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Market Operations Standing Committee March 5, 2003

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Market Surveillance Panel Consultation on CMSC Issues Related to Constrained off Payments to Generators and Imports. Market Operations Standing Committee March 5, 2003. Contents. Purpose & Context of Consultation CMSC Payments - Background Constrained off Payments

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Market Surveillance Panel Consultation on CMSCIssues Related to Constrained off Payments to Generators and Imports

Market Operations Standing Committee

March 5, 2003

contents
Contents
  • Purpose & Context of Consultation
  • CMSC Payments - Background
  • Constrained off Payments
    • Various Rationale Noted
  • Implications of Retaining Constrained off Payments
  • Issues for Discussion
  • Request for Additional Comments
purpose context of consultation
Purpose & Context of Consultation
  • Ongoing issue for MSP signaled earlier
    • constrained off payments do not seem necessary or appropriate and have the potential for abuse
      • MSP Report: May-August 2002
      • MSP Backgrounder paper April, 2002
    • experience from the operation of the market
  • MSP invites input
    • to focus discussion, reconsider constrained off payments for energy to generators and imports
    • if not eliminated, may need additional safeguards against abuse
purpose context of consultation cont
Purpose & Context of Consultation (cont.)
  • Timetable
    • Feb 21: Posting of discussion paper
    • Mar 31: Final date for submission of comments
    • early May: MSP conclusions and recommendations

to IMO Board

  • MOSC Consultation
    • to introduce issues
    • to promote some initial discussion of issues
    • to encourage subsequent written comments
cmsc payments background
CMSC Payments - Background
  • Design alternative to locational pricing
    • CMSC payments based on difference between offers (bids) and MCP
    • intended for transmission / reliability limits
    • but also induced by non-transmission causes
  • Mitigation framework limited to transmission
  • Weight of the recent evidence in other markets
    • constrained-off payments are not regarded as necessary in spot markets
constrained off payments various rationale noted
Constrained off Payments- Various Rationale Noted
  • Keep wholesale prices lower than otherwise
  • Enhance reliability
    • by maintaining critical plant in the marketplace
  • Information about transmission bottlenecks
    • helpful in identifying areas for investment
  • Operational benefits to the marketplace
    • encourages compliance; selection rule
  • Compensates for departures from optimality
    • existing generation and transmission endowment
implications of retaining constrained off payments
Implications of Retaining Constrained off Payments
  • Constrained off payments may interfere with appropriate signaling in the market
    • no incentive for generators to seek enhancements
    • siting of new generation is indifferent to transmission conditions
  • Potential to affect CMSC with offer price
    • treatment of negative offer prices
    • some aspects of the local market power mitigation framework need to be reviewed
issues for discussion
Issues for Discussion
  • Primary Discussion Issues
    • Implications for efficiency
    • Implications for reliability
    • Implications for coordinating transmission & generation
  • Additional or Optional issues (selected subset)
    • Implications for local market power mitigation
    • Implications for investment decisions
    • Audience identified issues
    • Discussion of one or two issues as time permits
implications for efficiency
Implications for Efficiency
  • What are the implications of keeping or removing constrained off payments?
    • Impact on market price
    • Total payments
    • Signals for suppliers or consumers
    • Etc.
implications for reliability
Implications for Reliability
  • What are the implications of keeping or removing constrained off payments?
    • Is it necessary or desirable to compensate a market participant to comply with a dispatch instruction?
    • Do payments help maintain critical plant in the market place?
      • Are constrained off payments the right vehicle?
    • etc.
implications for coordinating transmission generation
Implications for Coordinating Transmission & Generation
  • What are the implications of keeping or removing constrained off payments?
    • Are CMSC payments providing good transmission investment signals?
      • Are there other more effective drivers or signals?
      • What else is needed for transmission investment?
    • Are generator siting signals being blunted?
    • Is there a basis for treating new generation differently from earlier existing generation?
    • etc.
additional issues for discussion
Additional Issues for Discussion
  • To be determined
    • local market power mitigation framework?
    • investment decisions?
    • other identified issues?
request for additional comments
Request for Additional Comments
  • See Consultation page and Discussion Paper

http://www.theimo.com/imoweb/consult/consult_cmsc.asp

  • Provide written comments for posting on web site
  • For background information on CMSC
    • see links from Consultation page
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