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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 • 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 • 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.) • 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 • 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 • 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 • 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 • 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 • 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 • 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 • 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 • To be determined • local market power mitigation framework? • investment decisions? • other identified issues?
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 • send to MACD@theIMO.com • For background information on CMSC • see links from Consultation page