Alberta Energy-Capacity Market Framework Engagement November 2017

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1 Questions for discussion The engagement is seeking feedback on the six questions outlined in the table below. Please provide your input on these questions in Table 1 on the next three pages. Please submit your completed table and any additional input on this topic to the Submission Library for the Capacity Market Framework engagement at: Submissions will be accepted on this topic until November 24, 2017 Name & Organization: The Oil Sands Community Alliance (OSCA) is a member based organization in the Athabasca oil sands region. Since 1999, OSCA has monitored oil sands cogeneration capacity, with the objective of providing information to AESO and government policy makers on issues related to electricity demand, supply, and transmission development. Question Response (Y/N) Explanation/Further Details Capacity Market Input Points Do the current input points that exist for electricity sector stakeholders suffice for the capacity market? If not, please specify reasons why and suggested changes. N The proposed capacity market framework presents a substantial shift from the existing energy only market structure in Alberta and as such, the current input points and process for electricity sector stakeholders do not suffice for the capacity market. The proposed capacity market will require existing government agencies to change/expand their roles significantly. For example, for the first time since the deregulation of the market, AESO will have an active role in determining resource adequacy, and price signals for capacity. This will not only influence the capacity market but also the energy and ancillaries component of the market. AESO s enhanced role has implications that directly affect decision making for generation, load, imports and exports. Expansion of agency roles warrants enhancements of expertise in existing agencies, as well as the processes through which they interact with stakeholders and market participants. The transition to a capacity market was driven by the need to ensure a reliable electricity supply by providing investors Page 1

2 If used for the capacity market, should there be any changes to Alberta s current development, approval, or appeal processes? Y with a predictable revenue stream. Further, the new market structure is expected to encourage long-term investment needed for new generation in Alberta. In order to facilitate investor confidence, the market requires a governance structure (during the design and implementation phase) that encompasses consultation and strives for consensus between market participants and AESO. This is key to reduce legal and regulatory action by market participants and improve the long-term operational success of the market. Given AESO s expanded role and influence on price outcomes, it needs to be more open, transparent and accountable to market participants than in the existing energy only market structure. The following recommendations can foster investor and consumer confidence in AESO s decision making to be in the best long-term interest of the market. 1. Establish a Market Participant Committee (MPC) in legislation. The MPC would have voting rights and the ability to directly influence rule development and AESO decision making on major components of the electricity market. The MPC would evaluate AESO applications and vote on whether they are adequate. Voting rights should be defined and should adequately represent all major market stakeholder groups. The MPC has the ability to bring proposals directly to the AESO Board and the AUC for evaluation. 2. Capacity market elements to be set by an external third party MPC can work with AESO in the selection of the third party provider. AESO should not hold sole discretion to select the provider. 3. Approval of capacity market elements (including CONE, net CONE and the demand curve) should be reviewed by the MPC and AESO, and be subject to full review and periodic approval by the AUC. Page 2

3 Capacity Market Input Methods The process for capacity market rule approval should be similar to the transmission tariff approval approach, where capacity market elements are not presumed to be approved per the current process but rather adjudicated with evidence provided by all parties. Rule changes and new rules should be considered together in a single AUC proceeding as there are many interdependencies across topics. 4. Change the AUC mandate to require it to consider MPC approval or disapproval of an AESO application. Proposals approved by the AESO and the majority of market participants will have consensus and require reduced AUC arbitration, resulting in time and cost savings. 5. Existing rights of appeal to the AUC should be maintained and afforded to market participants. A commercial expedited arbitration process should be added for small disputes that impact individual market participants (such as UCAP calculation) to lower the burden and cost of objection. 6. Establish electricity market expertise within the AUC. Ensuring that the AUC has industry expertise to adjudicate capacity market design elements is critical to maintain investor confidence and long-term sustainability of the market. This would mean having dedicated Commissioners and staff with industry experience to preside and support market design hearings. Page 3

4 How would you like to provide input on capacity market rules, products and parameters? Input via a Market Participant Committee (MPC) as noted above. Having a MPC can enhance accountability and confidence that market considerations are being accounted for in the decision making. Should government provide guidance on sector representation in capacity market engagement? The government should establish a MPC that has voting rights. The voting shares of the MPC should be established jointly by the AESO and Industry and approved by the AUC and should represent all major market participant groups. Capacity Market Products Are there specific capacity market products or parameters that stakeholders should provide input on? Stakeholder input should be considered for all capacity market elements. However, direct input on key parameters such as Gross CONE, Net CONE, load forecasting and the demand curve. These parameters should be set by an external third party and stakeholders (through the MPC) should have the ability to nominate/select the third party provider. Additional Input Page 4

5 Do you have additional input? This submission comprises of high-level recommendations on the best way to refine the governance structure within Alberta. If a Market Participant Committee is created, a more thorough consultation process to discuss the details such as voting rights, stakeholder categories, sub-committee membership, and other issues would be required. Table 1: Stakeholder Involvement feedback matrix Organization Name: Oil Sands Community Alliance Information submitted to Alberta Energy through this site is being collected for the purpose of the Capacity Market Technical Engagement Process. The Freedom of Information and Protection of Privacy Act, s. 33 (c) governs Alberta Energy s collection of personal information which may be included in the submissions. Please direct questions about the collection and use of this information to Alberta Energy,5 th Floor, Amec Place Building, Avenue S.W., Calgary, Alberta, T2P 3W2, (403) Page 5