Acceptable Operational Reason (AOR) DISCUSSION PAPER William Chow

Acceptable Operational Reason (AOR)
DISCUSSION PAPER
William Chow
Date:
December 20, 2012
Prepared by:
William Chow
Market Implementation Analyst, Market Operations
Table of Contents
1
2
3
4
5
Executive Summary ............................................................................................................................. 3
Purpose ................................................................................................................................................. 3
Scope ..................................................................................................................................................... 3
Introduction / Background ................................................................................................................... 3
Policy Coherence.................................................................................................................................. 5
5.1
6
Areas Impacted ..................................................................................................................................... 5
6.1
6.2
6.3
7
AC not equal MC .......................................................................................................................................... 6
Energy Restatements ................................................................................................................................... 6
MW Restatements for DDS .......................................................................................................................... 6
Considerations for a revised AOR ...................................................................................................... 6
7.1
7.2
7.3
8
Coherence with ISO Core Market Rules ...................................................................................................... 5
Current Definition ......................................................................................................................................... 6
Other Issues ................................................................................................................................................. 9
General Considerations and Options ......................................................................................................... 10
Summary and Next Steps .................................................................................................................. 11
1 Executive Summary
ISO rules obligate participants to provide a reason for offering energy volumes different than their
maximum capability, submitting energy restatements in accordance with ISO rule 203.3 or submitting MW
restatements within two hours of the settlement interval (T-2) in the Dispatch Down Service (DDS)
market. The reason provided must fall within the parameters of the Acceptable Operational Reason
(AOR) as defined in the AESO’s Consolidated Authoritative Document Glossary (Glossary).
AOR is a key definition that plays a central role with respect to generating facility owners offering energy
to the market. The main purpose of this paper is to ensure definition clarity regarding how the AESO
intends market participants to use an AOR. This paper also explores possible revisions to the definition
based on its use since implementation.
This paper is a review of the definition of AOR and takes into account past clarifications made by the
AESO. AOR is currently, and will continue to be, a condition with respect to a generating asset and is not
related to circumstances that arise due to restrictions in transmission, trading, availability of
counterparties in other jurisdictions, or any other situation not directly related to the operation of the
generating asset.
The AESO is seeking feedback from pool participants regarding their use of AOR and issues they face
with using the definition in the context of generating constraints.
2 Purpose
In 2007 the AESO implemented the definition of AOR and is currently seeking to ensure that the definition
still works within the context of the current market and whether it fulfills its intended original purpose. The
purpose of this paper is to clarify the existing definition of AOR and seek comment from stakeholders
regarding any potential parts of the definition that need further clarification. The AESO’s goal is to ensure
a clear and concise definition of AOR that facilitates pool participants’ understanding of the parameters
for which energy restatements can be submitted, MW restatements within T-2 in the DDS market can be
submitted, and the reasons allowed for not having the asset’s available capability equal their maximum
capability. The AESO is also proposing options for new approaches for the purpose of aligning processes
and requirements around the use of AOR within the structure of the ISO’s authoritative documents.
3 Scope
The scope of this paper is limited to discussion of the AOR definition in the context of issues related to the
physical operation of a generating unit and the scheduling of imports and exports. The AESO is seeking
feedback from pool participants on ways to clarify or improve the definition within its intended scope.
The AESO is not seeking feedback from pool participants regarding inability to comply with offers related
to transmission or economic factors exogenous to the operation of their physical asset.
4 Introduction / Background
In December 2007, the AESO implemented an integrated package of market design changes which were
identified as Quick Hits. Quick Hits included the maximum capability and available capability ISO rules to
help establish on an hour by hour basis the actual supply available to the market. Quick Hits also included
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restatement ISO rules to facilitate ongoing supply updates and operational flexibility for pool participants.
These rules also introduced the definition of AOR to the market.
Quick Hits required pool participants to state their maximum generating capability and to offer the entirety
of an asset’s generating capability to the market. However, it was recognized that conditions related to
the physical operation of the generating unit might impact the requirement to offer all generating capability
to the market. Generating facility owners were therefore permitted under specific circumstances, defined
as AOR, to offer less than the maximum generating capability in order to ensure that their generating
assets could be safely operated and prioritized, having regard to safety or physical constraints and at the
same time, provide their available energy into the market in a fair and competitive manner.
1
AORs are required any time a pool participant’s available capability (AC) does not equal their maximum
2
capability (MC). AORs are also required for certain energy restatements and for restatements relating to
MW restatements within T-2 in the DDS market. AORs are conditions related solely to the operation of the
generating asset. Conditions related to transmission constraint or market-related conditions that are
solely economic are not AORs.
Acceptable Operational Reason, as set out in the AESO’s Glossary, means with respect to an asset, any
one or more of the following:
i)
a circumstance related to the operation of the generating asset which if it operated could
reasonably be expected to affect the safety of the generating asset, the environment,
personnel working at the generating asset or the public; or
ii)
re-positioning an asset within the energy market due to the need to meet a dispatch given to
that asset from the system controller to serve the stand-by ancillary services market; or
iii)
re-positioning a generating asset within the energy market to manage physical or operational
constraints associated with the asset; or
iv)
re-positioning an importer’s or exporter’s asset within the energy market to manage physical
or operational constraints associated with an interconnection or a neighbouring balancing
authority; or
v)
a circumstance directly resulting in the generating asset not being capable of operation,
which circumstance was solely caused by an occurrence of force majeure; or
vi)
re-positioning a generating asset for electric energy that is:
a)
produced on the property of which a person is the owner or a tenant; and
b)
consumed solely by that person and solely on that property.
The AESO currently has an Information Document (ID) to clarify several aspects of AOR. The ID clarifies
4 scenarios: restatements for operating reserves (subsection ii), restatements for asset constraints
(subsection iii), asset minimum on/off time, and generating units capable of dual or secondary fuel
operation. The AESO is considering incorporating some of the content of the ID into the definition as
appropriate.
1
As defined, for a generating asset, the maximum quantity, in MW, that the generating asset is physically capable of providing during each settlement interval of the trading day.
As defined by the maximum quantity, in MW, that the generating unit is physically capable of providing under optimal operating conditions while complying with all applicable
ISO rules and the ISO tariff.
2
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5 Policy Coherence
In June 2005, the Alberta Department of Energy (DOE) published the Alberta Electricity Policy Framework
which identified several short-term adequacy issues and provided recommendations for the energy
market. The policy paper highlights several features of the energy-only market that relate to AORs. The
DOE recognized that in order to avoid withholding and other forms of market power, an obligation on
generating facility owners and operators to offer a generating asset’s entire capability to the market,
together with limitations on restatements, was necessary. The AESO implemented Quick Hits to execute
these policy statements.
The AESO has the authority under subsection 20(1) of the Electric Utilities Act (EUA) to make rules
respecting the operation of the power pool and exchange of electricity through the power pool.
5.1
Coherence with ISO Core Market Rules
This paper references and reflects the language in the new Core Market Rules. The Core Market Rule
Changes are the result of the AESO’s reorganization and redrafting of the applicable authoritative
requirements from existing ISO rules Sections 3 and 6 (with the exception of those requirements
regarding operating reserves), and ISO Operating Policies and Procedures (“ISO OPP”) 003.2,
101,102,104, 705 and 801 (collectively the “Existing Core Market Rules”). The Core Market Rules will
become effective on January 8, 2013. For more information, please visit the AESO website: Proposed
ISO rules &OPP Changes.
6 Areas Impacted
As highlighted above, “the Quick Hits rules were designed to address the DOE policy intent by
implementing rules that had an immediate effect on the visibility of available supply and the credibility,
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stability, or undue volatility of the pool price” . The Quick Hits rules expand pool participants’ restatement
flexibility and ensures that the system controller has a complete view of the state of the generating
capability in the entire province at any given moment in order to maintain supply adequacy. Fundamental
to the Quick Hits rules was the concept of merit order stabilizers which included must offer, must comply
and limitations with respect to energy restatements. The need for an AOR revolved around the must offer
and must comply requirement, which is a fundamental component of the Alberta energy market.
The AESO recognized that power pool participants needed a mechanism to signal that they were
experiencing physical operating constraints because the Quick Hits rules required them to state their
maximum capability and offer that full amount. However, there were instances where participants could
not provide their MC into the market. Consequently, the AESO defined AOR to ensure that the reasons
that the full amount are not offered are unrelated to economic reasons as directed by the DOE in their
policy framework. Power pool participants are allowed to provide an amount that differs from their MC.
This is known as a generating asset’s AC, and the difference between its MC and AC is explained via an
AOR.
The AESO’s authoritative documents consist of ISO rules, the ISO tariff and Alberta Reliability Standards.
Authoritative documents contain binding rights, requirements and obligations for pool participants and the
AESO. Pool participants and the AESO are required to comply with provisions set out in authoritative
documents.
Pool participants are encouraged to review the following related documents:
3
Quick Hits Discussion Paper Performance Metrics for The Six Month Review. May 29, 2008
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1. Section 203.1 of the ISO rules, Offers and Bids for Energy;
2. Section 203.3 of the ISO rules, Energy Restatements;
3. Section 204.3 of the ISO rules, Dispatch Down Service;
4. Glossary definitions of acceptable dispatch variance, acceptable operational reason, available
capability and maximum capability; and.
5. The Pool Participant Manual for the AESO Energy Trading System.
AOR is a fundamental component of the market that has broad effects for all energy offers and bids that
pool participants make to the power pool. All submissions of AORs are done through the AESO’s Energy
Trading System where an AOR column is made available for all hour blocks. As highlighted in the next
subsections of this paper, three general categories exist that require the use of an AOR.
6.1
AC not equal MC
A pool asset’s AC must be equal to the MC. If the AC is not equal to the MC, it must be supplemented
with an acceptable operational reason as required by Section 203.1 5 of the ISO rules.
6.2
Energy Restatements
There are four (4) types of restatements for offers:
1. Available Capability Restatements
A pool participant must provide an AOR with the AC restatement as per Section 203.3 2(2) of the
ISO rules.
2. Price Restatements for Offers
Prices within T-2 are locked in as per Section 203.3 3 of the ISO rules. Outside of T-2, price
restatements may be made without an AOR.
3. MW Restatements for Offers
Within T-2, MW restatements must be accompanied with an AOR as per Section 203.3 4 of the
ISO rules. Outside of T-2, MW restatements may be made without an AOR.
4. Minimum Stable Generation (MSG) for Offers
MSG is a defined term in the AESO Consolidated Authoritative Document Glossary. Pool
participants require the ability to declare their minimum stable generation for their facility so that
the ISO has up-to-date information as to how low the MW volume can be dispatched down
without having to completely shut down a pool asset. This number is recorded for each hour in
the AESO’s Energy Trading System. Any changes to MSG require an AOR.
6.3
MW Restatements for DDS
An AOR must accompany a MW restatement within T-2 in the DDS market.
7 Considerations for a revised AOR
In this section, the AESO highlights portions of the current AOR definition that may warrant closer review,
and. is seeking general stakeholder comments regarding the AOR definition. However, the AESO invites
pool participants to use the current definition and the following specific portions as a starting point for
comment. Also, the AESO invites pool participants to comment on the AESO AOR ID (ID# 2009-003R).
7.1
Current Definition
Clause i) of the AOR definition states:
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i)
a circumstance related to the operation of the generating asset which if it operated could
reasonably be expected to affect the safety of the generating asset, the environment,
personnel working at the generating asset or the public;
The AESO considers clause i) to be clear and the matter of safety (for the generating asset, the
environment, personnel or the public) to be well understood throughout the industry.
Clause ii) of the AOR definition states:
ii)
re-positioning an asset within the energy market due to the need to meet a dispatch given to
that asset from the system controller to serve the stand-by ancillary services market;
The AESO has issued an ID that clarifies clause ii) and is set out in part below:
The purpose of this subsection is to allow generating units to comply with dispatches to provide
operating reserves that were offered in the stand-by operating reserve market without becoming
non-compliant in the energy market. While the AESO acquires stand-by operating reserves no
later than noon the day before they are required, the actual issuing of dispatches for stand-by
operating reserves is not predictable.
The AESO issues dispatches for standby operating reserves when active operating reserves
amounts are inadequate and this is quite often caused by an unexpected generating unit trip. The
unpredictable nature of the issuing of dispatches for stand-by operating reserves then, may find
the generating unit at an output level where it is unable to provide the product. The acceptable
operational reason therefore makes the explicit allowance found in paragraph ii), that allows the
legal owner of the generating unit to restate the generating unit’s energy so that the legal owner
can reposition the generating unit to provide stand-by operating reserves.
The AESO considers clause ii) to be clear but is open to discussing whether any of the language used in
the ID can be incorporated into clause ii).
Clause iii) of the AOR definition states:
iii)
re-positioning a generating asset within the energy market to manage physical or operational
constraints associated with the asset;
The AESO encourages discussion around the clarification regarding the wording “physical or operational
constraint” in clause iii) of the AOR definition. The AESO is also soliciting comment regarding
incorporating into the definition language from the ID that specifically addresses clause iii):
The purpose of this subsection is to allow the legal owner of a generating unit to restate the
generating unit’s energy when there is a problem (constraint) with the generating unit. It is
expected that these problems are unanticipated or could not have been avoided by the exercise
of reasonable diligence otherwise they would have been reflected in the legal owner’s offers
before the T-2 timeframe.
Clause iii) is not intended to allow the legal owner of a generating unit to re-position offers to
allow the generating unit to provide ancillary services from the active market. It is expected that
since active ancillary services are acquired the day before they are required and the provider is
aware of the time of day their product will be required, that the legal owner’s energy offers can be
submitted at least two (2) hours in advance of the delivery hour to allow the generating unit to
properly position to respond to the ancillary service dispatch.
This approach is aligned with providing a more stable merit order within two (2) hours of the
delivery hour and within the delivery hour. Unlike clause ii), where there is an explicit allowance
for stand-by operating reserves, neither clause iii) nor any other clause of the acceptable
operational reason definition offers the same allowance for active ancillary services.
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Clause iv) of the AOR definition states:
iv)
re-positioning an importer’s or exporter’s asset within the energy market to manage physical
or operational constraints associated with an interconnection or a neighbouring balancing
authority;
The purpose of this clause is to indicate that a neighbouring balancing authority has restricted energy and
the resulting action may force a market participant to restate AC. The AESO is open to a discussion
whether or not the wording “physical or operational constraints associated with an interconnection or a
neighbouring balancing authority” captures this intent.
The proposed Section 203.6 of the ISO rules, Available Transfer Capability and Transfer Path
Management, makes special provisions for pool participants trying to acquire transmission for an
interchange transaction. Specifically, section 5(2) and 5(3) of Section 203.6 reads:
(2) A pool participant with any form of interchange transaction must use all reasonable efforts to
procure transmission service from applicable service providers in an amount in MW at least equal
to the available capability of the interchange transaction, which reasonable efforts must include:
(a) determining whether there is transmission service posted by the applicable service
providers and available for that interchange transaction; and
(b) submitting a request to the applicable service providers to procure the transmission
service, if it has been posted and is available.
(3) If after complying with subsection (2) the pool participant is unable to procure all or a portion
of the requested transmission service for an energy interchange transaction, or the transmission
service for an energy interchange transaction is curtailed after procurement, then that
circumstance constitutes a reason for the pool participant to submit a restatement of available
capability, and may be the basis for the determination of an acceptable operational reason under
subsection (iv) of that definition.
The AESO seeks feedback from pool participants on whether the intent of the proposed Section 203.6 of
the ISO rules is captured in clause iv) of the AOR definition.
Clause v) of the AOR definition states:
v)
a circumstance directly resulting in the generating asset not being capable of operation,
which circumstance was solely caused by an occurrence of force majeure;
Force majeure is a definition in the AESO’s Glossary and the AESO is of the view that on a plain reading,
the meaning is clear.
Clause vi) of the AOR definition states:
vi)
re-positioning a generating asset for electric energy that is:
a)
produced on the property of which a person is the owner or a tenant; and
b)
consumed solely by that person and solely on that property.
The AESO is seeking to ascertain whether or not clause vi) needs to be clarified. The intent of clause vi)
is to allow certain generators of electric energy, typically those generating units linked to industrial
processes, to restate their AC due to the need for the electric energy produced on-site to be used for the
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generator’s own process. The purpose of the clause vi) is to reflect the exemption reflected in Section
2(1)(b) of the EUA. The AESO invites comment from pool participants for discussion.
7.2
Other Issues
The AOR ID also addresses two other issues. The first issue addresses pool participants with assets that
have minimum on/off run times. Specifically:
Certain generating units require minimum run and off cycle times to prevent excessive and
premature wear of their equipment. In order to remain compliant with section 3.5 of the ISO rules,
Offers and Bids, the pool participant is advised to use an acceptable operational reason to
address this dynamic. An example of this is a generating unit that has to be run a minimum of
thirty (30) minutes and, when shut down, must be off for a minimum of thirty (30) minutes.
In this situation, the following protocol can be used to manage the situation:
Whenever the generating unit is dispatched on, sufficient MW should be moved from a non-zero
price block down to the zero dollar price block through a restatement (type b) to ensure the
generating unit remains dispatched on for the minimum thirty (30) minutes. After the thirty (30)
minutes had expired the offer should be restated back to its original structure using a second
restatement (type b). Similarly, whenever the generating unit is dispatched off, the available
capability should be restated to zero (0) for the required thirty (30) minute off time. After the thirty
(30) minutes has expired, the available capability would be restated back to the available
capability of the generating unit.
The second issue deals with generating units capable of dual or secondary fuel operation:
Certain legal owners have the ability to operate their generating units using multiple fuel types on
either a temporary or longer term basis. These legal owners may:
(i)
regularly switch between different fuel types based on the relative cost or availability
of the fuel source, or predominantly use one fuel type but rely on another to backstop
fuel requirements as needed; or
(ii)
utilize a secondary fuel source only to manage short term operational requirements.
Of particular concern is the question of the extent to which switching from a primary to a
secondary fuel source must be reflected in the offers made to the power pool and the related use
of an acceptable operational reason, if applicable.
It is anticipated that generally two (2) types of dual / secondary fuel scenarios exist:
Type 1 - The generating unit can only operate on a limited basis in back-up fuel mode:
On a case by case basis, the AESO does not generally consider the consistent utilization of backup fuel for purposes such as start-up and flame stabilization, where such situations reflect shortterm operational requirements, to be a dual / secondary fuel generating unit. Therefore an
acceptable operational reason is not applicable to those situations.
Type 2 - The generating unit can reliably operate utilizing more than one fuel type:
The AESO considers a generating unit to be a dual / secondary fuel unit if it has historically
exhibited the operational and commercial ability to utilize more than one (1) fuel type to operate
for either a prolonged period or to backstop primary fuel requirements. The AESO expects that
the legal owner will reflect such capability in the available capability of the generating unit. In such
a situation, the use of an acceptable operational reason as a result of fuel switching would not be
appropriate. Even though a generating unit may be able to effectively operate using a secondary
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fuel source for a prolonged period of time, such use is not indefinite. The AESO expects that the
specific operational characteristics of the generating unit will drive how long the available
capability will reflect the two (2) fuel types. In the case of a generating unit fitting the description in
(ii) above, the AESO’s view is that secondary fuel capability is properly reflected in the declaration
of available capability and all such changes to available capability need to consider the extent of
possible operation of the generating unit with a secondary fuel. In this example, the legal owner
also has the obligation to promptly begin supplementing its primary fuel with secondary fuel to
maintain output within acceptable dispatch variance of the dispatched level in accordance with
section 6.6 of the ISO rules, Pool Participant Non-Compliance with Energy Market Dispatches.
The AESO encourages pool participants to review these two clarifying points in the AOR ID and comment
on their effectiveness. The AESO is not seeking to change the requirements in the wording of the ID but
is asking whether it the wording is clear enough or if any of the language from the ID should be moved
into the definition.
7.3
General Considerations and Options
The AESO is considering transitioning the AOR definition under the Glossary into an ISO rule under Part
200 of the ISO rules: Markets. The purpose of this transition would be to align the use of the current
definition more closely with the practice of the AESO in its implementation of authoritative documents.
Processes and requirements related to AORs make it fall outside the realm of what a definition normally is
and how it is used by the AESO. Typically, a definition is a self-explanatory statement needing minimal
clarification and minimal attached conditions. However, the definition of AOR goes beyond this and the
AESO proposes that it would be more beneficial to move the AOR definition in to an ISO rule.
Currently, the requirements regarding the use of AORs are encompassed in ISO Rule 203.1 Offers and
Bids for Energy, ISO Rule 203.3 Energy Restatements and ISO Rule 204.3 Dispatch Down Service.
These rules lay out the combined authoritative requirements to provide an AOR and each reference the
current definition in the Glossary. An information document clarifies some clauses within the definition by
stating the purpose of those clauses and providing some examples.
Given AESO practices, it would be an improvement to move the description of AOR into an ISO rule
format rather than a definition. Doing so would accomplish three things. Firstly, AOR is a definition that
has a direct attachment to requirements around processes for pool participants. Some of these process
requirements are laid out in Part 200 of the ISO rules and the Pool Participant Manual for the Energy
Trading System (ETS). However, there may be further undocumented processes that would fit well into a
general AOR ISO Rule. For example, the process requirements related to when and how a pool
participant may increase its AC after an operating constraint ceases to exist is not clear within any of the
existing documents. Other examples may exist that the AESO encourages pool participants to comment
on.
Secondly, language exists in the current AOR ID related to process requirements for pool participants that
may be better suited to an authoritative document as it is beyond the scope of a definition as it currently
stands. Examples of ID material that may be suited to a new ISO Rule include obligations to use and preconditions for use with respect to clauses ii) and iii).
Thirdly, an ISO rule is better suited to adapting to an evolving Alberta market affected by advancements
in technology and changes in the mix of generation. ISO rules have an established consultative process
and can be revised to accommodate a changing market.
The AOR definition as it currently is written and where it currently resides is considered to be authoritative
with respect to its obligations and conditions related to the use of an AOR. The proposed structure would
not change this. The proposed ISO rule would contain similar language and relate to the same process
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and conditions the current AOR definition does (and would incorporate any revisions identified as
necessary through this consultation). Under this proposal, the definition of AOR would be a simple
statement and details around its applicability would be stated in an ISO rule. This would accomplish the
AESO goal of keeping the definition of AOR in the Glossary to a simple and self-explanatory statement
and creating an ISO rule for pool participants to reference. The AESO is seeking comment from pool
participants regarding this approach to the AOR review and incorporating any potential changes in this
manner.
8 Summary and Next Steps
The AESO identified a need for a definition for AOR, given the implementation of Quick Hits. Specifically,
the must offer and must comply obligation means that pool participants are required to state the
generating asset’s maximum generating capability and offer the entirety of it to the market. The AESO
recognizes that certain circumstances related solely to the operation of the generating facility are such
that pool participants cannot utilize their entire generating capability. However, an AOR is required any
time AC does not equal MC, for certain energy restatements or for MW restatements within T-2 in the
DDS market.
The AESO is seeking comment on pool participants’ use of AOR and comments and suggestions on
whether or not the intent of the definition is captured in its wording. The AESO also invites pool
participants to comment on the proposal to move the definition in to an ISO rule as highlighted above.
The AESO reiterates that AORs will continue to be limited to issues related to generation and will not
include constraints related to transmission or exogenous economic conditions.
The anticipated next steps in consultation are:




Stakeholder comments on the Discussion Paper and AESO responses posted to the AESO website.
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 January 31, 2013.
Should you have any questions on this Paper, please contact William Chow by email or by phone at 403539-2785.
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