Stakeholder Comments and AESO Replies Matrix

Stakeholder Comments and AESO Replies Matrix
AESO Consultation – 2014 Budget Review Process (BRP):
Technical Meetings October 10th and October 16th, 2013
AESO’s 2014 Draft Pool Price, Ancillary Services and Transmission Line Losses Costs
Forecast, Own Costs Budgets and Market Systems Replacement Project Update
The following information is intended to summarize AESO management’s responses to stakeholder comments
on the AESO’s 2014 Draft Forecasts, Own Costs Budget and Market Systems Replacement Project update.
This information was presented at the October 10th and 16th BRP technical meetings in Calgary and Edmonton.
AESO Pool Price Forecast for 2014 – October Technical Meeting
Do stakeholders have any comments on the Pool Price forecast for the upcoming year?
ADC
1. Can the AESO publish a price duration curve for the 2014 pool price forecast?
Noted. The AESO does not plan to publish this information as part of the BRP. The AESO has provided
the annual average pool price as a key element of the BRP forecasting process.
ATCO Electric
No comments.
ATCO Power
1. ATCO Power appreciates the difficulty to forecast prices in the Alberta market but nonetheless notes that the
AESO’s 2014 forecast is significantly below recent history and the forward market. The supply/demand
picture provided by the AESO provides no apparent justification for this outcome.
Increases in available generation capacity in 2014 are the primary justification behind the expectation of
a lower average pool price. The return of Sundance 1, Sundance 2 and Keephills 1 units being the key
changes considered as this represents close to 1000MW of baseload generation returning to service, or
comparably over 15% of the coal fleet. As well, the AESO cannot include the impact of unexpected long
term forced outages in its forecast, which has been a driver of higher prices in recent years.
2. Using the P95 iteration doesn’t rectify the issue since the prices are not driven by an appropriately high level
of variability but instead by a gas price that is unrealistically inflated by about 50%.
Noted. Natural gas is one of the drivers of the higher prices in the P95 iterations used in the forecast.
There are many variables that are run through monte carlo simulation that would have higher impact
through the creation of volatility in each input.
3. Being cognizant of the difficulty to model the market and keeping in mind the timing of this process, ATCO
Power therefore suggests using an alternative way to establish a price forecast, for example through the use
of forward prices shaped based on historical variability.
Noted. The AESO feels that the modeling we undertake, which takes a fundamental view of the market,
our knowledge and available information is the best approach. AESO uses an industry standard model
for price forecasting that accounts for many historical variables. AESO also updates the prices every
quarter to take into account any changes in fundamentals throughout the year.
AESO Stakeholder Comment and AESO Replies Matrix
Page 1
AESO Pool Price Forecast for 2014 – October Technical Meeting
Do stakeholders have any comments on the Pool Price forecast for the upcoming year?
Capital Power
1. Capital Power appreciates the opportunity to participate in the review of the 2014 AESO Budget; this
process enhances our understanding of AESO priorities and the corresponding impact to our own workload.
Noted.
2. Capital Power is supportive of the AESO developing its own pricing forecast for the Budget Review Process,
and appreciated the high level overview of its forecast methodology that the AESO provided on October 10,
2013. Capital Power has no concerns with the forecast methodology for the pool price, load forecast, or the
expected supply additions identified by the AESO.
Noted.
IPCAA
1. Last year, IPCAA commented that it would be useful for the AESO to publish a high level description of how
the hourly price forecast is modeled. Such a description would indicate the assumptions, inputs/outputs at
each stage of the forecast model, and the intent of the various scenarios used to arrive at the final set of
numbers. This would give stakeholders an idea on how the results were obtained. This explanation remains
to be seen.
The response to this question was published in the AESO 2013 Business Plan and Budget Proposal and
follows: In creating the price forecast the AESO used the most up to date information available on future
supply, demand and market fundamentals. Key uncertainties such as gas price, forced outages and
weather related demand fluctuation were varied stochastically in the simulations.
The AESO created this pool price forecast for the BRP using a proprietary simulation model.
Expectations regarding future supply and demand can be found in the 2012 LTOU and the Quarterly LTA
Metric report. Additional details regarding the AESO’s supply and demand forecast and assumptions
can be found in the 2012 LTO and updated LTOU. For additional input, the AESO runs 1001 hourly price
simulations, with monte carlo simulation imbedded in several variables as noted above, and other
variables are held constant that are known to AESO such as supply additions and planned outages. No
scenarios are used in the BRP process. No sensitivities are tested either. Wind output and hydro
output are assumed to be relatively normal. As mentioned above, the AESO price forecasting algorithm
is considered proprietary and details considered confidential.
2. In 2013 BRP, the AESO’s model predicted a $50.73/MWh median and $75.20/MWh max for 2013, yet the
actual market price is $85.28 year-to-date. IPCAA understands the high price levels in 2013 are attributable
to unexpected generation outages and import/transmission constraints that occurred in 2013; therefore it
was difficult to predict. Has the AESO taken a review of system conditions and assessed whether the same
conditions might persist in 2014? If so, what is done differently in the Forced Outages simulation in the price
model this year? Is $48.48/MWh a reasonable price level to expect? (The forward curve is currently
$58.25/MWh.)
Random forced outages, as well as planned outages are imbedded in the 2014 simulations much like the
2013 process. Planned outages can change in duration and timing throughout the year and this will
impact the price in ways the AESO cannot predict. The AESO feels the 2014 price forecast used is
reasonable based on the information available at this time. The AESO also notes that there are other
third party forecasts that are in line with its own but is unable to publish these due to copyright.
AESO Stakeholder Comment and AESO Replies Matrix
Page 2
AESO Pool Price Forecast for 2014 – October Technical Meeting
Do stakeholders have any comments on the Pool Price forecast for the upcoming year?
3. IPCAA notes that the AESO has reduced its wind generation additions significantly. For example,
a. in the 2013 BRP, the forecasted 2013 wind generation addition was more than 200 MW, yet none of
it has materialized and this is recognized in the 2014 model.
The AESO acknowledges that an oversight occurred when preparing the technical meeting presentation
by mistakenly omitting the wind additions for 2014 from the Supply Additions slide (11 of 60) presented
at the October 10 & 16 stakeholder meetings. A revised graph is included in the response. The 2014
model includes 300 MW of wind capacity additions, capturing capacity from the Blacksprings project
that is now under construction.
The following is a revised Slide 11 from the Technical Meeting AESO’s 2014 Forecasts, Own Costs
Budget and Market Systems Replacement Update Stakeholder Meeting Presentation.
b. How is the lack of wind addition affecting AESO’s system development prioritization in bulk
transmission planning?
Up-to-date project information is included in the updates to the AESO project and planning processes.
In addition, see AESO reply to IPCAA comment 1 in the Any Other Comments section below.
AESO Stakeholder Comment and AESO Replies Matrix
Page 3
AESO Pool Price Forecast for 2014 – October Technical Meeting
Do stakeholders have any comments on the Pool Price forecast for the upcoming year?
TransAlta
1. TransAlta appreciates the opportunity to comment on the AESO’s pool price forecast and does not have any
specific concerns about the forecast presented.
Noted.
2. TransAlta is interested in the point of discussion at the October 10th meeting regarding the impacts of the
EATL line coming online in 2014. TransAlta suggests that at some point prior to the EATL line coming online
that the AESO publish its assessment of the expected system and market impacts as well as impacts on the
pool price and line losses. Given its role in the operation of the grid and the market, the AESO is in the best
position to do so.
The AESO is planning an information session on HVDC commissioning Monday, November 4, 2013.
Information regarding anticipated grid and market impacts will be presented at this time. Stakeholders
will find additional details on aeso.ca.
AESO Stakeholder Comment and AESO Replies Matrix
Page 4
AESO Ancillary Services Cost Forecast for 2014 – October Technical Meeting
Do stakeholders have any comments on the Ancillary Services Costs forecasts for the upcoming year?
ADC
1. Does the AESO anticipate any material cost change for Ancillary Services if the BAL002 standard is
implemented in 2014?
No material change in 2014 Ancillary Services costs are anticipated as a result of the implementation of
the standard at this time.
ATCO Electric
No comments.
ATCO Power
1. In ATCO Power’s view, LSSi is not an Ancillary Service. While the AESO has the right to approve Ancillary
Service costs, the AESO does not have the right to unilaterally determine whether a product is an Ancillary
Service or not. Absent confirmation from the AUC that LSSi is an Ancillary Service, ATCO Power considers
it inappropriate to simply treat it as such. Given that the finding could have significant implications regarding
the determination of the prudency of the costs, at the very least it should be highlighted to stakeholders that
this is a contentious item.
Noted. The treatment and recovery of LSSi costs are before the AUC in the AESO’s current deferral
account proceeding for 2012 and current tariff application proceeding for 2013 and 2014. The AUC is
aware of ATCO Power’s concerns in those proceedings, and has approved the recovery of LSSi costs in
the AESO’s 2013 tariff on an interim refundable basis. The AESO will note this information in the AESO
2014 Business Plan and Budget Proposal to the AESO Board.
2. With regard to other Ancillary Services costs, ATCO Power is concerned about the link to the price forecast.
In ATCO Power’s experience as an Ancillary Service provider, OR costs are largely nonlinearly related to
pool and gas prices. Any error or bias coming from the price forecasting would therefore translate into the
AS cost forecast. Given the previous observation about the low price forecast, ATCO Power is concerned
that the AS costs might be significantly understated.
Noted. Agree that recent annual Ancillary Services costs are less correlated to pool prices. Partly in
response to the lower correlation, the AESO’s tariff allocates actual costs incurred for operating
reserves to system access services on an hourly basis at the end of every month and does not depend
on forecast correlation with pool price; this change occurred in July 2011. The AESO also recognizes
that a reasonable forecast remains important and has allowed for volatilities and uncertainties in the
forecast. Specifically, we use P95 monthly forecasts to account for the seasonal volatility embedded in
the 2014 cost estimates. We also published a high and low forecast for Ancillary Services costs for 2014
to provide a range of outcomes. The AESO will continue to monitor events that impact costs and update
these estimates quarterly.
Capital Power
1. Capital Power has no concerns with the Ancillary Services Costs forecasts identified by the AESO.
Noted.
AESO Stakeholder Comment and AESO Replies Matrix
Page 5
AESO Ancillary Services Cost Forecast for 2014 – October Technical Meeting
Do stakeholders have any comments on the Ancillary Services Costs forecasts for the upcoming year?
IPCAA
1. There appears to be a trend of consistent under-forecasting in the OR cost category. It is understood this is
primarily due to the higher than expected pool prices, but are there any differences in forecasted capacity
vs. actual procured/activated capacity? This information would be helpful in understanding forecast
accuracy.
Noted. There are differences between forecasts and actual of both price and capacity, but a majority of
the difference in Operating Reserve (OR) costs is attributed to a difference in price not capacity. For
example, the year-to-date OR volumes (September 30, 2013) were 6.0 terawatt hours which is 0.1
terawatt hours or approximately one percent higher than the forecast volumes of 5.9 terawatt hours. In
addition, the OR volumes forecast reported for 2014 are 7.9 terawatt hours which is slightly less than the
2013 forecast of 8.0 terawatt hours.
2. In predicting OR costs, it is unclear how the AESO came up with the estimated hourly premium/discounts
that are indexed to the pool price. It is unclear whether this comes out as a part of the AURORA model, or if
another methodology was used.
Noted. The hourly premiums/discounts estimates are derived from a rolling window of twenty four
months of historical data. The estimate is then combined with the pool price results from the AURORA
model.
3. IPCAA observes that the 2014 LSSi forecasted cost is much more aligned with the 2012 and 2013 actual
and projected levels, but it is significantly lower than the forecasted levels in the past. What are the reasons
for this?
Noted. A review of historical LSSi data identified that the actual requirements were consistently lower
than the forecasted.
4. Last year, IPCAA promoted the idea of conducting a thorough cost-benefit analysis on LSSi. We
emphasized that it was important to evaluate the merits of the program in case there are changes that can
be made to improve cost efficiency. We haven’t seen any published result on this. Is a review being
conducted?
Noted. The AESO’s target date to publish the LSSi review report is year end. The report intends to
review product features, summarize the benefits and limitations and identify potential areas for
improvement. Additional interim LSSi information has been published as part of the AESO’s response to
information requests on the 2014 ISO Tariff Application. See www.auc.ab.ca Proceeding ID No. 2718
Response to UCA-AESO-001 September 30, 2013 for details.
TransAlta
1. TransAlta appreciates the opportunity to comment on the AESO’s AS cost forecast and does not have any
specific concerns about the costs presented.
Noted.
AESO Stakeholder Comment and AESO Replies Matrix
Page 6
AESO Transmission Line Losses Costs Forecast for 2014 – October Technical Meeting
Do stakeholders have any comments on the Transmission Line Losses Costs forecasts for the upcoming
year?
ADC
1. The losses in 2014 are forecast to increase over 2013, can the AESO explain what is causing the increase?
The AESO’s loss forecast is based on historic hourly loss volume data. The 2014 BRP loss forecast uses
the same forecasting model that was used in previous BRP forecasts with updated hourly historic
data. The forecast results for 2014 reflect the increasing trend in the historical hourly data up to 2013.
This aligns with the current projection for 2013 actual loss volumes to be higher than the 2013 forecast
loss volumes.
2. What is the projected impact on line losses once the HVDC lines are in service?
AESO is currently undertaking analysis and operational impacts of HVDC, including impact to system
losses. This work is ongoing and results are not final. The losses forecasts will be impacted in 2015.
ATCO Electric
No comments.
ATCO Power
1. Just as with AS costs, ATCO Power is concerned about the linkage between the price forecast and the
forecast for line loss costs.
Noted. The transmission line losses cost forecast is created by valuing the forecast losses at forecast
prices. Actual transmission line losses actual deviations are primarily the result of pool price variance
that can be explained. See also AESO response to IPCAA comment 1 below.
Capital Power
1. Capital Power has no concerns with the Transmission Line Losses Costs forecasts identified by the AESO.
Noted.
AESO Stakeholder Comment and AESO Replies Matrix
Page 7
AESO Transmission Line Losses Costs Forecast for 2014 – October Technical Meeting
Do stakeholders have any comments on the Transmission Line Losses Costs forecasts for the upcoming
year?
IPCAA
1. In contrasting the actual vs. forecast losses costs in the past years (referring to page 20 and 22 in the
presentation slides), it would be useful to have a column that indicates the $ and GWh differences, as well as
the % error between the two sets of numbers.
The following table provides the variance information requested. Also see the AESO 2014 Business Plan
and Budget Proposal for year-to-date 2013 information on losses.
2010 F/C
2010
Actual
Variance
Under
(Over)
%
Variance
2011 F/C
2011
Actual
Variance
Under
(Over)
%
Variance
2012 F/C
2012
Actual
Variance
Under
(Over)
%
Variance
173.6
131.2
42.4
24.4%
121.0
185.8
(64.8)
-53.6%
220.8
150.7
70.1
31.7%
2,643
2,667
(24)
-0.9%
2,564
2,367
197
7.7%
2,553
2,216
337
13.2%
64.40
50.88
13.52
21.0%
46.70
76.22
(29.52)
-63.2%
83.32
60.47
22.85
27.4%
Total
Losses
Costs
($M)
Total
Volumes
(GWh)
Average
Pool Price
($/MWh)
F/C - forecast
TransAlta
1. TransAlta appreciates the opportunity to comment on the AESO’s line loss costs forecast and does not have
any specific concerns about the costs presented.
Noted.
AESO Stakeholder Comment and AESO Replies Matrix
Page 8
AESO Own Costs Budget for 2014 - – October Technical Meeting
Do stakeholders have any comments on the AESO’s Activity-Based reporting presentation?
ADC
1. The activity based reporting method was helpful in seeing how the AESO is allocation resources to business
priorities.
Noted.
ATCO Electric
1. ATCO supports the AESO’s introduction of activity-based reporting as part of its 2014 BRP and its efforts to
promote transparency of its Own Costs and asks the AESO to provide comparative 2013 budget numbers
with year over year variance explanations for each of the key activities and their sub-processes.
The following table provides a comparison of the 2013 and 2014 budgets by key activity.
AESO Stakeholder Comment and AESO Replies Matrix
Page 9
AESO Own Costs Budget for 2014 - – October Technical Meeting
Do stakeholders have any comments on the AESO’s Activity-Based reporting presentation?
2. ATCO encourages the AESO to continue this initiative by also categorizing the AESO’s Information
Technology Services under their associated processes in the future.
Noted.
ATCO Power
1. This is the first time ATCO Power participates in the budget review process. ATCO Power is therefore
unable to compare the current format to the earlier format. The current presentation seems intuitive though
and appropriate for the process.
Noted.
2. ATCO has the following comments regarding specific activities:
(a) Given the concerns expressed by stakeholders regarding the ARS, particularly the audit, ATCO Power
is interested in better understanding how the AESO plans to address them. These efforts would seem to
fall under Electric System Operations.
Noted. As identified in the response to comments on the AESO business initiatives, the AESO
acknowledges that audit times on the ARS compliance areas are not within industry expectations. AESO
is currently reviewing the sources of potential delays with the audits, and will be discussing potential
areas of improvement such as reviewing program scope, improving audit processes internally, and
improving submission expectations with market participants.
For further comments, refer to the AESO’s response to ATCO Electric question 3 from the September 18,
2013 stakeholder meeting on the AESO’s Draft Business Initiatives for 2014. The document is located on
the AESO’s website (http://www.aeso.ca/downloads/RepliesComments_Matrix_Business_Initiatives_final.pdf).
Agreed. The AESO considers ARS (compliance program development and operations) as an Electric
Systems Operations process activity. It is classified under the Operations Business Services activity
grouping.
(b) ATCO Power is also interested in further detail on Market Development. Unfortunately stakeholder
concerns seem to not get resolved in the AESO’s consultation process resulting in a significant amount
of proceedings in front of the Commission. This creates a significant cost burden. ATCO Power would
like to see a more detailed breakdown of the costs in this area and get a better understanding on how
the AESO is planning to reduce or avoid costs in this area.
The following table presents the Regulatory Process Costs for expenditures incurred by the AESO.
These amounts are for third party costs associated with the regulatory proceeding and do not include
internal AESO staff costs. All Regulatory Process Cost expenditures occur in a cost-effective manner to
ensure prudent financial decisions are made and to demonstrate responsible stewardship of funds.
For new ISO Rules or Alberta Reliability Standards, or for amendments to existing ISO Rules or Alberta
Reliability Standards, stakeholder consultation is an important step in the AESO’s process to ensure
receipt and consideration of stakeholder feedback and comments. It is ultimately the AESO’s
responsibility to proceed in a manner that it feels is most appropriate; at times that may lead to
objections or complaints by market participants.
AESO Stakeholder Comment and AESO Replies Matrix
Page 10
AESO Own Costs Budget for 2014 - – October Technical Meeting
Do stakeholders have any comments on the AESO’s Activity-Based reporting presentation?
Proceeding Category ($ million)
Competitive Process
Objections and Complaints - 2013 and 2012

Objection to Available Transfer Capability and
Transfer Path Management

Objection to Transmission Loss Factor
Methodology and Requirements

Complaint to Real Time Transmission Constraint
Management Rule
Needs identification documents
2013:

Fidler 312S 240/138 kV Substation

BluEarth Hand Hills Wind Energy Connection

Foothills Area Transmission Development

Goose Lake to Chapel Rock Southern Alberta
Transmission Reinforcement

AUC Notices of Hearings
2012:

Airdrie Area 138 kV Transmission Reinforcement

East Calgary Transmission Project and Shepard
Energy Centre Interconnection

Red Deer Region Transmission Development

South Calgary 69 kV Transmission System
Upgrade

Spruce Grove 595S Substation and
Interconnection

Weasel Creek 947S and Abee 993S Substations

AUC Notices of Hearings
Transmission facility owner applications

Western Alberta Transmission Line (WATL) - 2013
and 2012

Eastern Alberta Transmission Line (EATL) - 2012

Heartland Transmission Project - 2012

Transmission Line 902L Conductor Replacement 2012
Other
Total
2014
Plan
0.7
2013
Projected
0.2
0.7
YTD Sept
2013 Costs
0.2
0.5
2012
Actuals
0.8
0.8
0.8
0.7
0.5
0.6
-
0.0
0.0
0.3
0.2
1.8
0.1
1.7
0.1
1.4
0.0
2.5
Totals may not add due to rounding
Capital Power
1. Capital Power appreciates the AESO’s efforts in preparing the activity-based cost reporting in response to
stakeholder requests to increase transparency, and has no concerns with the breakdown provided at the
Technical Review meeting on October 10, 2013. Capital Power encourages the AESO to provide activitybased cost reporting in all future BRPs going-forward.
Noted.
AESO Stakeholder Comment and AESO Replies Matrix
Page 11
AESO Own Costs Budget for 2014 - – October Technical Meeting
Do stakeholders have any comments on the AESO’s Activity-Based reporting presentation?
IPCAA
1. IPCAA appreciates the efforts taken by the AESO to implement the Activity-Based reporting structure. It is a
helpful to gain insight into the budget allocation amongst the different functions.
Noted.
2. IPCAA would like to see this reporting format be continued in the future and to have each year being
contrasted with the previous in order to identify cost changes. Any cost changes should be tracked back to
an area of activity with provided explanations. This type of reporting does improve the level of transparency
around the AESO’s operating costs. Hopefully this has been valuable for internal purposes as well, and not
simply for external stakeholders.
The process and results of the activity-based cost reporting provided additional insight on all business
activities underway at the AESO and resources dedicated to those deliverables. This information has
allowed management to confirm or reassess the alignment of resources to general AESO activities and
priorities. The plan is to continue this reporting format in future years.
TransAlta
1. TransAlta appreciates the AESO’s efforts in providing greater transparency into its own costs through the
use of the new activity-based format. TransAlta requests that a further breakdown of each activity block by
project also be provided to help stakeholders understand the AESO’s focus for the upcoming year and
conduct their own planning activities. TransAlta understands the industry is dynamic and priorities shift
during the year, but a breakdown of the activities by project will facilitate conversation during the BRP phase
and help participants understand the status of each initiative when priorities change.
The business initiatives presented to stakeholders at the September 18 BRP meeting identify the
AESO’s focus for the upcoming year; they will be documented in the AESO 2014 Business Plan and
Budget Proposal. The AESO will report its progress against these business initiatives, including
changes to priority or timing on a quarterly basis during 2014.
The activity-based cost reporting is developed at a level to provide useful information on the general
operations of the company as opposed to a much more detailed project-level. Project-level reporting is
used internally when management is reporting and monitoring specific tasks or initiatives. (Also refer to
the response to ATCO Electric 2 c).
AESO Stakeholder Comment and AESO Replies Matrix
Page 12
AESO Own Costs Budget for 2014 - – October Technical Meeting
Do stakeholders have any comments on the General & Administrative budget proposal for the upcoming
year?
ADC
1. The ADC encourages the AESO to allocate sufficient resources to the Customer access services activities
to ensure that load and generation connections advance on a timely and streamlined basis.
AESO management believes there are sufficient resources allocated to this area. Management continues
to review customer connection access service requirements on an ongoing basis and will add additional
resources if necessary.
ATCO Electric
1. It would be useful to see a comparative split of the AESO’s General and Administrative costs associated
with its regional vs bulk transmission plans.
Noted. The AESO will take this comment under consideration for the next BRP cycle.
2. Re: Electric Systems Development Costs:
(a) Please clarify if the $5.5 million budgeted for the Competitive Process includes costs for both the Fort
McMurray West and East projects. If so, how much was budgeted for each project?
2014
Plan
2013
Forecast
2013
Plan
Development of Tendering and Commercial
Documents (Financial, Tendering and Legal
Advisors)
Fort McMurray West
Fort McMurray East
1.1
0.3
2.1
-
0.9
-
Evaluation Teams & Fairness Advisor
1.0
1.0
1.2
Route Development & Owner’s Engineer
1.2
1.0
1.7
Integration Costs (AESO internal resources)
1.0
1.0
1.0
Communications
0.3
-
0.8
Issues Based Outreach
Total General and Administrative Costs
Regulatory Process Costs*
0.4
5.4
-
5.1
0.2
5.6
-
* These costs are not recorded as General and Administrative costs; they are included in Other Industry Costs.
(b) ATCO notes that these Competitive Process costs may be better classified as Market Development
activity cost. This would increase the total Market Development costs from $5 million to $10.5 million
and reduce Electric System Development costs from $16.5 million to $10.5 million.
The AESO considers Competitive Process a transmission development activity, not market-related,
which results in its classification within the Electric System Development process.
(c) Please specify what is intended to be accomplished and the amount budgeted for the AESO to develop
AESO Stakeholder Comment and AESO Replies Matrix
Page 13
AESO Own Costs Budget for 2014 - – October Technical Meeting
Do stakeholders have any comments on the General & Administrative budget proposal for the upcoming
year?
cost benchmarking for transmission projects, separate from the costs of transmission program support
and the costs of communications strategies for transmission projects.
The AESO’s intention in providing activity-based cost reporting is to describe general activity groupings
for each process and the associated dollars. The intention is not to associate dollars and specific
deliverables for each activity grouping. That level of information is considered too detailed for the
purpose of providing the activity-based cost reporting. (Also refer to the response to TransAlta 1).)
3. Please provide all metrics and external benchmarks used by AESO to help ensure that its corporate
services costs are as lean as possible.
Noted. When the information is available, the AESO compares its budgeted costs with other ISOs. In
general, the comparison shows that the business drivers between organizations are not comparable
which impacts the usefulness of the information. The AESO is open to ideas stakeholders have
regarding potential metrics or external benchmarks. This proposal has been offered to stakeholders in
prior BRPs.
4. The costs of developing benchmarking for transmission projects included under Electric Systems
Development would also be better classified as a Market Development cost, similar to other monitoring
activities listed under Market Development, such as the auditing and assessment of market participants for
compliance.
The activities included in Market Development include the compliance for ISO Rules. The cost
benchmarking activity included in Electric System Development relates to the development of a cost
benchmark database to be used to evaluate transmission projects within Alberta. A compliance function
performed by the AESO is not a part of the cost benchmarking activity. The AESO believes the current
categories are appropriate.
5. ATCO urges the AESO to review and re-consider the key activities included in each of its key processes.
Noted.
ATCO Power
1. ATCO Power is interested in additional detail around the transition of the reliability coordinator function and
the associated costs of $1 Million. In addition, ATCO Power would like to better understand the
WECC/NWPP Costs.
Additional information on the transition of the reliability coordinator (RC) function and the AESO impact
as well as WECC/NWPP costs will be provided in the AESO 2014 Business Plan and Budget Proposal.
Also refer to http://www.aeso.ca/downloads/AESO_to_Provide_RC_Functions_091213_(2).pdf for RC
information published on aeso.ca.
AESO Stakeholder Comment and AESO Replies Matrix
Page 14
Capital Power
1. As all costs are essentially flowed-through to either load or generators, Capital Power commends the
AESO’s efforts to self-fund new initiatives and attempts to identify further reductions for the 2015 G&A
budget.
Noted.
IPCAA
IPCAA has several specific questions with regard to AESO cost allocations:
1. What are the 2013 Actual YTD and Projected and 2014 Budget amounts allocated to Transmission
Constraints Management regulatory costs (i.e. AUC proceeding-related, etc.)?
Refer to the response provided in the Activity-based Reporting section to ATCO Power 2 b). The total
third party costs for Objections and Complaints are provided. Internal AESO resource time or costs is
not available.
2. What are the 2013 Actual YTD and Projected and 2014 Budget amounts allocated to Line Loss regulatory
costs (i.e. AUC Proceeding ID 2581, etc.)?
Refer to the response provided in the Activity-based Reporting section to ATCO Power 2 b). The total
third party costs for Objections and Complaints are provided. Internal AESO resource time or costs is
not available.
3. What are the 2014 Budget amounts allocated to the AESO Competitive Process – compared to the 2013
Actual YTD and Projection numbers? Are all of the Competitive Process costs part of the ESD category? If
not, where else are they allocated?
Refer to the responses provided in the Activity-based Reporting section to ATCO Power 2 b) and in the
General and Administrative Cost section to ATCO Electric 2 a).
Yes, all competitive process costs are included in the Electric System Development process.
4. Are all of the Transmission Cost Monitoring and Oversight activities part of the ESD cost category or are
some included elsewhere? What are the total FTEs and costs attributable to Transmission Cost Monitoring
and Oversight in 2014? How does this compare to 2013?
The Electric System Development process includes resources that are specifically dedicated to the cost
monitoring processes or activities but other resources also contribute to the deliverables for cost
monitoring.
Staff (number of staff resources)
Contract resources ($ million)
2014
Plan
3
2013
Plan
4
0.1
0.5
TransAlta
No comments.
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AESO Own Costs Budget for 2014 - – October Technical Meeting
Do stakeholders have any comments on the Capital Budget proposal for the upcoming year?
ADC
No comments.
ATCO Electric
1. ATCO would be interested in seeing the AESO’s 2014 Capital Budget presented in an activity-based
manner, similar to the profile shown for 2013 Capital Investments on slide 49 of the meeting presentation.
The AESO will take this comment under consideration for the next BRP cycle as part of AESO
management’s review of information technology costs.
2. ATCO would encourage the AESO to provide business cases and rationale for its capital budget decisions.
Noted. Additional high-level information regarding the AESO’s capital projects will be provided in the
AESO 2014 Business Plan and Budget Proposal and in the Quarterly Stakeholder Report. Detailed
business case information will continue to be managed internally through the AESO’s established
portfolio management process as discussed in the Business Plan and Budget Proposal.
ATCO Power
No comment.
Capital Power
1. Capital Power has no concerns with the Capital Budget proposal.
IPCAA
No comment.
TransAlta
1. TransAlta does not have any specific comments but would like to better understand how and when “selffunding” will be used and its impacts on planned initiatives.
The AESO is committed to continuing to prioritize our work and streamline our processes. We know that
new projects or initiatives will be identified in the future, but we plan to offset these additional costs by
identifying savings as we become a more focused and efficient organization. These changes will occur
without compromising the reliability or quality of our work.
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Other Comments
Do stakeholders have any comments on the Market System Replacement project update?
ADC
1. After reviewing the consultation summary on the MSR project, it is unclear that a 15 minute settlement is
being contemplated as one of the underlying requirements of the system. Can the AESO confirm its
position on this?
Dispatch and Settlement period alignment has been captured in the current list of system requirements.
The complete set of requirements will be assessed as part of the Phase II (Request for Proposal) project
process.
ATCO Electric
No comments.
ATCO Power
No comments.
Capital Power
1. The Market System Replacement (MSR) Project, stakeholder consultation, and potential costs associated
with this initiative are of particular interest to Capital Power. As such, we appreciated the update provided
by the AESO on October 10th advising that Phase II will cost approximately $1.5-2 Million in 2014 and that
the depreciable life of the new system should be approximately 7-10 years.
Noted.
2. Capital Power also looks forward to receiving more information about the potential impact to the trading
charge and the rate methodology that will be employed to recover costs associated with the project.
This information will be part of the AESO 2014 Business Plan and Budget Proposal. The 2014 trading
charge will incorporate the costs incurred in 2013, Phase 1- Validation (Business Case Development)
and the 2014 budget for the Business Plan and Budget Proposal, Phase 2 - Request For Proposal.
Capital cost for the project will not occur until 2015.
3. Given the significance of the scope of the MSR project and the estimated cost for Phase III, Capital Power
urges the AESO to take steps to ensure that stakeholders are actively engaged and consulted in all phases
of the project’s development and implementation.
Stakeholder involvement is essential to the success of the MSR project. Stakeholders will be engaged
throughout the entire project.
IPCAA
No comments.
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Other Comments
Do stakeholders have any comments on the Market System Replacement project update?
TransAlta
1. TransAlta believes that while it is important to replace aging technology and infrastructure, given the
significant cost of this project, the AESO should lay out a clear long term vision for the new system and what
it will be built to. TransAlta believes that the new system must have sufficient flexibility to accommodate not
only the market design requirements that exist today, such as the participation of wind in the market, the
ability for more than one participant to offer energy from an asset and constraints management, but also any
known initiatives that might be required in the next 5 to 10 years.
Agreed.
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Other Comments
Do stakeholders have any other comments to offer at this time?
ADC
No comments.
ATCO Electric
1. ATCO values the opportunity to participate in the AESO’s BRP and appreciates the information that the
AESO has shared.
The AESO appreciates the involvement and commitment that all stakeholders have provided throughout
the 2014 BRP.
ATCO Power
1. While it is informative to see the AESO’s forecast of costs, it would also be helpful to see detail around:
a. how costs have deviated from expectations;
b. whether changes compared to expectations represent anomalies or can be expected to persist;
and
c. how the AESO intends to work towards lowering costs.
All amounts have budget to actual information presented. This information was covered as part of the
technical meeting review or can be located in the AESO 2014 Business Plan and Budget Proposal.
Review and management of the AESO’s general and administrative and capital costs is discussed in the
AESO 2014 Business Plan and Budget Proposal. Also see the AESO’s reply to ATCO Power comments
on Pool Price, Ancillary Services Costs and Transmission Line Losses Costs above.
2. Finally, ATCO Power would like to thank the AESO for the opportunity to provide comments and apologizes
in case any of the comments provided here have already been addressed during the technical meeting.
Unfortunately no representative from ATCO Power was able to attend the meeting due to a scheduling
conflict with an AESO R&V application.
Noted. It was unfortunate that ATCO Power representatives were unable to attend. The AESO tries to
accommodate all schedules. We look forward to ATCO Powers future participation.
Capital Power
Capital Power has no other comments at this time.
IPCAA
1. Under Electric System Development, IPCAA would like to see additional transparency from the AESO on
project prioritization and cost-benefit analysis, and for the AESO to start incorporating ratepayer input into its
planning and prioritization process. In the recent AUC Decision 2013-358, the Commission offered the
following statement regarding project prioritization:
“Notwithstanding, the Commission considers the approach advocated by the [Ratepayer Group] RPG to
include rate payers in the process, and to plan transmission on the basis of overall project prioritization, to
have merit. However, as set out in Section 17 of the Electric Utilities Act and Part 2 of the Transmission
Regulation, system planning is clearly the responsibility of the AESO. Consequently, apart from encouraging
the AESO to consider this approach, the Commission cannot direct the AESO to engage in this process.” –
paragraph 388
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Other Comments
Do stakeholders have any other comments to offer at this time?
As identified in the response to comments on the AESO’s Business Initiatives the AESO notes that
planning is an iterative process and that iteration provides an ongoing opportunity to review
transmission project requirements and priorities. In 2013, the AESO’s regional planning efforts and its
intent to file an updated Long-term Transmission Plan will provide the AESO opportunities to review and
revise project priorities if necessary. As this comment is considered beyond the scope of the BRP
process, it will be forwarded to the appropriate executive for reference.
TransAlta
TransAlta has three other comments to offer in relation to the AESO’s responses to the Business Initiatives
comments:
1. In its response to TransAlta, Comment 3, the AESO states “The AESO has identified the need to reallocate
resources to facilitate CIP implementation.”
As stated in its comments on draft Business Initiatives, TransAlta raised the question that the skill set
required in order to facilitate implementation of CIP standards requires both IT specific technical and
compliance expertise. Is the AESO of the opinion that they have the appropriate resources internally and
just need to reallocate those resources, or will the AESO need to acquire a new skill set, in which case
additional resources will need to be added? If new resources are to be added, has the AESO made
appropriate allowances for it in their 2014 business plan?
Noted. The specific reference is with respect to finding a self-funded solution. This means that should
additional resources be required, a vacant staff position or budget dollars would be transferred from
another area. The required skill set may or may not be available internally.
2. In its response to ATCO Electric, Comment 3, the AESO states “The AESO acknowledges that audit times
on the ARS compliance areas are not within industry expectations,” and further “The AESO is expecting to
see improvements in the audit timelines by the start of the next 3 year audit cycle in January 2014.”
TransAlta would like the AESO to make a commitment to meet their target of 2-3 months for the audit
timelines.
Noted. The AESO intends to perform its requirements according to plans.
3. In its response to ATCO Power, Comment 1, the AESO states “The AESO will continue to monitor this
[NERC] initiative in the US and work with AESO Reliability Committee (ARC) members and its working
groups to make improvements. This will allow AESO resources to focus on the important issues and to
provide support to stakeholders.”
TransAlta requests clarification on the types of improvements the AESO is expecting and what would be
considered a satisfactory standard.
Noted. As identified in the response to comments on the AESO’s Business Initiatives the review of
improvements is currently work in progress and the details are to be provided by the process owners
and discussed with market participants when available.
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