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Market Evolution Program Day Ahead Market Project

Market Evolution Program Day Ahead Market Project. Regulatory Affairs Standing Committee Meeting May 14, 2003. Day Ahead Market - History. Stakeholder input to IMO Straw-Plan for Market Evolution (Jan 2002) – implementation of a day ahead market is a high priority

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Market Evolution Program Day Ahead Market Project

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  1. Market Evolution ProgramDay Ahead Market Project Regulatory Affairs Standing Committee Meeting May 14, 2003 1

  2. Day Ahead Market - History • Stakeholder input to IMO Straw-Plan for Market Evolution (Jan 2002) – implementation of a day ahead market is a high priority • IMO 2003-2005 Business Plan – a day-ahead commitment market, with the real-time market evolving to a balancing market, is a critical element in executing the strategy of creating amore effective, reliable and mature market • Market Surveillance Panel Report (March 2003) – one potential avenue to improve the ineffective pre-dispatch signals is to develop alternative mechanisms for providing price signals such as a day-ahead market • FERC SMD NOPR (July 2002) - proposed requirements to run a voluntary, bid-based, security constrained day-ahead energy market. • FERC White Paper (April 2003) - reaffirms the necessity of a DAM and commitment to resolve seams issues and integration of regional efforts 2

  3. Day Ahead Market - Options Considered • A simple, single-node, bid-based day-ahead market for energy only (analogous to the Energy Forward Market currently documented in the Market Rules) • A comprehensive day-ahead market that contains most of the characteristics and features of day-ahead markets in neighbouring markets (PJM, NE, NY and proposed for MISO), with the key exception of locational marginal pricing • An alternative DAM proposed by Coral, characterized by a bid-ask-trade mechanism to discover price for energy, firm physical obligations to deliver and mandated particpation by all loads and generators 3

  4. Day Ahead Market -Conclusions to date • A simple, single-node, bid-based day-ahead market for energy only for the summer of 2003 was not pursued due to the following: • risk that it would be illiquid or would not clear • delivery risk due to the short timelines • adverse impact on other initiatives • IMO Feasibility Study and market participant feedback (via DAM Working Group) regarding DAM options concluded that the preferred path is to pursue a comprehensive DAM consistent with the DAM employed in neighbouring jurisdictions • Now performing high-level design with target implementation of Fall 2004 • Staged approach - high-level design to be completed by July at which time an assessment will be made whether to proceed further 4

  5. Day Ahead Market -Activities • Assessment of high level design: • How well it addresses some of the problems evident in current market design and operation • Appropriate linkages to long term resource adequacy initiative • Broad stakeholder consensus on the benefits of implementing the proposed design • Appropriate cost recovery mechanism • Working Group is engaged in identifying design issue areas and examining potential solutions • Broader stakeholder education/consultation workshops planned for late May/early June regarding proposed high level design • MAC - June 11 • IMO Board - July 3 5

  6. Day Ahead Market -Regulatory issues encountered so far • Load participation in the DAM: • effectiveness of DAM enhanced as the amount of load participation increases • impact of gap between MW quantity of load participants and generation participants mitigated by allowing virtual load in DAM Potential approaches to increase load participation in DAM: • SSS Rate to be a blend of the day-ahead and real-time spot prices • Provide for a more active LDC role in the procurement of electricity • Third-party procurement 6

  7. Day Ahead Market -Regulatory issues encountered so far • MPMA for OPG: • Is the MPMA restricted to the Real-Time Market? • What settlement components of the Day Ahead and Real Time Markets will be used to determine the rebate? 7

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