reserves ..................................................................................................................... 14 5.3.11 Dispatch Down Service ................................................................................................................ 15 5.3.12 Supply Surplus ............................................................................................................................. 15 6 Considerations for a Revised Price Restatement Period ............................................................... 15 6.1 6.2 6.3 6.4 Price restatement period greater than T-120 .............................................................................................. 15 Price restatement period less than T-120 and greater than or equal to T-60 ............................................. 16 Price restatement period less than T-60 and greater than or equal To T-20 .............................................. 16 Price restatement period less than T-20..................................................................................................... 16 7 Summary and Next Steps .................................................................................................................. 16 1 Executive Summary
In December 2007, the Alberta Electric System Operator (AESO) undertook the Quick Hits
Implementation (Quick Hits) initiative in response to recommendations in Alberta’s Electricity Policy
Framework issued by the Alberta Department of Energy (DOE). As part of this initiative, the AESO
implemented the price restatement period1 along with other market changes in order to stabilize the
energy market merit order, ensure short-term adequacy and provide increased restatement flexibility for
market participants.
A review of Quick Hits (Quick Hits Review) was published by the AESO in July 2009 which indicated that
the intended benefits of Quick Hits are being realized. The AESO has continued to monitor the operation
of the market and initiated various efforts to enhance the design of the market as it evolves. At the same
time, market participants and the AESO have gained valuable experience operating under the Quick Hits
rules. Consequently, the AESO is of the view that initiating stakeholder consultation at this point to review
the current price restatement period may provide benefits in the form of increased market responsiveness
and efficiency.
In this discussion paper, the AESO presents a current market timeline, an analysis of current restatement
activity and identification of market areas that could be impacted as a result of a change to the price
restatement period. The AESO also presents options for a revised price restatement period to consider
with the purpose of initiating discussion on the potential impacts of changing the current two-hour
restriction on price restatements. Our focus is to assess options for fine-tuning the price restatement
period which could lead to an even fairer, more efficient and openly competitive (FEOC) market without
compromising the system reliability and offer submission benefits achieved through Quick Hits.
2 Purpose
The purpose of this discussion paper (the Paper) is to review the price restatement period and explore
the potential market impacts of changing the current two hour limitation on restatements. The intent of this
Paper is to initiate consultation with industry stakeholders on whether a change to the price restatement
period is desired and on potential options for refining the restatement period.
3 Terms of Reference
3.1
Principles
The principles for the purposes of this Paper are as follows:
1. The ISO Rules Consultation Process includes Principles for ISO Rules Consultation. In the event
an issue(s) addressed within the Paper manifests in the creation or amendment of ISO rules, the
ISO Rules Consultation Process will be initiated.
2. The AESO and market participants will act in good faith and in a fair and respectful manner.
3. The AESO has specific obligations as set out in various Acts and Regulations. Specifically, the
AESO must ensure the safe and reliable operation of the Alberta Interconnected Electric System
(AIES) and must also promote a fair, efficient and openly competitive (FEOC) market for
electricity. The AESO has a specific legislated obligation to collect, store and disseminate
information relating to the current and future electricity needs of Albertans. As part of this
1
“Price restatement period’ means the two-hour period prior to the start of a settlement interval that participants can
not submit price restatements.
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obligation, the AESO is required to make decisions on the appropriateness of publicly disclosing
certain information.
4. The stakeholder consultation process, particularly the degree of detail of information provided by
the AESO and market participants, the time required for review of that information provided, and
the amount of discussion will be commensurate with the importance, complexity, potential
impacts, and urgency of the proposed ISO rules or process changes to which it applies.
5. An effective consultation process will involve a full discussion of the views of the market
participants in order to enable the AESO to make the best decision possible in the context of the
AESO mandate to make ISO rules under the legislation and regulations.
6. The AESO will consider all feedback by market participants in response to this Paper. The AESO
is also committed to consulting with market participants with respect to any changes to the stated
scope of the initiative.
3.2
Scope
The scope of this Paper is limited to the price restatement period and the market impacts associated with
any changes under consideration. The AESO is seeking feedback from market participants on the issues
discussed in this paper and on any additional market impacts directly resulting from a change in the price
restatement period.
The AESO is not seeking feedback from market participants at this time regarding:
3.3

the amendment of ISO mandated responsibilities; or

general changes to the current market design framework; or

additional changes implemented as part of Quick Hits other than the price restatement period.
Potentially Affected Market Participants
All market participants may have an interest in the issues addressed in this Paper.
4 Background and Policy Coherence
Under Alberta’s electricity market design prior to the implementation of Quick Hits, suppliers submitted
non-binding day-ahead offers and generator status information to the AESO. Using the day-ahead offers
and its load forecast, the AESO developed an operating schedule and a price forecast for the next day.
During the operating day, the AESO issued dispatch instructions to suppliers to either increase or
decrease generation in order to meet demand.
The previous market design allowed market participants to restate their offers up to the time of delivery
allowing offers to be changed while they were being dispatched. This ability to restate combined with no
obligation for participants to respond to dispatches created volatility and uncertainty with respect to the
price signal and could have deterred certain generators, such as long lead time and peaking units, from
participating in the market. Additionally, the system controller did not have a consistent picture of supply
and demand in the hours ahead. As a result, the market design prior to Quick Hits was seen to cause
short-term adequacy issues and a change in the market design was required to balance market
facilitation and system reliability.
In June 2005, the Alberta Department of Energy (DOE) published Alberta’s Electricity Policy Framework
which identified several short-term adequacy issues and provided recommendations for energy market
merit order stabilizers. These included must offer requirements for generators and a limitation on
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restatements. While restatements due to operating constraints are acceptable, the ability to restate for
economic reasons incented suppliers to self-dispatch causing supply adequacy uncertainty. The DOE
recommended intra-Alberta generators have the ability to restate their offer price up to two hours prior to
the start of the delivery hour, commonly referred to as T-2, and within T-2, restatements could only be
made for physical operating reasons or to accommodate unexpected supply coming back early from an
outage.
Another goal of the merit order stabilizers was to improve the AESO’s visibility of supply by establishing a
baseline of all potential supply available. The combination of Maximum Capability (MC) and Available
Capability (AC) rules provide this visibility and rules regarding Acceptable Operating Reason (AOR)
provide further assurance that generators will respond to a dispatch instruction. Further, the rules
implemented as part of Quick Hits do not allow a voluntary price restatement within T-2. This restriction is
a key component of the current market design intended to ensure efficient dispatch, enhance merit order
stability and avoid undue intra-hour volatility and price-chasing. These recommendations were put into
operation as part of Quick Hits in 2007. The AESO analyzed the impacts of the changes and published
the Quick Hits Review which demonstrated that the intended benefits of Quick Hits are being realized.
The AESO continues to monitor the operation of the market and has initiated various efforts to evolve the
market design to integrate new generation resource types and potential intertie capacity, along with other
incremental market enhancements.
In the past four years, market participants and the AESO have gained valuable experience operating
under the Quick Hits rules, and while the current policy and ISO rules specify a two-hour price
restatement period, market participants have suggested there may be market benefits in reviewing this
two-hour restriction. The AESO is of the view that the current price restatement period is working as
intended, but with the various market initiatives underway, there is a basis for initiating discussion on the
price restatement period and assessing whether fine-tuning this period can lead to an even more FEOC
market without compromising the system reliability benefits achieved through Quick Hits.
5 Analysis
In this section, the AESO reviews a segment of the current market timeline, current restatement activity
and market areas that could be impacted by a change in the price restatement period.
5.1
Current Market Timeline
A timeline showing some key market events during the offer process starting at day-ahead (D-1) up to the
beginning of the settlement interval (T) is illustrated in Figure 1. The timeline is only intended to provide
context for the analysis and discussion in this Paper and is not representative of all events in the offer
process. While ‘T-2’ is commonly used to mean two hours prior to the start of the settlement interval, ‘T-x’
in Figure 1 below refers to ‘x’ minutes prior to the start of the settlement interval.
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Figure 1 – Market Timeline
5.2
Current Restatement Activity
Market participants first submit offers for their assets prior to noon on the day before a given settlement
interval. Participants are then allowed to submit restatements, called voluntary price restatements, to
change their price or volume up to two hour prior to the start of the settlement interval. However, if there
is a change to an asset’s available capability (AC), or the asset can no longer comply with their offer
submission within the price restatement period, participants may submit only volume restatements, called
mandatory energy restatements, changing the offered volumes and providing an acceptable operational
reason for the restatement.
For the analysis of current restatement activity, hourly generator price and volume restatements as well
as import and export restatements in the month of April from the years 2008 to 2011 are tabulated and
presented below. Similar analysis was completed for the months August and December with very similar
results. For the analysis presented below ‘T-x’ refers to ‘x’ hours prior to the start of the settlement
interval.
Currently there are approximately sixty-five (65) assets that offer into the market daily. An analysis of
price restatement activity indicates there is an increasing number of price restatements submitted by
generators leading up to T-2, as shown in Figure 2 below, with an average of one price restatement per
hour occurring in the T-3 to T-2 timeframe. This demonstrates price discovery takes place up to T-2 as
participants respond to changes in their market position or in general market conditions. In accordance
with the Voluntary Price Restatement rule (ISO Rule 3.5.3.3), no price restatements are seen between T2 and the start of the settlement interval (T to HE).
Page 6
Figure 2 – Price Restatements by T minus for the month of April 2008 - 2011
1,600
1,600
1,400
1,200
1,400
1,000
800
Total Number of Restatements
1,200
600
400
1,000
200
0
T-4 to T-3
800
T-3 to T-2
T-2 to T-1
T-1 to T
T to HE
600
400
200
2008
2009
2010
T to HE
T-1 to T
T-2 to T-1
T-3 to T-2
T-4 to T-3
T-5 to T-4
T-6 to T-5
T-7 to T-6
T-8 to T-7
T-9 to T-8
T-10 to T-9
T-11 to T-10
T-12 to T-11
T-13 to T-12
T-14 to T-13
T-15 to T-14
T-16 to T-15
T-17 to T-16
T-18 to T-17
T-19 to T-18
T-20 to T-19
T-21 to T-20
T-22 to T-21
T-23 to T-22
T-24 to T-23
T-25 to T-24
T-26 to T-25
T-27 to T-26
T-28 to T-27
T-29 to T-28
T-30 to T-29
T-31 to T-30
T-32 to T-31
T-33 to T-32
T-34 to T-33
T-35 to T-34
0
2011
An analysis of volume restatements or mandatory energy restatements indicates an increasing number of
restatements by generators leading up to T-2, as shown in Figure 3, with an average of one volume
restatement per hour in the T-3 to T-2 timeframe. Within the T-2 to HE period volume restatements occur
only for acceptable operational reasons. More restatements are seen in the T-1 to T timeframe than in the
T-2 to T-1 timeframe because it might be clearer to participants that they will be unable to comply with the
upcoming dispatch.
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Figure 3 – Volume Restatements by T minus for the month of April 2008 - 2011
1,200
1,200
1,000
800
1,000
600
200
T-4 to T-3
T-3 to T-2
T-2 to T-1
T-29 to T-28
T-26 to T-25
0
T-32 to T-31
Total Number of Restatements
400
800
T-1 to T
T to HE
600
400
200
2008
2009
2010
T to HE
T-1 to T
T-2 to T-1
T-3 to T-2
T-4 to T-3
T-5 to T-4
T-6 to T-5
T-7 to T-6
T-8 to T-7
T-9 to T-8
T-10 to T-9
T-11 to T-10
T-12 to T-11
T-13 to T-12
T-14 to T-13
T-15 to T-14
T-16 to T-15
T-17 to T-16
T-18 to T-17
T-19 to T-18
T-20 to T-19
T-21 to T-20
T-22 to T-21
T-23 to T-22
T-24 to T-23
T-25 to T-24
T-27 to T-26
T-28 to T-27
T-30 to T-29
T-31 to T-30
T-33 to T-32
T-34 to T-33
T-35 to T-34
0
2011
Importers must offer into the energy market by T-2 and then procure transmission for all points in the
transaction. If an importer is unable to procure the necessary transmission, they must restate their offer
as soon as reasonably practicable and this normally occurs in the T-1 to T timeframe. Consequently,
import restatements show the most activity between T-1 and T, as illustrated in Figure 4, with an average
of one restatement per hour during this time.
Page 8
Figure 4 – Import Restatements by T minus for the month of April 2008 - 2011
1,800
1,800
1,600
1,400
1,600
1,200
1,000
1,400
Total Number of Restatements
800
600
1,200
400
1,000
200
0
T-4 to T-3
800
T-3 to T-2
T-2 to T-1
T-1 to T
T to HE
600
400
200
2008
2009
2010
T to HE
T-1 to T
T-2 to T-1
T-3 to T-2
T-4 to T-3
T-5 to T-4
T-6 to T-5
T-7 to T-6
T-8 to T-7
T-9 to T-8
T-10 to T-9
T-11 to T-10
T-12 to T-11
T-13 to T-12
T-14 to T-13
T-15 to T-14
T-16 to T-15
T-17 to T-16
T-18 to T-17
T-19 to T-18
T-20 to T-19
T-21 to T-20
T-22 to T-21
T-23 to T-22
T-24 to T-23
T-25 to T-24
T-26 to T-25
T-27 to T-26
T-28 to T-27
T-29 to T-28
T-30 to T-29
T-31 to T-30
T-32 to T-31
T-33 to T-32
T-34 to T-33
T-35 to T-34
0
2011
Similar to importers, exporters must also bid into the market by T-2. As shown in Figure 5, most
restatements occur in the T-3 to T-2 timeframe prior to the restatement period taking effect with some
restatements occurring in the T-1 to T timeframe as the export schedules are finalized. Exports have
fewer restatements when compared to imports primarily due to the relatively small amount of energy that
was exported in the timeframe studied and also because export capacity may be more readily available.
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Figure 5 – Export Restatements by T minus for the month of April 2008 - 2011
350
350
300
250
300
200
150
Total Number of Restatements
250
100
50
200
0
T-4 to T-3
T-3 to T-2
T-2 to T-1
T-1 to T
T to HE
150
100
50
2008
2009
2010
T to HE
T-1 to T
T-2 to T-1
T-3 to T-2
T-4 to T-3
T-5 to T-4
T-6 to T-5
T-7 to T-6
T-8 to T-7
T-9 to T-8
T-10 to T-9
T-11 to T-10
T-12 to T-11
T-13 to T-12
T-14 to T-13
T-15 to T-14
T-16 to T-15
T-17 to T-16
T-18 to T-17
T-19 to T-18
T-20 to T-19
T-21 to T-20
T-22 to T-21
T-23 to T-22
T-24 to T-23
T-25 to T-24
T-26 to T-25
T-27 to T-26
T-28 to T-27
T-29 to T-28
T-30 to T-29
T-31 to T-30
T-32 to T-31
T-33 to T-32
T-34 to T-33
T-35 to T-34
0
2011
For both imports and exports, restatements within T-1 and T are a result of participants offering into the
market at T-2 without being certain of their ability to procure transmission for the transaction. Figure 6
and Figure 7 show import and export restatement activity in the hour prior to the settlement interval by
five minute intervals. The highest number of import and export restatements during this period occurs
between the 41st and the 45th minute. This is typically when the intertie schedule is finalized. In April
2011, the higher import restatement activity could be due to higher imports (382,364 MWh) compared to
previous years (158,160 MWh in April 2010 and 131,750 MWh in April 2009) and the lower export
restatements could be due to lower exports (863 MWh) compared to previous years (21,253 MWh in April
2010 and 36,987 MWh in April 2009).
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Figure 6 – Import Megawatt Restatements by five minute blocks for the month of April 2008 - 2011
Figure 7 – Export Megawatt Restatements by five minute blocks for the month of April 2008 - 2011
With regard to price and volume restatements, it is anticipated that this behaviour would continue under a
revised price restatement period, but importers may be better able to evaluate current market or
operational conditions and reflect them in their offers. It follows that the closer to real time the price
restatement period takes effect, the more accurately participant offers will reflect market conditions.
While the AESO has not ruled out lengthening the price restatement period, preliminary analysis indicates
that aligning the restatement period with a point in the market timeline within T-2 will allow participants to
respond to market conditions closer to real-time and may allow for increased overall market efficiency and
responsiveness, without compromising the safe, reliable and economic operation of the system.
Page 11
5.3
5.3.1
Areas Impacted
System Operation
The system controller relies on a stable energy market merit order at T-2 in order to conduct assessments
which consider forecast demand, asset ramp rates, intertie schedules and other operational constraints,
to ensure timely and efficient dispatch for each settlement interval. Shortening the price restatement
period would result in the energy market merit order not being stable until closer to the beginning of the
settlement interval and the system controller would have less time to prepare for each top-of-the-hour
dispatch. Intra hour stability, however, is expected to remain unchanged. Recognizing that there may be a
potential gain in market efficiency and responsiveness, any change in the price restatement period must
also continue to provide the system controller sufficient time to prepare for top-of-the-hour dispatch and
operate the system in a safe, reliable and economic manner.
5.3.2
Adequacy Assessments
The system controller conducts adequacy assessments as required, in particular after T-2 when the
energy market merit order is stable, to ensure sufficient supply is available to meet forecast demand in
future settlement intervals. Adequacy assessments have improved since the implementation of the must
offer rules which require generation to offer all available supply into the market and to communicate any
changes through restatements. Analysis conducted during the Quick Hits Review indicated adequacy
assessments are more accurate within the T-2 to T timeframe as both the supply and demand forecasts
used in the assessments are closer to actual supply and demand in real time. Therefore, given the must
offer rules are maintained, shortening the price restatement period may have little or no impact on
adequacy assessments except possibly in the case of long lead time energy assets as discussed in
section 5.3.3.
5.3.3
Long Lead Time Energy Assets
Long lead time energy (LLTE) assets make the decision to start up and offer into the market when price
expectations allow for the recovery of asset startup and minimum run time costs. LLTE assets have a
range of start times with most being able to start up and be ready to participate in the market within one
or two hours although a few require up to four hours. ISO Rule 6.3.5 (the LLTE Rule) requires LLTE
assets to notify the AESO of the time of day that the asset will be synchronized to the AIES and adjust
their available capability for dispatch according to the energy market merit order at least two hours prior to
the beginning of the settlement interval.
The LLTE Rule also allows the AESO to direct LLTE assets if an adequacy assessment forecasts
insufficient supply to meet demand for a future settlement interval. Shortening the price restatement
period is not expected to impact the accuracy of the adequacy assessments if the LLTE Rule is left
unchanged as the system controller will have accurate asset availability information at T-2. However,
LLTE assets may be put at a disadvantage if they are required to commit to a startup time at T-2 which
may allow other generators to react to this commitment and subsequently change their offers.
If the LLTE Rule is modified to synchronize the mandatory start up notification and price restatement
periods to a period less than T-2, the system controller will have to make an assessment of supply
adequacy in time to issue a directive to the LLTE asset to start up if insufficient supply is anticipated. The
system controller will know if the LLTE asset is physically available to the system but will not know
whether the asset intends to start or if a directive needs to be issued for the asset to start. Additionally,
LLTE assets could begin moving prior to the notification deadline and be available for dispatch while the
adequacy assessment did not reflect the availability of such supply.
5.3.4
Energy Market Merit Order Stability
The merit order stabilizers were introduced to create offer stability in the energy market merit order
(EMMO) and to ensure a more efficient dispatch by eliminating undue volatility caused by last minute
restatements to price and volume. The Quick Hits Review indicated a more robust EMMO post-Quick Hits
Page 12
implementation and the must offer requirements are probably the most significant contributor to there
being more distinct offers at all supply levels.
Changing the price restatement period from T-2 to a shorter timeframe may have little or no impact on the
stability and efficient dispatch of the EMMO as long as the must offer requirements for generators and
limitations on restatements during the delivery hour are maintained.
5.3.5
Price Forecasting
The implementation of Quick Hits rules has improved the pool price forecast relative to the previous
format and as the offers are locked in at the time of forecast, the pool price forecast can be considered
accurate a majority of the time. However, small changes in demand and supply conditions reflected in
participant restatements within T-2 may have a large impact on the actual pool price.
As per ISO rule 5.6, the AESO must publish the pool price forecast at least seventy (70) minutes prior to
the start of the delivery hour. The AESO actually publishes the pool price forecast at T-2 in alignment with
the price restatement period. Factors such as coal outages, price responsive loads and changes in wind
generation within the restatement period and during the delivery hour have a significant impact on
determining the actual pool price, resulting in the price forecast being less accurate. Revising the price
restatement period may further reduce the accuracy of the pool price forecast two hours out and require
changes to the timing of when the forecast is published or the frequency of updates so that the most
accurate market conditions can be reflected. In general, providing the market with forecast information in
a timely manner facilitates better market decisions and promotes a fair, efficient and openly competitive
market.
5.3.6
Intertie Scheduling
Importers and exporters in Alberta submit an energy offer at T-2 then secure transmission for all points of
the transaction and submit a corresponding electronic tag (e-tag) as part of the intertie scheduling
process. Currently, the AESO approves all e-tag submissions and the neighbouring transmission provider
curtails e-tags according to their priority mechanism based on available transfer capability. If further
curtailments are required, then the AESO makes the necessary curtailments fifteen (15) minutes prior to
the start of the settlement interval. At this point the intertie schedules are considered set and dispatched
in time for delivery for the upcoming settlement interval.
One of the challenges faced by importers is that while import offers need to be submitted to the AESO by
T-2, external intertie scheduling is not underway until the T-1 to T timeframe. This means that the
participant may not have certainty on their ability to procure transmission to deliver the energy offered at
T-2. An analysis of restatements indicates that the majority of the import restatements occur within the T1 to T timeframe and import restatements occur primarily due to importers being unable to procure
transmission.
With the pending development of the Montana-Alberta Tie Line (MATL) and the restoration of the existing
interties, the AESO is developing rules regarding interties as part of the Intertie Framework initiative. This
framework is based upon design principles that include facilitating competition by reducing barriers while
maintaining reliability and supporting a level playing field for generators, imports, exports and loads where
possible. A key component of the framework is the allocation of intertie capacity between the various
interconnections.
It is anticipated that closer alignment of the intertie scheduling and the price restatement period may
assist in meeting these design objectives and may provide participants greater certainty on the availability
of transmission, as well as the price of energy in other jurisdictions. Given that importers and exporters
are price takers, closer alignment of the intertie scheduling and the price restatement period may also
provide certainty with respect to the price participants receive, leading to more efficient import/export
decisions and increased optimization of intertie usage. The AESO is also considering establishment of a
Page 13
process to allow imports and exports to submit priced offers which should further enhance the benefits of
having closer alignment of the price restatement period with intertie scheduling.
5.3.7
Wind Power Integration
Given the variable nature of the resource availability, wind generators are currently price takers and are
not subject to the price restatement period as they do not offer into the market. This means that wind
generators put energy onto the system when it is available and the AESO manages wind generation in
real time using wind forecasts to anticipate changes in generation. However, over the past few years wind
generation levels have increased prompting the AESO to review options for integrating wind generation
onto the system fairly, safely and reliably. The AESO is consulting on such changes through the Wind
Power Integration initiative.
The variable nature of the wind resource under the current market design adds uncertainty to real-time
supply and demand conditions, and the market is unable to respond to market signals resulting from
changes in the wind forecast during the price restatement period. However, wind forecast accuracy
increases as it gets closer to the delivery hour, with the day ahead mean absolute error for the aggregate
wind forecast averaging 14% and the average for seven hours ahead averaging 11% in 2010.
Additionally, the AESO is developing more real-time forecasts and expects further improvement in wind
forecast accuracy.
The AESO is of the view that regardless of the wind integration options considered, the market has better
wind forecast information available closer to the delivery hour. Shortening the price restatement period
would allow participants to make a better assessment of supply and demand conditions, including
changes in wind generation, which could result in a more efficient market response.
5.3.8
Transmission Constraints Management
The Transmission Constraint Management (TCM) protocol (ISO Rule 302.1) includes a step which uses
reverse merit order (RMO) curtailment to manage constraints. Effective generators on the upstream
constraint side2 are curtailed using the highest priced offer in the merit order followed by the next highest
priced offer if necessary and so on. If the offers are equally priced then a pro-rata methodology is applied.
The TCM protocol also contains a step whereby if a constraint persists on a continuous basis for longer
than the T-2 period, then all curtailment switches to the use of pro-rata only for constrained offers below
the system marginal price (SMP). Shortening the current price restatement period may require the AESO
to consider additional rule revisions in order to prevent a potential race to zero for offers from generators
in a constrained area as they attempt to avoid curtailment. Depending on the price restatement options
considered, the system controller procedures may be simplified. For example, if the restatement period is
sufficiently short, the switch to pro-rata for constraints lasting longer than the revised restatement period
may be impractical and could be eliminated.
5.3.9
Demand Response
Loads in Alberta participate in the operating reserve market and also provide frequency-based load shed
services. Loads have the ability but don’t currently bid into the market, with some loads demonstrating
price responsive behaviour instead. Applying the price restatement period closer to real time is
anticipated to be neutral in its impact on demand response in Alberta.
5.3.10 Operating Reserve
Generators participating in the operating reserve market make the determination whether to offer their
energy into the energy market or the operating reserve market. Operating reserve transactions are
2
“Upstream constraint side” means, in relation to the transmission elements that comprise the transmission
constraint, those elements of the interconnected electric system more proximate to the supply side of the
transmission constraint than to the load or consumption side of the transmission constraint.
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completed day ahead and participants can restate based on availability at any time. Additionally,
participants with multiple assets can substitute operating reserve sold from one asset to another up to
thirty minutes prior to the beginning of the settlement interval. Shortening the price restatement period
may provide some participants an increased ability to optimize their assets in the energy market based on
their day-ahead operating reserve commitments leading to enhanced efficiency and competition.
5.3.11 Dispatch Down Service
Dispatch Down Service (DDS) is a market mechanism used to offset the price impact of Transmission
Must-Run (TMR) generation whereby generators offer into the DDS market at a price and are dispatched
down in order to reconstitute the pool price. Participants must submit their DDS offers prior to T-2 and are
subject to similar rules as in the energy market in that offer changes within T-2 require an acceptable
operating reason. Participants with a DDS offer that are in merit in the energy market provide energy until
a DDS dispatch is received, at which point the participant switches from providing energy to providing
DDS.
The offer deadline for restating energy and submitting DDS offers was set at T-2 to allow participants to
optimize their offers between the two markets. Consequently, a change in the price restatement period
would necessitate a coincidental change in the restatement period for DDS to maintain alignment.
Shortening the T-2 restatement period should result in increased market efficiency and responsiveness
as more accurate market information is available.
5.3.12 Supply Surplus
Supply surplus occurs when there is more supply available at zero dollars than the existing system
demand. The AESO publishes a supply surplus report which provides a signal to the market that a supply
surplus event is anticipated in the following six hours. Prior to T-2, participants are able to respond to the
excess supply situation by restating their offers. Once a supply surplus event occurs, the system
controller uses the procedures set out in OPP 103 to balance supply and demand. The AESO is currently
undertaking a Supply Surplus initiative to update the supply surplus procedures to ensure fairness in the
procedures.
There may be unforeseen market changes within T-2 that could cause supply surplus, such as a
significant increase in wind generation, and although the market signal is provided through the supply
surplus report, participants are unable to respond due to the restatement restriction during the price
restatement period. Shortening the price restatement period should enhance the ability of participants to
respond to the supply surplus market signals provided.
6 Considerations for a Revised Price Restatement Period
In this section, the AESO presents four time periods for consideration while evaluating options for a
revised price restatement period. The intent of presenting the time periods is to highlight some key
considerations during each period and provide structure for discussion during the consultation process. In
this section, ‘T-x’ refers to ‘x’ minutes prior to the start of the settlement interval.
6.1
Price restatement period greater than T-120
The AESO is open to discussing a price restatement period greater than the current two-hour period.
However, preliminary indications are that if a change to the price restatement period is desired, then
shortening the current price restatement period is more likely to allow for alignment with key points in the
market timeline that may lead to an increase in overall market efficiency and responsiveness to changes
in market conditions.
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6.2
Price restatement period less than T-120 and greater than or equal to T-60
While considering options for a price restatement period between T-120 and T-60, a key timing point is T85 which is when the AESO will calculate and post available transfer capability (ATC) limits and
allocations for the interconnections, as per the proposed Available Transfer Capability and Transfer Path
Management rule (ISO Rule 203.6). This ATC allocation between the transfer paths is based on import
and export offers currently received at T-120, meaning the import and export offers must be submitted
prior to T-85. This represents a difference of at most thirty-five (35) minutes from the current restatement
period and may provide market participants more information on market conditions when submitting bids
or offers. However, when considering options shorter than the T-85 timeframe, impacts to the ATC
allocation process will need to be evaluated.
6.3
Price restatement period less than T-60 and greater than or equal To T-20
During the T-60 to T-20 timeframe, the primary activity is the scheduling of import and export transactions
and the submission of these transactions by T-20. The analysis in section 5.2 indicates the greatest
number of import restatements occurs in the hour prior to the start of the settlement interval, and the
primary reason for the restatements is a market participant’s inability to procure transmission for the offer
submitted at T-120.
A price restatement period in this timeframe would provide market participants greater certainty on their
ability to procure transmission and may reduce the current number of import restatements. It would also
provide market participants more information on changes in market conditions, but considerably reduce
the amount of time the system controller has to prepare for top-of-the-hour dispatches or address any
short-term adequacy concerns. While there have been significant improvements to the tools used by the
system controller to manage the electric system, a price restatement period in this timeframe will need to
balance potential market efficiency with the ability to maintain system reliability.
6.4
Price restatement period less than T-20
A price restatement period of less than T-20 may provide market participants with the best information on
market conditions compared to the previous three options, but is the riskiest in terms of the time the
system controller has to prepare for the top-of-the-hour dispatches or address any short-term adequacy
concerns. This option may limit the benefits achieved through the implementation of the merit order
stabilizers under the current market design, but is considered open for discussion as there may be other
market enhancements or enhancements to system controller tools that could help manage these
concerns.
7 Summary and Next Steps
Through this Paper, the AESO has endeavoured to present a current market timeline, an analysis of
current restatement activity and the areas of the market that could be impacted by a change in the price
restatement period. In the AESO’s view, the current price restatement period is working as intended, but
proposed revised time periods are presented for consideration.
The AESO reiterates that the scope of this discussion is the duration of the price restatement period only.
Other rules implemented as part of Quick Hits, such as the must offer requirements and the limitation on
restatements, are not within the scope of this review.
The AESO is seeking stakeholder feedback on the price restatement period as it relates to the areas
identified in this discussion paper, as well as any other market areas that are impacted either positively or
negatively. The AESO is also seeking feedback on whether a change to the current price restatement
period is desired and on potential options for refining the price restatement period.
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The anticipated next steps in consultation are:

Stakeholder comments on the Discussion Paper and AESO responses posted to the AESO
website.

Stakeholder working group sessions as required.

Recommendation Paper published for stakeholder feedback.

Stakeholder responses to the Recommendation Paper posted to the AESO website.

Implementation of the final recommendations (e.g. ISO rules development and filings, as
applicable)
The AESO looks forward to receiving stakeholder input on this initiative and requests that comments are
provided to [email protected] using the stakeholder comment matrix provided by March 9, 2012.
Should you have any questions on this Paper, please contact Hameed Zaman by email or by phone at
403-539-2667.
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