Market Services Stakeholder Session

January 12, 2011

2

Agenda

Introductions, 2010 in review, the year ahead Kelly Gunsch

Market Suspension Anita Lee

Supply Surplus Ruppa Minhas

Coffee Break

Wind Integration Jacques Duchesne

Intertie Framework – ATC Allocation Kevin Dawson

Transmission Constraint Management / Remedial Action Schemes

Gordon Nadeau

Questions & Answers

3

Consultation and Conceptual Design

Definition of the Problem

Clear Interpretation of Policy Framework

Share our Data &Analysis

Share our Research& Learnings

from Other Markets

Review ProgressAgainst Objectives

12 – 18 months

Iterative Consultation if New Ideas, New Concerns,

New Data

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Solution Development and Implementation

Conceptual design

- define success

- idea generation

- stakeholder consultation

- iterative

- rules development

*AUC approval now required

Detailed design

- processes

- systems

- procedures

- training

Implementation

- process changes

- system changes

- testing & training

Operationalize

Steps may be iterative, performed more than

once within each initiative

Feedback loop – is the implemented solution achieving the initial objectives?

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2010 & 2011 Priorities

• Wind

– Integrate new wind

– Complete implementation of Phase 1

– Phase 2

• Interties

– Integrate MATL

– ATC Allocation

– Intertie (ATC) restoration initiatives

– Implementation of long term framework

• Demand Response

– LSSi

– Brattle Review

• TCM & RAS

– Compliance Filing & Phased Implementation

– Draft RAS Rule

• Contingency Rules

– Supply Surplus

– Market Suspension

• FEOC Regulation Implementation

– AESO Rule updates necessary

• Outage Information Sharing

• Market Rule Transition (TOAD program)

• OR Redesign

Market Suspension

Anita Lee, P.Eng. PMP

January 12, 2011

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Purpose of review

• Current rule is outdated (e.g., pricing methodology)

• Current rule does not differentiate between events of lesser impact (such as temporary loss of the dispatch tool) and events of more significant impact (such as an AIES blackout)

• Ensure market suspension is only used as a last resort

8

Status Update

• Recommendation Paper issued December 2, 2010

• Stakeholder comments due January 14, 2011 – comments to be sent to anita.lee@aeso.ca

• Development of rule changes in Q1 2011

• Stakeholder consultation on rule changes in Q2 2011

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Highlights of Recommendation Paper

• Limited Market Operation

– Triggered when:

• There is a temporary outage to market operation tools (DT or ETS)

• The System Controller cannot access market operation tools after evacuation from the System Coordination Centre and before the Backup Coordination Centre is activated

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Highlights of Recommendation Paper

• During limited market operation:

– The System Controller will use the best available EMMO for energy market dispatch

– DDS dispatch and AS dispatch will be limited

– Payments to Suppliers on the Margin (PSM) will be suspended

– The System Marginal Price (SMP) will be set by the highest price block dispatched in the EMMO in use

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Highlights of Recommendation Paper

• Market suspension triggered when:

– There has been an extended period of market operation tool outage,

– The System Controller has evacuated the System Coordination Centre and cannot access or activate the Backup Coordination Centre,

– The AIES has broken into two or more electrical islands, or

– The AIES has experienced a blackout

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Highlights of Recommendation Paper

• A market suspension

– Must be authorized by the AESO CEO or his designate, except in the case of an AIES blackout where it can be declared by the System Controller

• During a market suspension

• The System Controller will not necessarily follow the EMMO, but will direct generation as necessary to maintain system reliability

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Highlights of Recommendation Paper

• System Marginal Price during a market suspension will be determined as:

– 30 day rolling average on peak price and 30 day rolling average off peak price, prior to initiation of the market, or

– $999.99 when all available energy is dispatched and the System Controller invokes Supply Shortfall procedures in order to manage supply and demand balance

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Highlights of Recommendation Paper

• A cost-based mechanism will be provided

– To ensure generators’ operating costs are covered

– The cost calculation formula is similar to that for Long Lead Time Energy (LLTE), except generator start up costs are only included if a generator is directed by the System Controller to start during a market suspension, and

• Directed off by the SC during the market suspension, or

• Dispatched off by the SC upon the cancellation of the market suspension and return to normal market operation

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Next Steps

• Comments on the Market Suspension Recommendation Paper are due this Friday, January 14, 2011 to anita.lee@aeso.ca

Questions?

Supply SurplusRecommendations

Ruppa Minhas

January 12, 2011

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Status Update

• AESO responses to stakeholder comments on the Supply Surplus Discussion Paper published December 2, 2010

• Supply Surplus Recommendation Paper published for stakeholder comment on December 2, 2010

– Stakeholder comments on the Recommendation Paper are due January 14, 2011

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Supply Surplus

• Supply Surplus:

– More supply than demand at $0

• Purpose:

– Provide recommendations on the solutions for managing supply surplus conditions

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Recommendations - Summary

• No exemption for wind generators and cogenerators

• Implement of voluntary generator curtailment request (VGCR)

• Allow exports within T-2

• Update minimum stable generation (MSG)

• Supply surplus report

– Implemented December 8, 2010

• A voluntary generator curtailment program (VGCP)

– Not recommended

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Recommendation - No exemption for wind and cogenerators

• It is necessary to include all generation types in the supply surplus procedures so that they are all on a level playing field

• Allowing a blanket exemption for one generation type will not accomplish this

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Recommendation - No exemption for Cogenerators

• To ensure a FEOC market the rules must consider, and, to the extent possible, accommodate the different characteristics of each generation type without unduly favouring one type of generation over another

• Minimize the impact to cogen facilities as a result of supply surplus:

– Electric energy produced and consumed on site is not subject to the ISO rules: EUA, Section 2(1)(b)

• Cogenerators will not be curtailed below 0MW net to grid

– Generators will be curtailed to their MSG level

• Revise MSG definition to better accommodate current generator limitations

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Minimum Stable Generation

• MSG definition and application requires an update

• MSG workgroup

– Meeting was held in October 2010

• Further consultation:

– Meeting again soon:

• To finalize the proposed definition

• To discuss options for changing the application of MSG

–To allow participants to change the MSG value on a time-ahead basis

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Comparison – Supply Surplus and Supply Shortfall

Supply Surplus Supply Shortfall

$0

• More supply than demand

• Need to achieve supply-demand balance

$999.99

• More demand than supply

• Need to achieve supply-demand balance

Curtail current hour import transactions

• Included within existing and recommended procedure

Reduce export ATC to zero

• Step 6 in OPP 801

Voluntary Generator Curtailment Request

• Request to market to allow generators to voluntarily curtail supply

Request to market to provide supply

• Step 4 in OPP 801

Allow exports within T-2

• Low cost and easy to implement

Allow imports within T-2

• Step 5 in OPP 801

Assess an assets involvement in RR, consider re-dispatch if required

• Included within existing and recommended procedure

Issue directive for excess reserves

• Step 19 in OPP 801

Supply Surplus Report

• Provides the market with an indication of potential supply surplus conditions

Supply Adequacy Report

• Provides the market with an indication of potential supply shortfall conditions

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Voluntary Generator Curtailment Program (VGCP)

• VGCP not recommended at this time

• Received mixed participant support and most participants were not in favour

• May be a more complex solution than is required

• Not required at this time

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Recommendation – Supply Surplus Procedure

1) Curtail current hour import

2) Maximize the posted export ATC limit

3) Send out a VGCR request to voluntarily reduce generator output.

4) Dispatch flexible blocks of the $0 offers for partial volumes on a pro-rata basis and direct wind generation on a pro-rata basis.

5) Direct assets with inflexible $0 offers to MSG

6) Assess an assets involvement in RR, consider re-dispatch if required

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Supply Surplus Report

• Available on the AESO website on December 8, 2010

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Next Steps

• Stakeholder comments on recommendation paper due January 14, 2010 to ruppa.minhas@aeso.ca

• MSG workgroup meeting soon

– Invite will be sent out through the weekly stakeholder email and posted on the AESO website once scheduled

Questions?

Coffee Break

Wind Integration Program

Jacques Duchesne P. Eng.

Program Manager, Wind Integration

January 12, 2011

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Wind Integration – Objectives

Phase 1:

• Wind integration management plan designed and implemented to safely integrate 1100 MW of wind by end of 2011

Phase 2:

• Wind integration plan for up to 4000 MW

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Agenda

• Program overview

• Status update phase 1

– Wind Technical Rule

– Wind power management

– Forecasting

• Status update phase 2

– Discussion Paper

– Stakeholder sessions

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Wind Integration Program – High Level View

Wind Power

Forecaster Selection

Wind Power

Forecast Integration

Short-Term

Plan Design

Wind Technical Rule

Phase 2

Design & Consultation

Phase 2 Implementation

Short-term

Market studies

Long-Term

Market Studies

Wind Power Management

2010 2011 2012 / 2013

Wind Power

Forecast Integration Design

Wind Power Forecast Roll-out

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Phase 1 Update

• Wind Technical Rule

– Filed with AUC August 2010

– Hearing scheduled for February 28

• Phase 1 Recommendations - September 2010

– Use EMMO as primary tool

– Use wind power management when wind ramping up too fast

– For wind ramp down, activate contingency reserves from standby. No additional volume required at 1100 MW wind.

– Continue implementation of centralized forecast

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Wind Forecast

• Signed contract with WEPROG January 2010

• Forecast will:

• Reduce wind related Area Control Error (ACE) events

• Decrease the amount of wind generation impacted by Wind Power Management

• Provide visibility to system controllers

• Developed implementation guide November 2010

• Roll-out to existing wind farms in progress

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Phase 2 - Status

• Market and Operational Studies completed December 2010

– Cases: 1575 MW, 1700 MW, 2500 MW & 4000 MW

• Issued Discussion Paper for comments – December 2010

– Comments due back January 28

• Will hold stakeholder consultation to explore in Q 2011

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Phase 2 Summary – Discussion Paper

• Rely on the Energy Market Merit Order

• Increase regulating reserve volumes.

• Refine short-term wind integration recommendations

• Develop a ramping service

• Develop a wind firming service: A market service could be developed to firm overall wind production

• Develop must offer must comply (MOMC) rules for wind

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Next Steps

• Phase 1

– Tool to calculate ramp rate and system wind power limit

– Consult on rule defining use of WPM

– Site specific forecast integration

• Phase 2

– Stakeholder comments due back January 28

– Ongoing consultation – wind working group Q1 2011

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Next Steps

• Comments on the Phase 2 Wind Integration Discussion Paper are due Friday, January 28, 2011 to jacques.duchesne@aeso.ca

Questions?

Intertie Framework – Available Transfer Capacity Allocation

Kevin Dawson, Program Manager, Interties

January 12, 2011

43

Intertie Framework – Today’s Agenda

• Summary of Intertie Framework Recommendation Paper

• Overview of recent ATC information package (letter, term sheet)

• Discussion on ATC allocation recommendation

– Options considered

– Recommendation

– Next steps

44

Intertie Framework Recommendation Paper

• Intertie Framework Recommendation Paper published October 7, 2010 contained four main recommendations:

– ATC allocation by energy price and then pro rata

– Implement dynamic scheduling

– Develop and implement a merchant transmission service (MTS) tariff

– Plan system so each intertie can simultaneously transfer path rating

• Stakeholder comments have been received and posted

45

Intertie Framework – ATC Allocation

• Immediate focus on ATC allocation as third tie line under construction will result in requirement to allocate limited ATC among multiple interties

• ATC letter and term sheet posted December 16, 2010 – For information purposes

– Provides overview of new rule framework

• Process going forward

– Rule drafting in progress (in integrated format)

– Rule cycle for February / March

• Fulsome opportunity for comment on rule change and rule language

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Intertie Rules – Term Sheet Overview

• Rule framework integrates previous OPPs with rules

– Limits Total and Available Transfer Capacity (TTC, ATC)

– Scheduling

– Validation and setting of schedules

– Congestion management on the interties

– Dispatching intertie schedules

• Term sheet provides overview of new rule format outlining proposed rule provisions and how they map to current rules and OPPs

– Highlights where rule changes are recommended – allocation of ATC

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ATC Allocation – Design Choices

• Approval process– Approve tags, allow for other scheduling authorities to make cuts

using their criteria (tariff)

• Alternative does not recognize commercial product in other jurisdiction and may prematurely reject tags

• Timeline– Xx:45 consistent with objective noted above

• Earlier alternatives, e.g., T-2, perhaps more consistent with rest of market but don’t recognize products in other jurisdictions and may reduce overall intertie utilization

• Procedures– Submissions, scheduling and congestion management

• Discussed below

48

ATC Allocation Recommendation

• Recall – current method is to curtail on a last in, first out (LIFO) basis

• New proposal – pro rata– At xx:45, assessment and validation

– Test for oversubscription first at system, then AC, then intertie level

– Resolve any oversubscription by:

• Netting out counterflows and wheelthroughs

• Price (when implemented)

• Pro rata of equal priced offers / bids at assessment level (system, AC, intertie)

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Example ATC Pro Rata Allocation Math

• Simplified example – no wheelthrough and only 1 tag per import/export

• In this example, system limit is OK but AC import limit is violated

• BC and Montana imports pro-rated down by 100 MW to come within limits

• All interties are within limits

Import Export Import Export Import Export Import Export Import ExportCapability 700 700 300 300 150 150 700 700 850 650Scheduled 550 50 300 0 50 0 850 50 900 50Net Sch. 500 300 50 800 850

Adjustment -65 -35 -100

Final Sch. 485 50 265 0 50 0 700 750

MT Intertie SK Intertie Net AC limit System limitBC Intertie

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Congestion Management Choices

• Number of choices considered and rejected:– Pro rata math limited to maximum of ATC on any line instead of

schedules

• Recognize incentive to over schedule, however “must supply” if dispatched

• May need to revisit if “must supply” risk is not sufficient to limit behaviour, but mathematically implementation is problematic

– Curtail first at intertie level, then AC, then system

• No opportunity at xx:45 to optimize process. Recognize that on occasion cut at intertie level may be more efficient. Will monitor to see if occurrence more frequent than expected.

• Expect ability to “net schedule” at system level should allow for maximized utilization of ATC

– Curtail by participant not tag

• Fairness issue

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Next Steps

• ATC term sheet comments welcome but not required

• Rules process for integrated rule language to commence in February

• Expect rule filing with AUC by end of March, 2011

Questions?

Transmission Constraint Management & Remedial Action Schemes

Gordon Nadeau

January 12, 2011

Transmission Constraint Management

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Transmission Constraint Management AUC Decision 2009-042

• Original proposed rule was deemed to be technically deficient and the AESO has addressed those deficiencies by:

– defining the scope of the rule

– providing clarity around certain steps

– defining specific fundamental terms

– defining the use of TMR

56

Transmission Constraint Management AUC Decision 2009-042

• ENMAX proposal:

– Not generally consistent with the AESO’s approach, as stated by the Commission

– has perverse incentives

– not compatible with the current market design

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Transmission Constraint Management - Rule Filing

• Submitted the rule 9.4 as a compliance filing on December 16, 2010

• TCM update letter on the AESO progress on TCM Initiatives

• TCM rule language comment response matrix

• Rule was filed in accordance with section 20.5(2) of the EUA

• AUC will provide further direction

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Transmission Constraint Management-Implementation

• Once a final decision is received:

– Operational tool development

– OPPs will be aligned and filed in stages in 2011 and full implementation of Rule 9.4 thru OPPs and systems to proceed through 2012

Remedial Action Schemes

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Remedial Action SchemesBackground

• Remedial Action Scheme (RAS) consultation has proceeded in parallel with TCM rule 9.4; part of comprehensive consultations on constraint management

• On July 20 2010, the AESO initiated formal rule consultation on a proposed Connection RAS rule and provided a draft RAS ID to help clarify the policies applied to Connection RAS

• Stakeholder comments on the proposed Connection RAS rule were posted to the AESO website on September 9, 2010

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Current Connection RAS Status

• The AESO is currently considering stakeholder comments

• Some stakeholders are seeking clarity on AESO connection policies; others are looking for firm AESO commitments during the connection process

• The AESO is of the view that further consultation is required to discuss these issues and potentially broaden the scope of the Connection RAS rule

• Targeting first half of 2011 for filing rule with AUC

Questions?

Thank you