Monday, December 16, 2019

a little nonsense: Ontario’s Demand Response auction

The Independent Electricity System Operator (IESO) recently announced the results of its latest Demand Response Auction. They communicated the pricing trend this way:
The average annual clearing price of this year’s auction was $58,725/MW, a 36% decrease since the first auction in 2015.
Sound good? How about in comparison to the similar message from the previous year’s news release:
The average annual clearing price for availability payments of $52,810/MW represents a 30% decrease from last year, and a 42% decrease since the first auction in 2015.
Context changes things: the price of capacity in the IESO's demand response auction rate rose this year, for the very first time. There are two main reasons prices would rise: the IESO, and the OEB.

The Ontario Energy Board (OEB) regulates the province's energy sectors to ensure maximum harm to consumers and minimum efficiency- or at least some days it seems like that’s what they’re doing. Late in November the OEB ruled to suspend changes to the IESO's auction procuring capacity which were intended to expand participants. The changes were objected to by, primarily, the Association of Major Power Consumers in Ontario (AMPCO). The objection seems to be that AMPCO's membership would lose the benefits of what they've stolen fair and square in the past, although they didn't use precisely that language in their appeal of the change to market rules that would transition the Demand Response Auction (DRA) to a broader transitional capacity auction (TCA).
3. Generators receive payments for energy services provided to the [IESO Administered Market]. [Demand Response] resources do not...
4. The effect of implementing the Amendments to broaden the DRA to a TCA without first addressing the inequity in treatment between generation resources and DR resources in the IAM energy market is to unjustly discriminate against DR resources, and in favour of generation resources. This is because the Amendments would allow the latter to effectively and unfairly displace the former in the capacity auction platform which was developed for DR resources and through which such resources have been successfully and competitively participating in the IAM since 2015.
"Successfully" is a funny term. The OEB includes a Market Surviellance Panel which produces some excellent reporting, unlike the organization's multiple Hamlets endlessly stringing out decisions on things like rule changes and rate applications. the panel's most recent report shared this:
Ratepayers will pay $161 million to resources procured under the first four Demand Response auctions. The Panel continues to question the value of this program for ratepayers, given that none of the hourly demand response resources have been activated to provide DR and reduce their consumption.
The just-completed auction was the 5th. So what the OEB is solemnly hearing now is the argument that changes to a mechanism that has never produced any value to ratepayers in the province are unjust - to the largest power consumers in the province. We could call this group, just for the sake of bucketing, Class A consumers.