tg overview of the ieso administered markets

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1 Overview of the IESO - Administered Markets IESO Training July 2017

2 Overview of the IESO - Administered Markets AN IESO TRAINING PUBLICATION This guide has been prepared to assist in the IESO training of market participants and has been compiled from extracts from the market rules or documents posted on the web site of Ontario’s Independent Electricity System Operator. Users of this guide are r eminded that they remain responsible for complying with all of their obligations under the market rules and associated policies, standards and procedures relating to the subject matter of this guide, even if such obligations are not specifically referred t o herein. While every effort has been made to ensure the provisions of this guide are accurate and up to date, users must be aware that the specific provisions of the market rules or particular document shall govern. Independent Electricity System Opera tor Station A, Box 4474 Toronto, ON M5W 4E5 Tel: (905) 403 - 6900 Toll Free 1 - 888 - 448 - 7777 [email protected] Website: www.ieso.ca

3 Table of Contents Table of Contents ... ... 1. Introduction ... 1 ... ... 2. The Wholesale Electricity Market in Ontario ... ... 2 ... ... ... 4 3. The Role of Ontario’s IESO 4. Ontario’s Physical Power System ... ... ... 5 ... controlled Grid - 5. The IESO 7 ... ... 6. Participating in the IESO - Administered Markets ... ... . 8 14 ... 7. The Real - Time Energy Markets ... ... 8. Other Physical Markets ... .. 18 ... ... ... 19 9. Physical Bilateral Contracts ... ... ... 20 10. Financial Settlements for Real - time Market Transactions ... 21 ... ... ... 11. The Market Rules and Market Manuals 22 ... ... ... ... 12. Conclusion July 2017 Overview of the IESO Administered Markets i Public

4 1. Introduction 1. Introduction - This overview provides an introduction to Ontario’s IESO administered markets, including discussions of: The wholesale electricity market in Ontario   The roles of the IESO and market participants in the wholesale markets  controlled grid - The IESO - l The rea  time energy markets Financial aspects of the wholesale markets  - For more in depth information, please refer to the materials available in the Training section of the IESO web site. July 2017 Overview of the IESO Administered Market s 1 Public

5 2. The Wholesale Electricity Market in Ontario 2. The Wholesale Electricity Market in Ontario Ontario’s wholesale electricity market opened on May 1, 2002, moving our province from a monopoly - based electricity system to a competitive wholesale electricity market. price of electricity is determined in a competitive market. The wholesa wholesale The  le price applies to most consumers using more than 250,000 kilowatt - hours per year. Prices for certain classes of retail consumers are regulated. The Regulated Price Plan  (RPP) took effect April 1, 2005 and is administered by the Ontario Energy Board. Cur rently, RPP rates apply to residential customers, qualifying farms, and customers who consume less than 250,000 kilowatt - hours per year. Historically, only the former Ontario Hydro along with municipal utilities provided power to ity prices were set by the provincial government. all electric Ontario, and - organized Ontario Hydro into five successor companies. The Ontario Electricity Act of 1998 re As of April 1, 1999, the following companies came into existence: Two commercial companies:  generates electricity and competes with other, - Ontario Power Generation Inc. (OPG) new generating companies in the new marketplace (website: www.opg.com) Hydro One  - transmits and distributes electricity (website: www.hydroone.com) ompanies: profit c - Two not - for The  originally called the – Independent Electricity System Operator (IESO) Independent Electricity Market Operator (IMO) - oversees the wholesale markets to ensure fair competition, and ensures the reliability of the electrical system (website: www.ieso.ca)  sets safety standards for wiring installations; The Electrical Safety Authority (ESA) - responsible for equipment and appliance certification (web site: www.esainspection.net) One crown agency: responsible for servicing and T  (OEFC) - Ontario Electricity Financial Corporation he paying down the ‘stranded debt’ of the former Ontario Hydro, that is, the debt in excess of the debt assigned to the other successor companies (website: www.oefc.on.ca) July 2017 Overview of the IESO Administered Market s 2 Public

6 2. The Wholesale Electricity Market in Ontario 1 The created the Ontario Power Authority (OPA) Electricity Restructuring Act, 2004 . The aim of the OPA wa - term adequacy in Ontario by: s to provide long  Assessing the adequacy and reliability of electricity resources  rgy Forecasting future demand and the potential for conservation and renewable ene  Preparing an integrated system plan for generation, transmission, and conservation Procuring new supply, transmission and demand management  1 The IESO and the OPA have now merged, operating as one organization since January 2015. The IESO is now responsible for all of the former OPA accountabilities listed above. July 2017 Overview of the IESO Administered Market s 3 Public

7 3. The Role of Ontario’s IESO 3. The Role of Ontario’s IESO What is Ontario’s IESO? The IESO is a non profit, regulated corporation without share capital. The Ontario Energy - Board (OEB) regulates the IESO, and the Ontario government appoints its directors. The IESO has two distinct roles: Overseeing and Runni ng the IESO - administered Wholesale Markets 1) The IESO administers a set of rules (the Market Rules) that govern the operation of the wholesale electricity market. The IESO monitors market activity to ensure compliance with these rules, and performs surveill nsure fair market competition. ance of market activity to e The IESO itself does not buy or sell electricity. It administers the wholesale electricity market by authorizing market participants, publishing system forecasts and market information, transactions for the producing statements and invoices, and performing financial settlement markets. The IESO also runs the wholesale energy market. Based on bids and offers from consumers and pplied by each suppliers, the IESO determines the amount of energy to be consumed or su company, and the price for that energy. 2) Ensuring the Reliability of the Integrated Power System The IESO and all market participants are jointly responsible for ensuring the reliability of the power system. re, Ontario’s IESO manages the power system. The IESO ensures From its system control cent that the system adheres to reliability standards set by standards authorities such as the North American Reliability Council (NERC) and the Northeast Power Coordinating Council (NPCC). In additi on, the IESO provides input to both of these reliability organizations to ensure that appropriate reliability standards are set. time information on voltage levels, power flows, and equipment status. - The IESO gathers real monitor this information and manage the security and Trained and certified IESO staff adequacy of the power system 24 hours a day, every day of the year. July 2017 Overview of the IESO Administered Market s 4 Public

8 4. Ontario’s Physical Power Sys tem 4. Ontario’s Physical Power System ricity market has not changed Ontario’s The introduction of competition into the wholesale elect - well established electric power system. This physical power system is made up of a network that transmits electricity from suppliers (generators) to consumers (loads). tem, please To explore more of Ontario’s physical power sys see the IESO’s Interactive Ontario Electricity System Map . Ontario’s Transmission System voltage - Electric power is transmitted across the province on 30,000 kilometres of high transmission lines. Hydro One owns most of the transmission system. Transformers are used to voltage lines. Hydro - voltage lines to low link electric power from the high - One, several - municipally owned utilities, and private companies then distribute the electric power at low - voltage to end use customers. The Ontario high voltage lines interconnect with lines from Manitoba, Quebec, New York, - Michigan and Minnesota. These interconnection lines (or interties) allow electricity to be imported into and exported out of Ontario. Ontario currently has the instal led capacity to generate more than 35,000 megawatts of electric power. The available capacity changes throughout the day and year according to how many July 2017 Overview of the IESO Administered Market s 5 Public

9 4. Ontario’s Physical Power Sys tem plants are in maintenance outage. Ontario Power Generation Inc. (OPG) is the largest provider . OPG’s generating plants include nuclear, ing capacity to the Ontario market. of generat oil and natural gas hydroelectric, - fired stations. In addition, a number of biomass, independently owned generators supply power to the system. s 6 Overview of the IESO Administered Market July 2017 Public

10 controlled Grid 5. The IESO - controlled Grid - 5. The IESO The portion of the Ontario transmission system that is controlled by the IESO is called the controlled grid’. It includes all transmission lines equal to or greater than 50 kiloVolts. - ‘IESO These are not the lines that go directly into your home. They are the high voltage transmission lines that provide wholesale electricity to large industrial consumers, and to distributors who then provide electricity at the retail level. controlled grid lies within the Ontario Control Area, which also includes - The IESO the distribution lines and energy consumers (loads) within Ontario. The IESO is responsible for balancing the supply and demand of energy so that supply always equals demand. Energy Supply tario and by imports from Energy is supplied to the market by generators located within On neighbouring jurisdictions. Energy Demand of energy in Ontario are called loads. There is also demand from neighbouring Consumers jurisdictions for energy produced in Ontario. Ontario’s IESO must consider both the f loads within Ontario and those of energy exports when balancing supply and requirements o demand. Measuring the Flow of Energy Meters are used to measure the flow of energy at any point where energy flows into or out of controlled grid. The meters must be ca - the IESO pable of measuring energy at specific time intervals. The resulting meter readings are the basis of settling energy charges in the wholesale market. July 2017 Overview of the IESO Administered Market s 7 Public

11 A dministered Markets 6. Participating in the IESO - 6. Pa rticipating in the IESO - a dministered Markets MINISTERED MARKETS - 6.1 THE IESO AD There are three types of markets in Ontario’s wholesale electricity market: affect the actual delivery and use of electricity. The real - Real - time markets -  time markets for energy and operating reserve form the core of the IESO - adminis tered markets (operating reserve is the replacement power that can be called upon in case of equipment failure or emergency) deal only with the transfer of money and financial risk; they do not Financial markets  - ctricity affect the actual delivery and use of ele  enable the IESO to ensure the reliability of Ontario’s power - Procurement markets start capability (black - start capability is a - system by acquiring services such as black generator’s ability to help restore the province’s power system without relying on an electricity) external supply of 6.2 BECOMING A MARKET PARTICIPANT administered markets, a company must first In order to participate in any of Ontario’s IESO - apply to the IESO and pay an application fee. When the company has met all the requirements, the IESO will authori ze it as a ‘market participant’. Participants with physical connections to the grid must register their facilities with the IESO, and are also required to have registered interval meters to measure energy that flows into or out - . In addition, participants must obtain appropriate licenses from the controlled grid of the IESO Ontario Energy Board. As a condition of authorization, market participants must meet credit requirements, called at if any market ‘prudential’ requirements. This guarantee of creditworthiness ensures th participant encounters financial difficulties and is unable to pay, other market participants will not suffer undue losses. Prudential requirements are based on the market participant’s activities - he same for all market participants. the requirements are not t in the market Step - For additional information on the authorization process, refer to Market Entry: A Step - by Guide available via the Training section of the IESO web site. 6.3 TYPES OF MARKET PARTICIPANTS to classify the types of companies that participate in the IESO There are different ways - administered markets. One classification is based on the company’s physical assets. Some companies have their own equipment that produces or uses electricity; some companies market without actually producing or using electricity. participate in the July 2017 Overview of the IESO Administered Market s 8 Public

12 A dministered Markets 6. Participating in the IESO - Companies with physical assets may be connected directly to the IESO controlled grid, or they - may be ‘embedded’. Embedded companies are connected to a distributor’s lines, which are controlled grid. - ected to the IESO themselves conn A market participant may play more than one role in the market. For example, a market participant could be both a generator and a wholesaler. 6.4 PHYSICALLY CONNECTED MARKET PARTICIPANTS administered markets, any - While many companies may choose to participate in Ontario’s IESO controlled grid to convey - company with equipment directly connected to Ontario’s IESO electricity into, through or out of the grid must become a market participant. Market participants who are connected to the grid can be further classified according to their interaction with the IESO. It is also important to know how they are compensated or charged. In - re dispatchable or non the case of generators and loads, we also need to know if they a dispatchable. T ransmitters The term transmitter refers to the market participants who own the equipment that makes up - the IESO controlled grid. Transmitters do not buy or sell energy; rather, they add value by building and maintain ing the grid that connects generators and wholesale loads throughout the province. July 2017 Overview of the IESO Administered Market s 9 Public

13 A dministered Markets 6. Participating in the IESO - Transmitters are compensated by an approved uplift (overhead) charge applied to all electricity purchased through Ontario’s IESO - administered market. Hydro One is an exampl e of a transmitter. Distributors The term distributor refers to the local distribution company (LDC) which takes electricity from the IESO - controlled grid and distributes it to retail consumers. Distributors add value by delivering electricity directly t o retail consumers, at the appropriate voltage for their needs. Distributors are compensated by payments made to them by their own customers. The Ontario Energy Board is responsible for licenses and regulations related to distributors. Your local municipa l utility is an example of a distributor. Generators Dispatchable Generators Dispatchable generators must be able to adjust the amount of their energy generation in response to instructions from the IESO. These instructions are called ‘dispatch’ instructions, and the generators are called ‘dispatchable’. The IESO issues dispatch i nstructions for each 5 - minute interval of the day. Dispatchable generators must be equipped to receive and respond to dispatch instructions from the IESO 24 hours a day, 365 days a year. The dispatch instructions to reach a specific level of generation ar e based primarily upon the generator’s offers to sell electricity at specific prices relative to the bids and offers from other facilities. For example, a generator may agree to sell 50 megawatts of energy if the price is $22/megawatt or higher, but may no t wish to sell if the price is lower than $22. If there is demand for energy priced at $22 or more, the generator will receive dispatch instructions from the IESO telling it the amount to generate. If the only demand is for energy priced below $22, . The dispatch instructions also or to produce electricity generat the dispatch not O will the IES take into account the facility’s ability to adjust its generation levels. Most of the energy supply in Ontario is provided by dispatchable generators. Dispatchab - le Generators Non Non - dispatchable generators do not submit offers to provide energy; instead, they submit estimates or forecasts of energy production. They agree to be paid the current market price when they generate electricity, regardless of what that pric e might be. - scheduling and intermittent: - self dispatchable generators - There are two types of non scheduling generator is a - a situated on generator  An example of a self - electric hydro not always be able to no ability to store the water . This generator might small river with energy output in response to the IESO’s dispatch instructions. This increase or decrease - scheduling. Self - type of generator would register as self scheduling generators submit schedules to the IESO indicating the amount of energy they will be providing for each July 2017 Overview of the IESO Administered Market s 10 Public

14 A dministered Markets 6. Participating in the IESO - in order to be - scheduling generators are restricted by size - hour of the day. Self scheduling, a generator must be rated between 1 and 10 megawatts. - classified as self (‘Cogeneration’ facilities are producers of another form of energy, such as steam, with product. They may be self - scheduling even if they exceed 10 electricity as a by - megawatts.) LOADS Dispatchable Loads As with dispatchable generators, dispatchable loads must be able to adjust their power consumption in response to instructions from the IESO. These instructions are called ‘dispatch’ spatch instructions to instructions, and the loads are called ‘dispatchable’. The IESO issues di minute interval of the day, and the loads must be equipped to - dispatchable loads for each 5 receive and respond to dispatch instructions from the IESO 24 hours a day, 365 days a year. (Dispatchable loads account for only a small port ion of the energy consumed in Ontario at this time.) The dispatch instructions to reach a specific level of consumption are based primarily on the load’s bids to purchase electricity at specific prices relative to the bids and offers from other . For example, a load may submit a bid to purchase 20 megawatts of energy if the price facilities is $25/megawatt or below, but may not wish to purchase if the price is higher than $25. If there ch instructions from the is available energy that costs $25 or less, the load will receive dispat IESO telling it how much energy to withdraw from the grid. If the only available energy costs more than $25, the IESO will send dispatch instructions telling the load not to withdraw the 20 megawatts from the grid. The dispatch ins tructions must also take into account the facility’s ability to adjust its energy consumption levels. Dispatchable Loads Non - Non dispatchable loads consume electricity in much the same way as you do at home. They - - simply draw electricity from the IESO co ntrolled grid as needed for their equipment. They agree to pay the wholesale market price for electricity at the time of consumption, regardless of what that price might be. Wholesale prices for non - dispatchable loads are set on an hourly basis. utor is another example of a non A distrib dispatchable load. The distributor takes electricity - - controlled grid and distributes it to retail consumers at a lower voltage. Your from the IESO ds account for most dispatchable loa - local municipal utility is an example of a distributor. Non of the energy consumed in Ontario. July 2017 Overview of the IESO Administered Market s 11 Public

15 A dministered Markets 6. Participating in the IESO - 6.5 EMBEDDED FACILITIES Embedded facilities are not connected directly to the IESO - controlled grid. Instead, they are connected to a distributor, who, in turn, is connected to the grid. ding embedded consumers vary according to the volume of electricity consumed. Rules regar Electricity consumers using less than 250,000 kWh per year and qualifying farms pay set rates for the electricity they consume. The Ontario Energy Board (OEB) reviews these rate s and may change them from time to time. Consumers with ‘smart meters’ pay set rates depending on the time of day. See the Ontario Energy Board web site for details. Large volume embedded facilities have a choice as to how they interact with the wholesale electricity market. They may contract with the distributor to buy or sell electricity, or they may choose to become a market participant. If the embedded facility becomes a market participant, it - y also enter into physical bilateral time markets and ma may buy or sell energy through the real contracts (see Section 10). 6.6 MARKET PARTICIPANTS WITHOUT PHYSICAL FACILITIES administered markets without having physical - Some companies participate in Ontario’s IESO - facilities that produce or consume electricity. These companies may participate in both the real time markets and the financial markets. Wholesalers and Retailers W holesalers buy energy on the wholesale market, and sell energy and services to other market participants; retailers sell energy and services to consumers at the retail level (that is, they may - s are re market participants). Both wholesalers and retailer - selling electricity rather sell to non than producing electricity themselves. They may also act as importers or exporters. Importers July 2017 Overview of the IESO Administered Market s 12 Public

16 A dministered Markets 6. Participating in the IESO - bring energy products into Ontario from one of the five neighbouring jurisdictions: Quebec, New York. Exporters export electricity from Ontario into Manitoba, Michigan, Minnesota and these neighbouring jurisdictions. 6.7 FINANCIAL MARKETS - Market participants may also participate in the IESO administered financial markets. These markets do not affect the actual delivery of elect ricity. The financial markets allow market participants to reduce price risks. They involve the transfer of funds only; they do not involve the transfer of energy. . administered financial market At this time, the transmission rights market is the only IESO - The Transmission Rights (TR) Market Prices in Ontario may be different from prices in other jurisdictions. The use of Transmission Rights, or TRs, allows importers and exporters to reduce the price risk associated with trading dictions outside of Ontario. between Ontario and juris AHEAD COMMITMENT PROCESS - 6.8 DAY The DACP improves the efficiency of the electricity market through the advanced scheduling and commitment of resources required to provide electricity on a daily basis, and by optimizing ing and anticipated generation more effectively, while ensuring reliability. exist - The DACP is not a ‘day – ahead market’ - ahead commitment helps address however, the day reliability concerns. July 2017 Overview of the IESO Administered Market s 13 Public

17 7. The Real Time Energy Markets - 7. The Time Energy Markets - Real Ontario’s IESO continually balances generation (supply) and load (consumption). Supplying Energy to the Ontario Market Energy is supplied by generators in Ontario and by imports into Ontario from neighbouring jurisdictions. As w e have seen, dispatchable generators submit offers to supply energy, and self - scheduling and intermittent generators submit schedules and forecasts. Facilities in neighbouring jurisdictions are not under the control of Ontario’s IESO, but their energy off ers must be taken into account when prices and dispatch instructions are set. The actual generators in other jurisdictions do not have to be registered with Ontario’s IESO. Instead, Ontario’s IESO has set up ‘boundary entities’ to enable importers to submi t offers into the IESO administered market. Boundary entities are not actual physical facilities. They are - created so that the IESO computer software can consider and schedule energy imports and exports. Consuming Energy in the Ontario Market onsumed by loads and by exports from Ontario to neighbouring jurisdictions. Non - Energy is c dispatchable loads draw electricity as they need it; dispatchable loads submit bids to buy energy. Ontario’s IESO. As with Facilities in neighbouring jurisdictions are not under the control of energy imports, ‘boundary entities’ have been set up by Ontario’s IESO to enable exporters to submit bids to export energy, and to allow the IESO computer software to schedule successful export bids. es for Energy Determining Market Clearing Pric The competitive wholesale price for electricity in Ontario (called the market clearing price, or MCP) is based on bids and offers into the market from dispatchable facilities and boundary - ble facilities. dispatcha entities, and on supply and demand from non The market clearing price for energy is set for each five minute interval. - July 2017 Overview of the IESO Administered Market s 14 Public

18 Time Energy Markets 7. The Real - Determining Dispatch Instructions - The IESO issues dispatch instructions to each dispatchable facility in Ontario for each five d to boundary entities for each hourly interval of every day. minute interval of every day, an The dispatch instructions specify the required amount of energy that is to be injected or withdrawn for each interval. As previously discussed, these specified amounts are determined by the fac ility’s bids or offers: In most cases, a generator or importing boundary entity is sent dispatch instructions to  inject energy into the IESO - controlled grid whenever the market clearing price for a y the generator or boundary given interval is equal to or exceeds the price offered b entity for that interval  In most cases, a load or exporting boundary entity is sent dispatch instructions to - withdraw energy from the IESO controlled grid whenever the market clearing price for ess than the price bid by the load or boundary entity for a given interval is equal to or l that interval Dispatch instructions cannot always follow this formula. If there are physical or security constraints on the lines, or if there are physical limitations at the facility itself, dispa tch instructions may be different from what we would expect if we just considered bids and offers. Constraints and Transmission Limits The market clearing price for Ontario is determined using an ideal system where there are no transmission of power. Unfortunately, the physical behaviour of the physical limitations on the power system can prevent this ideal dispatch from being realized. There may be constraints on the lines. For example, on a very hot day with little wind the limit on the transmission line s will drop. In order to preserve the integrity of the power grid, the IESO’s dispatch instructions must take these constraints on the transmission lines into account. When there are constraints on the lines be different from what we would expect, but the (congestion), actual dispatch instructions may market clearing price does not change. However, in order to maintain fairness in the market, on’ and ‘constrained off’ payments if they are - - generators and loads are paid ‘constrained affected by transmission line limitations. On and Constrained - Off Payments - Constrained off payments compensate market participants whose dispatch - on and constrained - Constrained instructions are different from what they would be if there were no limitations on the lines or physic al limitations in adjusting energy consumption or generation levels at the facility itself. For example, a generator may offer energy at a price below the market clearing price, and ere are constraints on would expect to be ‘dispatched on’ to inject that amount of energy. If th the transmission lines, the IESO may have to send ‘dispatch off’ instructions, telling the generator not to inject the energy. This would result in the generator not realizing the profit that would have been realized if there had bee n no congestion. In a case such as this, the generator is July 2017 Overview of the IESO Administered Market s 15 Public

19 7. The Real - Time Energy Markets off’ payment to return them to the profit that would have been realized had - paid a ‘constrained there been no constraints. - work in a similar Other constrained off payments for generators and loads on or constrained - fashion. Intertie Zone Prices Interconnection lines (or interties) allow electricity to be imported into and exported out of Ontario. Congestion can also occur on these intertie lines. Separate intertie zone prices are necessary at each of the intertie zones to account for price differences in the neighbouring jurisdictions resulting from constraints on the interties. The Real - Time Operating Reserve (Or) Market There may be occasions when the balance between generation and load is affec ted by an unanticipated event, such as equipment failure or emergency. Spare capacity that can be called upon on short notice is required to restore the balance in the case of such an event. This spare capacity is called operating reserve. Ontario’s IESO administers three separate Real - time Operating Reserve Markets to provide - based way for the IESO to quickly replace the supply of electricity for a short a market period of time until requirements can again be supplied from normal dispatch: 10 minute synchronized reserve (also called 10 minute spinning)  - 10 minute non  spinning) - synchronized reserve (also called 10 minute non non synchronized) - synchronized or  30 minute reserve ( Payments in the Operating Reserve Market As with the energy ma rket, a market clearing price is determined for each of the three operating reserve markets. The IESO considers the offers in order of increasing price, then selects the and necessary resources to meet its requirements. (In practice, the market clearing price dispatch instructions for operating reserve are determined jointly with the Real - time Energy Market clearing price and dispatch instructions.) Operating reserve offers are essentially stand - ice for that class of operating by offers. All accepted offers are paid the market clearing pr - by reserve, regardless of whether or not the reserve is actually used. These payments are stand payments. For operating reserve that is actually used, the suppliers are paid for the energy provided. Who Can Offer into the Operating Reserve Market? - 30 Minute 10 Minute Non 10 Minute Synchronized Synchronized Dispatchable Dispatchable Dispatchable Generators Generators Generators July 2017 Overview of the IESO Administered Market s 16 Public

20 Time Energy Markets 7. The Real - Energy and Operating Reserve Prices time market prices are determined: - Every five minutes the following real A market clearing price for energy across Ontario   neighbouring A market clearing price for energy at each of the intertie zones with markets  A market clearing price for each of the three operating reserve classes across Ontario  synchronized and 30 minute operating - A market clearing price for 10 minute non reserve at each of the intertie zones with neighbouring markets - minute prices, each hour a calculation is performed to determine the In addition to the five - Hourly Ontario Energy Price (HOEP). HOEP is determined by using the average of the five P is used as the wholesale price for electricity for non minute Ontario energy prices. HOE - dispatchable loads. - dispatchable generators and non July 2017 Overview of the IESO Administered Market s 17 Public

21 8. Other Physical Markets 8. Other Physical Markets The Procurement Market - The procurement market consists of contracted ancillary services and reliability must run contracts. controlled grid, - Ancillary services are services required to maintain the reliability of the IESO including: Frequency control  Voltage control  Reactive power  controlled grid. - - run contracts are also used to ensure the reliability of the IESO Reliability must - A reliability must run contract allows the IESO to call on the registered facility under contract to produce electricity if it is needed to maintain the reliability of the electricity system. July 2017 Overview of the IESO Administered Market s 18 Public

22 9. Physical Bilateral Contracts 9. Physical Bilateral Contracts Market participants may opt to purchase or sell energy through physical bilateral contracts. A eement between an energy consumer and an energy supplier physical bilateral contract is an agr to buy and sell a specified quantity of energy at a specific price. In Ontario, physical bilateral contracts are used primarily to manage price uncertainty. Physical Bilateral Contracts and Energy S cheduling/Dispatch In the IESO - administered markets, physical bilateral contracts are not part of the actual scheduling and dispatch of energy. Physical bilateral contracts are used only in the settlement of market charges and payments. (In many other jur isdictions, the bilateral contract information is integrated into market scheduling and dispatch decisions.) In Ontario, as we have seen, the injection or withdrawal of energy by dispatchable participants, bid prices in relation to the market price for importers, and exporters is based on their offer/ - dispatchable facilities withdraw energy as needed, or supply energy according to energy. Non impact the way the do not their submitted forecasts and schedules. Physical bilateral contracts s and generators. IESO dispatches load Submitting Physical Bilateral Contract Data to the IESO The parties to a physical bilateral contract may choose to submit the contract data to the IESO for settlement, or they may decide to settle the contract themselves. s submit the contract data to the IESO, they provide information about the time, If the partie amount, and point of supply for the energy under contract. The actual price and payment terms are private; there is no provision or need for the IESO to know this information. The IESO uses the contract data to adjust the energy market settlement statements for the consumer and supplier. For parties who decide to settle the transaction on their own, the IESO bills consumers and pays suppliers in the same way as it does for par ties without physical bilateral contracts. The parties themselves administer any payments required by the contract. July 2017 Overview of the IESO Administered Market s 19 Public

23 Time Market Transactions 10. Financial Settlements for Real - time Market - 10. Financial Settlements for Real Transactions ts receive payments or invoices directly from the IESO for time marke - Participants in the real energy sold or purchased in the real time markets. In addition, other charges are included in the - invoices sent to participants: Charges for transmission and distribution of energy (set by the Ont ario Energy Board) Uplift’ or overhead charges to cover costs incurred to supply items such as operating reserve ‘ and congestion costs Settlement Statements The IESO issues a preliminary settlement statement and a final settlement statement for each time - trading day. These statements indicate amounts of power purchased or produced, the real . market price at the times of transactions, and the total daily charges Ten business days after the trading day, the IESO sends each participant a preliminary statement of transactions for that trading day. Time is allowed for the participants to verify the ecessary. Ten business days statement, and for the IESO to verify and recalculate charges, if n after the preliminary settlement statement is issued, the IESO issues the final settlement statement for the trading day. Invoices Once a month, the IESO issues invoices to participants based on the daily statements. The hly invoices are issued ten business days after the last billing day of the month. mont These invoices must be paid within two business days, to allow the IESO to pay suppliers two business days later. July 2017 Overview of the IESO Administered Market s 20 Public

24 11. The Market Rules and Market Manuals 11. The Market Rules and Market Manuals Market Rules - - The Market Rules govern Ontario’s IESO administered controlled grid and Ontario’s IESO markets, with the goal of ensuring an efficient, competitive and reliable wholesale electri city market. Market Manuals In order to operate the markets, the IESO has produced procedures, forms, standards and policies. The market manuals provide the details of these procedures and policies. Compliance with the Market Rules sponsible for supervising, administering and enforcing the Market Rules. Ontario’s IESO is re Both the IESO and market participants are bound to comply with the rules, and the IESO is responsible for ensuring compliance. In case of disagreement, the rules set out a procedure f or resolving disputes. Accessing the Market Rules and Market Manuals The complete Market Rules and market manuals are available in the Documents section of the . http://www.i IESO website at eso.ca/imoweb/documents/documents.asp July 2017 Overview of the IESO Administered Market s 21 Public

25 12. Conclusion 12. Conclusion provides an overview of Ontario’s competitive electricity market. The IESO website This guide www.ieso.ca provides a wealth of additional information, including: at and Training Materials - ) Training Materials ( Instructor Participant Tool Training Led Courses ,  G uides are available for such topics as market entry, prudentials, dispatchable loads, connecting to the IESO, the Day - Ahead Commitment Process (DACP), the IESO portal, and information technology in the market depth training is available through Trainin to - - - face  In g courses (print material, face courses, and recorded presentations) The Market Rules and Market M - Market Rules and Manuals anuals legally define the - administered markets. They are the source for operation and administration of Ontario’s IESO , and can be found on the all training material Market Rules and Manuals Library webpage . Ontario’s IESO publishes a great deal o Power Data f information in the Market Information - including current and historical website, IESO Reports section of the website and on the reports, transmission rights auction reports, and weekly and adequacy demand and prices, monthly market reports. generation month outlooks, which assess the adequacy of - In addition, the IESO publishes 18 capability for the Ontario electricity system. and transmission Other Web Resources Ontario Energy Board at www.oeb.gov.on.ca  Ministry of Energy at http://www.energy.gov.on.ca/  North American Electric Reliability Corporation at http://www.nerc.com/  rdinating Council (NPCC) at www.npcc.org Northeast Power Coo  July 2017 Overview of the IESO Administered Market s 22 Public

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