Coal faces more uncertainty than any other base-load generating source. Two new factors, hitherto irrelevant to the U.S. industry, will shape future generation investment—imports of liquefied...
The Ontario Coal Conundrum
Tough plant-retirement decisions being made in Canada to reduce its carbon footprint contrasts with America’s embrace of coal-based generation.
period of deregulated retail rates in 2002, the Ontario market returned to fixed rates in 2003 and 2004. However, customers with a load in excess of 250,000 kWh per year still pay the wholesale market price. In April of 2005, a new retail rate structure became effective that ties the consumer electricity rates tighter to the cost of generation while still keeping rates under a regulated umbrella. This was done by the new electricity regulated price plan (RPP) determined by the Ontario Ministry of Energy (OME). RPP prices are calculated by the Ontario Energy Board (OEB) using the following components:
• OEB’s forecast of the Ontario spot-market price of electricity over the next 12 months;
• Prices set by the OEB for Ontario Power Generation’s (OPG) regulated (as of April 1, 2005) nuclear and hydroelectric generation facilities (currently an average 4.5 cents/kWh based on projected operating costs plus a 5 percent return on equity);
• Prices the Ontario government will pay under long-term power supply contracts with private generators over the next 12 months; and
• The estimated value of difference that is expected to result from the government’s decision to impose a 13-month (April 1, 2005-April 30, 2006) revenue limit (4.7 cents/kWh) on most of the output from OPG’s unregulated assets.
Current prices established by OEB are intended to remain in place for approximately one year (April 2005 to April 2006). At the end of this period, and every six months thereafter, prices consumers pay for electricity may change based on an updated OEB forecast. The RPP also allows for unscheduled price adjustments to deal with the effect unanticipated circumstances could have on prices.
IESO Market Design
IESO is tasked with managing and operating the grid and wholesale marketplace, and is regulated by OEB. The two key focal areas that encompass IESO authority are:
• Ensuring the reliability of the integrated power system; and
• Overseeing the IESO-administered wholesale markets, including the real-time energy and operating reserve markets.
The real-time energy and operating reserve markets are electricity markets administrated by the IESO, which, for purposes of submitting and revising dispatch data, operate in advance of, and up to, the dispatch hour. Based on this dispatch data, the IESO determines dispatch instructions for each registered facility and boundary entity as the primary means of coordinating the operation of the physical markets during the dispatch hour.
Every five minutes the following real-time market prices are determined:
• Single market clearing price (MCP) for Ontario region; and
• Separate MCPs for energy at each of the 12 intertie zones with neighboring markets.
In addition to the five-minute prices, each hour a calculation is performed to determine the Hourly Ontario Energy Price (HOEP). HOEP is determined by using the average of the five-minute Ontario energy prices. HOEP is used as the wholesale price for electricity for non-dispatchable generators and non-dispatchable loads.
The IESO administers three separate real-time operating-reserve markets to provide a market-based way for the IESO quickly to replace the supply of electricity for a short period of time until requirements can again be