Monday, April 9, 2012

Penthouse Fora: Personal thoughts on the IESO's Year

Ontario's Independent Electricity System Operator (IESO) released it's 2011 Annual Report just prior to the Easter weekend.    It didn't get much attention, because it didn't say anything.

That should be noteworthy.

Picture from despair.com - honest
Some quick estimates for an alternate 2011 Annual report:
The market the IESO is tasked with operating shrank from 157TWh to 154TWh, with the Ontario demand portion shrinking from 142.2 to 141.5.  The price drop was more severe, with the Hourly Ontario Energy Price (HOEP) dropping to $31.46/MWh from $37.85 in 2010.  Exports shrank less than imports did.  Because Ontario has a Global Adjustment mechanism that recovers the difference between the prices guaranteed to producer and the market rate, these numbers indicate Ontario's ratepayers had over $450 million added to their costs to recover the difference between the average cost power was purchased from generators at ($68 including other systems cost), and what it was dumped at in adjacent markets ($31.46).   Looking at it another way, in 2011 prices for Ontario customers rose by 10% while prices for export customers dropped by about 20%.



Ontario's government finances are also diminished by the low HOEP, as only unregulated hydro assets are now subject to the downs and downs of the market, and those are all public OPG assets.

Things are much worse so far in 2012, despite the implementation of a new vision statement at the IESO during 2011:

“A reliable, efficient and innovative electricity marketplace that enables informed decisions by all participants, including consumers.
As mentioned by myself, and the handful of other sentient beings interested in the market, all generation, except for unregulated Ontario Power Generation assets, have a price guarantee outside of the market (in some cases, including coal and natural gas, the amount is for capacity - so these sources do have some reason to bid into the market when prices signal to do so) .  "Efficient," "marketplace," and "participants" are all pretty questionable terms.

The accomplishments the IESO touts (page 6) are what the rest of us would call planning - or bs:
  • There was considerable progress on the Renewable Integration Initiative in 2011.
  • The Visibility Technical Working Group was established in February 2011 
  • The Dispatch Technical Working Group was established in May 2011 
  • The Floor Price Focus Group was established in November 2011
Page 12 of the annual report lists the studies done concurrent with establishing groups.  

Perhaps some will find more meaning in the IESO's bold mission statement initiated during 2011:
The IESO acts in the interests of the people of Ontario to ensure a reliable and effective Ontario electricity sector. To accomplish this, the IESO will:
  • Operate a reliable power system through forecasting and meeting real-time electricity demand and coordinating power flows with its interconnections
  • Provide customers, or their agents, with relevant, timely and transparent information and services needed to enable their effective participation in Ontario’s electricity marketplace
  • Foster needed change in the way that electricity is produced, delivered and consumed
  • Develop collaborative relationships with participants and stakeholders
  • Provide superior service in the administration of an efficient wholesale electricity market
  • Attract, retain and develop a talented, highly professional workforce
I'm unclear what, if anything, would constitute failure in performing the stated mission?

Last week the IESO updated the report they put on the web to illustrate Surplus Baseload Generation (SBG).  The update includes more stakeholder work, in the form of 'new centralized wind forecasting results.'  Although the reporting from the Thursday leading into the Easter weekend showed an 'alert' for only a couple of hours (that minimum production would exceed the demands in Ontario and export markets), there were non-utility generators idled for the entire weekend.  Non-utility generators hold contracts with the OEFC, so they shut them down only on a planned basis.

Some NUG's are refined jet engines (including  the two idled a couple of weeks ago,- meaning the most appropriate generators we have for peaking supply are not only contracted to run at all times, but when paid to shut down, remain shut down during afternoon peaks other generators kick in for.  What stakeholders brought up a forecasting system allowing this?

The IESO annual report doesn't include metrics on the cost of dumping exports (ie. the cost of an inefficient sector), nor does it include metrics on curtailment.
It does include metrics on doing what it's told to do, including the Smart Metering Initiative:
  • 4.7 million smart meters installed 
  • 3. 7million+ on time-of-use (TOU) rates 
  • Implemented a central data repository (Meter Data Management and Repository (MDM/R) to service Ontario’s local distribution companies 
  • Enrolled 64 of 74 LDC’s in the MDM/R
So?

Page 23 boasts of $600K+ Paul Murphy's tenure leading the ISO/RTO Council (an organization with representation from organizations controlling the majority of the North American grid).  An abbreviated version of the accomplishments:
  • Submitted comments …
  • Completed a white paper …
  • Completed an assessment …
  • Developed a detailed and comprehensive crisis communications checklist …
Page 26 of the Annual Report includes a sidebar on a key accomplishment from the year – a report from a forum created to produce a report instigating further fora.
The Electricity Market Forum Report calls for further analysis and action in a number of areas including pricing, data and consumer engagement, among others. Glancing through that forum’s report I was struck by the starting perspective of the forum:
“On the whole, Market Forum members were of the view that the electricity market is largely working well. No participant or presenter recommended fundamental change.”
I guess the reason to have a forum examine a non-issue in order to report on the need for four or five more fora would be just for shits and giggles.
In Ontario’s electricity sector, shits and giggles are alternatively called stakeholders.

The stakeholders recommended more navel gazing and consulting jobs - here's the edited version of 12 recommendations: 
  1. The IESO should review…
  2. The IESO should commission …
  3. The IESO, the OPA and the OEB should jointly engage in a consultation …
  4. The IESO should examine whether …
  5. Any potential Market Rule changes should be co-ordinated…
  6. The OPA’s procurement process should seek to better ensure …
  7. The OEB’s approach … should be reviewed
  8. The IESO should engage in a stakeholder consultation …
  9. The IESO customer consultation should correspond with … the OPA’s review …
  10. The OEB’s RPP (including TOU) should be designed to provide signals …
  11. The IESO should consider improving, amending, or replacing …
  12. The IESO should review whether there are …
The IESO 2011 annual report could have enraged if it attempted seriousness.  It is likely the money put out for working groups, fora, and purchasing additional study is for the purpose of avoiding accountability.
The direction from the government is idiotic, and the expense is in finding a way to avoid saying so while acquiring coverage against being held personally responsible as pricing rises along with the escalation of supply mitigation measures.
On this website I've often examined the numbers on Ontario's electricity sector - particularly because one original reason for the site was to maintain some skills with data management while concentrating on the home front.   

In reviewing the IESO report it is the experience of being a parent that helps to view the participants in the farce with some empathy - and bemusement.

They are our vegetables.









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  1. No doubt Mr. Murphy will get a bonus for his hard earned accomplishments. I'm sure when the IESO and OPA merge, both Mr. Murphy and Mr. Anderson will receive big bonuses for a job well done. Tough job but someone's got to do it.

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