Overview of the Alberta Capacity Market

Transcription

1 Overview f the Alberta Capacity Market This sectin prvides an verview f the Cmprehensive Market Design Final prpsal. 1.1 Overview f the Alberta capacity market Intrductin In January 2017, the Gvernment f Alberta directed the AESO t design and implement a capacity market in Alberta. 1 The Alberta capacity market will be a mechanism t achieve resurce adequacy and meet the gvernment-defined resurce adequacy standard at least cst by enabling brad cmpetitin amng capacity resurces. The capacity market will wrk efficiently and effectively with the energy and ancillary services markets and will be cnsistent with the lwer-carbn electricity system f the future. The first capacity market auctin is t cmmence in 2019 with first delivery f capacity t ccur in CMD Final The final Cmprehensive Market Design (CMD Final) represents the AESO s prpsed technical design fr Alberta s capacity market, including assciated changes t the energy and ancillary services markets. CMD Final describes a hlistic market design intended t achieve the desired end state and criteria develped thrugh input frm industry. 2 The technical design fr the capacity market that is reflected in CMD Final is a culminatin f significant analysis and due diligence cmpleted by the AESO and CMD wrking grup members. It is als a reflectin f feedback received and cnsidered ver the curse f an extensive engagement with stakehlders that cmmenced in early 2017, fllwing the Gvernment f Alberta s directin t the AESO t design and implement a capacity market fr Alberta. CMD Final will frm the basis fr develpment f ISO rules necessary fr the implementatin f the capacity market. The Alberta capacity market design cntains several high level cmpnents including prequalificatin f resurces, determinatin f resurce capacity value, determinatin f a prcurement demand curve, auctin mechanics, perfrmance measurement, market pwer mitigatin measures, financial settlement and integratin with existing energy and ancillary services markets. A summary f the key design elements f these cmpnents is prvided in the table belw. Design Overview Eligibility and Prequalificatin Requirements; and Financial Security Requirements Minimum asset size requirement f 1 MW. Certain prequalificatin requirements are asset-specific t accmmdate different perating characteristics and ensure feasibility f physical delivery. Assets that are eligible t prequalify include thermal, demand respnse, external, strage, hydr, variable, and aggregated assets. Existing generatin assets lcated in Alberta with an estimated UCAP f 1 MW r greater will be autmatically prequalified fr capacity auctins. New capacity 1 Gvernment f Alberta Mandate Letter: pdf 2 Please see the Sectin 1 ratinale dcument r final.pdffr further infrmatin. Page 1 f 11

2 assets, external capacity assets and demand side assets will be required t prequalify in rder t participate in the first transitinal auctin. Resurces that are the subject f a renewable electricity supprt agreement in cnnectin with Renewable Electricity Prgram (REP) Runds 1, 2 r 3 are nt eligible t participate in a capacity auctin. Energy efficiency resurces will nt be eligible fr participatin in initial capacity auctins. Demand respnse assets will be eligible t participate n the supply side f the capacity market. Strage assets must demnstrate 4 hur cntinuus discharge capability at its estimated UCAP level. A refurbished capacity asset is defined as an asset that has met ne f: increased maximum capability f the asset by the greater f i) 15% f the asset s mst recent maximum capability r ii) 40MWs abve the asset s mst recent maximum capability; r making an investment f at least $200/kW fr the whle asset s mst recent maximum capability. The capacity market ffers f a refurbished asset will nt be subject t capacity market pwer mitigatin. Firms subject t mitigatin will be prvided a ne-time ptin t prvide a mitigated ffer fr the existing asset t be utilized in a multistage market clearing prcess A capacity asset may chse t add incremental capability t the asset thrugh increasing an asset s maximum capability. Offers fr the incremental capacity will nt be subject t capacity market pwer mitigatin. The incremental capacity will need t be prequalified. New capacity assets will be required t pst security in rder t participate in a capacity auctin. Security requirements will decline thrugh time until the new asset achieves cmmercial peratin. New capacity assets ther than refurbished r incremental will be required t pst financial security with the AESO at a rate equal t 5% * grsscone * 1/ a Capacity Recvery Factr. Refurbished and incremental assets will be required t pst financial security at fixed rates. Prequalified capacity assets will remain prequalified fr subsequent auctins subject t certain cnsideratins, including lss f pl participant status, failing t meet develpment milestnes, material changes t the asset, delisting r a change in self-supply designatin. Physical bilateral transactins are nt permitted in the Alberta capacity market. Hwever, a site may self-supply capacity prvided the lad is capable f being served in whle r in part by generatin that is lcated n the same site, and at the same pint f intercnnectin t the electric system (including industrial system designatins and sites under the Duplicatin Avidance Tariff). Sites with nsite generatin that are nly net-metered, and sites with nsite generatin that are net-metered and cannt physically flw their grss vlumes due t system cnnectin limitatins must self-supply. Page 2 f 11

3 The City f Medicine Hat will be required t self-supply capacity. Self-suppliers wh intend t change frm participating n a net basis t a grss basis r frm a grss basis t a net basis must declare their intentin. Changes will nly be allwed every fur years with the exceptin that changes t the selfsupply designatin will be permitted prir t fur years due t physical peratinal changes at the self-supply facility. Delisting Capacity assets must temprarily r permanently delist befre ceasing participatin in the capacity, energy r ancillary service markets. Delisting requests r ntificatins will either be permanent delisting ntificatins (asset retirement) r temprary delisting requests. Temprary delisting requests may be fr physical r ecnmic reasns. The AESO may cnduct a reliability review prir t finalizing its assessment f delisting requests. Temprary ecnmic delisting requests will nly be allwed fr the secnd rebalancing auctin. The legal wner f a capacity asset that is making a temprary ecnmic delisting request must ffer the net avidable csts f such asset int the secnd rebalancing auctin. Cst submissins will require crprate fficer attestatin. An asset will nly be allwed t temprarily withdraw frm the energy and ancillary services markets fr the duratin f the bligatin perid if the secnd rebalancing auctin clears at a price less than the temprary ecnmic delist ffer price. A capacity asset may temprarily ecnmically delist frm the capacity market but chse t participate in the energy and ancillary services markets fr n mre than 5 cntinuus mnths in the same bligatin perid. Avidable csts and EAS ffsets will be calculated based n utage dates prvided prir t finalizatin f the secnd rebalancing auctin A temprarily delisted capacity asset will be allwed t return t the energy market if the AESO determines a reliability need exists A capacity asset may nt ecnmically delist fr mre than tw cnsecutive bligatin perids. Temprary physical delist requests must be submitted when a capacity asset is expected t be physically unavailable fr five cntinuus mnths r mre during the bligatin perid. Permanent delist ntificatins may nly be submitted during the prequalificatin perid assciated with the base auctin and first rebalancing auctin. Requests fr the secnd rebalancing auctin are nt permitted. A capacity asset retirement date need nt ccur at the start f the bligatin perid. The legal wner f a capacity asset intending t permanently delist may cntinue t participate in the energy and ancillary services markets until the physical retirement date thrugh submissin f a temprary physical delist request fr the relevant prtin f the initial retirement year. N ecnmic test will be cnducted n permanent delist ntificatins. Capacity Value (UCAP) Determinatin The AESO will calculate and assign a UCAP value fr each prequalified asset. Five years f histrical data will be utilized fr asset specific UCAP determinatin fr existing assets. The 250 tightest supply cushin hurs in each year will be utilized. Participants will be allwed t chse a UCAP within a range determined as the maximum r minimum values that result frm the fllwing appraches: Page 3 f 11

4 eliminating the tp and bttm 5% f the data set utilized t determine UCAP increasing and decreasing the asset s UCAP by 2% f the asset s maximum capability increasing and decreasing the asset s UCAP by 1 MW Frced and planned derates and utages, distributin system cnstraints and transmissin utages that result in an asset being electrically discnnected frm the transmissin system and frce majeure events will nt be excluded frm availability and prductin data and will act t reduce calculated UCAP values. Transmissin system cnstraints will be excluded and will nt reduce calculated UCAP values. Assets with insufficient histrical perating data will have data supplemented by class averages, engineering estimates r infrmatin gathered thrugh jurisdictinal reviews. An availability r capacity factr methdlgy will generally be used t calculate assetspecific UCAPs: An availability factr will be used when metered generatin r lad vlumes align with energy market dispatches (typically, thermal, strage, large hydr and net t grid dispatched self-supply sites). An availability factr determined thrugh linear regressin will be used fr selfsupply sites fr which the generating assets are dispatched n a grss t grid basis. A capacity factr will be used when metered generatin r lad vlumes d nt align with energy market dispatches (typically, wind, run f river hydr and slar assets) Demand side resurces will be classified as either firm cnsumptin level (FCL) r guaranteed lad reductin (GLR): UCAP fr FCL assets will be established as 91% f the difference between an estimated baseline cnsumptin level and the FCL f the asset. UCAP fr GLR assets will be established as 91% f the GLR level prvided during prequalificatin. An availability factr methdlgy will be utilized nce sufficient histrical perfrmance data is available. Assets with UCAP values less than 1 MW may aggregate with ther assets in rder t participate in the capacity market. UCAP fr these assets will be determined using a capacity factr methdlgy unless all aggregated assets are eligible fr UCAP determinatin using an availability factr. UCAP fr external capacity assets will be based n firm transmissin vlume held in the external jurisdictin and demnstratin that the supply surce is a nn-recallable resurce f sufficient size. This vlume will then be derated t reflect the frequency f time during histrical supply cushin hurs that the respective intertie was ut f service with 0 ATC. UCAP fr mthballed r temprarily delisted assets with data available fr 250 r mre tight supply cushin hurs will utilize available data t calculate UCAP. Assets with less than 250 hurs f data available will have available data supplemented with class average data such that a ttal f 250 data pints is btained. A UCAP refinement prcess will allw capacity market participants t submit a request t review the UCAP r UCAP range fr select reasns. If issues cannt be reslved thrugh the UCAP refinement prcess, a capacity market participant may utilize a frmal dispute reslutin prcess. Page 4 f 11

5 Calculatin f Demand Curve Parameters Frward Capacity Auctin (Base Auctin) The demand curve will be develped in rder t satisfy the resurce adequacy standard specified by the Gvernment f Alberta. The AESO will use a frward-lking prbabilistic resurce adequacy mdel (RAM) t determine capacity vlume requirements. The RAM will cnsider factrs that impact the supply demand balance in Alberta such Alberta grss lad, supply availability, frced and planned utages fr thermal assets, nsite generatin, variable generatin prfiles, hydrelectric generatin prfiles, and imprts. Outputs f the RAM will be translated int fleet-wide UCAP values using a frmula t align with asset-specific UCAP calculatins. System UCAP requirements will be adjusted t accunt fr self-supplied vlumes and ineligible resurces (including successful Renewable Electricity Prgram (REP) Rund 1, 2 and 3 prjects). The reference technlgy used fr determining grss-cone and net-cone will be a natural gas-fired technlgy and selected thrugh detailed cst screening. Additinal details n the reference technlgy selectin are being develped by the AESO and subject t further cnsultatin. A cmprehensive grss-cone estimate will be cmpleted by an independent cnsultant at regular intervals. Annual interim adjustments will be made using cst indices. Finalizatin f the grss-cone estimate is underway by the AESO and subject t further cnsultatin. The energy and ancillary services ffset fr the reference technlgy will be determined n a frward lking basis via a frward market methdlgy utilizing frward market electricity and natural gas prices. Additinal details n the EAS ffset are being develped by the AESO and subject t further cnsultatin. The demand curve fr the Alberta capacity market will be a dwnward-slping, cnvex demand curve with the fllwing parameters: The price cap will be set based n the maximum value f either a 1.75 net-cone multiple r a 0.5 grss-cone multiple; The minimum quantity pint will be set at a value f capacity equivalent t the Gvernment f Alberta s set minimum f % f EUE (fr the first auctin this is expected t be 964 MWh) in ne year ; The inflectin pint is set at x net-cone, at a quantity 7% abve the minimum acceptable quantity; and The ft is set at 18% abve the minimum acceptable quantity, at a price f zer. The demand curve fr a rebalancing auctin will have the same shape as the base auctin demand curve. Prcurement vlumes will be updated prir t each rebalancing auctin. Three-year frward perid. A transitin perid with frward perids shrter than three years fr base auctins will be required t establish the three-year frward perid. One-year bligatin perid, running Nvember 1 Octber 31. N ptin fr seasnal capacity cmmitments (annual bligatins nly). REP Rund 1, 2 and 3 resurces with a Renewable Electricity Supprt Agreement will be ineligible. N ther adjustments fr ut-f-market payments will be made fr the initial auctin. Unifrm price, sealed bid, single rund auctin. Page 5 f 11

6 Offers may be submitted using up t seven price quantity pairs. There will be limits as t which blcks may be inflexible. Alberta will clear as a single capacity regin with ne capacity price set at the uncnstrained price level established withut cnsideratin f expected transmissin cnstraints. The capacity market auctin clearing algrithm will maximize scial surplus and minimize deadweight lss. After cnsidering vlumes limited due t expected transmissin cnstraints, any capacity asset vlumes required t satisfy the capacity purchase vlume determined thrugh uncnstrained market clearing that are priced abve the market clearing price will receive uplift payments equal t the difference between their ffer price and the market clearing price. External capacity asset ffers and any transmissin-cnstrained asset ffers will generally be cleared, subject t the principle f maximizing scial surplus, based n ffered capacity price in the supply curve and, then by pr rata allcatin until the transmissin cnstraint limit is reached. Cleared assets will receive the market clearing price. A dispute reslutin prcess will be established such that participants can dispute determinatins made by the AESO in respect t prequalificatin assessments, UCAP determinatin, delisting, self-supply r market pwer mitigatin. Rebalancing Auctins Mnitring and Mitigatin After a transitin perid, tw rebalancing auctins will be held at 18 and 3 mnths befre the bligatin perid. During the transitin perid, ending after auctins fr the 2023/24 bligatin perid, ne rebalancing auctin will be held three mnths befre the bligatin perid. Capacity suppliers may ffer repricing bids and incremental sell ffers int the rebalancing auctin. Capacity suppliers chsing t buy back an bligatin fr reasns ther than UCAP reductin in the final rebalancing auctin r missing milestnes will nt have the ability t submit a price abve the price cap. Offers may be submitted using up t seven price quantity pairs. There will be limits as t which blcks may be inflexible. Capacity suppliers wh are required t buy-ut in a rebalancing auctin due t failure t meet develpment milestnes r UCAP reductins will be priced marginally abve the market price cap t ensure they clear in the market. The rebalancing auctin may clear with a net purchase r sale frm the AESO, cnsistent with an updated demand curve. The shape f the demand curve will stay the same in the rebalancing auctin. Rebalancing auctins will clear using the same mechanics as the base auctin. Rebalancing auctins will reflect updated assessments f any anticipated transmissin cnstraints. Previusly cleared capacity cmmitted assets which are n lnger able t deliver all r a prtin f their cmmitted capacity vlume will nt be subject t reduced capacity payments. A must-ffer requirement will apply t all qualified capacity assets unless they are permanently delisted r temprarily physically delisted. The AESO will cnduct an ex-ante market pwer screen prir t each base auctin t identify firms wh will be subject t capacity market ffer price mitigatin based n their prtfli size. Rebalancing auctins will nt be subject t ffer mitigatin. Firms subject t market pwer mitigatin will be identified utilizing the demand curve. A market pwer screen will be applied t identify firms that have the ability t prfitably Page 6 f 11

7 Supply Obligatins and Perfrmance Assessments increase the clearing price f an auctin by 10% r mre, measured bth abve and belw the inflectin pint f the demand curve, by withhlding capacity frm a base auctin. The market pwer screen will be based n a firm s capacity ffer cntrl f existing asset UCAP, regardless f resurce type. Firms that fail the market pwer screen will be required t ffer all existing capacity assets at r belw the default ffer price cap f 0.8 x net-cone. Assets may be allwed t ffer at higher prices subject t demnstrating higher net avidable csts. Net avidable cst will be equal t avidable csts minus the energy and ancillary service ffset. There will be n minimum ffer price requirements fr capacity suppliers due t net-shrt capacity psitins r ut-f-market payments. Prir t the cmmencement f an bligatin perid, a capacity supplier will be required t meet develpment milestnes: A new surce capacity cmmitted asset will be required t meet develpment milestnes tracked by the AESO. If, prir t the first rebalancing auctin, majr milestnes have are delayed by mre than eight mnths, r prir t the secnd rebalancing auctin majr milestnes are delayed by mre than five mnths, the new capacity asset will be required t buy ut its capacity cmmitment in the rebalancing auctin. A new demand respnse asset that cannt demnstrate a UCAP equal t r greater than 75% f its capacity bligatin prir t the secnd rebalancing auctin will be required t buy ut f its bligatin by the amunt the bligatin exceeds its UCAP. In the secnd rebalancing auctin, an existing capacity cmmitted asset with an bligatin vlume greater than its final UCAP will be required t buy back the difference between its bligatin vlume and its final UCAP. During an bligatin perid, the AESO will assess a capacity cmmitted asset n bth an availability and delivery basis: The availability f a capacity cmmitted asset will be assessed during the 250 tightest supply cushin hurs. The AESO will perfrm a supply cushin analysis at the end f each bligatin perid t identify the 250 tightest supply cushin hurs. The AESO will apply an unavailability payment adjustment t capacity suppliers with a negative availability vlume thrughut an bligatin perid. The unavailability payment adjustment rate will be a $/MWh value equal t 40 % f 1.3 multiplied by the asset specific weighted average capacity revenue per MW acrss all auctins fr the bligatin year divided by 250. A capacity cmmitted asset with a psitive availability vlume thrughut an bligatin perid will be eligible t receive an ver-availability payment adjustment, t be whlly funded frm the unavailability payment adjustments received frm capacity cmmitted assets with negative availability vlumes. The ver-availability payment adjustment will be based n a $/MWh rate determined by dividing the ttal unavailability payment adjustments cllected in an bligatin perid ($) by the ttal ver-availability vlume (MWh). The delivery f a capacity cmmitted asset relative t its capacity bligatin will be assessed during EEA events (levels 1 thrugh 3) using actual energy prductin, level f cnsumptin and/r prvisin f reserves. The bligatin vlume will be multiplied by a balancing rati (energy and reserves prduced by all capacity cmmitted assets during a perfrmance assessment perid divided by ttal capacity purchased). External assets will be cnsidered meeting delivery requirements fr the first tw hurs f a delivery event if they have an ffer in the merit rder but are nt dispatched because the available transfer capability is fully utilized. Page 7 f 11

8 The AESO will apply a nn-delivery payment adjustment fr a capacity cmmitted asset with a negative delivery vlume. The nn-delivery payment adjustment rate will be a $/MWh value equal t 60% f 1.3 multiplied by the asset specific weighted average capacity revenue per MW acrss all auctins fr the bligatin year divided by the maximum f (Expected EEA hurs, 20). The nn-delivery payment adjustment rate will then be multiplied by the delivery vlume shrtfall t determine the nn-delivery payment adjustment fr the delivery event. A capacity cmmitted asset that has a psitive delivery vlume will be eligible t receive an ver- delivery payment adjustment. Over- delivery payment adjustments will be whlly funded frm the nn- delivery payment adjustments received frm capacity cmmitted assets with negative delivery vlumes In the event availability and delivery assessment perids verlap, bth frms f payment adjustments will be applicable. The AESO will cap the cmbined payment adjustment expsure t unavailability and nn-delivery payment adjustments fr each capacity cmmitted asset. Mnthly nn-delivery payment adjustments fr a capacity cmmitted asset will be capped at 300% f the mnthly capacity revenue based n the capacity cmmitted asset s bligatin price per MW. The cumulative annual unavailability and nn-delivery payment adjustments fr a capacity cmmitted asset will be capped at 130% f the annual capacity revenue based n the bligatin price per MW. Over-availability and ver-delivery payment adjustments will be capped at a 1x the capacity cmmitted asset s ttal annual bligatin revenue. A capacity cmmitted asset that is cnstrained dwn due t limits n the Alberta internal transmissin system will be exempt frm unavailability payment adjustments and nn-delivery payment adjustments n that vlume f its bligatin. Availability and delivery assessments will nt be cnducted during market suspensin, limited market peratins and ther specified rare events. N ther exemptins t the assessment f unavailability r nn-delivery payment adjustments will be permitted, including fr n-site and/r distributin system cnstraints, r transmissin utages that result in the asset being electrically discnnected frm the transmissin system. A capacity supplier will have the ptin f ex ante asset substitutin, r ex pst vlume reallcatin t avid r decrease nn-delivery payment adjustments assciated with a failure t deliver n its bligatin vlume during a delivery assessment perid. Settlement and Financial Security Requirements Payments will nt be made t capacity suppliers prir t the start f the bligatin perid. Cnsistent with the energy market, capacity market statements will be issued mnthly. Mnthly capacity payment is equal t the capacity market price fr the delivery year multiplied by the capacity bligatin cleared in the base auctin, minus the difference in cleared quantity between the rebalancing auctins, multiplied by relevant rebalancing price. Capacity payment adjustments due t nn-availability and nn-delivery will be deducted frm mnthly capacity payments. Remaining payment adjustment balances will be carried ver t subsequent mnths until the ttal payment adjustment is cllected. Csts f prcuring capacity will be allcated t custmers accrding t the apprved capacity cst allcatin methdlgy. N net settlement instructins fr capacity will be enabled. Capacity assets lking t buy back in rebalancing auctins, as well as new capacity assets, will need t demnstrate sufficient credit and may have t prvide security. Page 8 f 11

9 Capacity bligatin is the last bligatin fllwing the final rebalancing auctin prir t the delivery year. This bligatin must be actively tracked by the AESO. New capacity assets that have nt reached cmmercial peratin befre the start f the settlement perid will nt be paid the mnthly capacity payment in that settlement perid. The mnthly capacity payment fr that settlement perid will be held by the AESO until all penalties fr the bligatin year are assessed and thereafter will be applied twards the payment adjustment balance. Financial security is nt required fr existing capacity assets during the bligatin perid prvided the asset maintains an bligatin and is eligible fr a capacity payment fr the fllwing bligatin perid. Any residual funds remaining after all nn-availability and ver-availability r all nndelivery and ver-delivery payment adjustments are made will be returned t lad by being applied against the csts incurred by the AESO t prcure capacity. Radmap fr Changes in the Energy and Ancillary Services Markets Current aspects f the energy and ancillary services markets will cntinue, including, withut limitatin: Current self-cmmitment rules. Current must-ffer requirement will cntinue t apply t a generatin asset, regardless f whether r nt it has a capacity cmmitment (available capability must be ffered). A lad asset that des nt have a capacity cmmitment (demand respnse and price-respnsive lad) may ffer r may cntinue t self-dispatch. A generatin asset, regardless f whether r nt it has a capacity cmmitment, must submit infrmatin related t asset utages in accrdance with current requirements (n utage apprval). All ffers may be between the price cap ($999) and flr ($0), unless mitigated (further explained belw). The current market structure fr ancillary services will remain the same. Ex pst mnitring and mitigatin f the market will cntinue. New requirements t facilitate implementatin f the capacity market and market pwer mitigatin include: Offer cntrl infrmatin must be submitted. Sectin f the ISO rules, Mthball Outage Reprting will be replaced by capacity market delist prcess. Market participants must ffer energy in the delivery perid unless delisted. Minr changes t the supply adequacy r supply shrtfall rules t include assets with capacity cmmitments. A lad asset with a capacity cmmitment must participate by submitting an ffer, nt a bid (similar t generatin assets), and cmply with dispatch requirements. In the event f equal priced ffers thrughut the merit rder, including at the ffer cap ($999.99), a lad asset with a capacity cmmitment will be the last dispatched assets. A lad r aggregated lad that has nt cleared in a capacity auctin will nt have a must ffer requirement. An imprt r exprt asset will be prvided the ptin t submit ffers in price quantity pairs upn request f a new priced asset, in which case they will be dispatched during the settlement perid, and may set system marginal price. An imprt asset with a capacity cmmitment will nt have pririty dispatch ver an imprt asset that des nt have a capacity cmmitment. Page 9 f 11

10 An imprt asset with a capacity cmmitment must ffer its bligatin vlume int the energy market. A lad asset with a capacity cmmitment must submit utage infrmatin, similar t the existing requirements fr generatin assets (n utage apprval). A generating unit, aggregated generating facility, energy strage facility, lad asset r aggregated lad asset must submit its ramp capability during the asset s peratinal state (ramp table r curve). A three-part market pwer mitigatin test will be applied: A market pwer screen t identify if a firm has market pwer based n an hurly residual supplier index (RSI) structural screen set at an RSI f 1.0. The RSI calculatin will incrprate a vluntary submissin f physical and financial supply bligatins, which will be netted ff the firm s prtfli. N-lk scarcity test: If the supply cushin is frecast t be lwer than 250 MW in a delivery hur, there will be n market pwer mitigatin in that delivery hur irrespective f generatr cncentratin r ffer prices. Asset-specific reference price: Calculate the maximum price level that a generatr wuld be expected t ffer energy at if it had n market pwer based n the asset-specific shrt-run marginal csts adjusted thrugh the use a market-wide marginal cst multiplier t accunt fr cycling and start-up csts r a scarcity multiplier t accunt fr scarcity market cnditins. An ffer that fails the market pwer mitigatin test will have its ffers r bids mitigated t an asset-specific reference price, calculated as: Fr thermal assets, 3 x marginal cst, defined as heat rate x fuel price + variable O&M + carbn price t x Asset-specific Carbn Efficiency Factr at supply cushins ver 1,000 MW increasing t a multiple f 6 x marginal cst at supply cushins frm 1,000 t 250 MW; r Fr ther assets, including an imprt asset r a nn-thermal, energylimited asset, a frmula that captures the cncept f pprtunity cst. An asset may submit t the AESO an exceptin request fr the asset-specific reference price, and in ding s must submit its actual shrt-run marginal cst. The fllwing design changes are included in the market radmap (i.e., nt included as part f the capacity market implementatin fr 2021) and will be reviewed and implemented as part f the nging evaluatin f the market and day t day peratins: Energy market pricing methdlgy, including thse that may be required t ensure efficient dispatch and pricing during shrtage and surplus events in the future: raising the ffer cap abve $999.99; negative pricing; and shrtage pricing. Dispatch and flexibility: dispatch certainty thrugh tightened dispatch tlerance, ramp by blck, and delay times; intrductin f a ramp prduct; and shrter settlement. Page 10 f 11

11 The fllwing design changes will nt be included as part f the capacity market implementatin r market radmap, althugh they may be cnsidered as part f a separate evaluatin at anther time shuld the need arise: lcatinal marginal pricing (LMP); security cnstrained unit cmmitment (SCUC); security cnstrained ecnmic dispatch (SCED); intertie dynamic scheduling; c-ptimizatin f the energy and ancillary services markets; and day-ahead market (DAM). 1.2 Auctin Timelines and Transitinary Perid Each capacity auctin prcess is expected t take apprximately eight 3 mnths, starting frm the prequalificatin prcess thrugh t market clearing and psting f auctin results. In the transitin t the final capacity market structure, auctins will be cnducted n a cmpressed frward perid and with a reduced number f rebalancing auctins. The initial base auctin prcess fr the 2021/2022 bligatin perid will start in Nvember 2019 and is anticipated t run thrugh t apprximately the end f June During the transitinary perid, base auctins will be held apprximately every six mnths until the full three-year frward perid is achieved with the cmpletin in Octber 2021 f the base auctin prcess fr the 2024/2025 bligatin perid. Please see CMD Final Sectins 5 and 6 fr additinal detail. 3 Subject t adjustment based n further assessment during the implementatin phase f capacity market intrductin. Finalized auctin timelines will be prvided befre each auctin. Page 11 f 11