Market Evolution Program

1
Market Evolution Program
Hok Ng
2
Proposed Scope for Analysis of Historical
Nodal Prices
3
Objective

• To provide an analysis of historical nodal
  pricing data to allow stakeholders to assess the
  potential impact of nodal pricing
• The scope of the analysis will include
• an examination of how nodal pricing data has
  varied over time
• a consistent comparison between nodal pricing and
  uniform pricing
• an examination how nodal pricing data has varied
  across the province

4
Temporal Effects

• Objective - To illustrate how indicative prices
  have changed over the study period
• Monthly, on-peak and off-peak average values will
  be calculated for
• Hourly Ontario Energy Price (HOEP)
• Ontario generator-weighted average nodal price
• Ontario demand-weighted average nodal price
• best approximation of the load-weighted average
• the difference between the two weighted-average
  nodal prices approximates the loss residual and
  congestion rents
• Richview nodal price (reference bus)

5
Temporal Effects

• Objective - To indicate the volatility of
  indicative prices, the standard deviations will
  be calculated for
• HOEP
• Ontario generator-weighted average nodal price
• Ontario demand-weighted average nodal price
• A representative node in each of the transmission
  zones

6
Comparing Nodal Uniform Pricing

• Objective - To provide a consistent comparison
  between nodal pricing and uniform pricing over a
  set of known data from actual market operations
• This objective is supported by
• Accounting for the differences in the manner in
  which costs for congestion and losses are
  distributed under todays uniform pricing system
  vs. a nodal pricing construct
• Accounting for the application of current rebate
  mechanism to todays uniform prices vs. nodal
  prices

7
Comparing Nodal Uniform Pricing

• Monthly average prices under the uniform pricing
  methodology will be calculated by
• HOEP CMSC losses - rebates
• Monthly average prices under the nodal pricing
  methodology will be calculated by
• (demand-weighted average nodal price) - (loss
  residual congestion rent) - rebates
• equivalent to (generator-weighted average) -
  rebates
• assuming that transmissions rights are allocated
  to load
• Nodal prices already include congestion and
  losses
• All other uplifts are common to uniform pricing
  and nodal pricing methodologies

8
Spatial Effects

• Objective - To examine how indicative prices have
  varied amongst Ontario transmission zones
• The monthly average nodal prices for
  representative nodes in each of the 10
  transmission zones will be calculated

9
Study Period/Exclusion of Certain Data

• Nodal pricing data will be assessed for the
  period of Oct 4, 2002 - Oct 31, 2003
• Most recent 12 months of data is used (data
  during the blackout restoration, Aug 14-22, 2003
  is excluded)
• Published historical nodal prices for the period
  of May 1, 2002 - October 3, 2002 were incorrect
• The software bug causing the incorrect nodal
  pricing calculations was detected shortly after
  market opening but was not corrected until
  October 2002

10
Study Period/Exclusion of Certain Data

• The published erroneous prices exclude the loss
  component of the nodal price
• the software error affected the constrained
  algorithm only
• - however, system was dispatched correctly
  during this period
• - market was settled correctly as the uniform
  prices used for settlement are calculated in
  the unconstrained algorithm
• The IMO is not planning to recalculate data
• The IMO is not aware of any other errors of this
  nature

11
Error Impact on Published Nodal Prices
DSO Calculation 1
DSO Calculation 2

• Incorrect penalty factors were used only in the
  second calculation, i.e., the calculation of
  prices for all nodes other than Richview

12
Summary of Limitations

• The analysis will provide a high-level gauge how
  nodal prices have varied over the past 12 months
  and over each of the 10 transmission zones in
  Ontario
• The analysis will not
• explain the differences between HOEP and nodal
  prices
• predict future prices
• explain all changes to prices over time
• capture bidding behaviour in determining prices

13
Summary of Limitations

• The time period of the analysis is limited to 12
  months
• conclusions cannot be drawn regarding the impact
  of the weather effect on nodal prices vs. uniform
  prices
• Various aspects of market schedule/price
  formulation are not equivalent
• the CMSC approximates a value of congestion in a
  manner entirely different from the nodal pricing
  construct
• the calculation used to determine uniform prices
  differs from that of nodal prices (unconstrained
  v.s. constrained)

14
Nodal Pricing - Events

• Dec 3 - MOSC
• Scope of Nodal Pricing Analysis
• Dec 9/10 - Workshop
• Nodal Pricing Basics (full)
• Jan 8 04 - Workshop
• Nodal Pricing Basics (registration required)
• Jan 14 04 - MOSC
• Nodal Pricing Analysis