ONTARIO: Straddling the ONTARIO: Straddling the Northeast and Midwest RTOs Northeast and Midwest RTOs Presentation to Ontario Power Summit Presentation to Ontario Power Summit Update on Regional market Update on Regional market Developments Developments June 11, 2002 June 11, 2002 Toronto, Ontario Toronto, Ontario Amir Shalaby Manager of Regulatory and Government Affairs The Independent Electricity Market Operator Toronto, Ontario, Canada
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ONTARIO: Straddling the Northeast and Midwest RTOs Presentation to Ontario Power Summit Update on Regional market Developments June 11, 2002 Toronto, Ontario.
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ONTARIO: Straddling the Northeast and ONTARIO: Straddling the Northeast and Midwest RTOsMidwest RTOs
Presentation to Ontario Power Summit Presentation to Ontario Power Summit
Update on Regional market DevelopmentsUpdate on Regional market Developments
June 11, 2002June 11, 2002
Toronto, OntarioToronto, Ontario
Amir Shalaby
Manager of Regulatory and Government Affairs
The Independent Electricity Market Operator
Toronto, Ontario, Canada
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Scope of PresentationScope of Presentation
• Overview of Ontario electricity markets
• Ontario’s participation in current policy choices at FERC
• RTO developments in the Midwest & Northeast
• Next frontiers for markets and regional scope for Ontario
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Ontario: Quick BackgroundOntario: Quick Background• 11 million people. 3 Million Customers .Sales
of 150 TWh; valued at Over $10 billion /year..
• Trade with US: ± 5 TWh/yr (± 3% of production)
• 6,000 MW interconnection with the U.S. (Northeast and Midwest) and Canadian Provinces
• Totally unbundled industry structure
• Four Transmitters, 90 distributors, many generators, an Independent Operator
• Divestiture and privatization of the former Ontario Hydro is underway
• Wholesale and retail electricity markets were open on May 1, 2002
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Ontario Straddles the Northeast and Ontario Straddles the Northeast and the Midwest the Midwest
New York (Niagara)(2100 MW Limit)
New York (East)(400 MW Limit)
OntarioManitoba(369 MW Limit)
Quebec (North)(80 MW Limit)
Michigan(2450 MW Limit)
Minnesota(150 MW Limit)
Quebec (South)(1130 MW Limit)(* 200 MW Limit)
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The Neighbourhood:The Neighbourhood:Midwest ISO/TRANSLink/SPP/Alliance/PJM/NERTOMidwest ISO/TRANSLink/SPP/Alliance/PJM/NERTO
Midwest ISO Service Territory
TRANSLink (Non-MISO Members)
SPP Service Territory
Alliance Service Territory
PJM West Service Territory
PJM Service Territory
NERTO
Ontario
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Northeast: • Evolves from operating ISOs
• High density, frequent congestion, geographically small
• Current focus is on market design / role ofITCs/ cost benefits
• Ontario’s IMO active in discussions
Midwest: • Numerous control areas and transmission Owners • Largest geographic RTO
• Early stages of market development
• Focus is on consolidation of control areas, role of ITCs, Transmission agreements and coordination with other RTOs.
• Ontario’s IMO starting discussions
Northeast & Midwest: Different Origins, Northeast & Midwest: Different Origins, Different Evolution PlansDifferent Evolution Plans
Developments at FERC:Developments at FERC: • Standard Market Design and Tariff• Generation Interconnection Standards• Various RTO rules/orders/announcements• Standards Developments (reliability, business
practices)• Office of Market Oversight
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IMO Perspective on Standard Market IMO Perspective on Standard Market DesignDesign
• Ontario’s market design is compatible in principles, concepts and in certain aspects in detail design
• Two incomplete components in Ontario are LMP and day ahead markets
• Comfortable with Financial Transmission reservations and rights , not physical
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IMO Perspective on Allocation of IMO Perspective on Allocation of RTO FunctionsRTO Functions
• Straightforward if SMD is adopted
• Most RTO functions belong with the independent entity of the RTO due to the integrated nature of functions of a SMD
• Transmission owners are asset operators and managers, proponents for transmission rates, and partners in planning and congestion relief.
• April decisions on Translink and Alliance provide guidance
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IMO Perspective on Standards IMO Perspective on Standards DevelopmentsDevelopments
• Process should enable various jurisdictions to adopt compatible standards
• Best facilitated with an international, self-governing , industry based organization
• Reliability standards have a public interest nature to them
• Reliability standards do interact with business practices. Coordination is therefore in the best interest of the entire industry
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RTO Developments in the Midwest RTO Developments in the Midwest and Northeastand Northeast
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NYISO and ISO-NE committed to:NYISO and ISO-NE committed to:• Developing a common NY and NE energy market
• Evaluating the economic benefits and system reliability implications while maintaining integrity of current markets
• Preparing a comprehensive integration plan with orderly transmission
• Ensuring stakeholder input
• Maximizing reuse of existing assets
• Submitting a filing to FERC by June 30th
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• Submissions to FERC on: design/allocation of functions/standards development
• Participation in Northeast evolution: MOU agreement, mediation at FERC, NERTO design, seams mending at FERC(June 12)
• Discussions with MISO
• Review of emerging standards
Ontario’s Involvement in RTO Ontario’s Involvement in RTO DevelopmentsDevelopments
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Val
ue
Cre
atio
n
NY
PJM
NEPOOL
Stage 0 - Current State Markets
NYISO ISO-NE
PJM
Stage 1 - NE Implements SMD 1.0
NY
PJM
SMD 1.0
NYISO ISO-NE
PJM
MACC
NPCC
IMO
IMO
SMD 1.0
ISO-NENYISO
SMD2.0
PJM
PJM
NPCC
Stage 3 – Consolidated Market
NYISOISO-NESMD2.0
IMO
NPCCIMO
PJM
PJM
MACC
CONSOLIDATE MARKETS
STANDARDIZE MARKET DESIGN
Timing
IMO
IMO
Stage 2 - NY Implements SMD 2.0
Now Month 12 Month 24 Month 36
Possible Northeast Market Evolution Possible Northeast Market Evolution (including Ontario)(including Ontario)
IMO
IMO
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Next Frontiers for Markets and Next Frontiers for Markets and Regional Scope for Ontario Regional Scope for Ontario
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Opportunities with Neighbouring Opportunities with Neighbouring RTOsRTOs
• Shared reserves and other synergies
• Coordinated scheduling of transactions
• Eliminating export transmission tariffs
• Coordinated planning
• Dealing with circulating power
• Joint assessment of interconnection projects near borders
• Closer coordination of outage plans
• Common energy day ahead market and other features
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Relevance of Regulatory Relevance of Regulatory Developments to OntarioDevelopments to Ontario
• Increased emphasis on independence
• Challenge to integrate markets and reliability
• Move to converge to “standard market Design” • Further context for evaluation of ‘unfinished business’ in Ontario:
– LMP and day ahead markets are central to SMD
– PBR for transmission has been deferred
– Interregional coordination with U.S. RTOs (day ahead, license plates, Open System Scheduling, Transmission Planning)
Ontario RestructuringOntario Restructuring Policy Development: Committees, White
paper, Design Committee 1995-1999
Policy Development: Committees, White paper, Design Committee 1995-1999
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Day 1 Market StatisticsDay 1 Market Statistics
• Ontario’s new market has 239 participants– 93 Local Distribution Companies – 89 Industrial Consumers– 19 Generators– 34 Wholesale Buyers/Sellers– 4 Transmitters
• 1st 5-min price for electricity was $25.43 MW/hr or 2.54 cents kW/hr
• At opening market demand was 14,500 MW
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Market Prices on Day 1Market Prices on Day 1
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Market Demand on Day 1Market Demand on Day 1
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IMO - Operational AuthorityIMO - Operational Authority– Serves as reliability authority for Ontario– Directs the operations of the IMO-controlled
grid - does not physically operate the system – Maintains short-term reliability:
• implements interchange scheduling
• establishes operating procedures
• redispatches generation for Emergencies
• approves transmission maintenance schedules
• coordinates and approves transmission and generation outages
• establishes Emergency Plan
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IMO - Tariff Administration and DesignIMO - Tariff Administration and DesignTransmission Rates– Transmission Owners develop and propose
revenue requirements, rate design, and the rate levels necessary to recover the costs of service.
– The OEB requires and approves.– Approved rates are billed and settled by the IMO
and transferred to the TOs.
Market Rules– Market rules (often called RTO tariffs in the U.S.)
are developed in a consultative ‘Technical Panel’ of the IMO and approved by IMO Board of Directors. Appeals can be made to the OEB.
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IMO - Interconnection RequestsIMO - Interconnection Requests– IMO conducts system impact studies in
coordination with affected TOs. – Evaluation is based on impact on reliability of
IMO-controlled grid.– IMO submits approval or disapproval of each
connection proposal to the OEB.– System impact study evaluation results are used by
the OEB to assess compliance with the Transmission System Code and to assess whether to grant a “leave to construct”.
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IMO - Real-Time Energy MarketIMO - Real-Time Energy Market• bid-based• security-constrained 5-minute dispatch• single settlement• generators submit single-part bids and perform their
own unit commitment• open to dispatchable loads and generators• allows for submission of bilateral contract data for
settlement purposes
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IMO - Real-Time Market for IMO - Real-Time Market for Operating ReservesOperating Reserves
• 10 minute and 30 minute reserve markets• bid-based• joint co-optimization with energy market
• Three other ancillary services (voltage support, black start, AGC) are procured through competitively tendered contracts
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• auction FTRs across the interconnections
• ability to hedge against changes in locational differences in energy prices between
the uniform Ontario price and the prices for each intertie zone