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 Categry Eligibility and Prequalificatin Requirements; and Financial Security Requirements High-level Design Elements 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 Categry High-level Design Elements 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 Categry High-level Design Elements 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 Categry High-level Design Elements 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 Categry Calculatin f Demand Curve Parameters Frward Capacity Auctin (Base Auctin) High-level Design Elements 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 Categry High-level Design Elements 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 Categry Supply Obligatins and Perfrmance Assessments High-level Design Elements 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 Categry High-level Design Elements 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 Categry High-level Design Elements 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 Categry High-level Design Elements 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 Categry High-level Design Elements 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

12 2 Supply Participatin This sectin address the requirements and prcesses fr prequalificatin, self-supply designatins and delisting 2.1 Prequalificatin applicatins Prequalificatin f existing versus new capacity assets A new capacity asset must be prequalified by the AESO in rder fr such asset t be eligible t participate in a capacity auctin. A new capacity asset includes brand new assets, as well as incremental and refurbished capacity assets that meet the qualificatin threshlds stated in subsectins and belw All existing generatin assets lcated in Alberta that currently participate in the energy market and have an estimated UCAP equal t r greater than 1 MW will autmatically prequalify t participate in the first transitinal capacity auctin. As described in subsectin f Sectin 10, Radmap fr Changes in the Energy and Ancillary Services Markets, capacity assets with a maximum capability less than 5 MW but greater than r equal t 1 MW will have the ptin t ffer in the energy market A ptential external capacity asset (imprt) that currently participates in the energy market must submit a prequalificatin applicatin t the AESO in rder t participate in capacity auctins fr the first time. Ineligible assets An asset that is the subject f a renewable electricity supprt agreement in cnnectin with Renewable Energy Prgram (REP) Runds 1, 2 r 3 is nt eligible t participate in a capacity auctin. There is n requirement fr such asset t be prequalified by the AESO An energy efficiency resurce is nt eligible t participate in the initial capacity auctins. General prequalificatin requirements Parties seeking t have a new capacity asset prequalified by the AESO t participate in a capacity auctin must submit a prequalificatin applicatin t the AESO befre a prescribed deadline. The prequalificatin applicatin must cntain: (a) cntact infrmatin (e.g., the names f the authrized cntact persn(s) respnsible fr liaising with the AESO, telephne numbers, registered address and address f the cntact persn(s) with respect t the prequalificatin applicatin); (b) a descriptin f the new capacity asset; (c) a detailed prject develpment and implementatin plan that includes: i. an verall prject plan fr delivery f the new asset, including the cmmissining perid and target in-service date; ii. a prject timeline (e.g., Gantt chart, r similar schedule diagram) with an in-service date that is n later than the start f the bligatin perid fr a capacity auctin that the party is seeking prequalificatin fr; iii. a cncise supprting narrative describing the basis fr expectatins and ratinale fr such timeline; iv. the current status f the prject s prgressin alng the timeline, and key activities and majr milestnes that have been cmpleted t date; Page 1 f 9

13 v. the critical path(s) in the timeline and the majr milestnes that frm each critical path (such as envirnmental studies, cnstructin permits, prcurement lead times fr critical equipment) and the key elements t be cmpleted, addressed r achieved within the critical path; vi. start/end dates and duratins f key activities and dates f majr milestnes that have nt been cmpleted; and vii. if applicable, any required distributin system cnnectin apprvals r agreements, including any which have already been attained and identificatin f the cnnecting authrity and distributin facility wner invlved with such activities. (d) evidence that the new capacity asset has an estimated UCAP equal t r greater than 1 MW; (e) evidence that the new capacity asset meets the asset-specific requirements set ut in subsectins t , as required; (f) evidence that the legal wner f the new capacity asset can satisfy security requirements set ut in subsectin ; and (g) such ther infrmatin and evidence that the AESO deems necessary. Asset-specific prequalificatin requirements If a capacity asset r aggregated capacity asset falls int mre than ne f the fllwing asset-specific categries, the prequalificatin requirements in each asset-specific categry will apply t the asset Demand respnse assets. A demand respnse asset is eligible t participate n the supply side f the Alberta capacity market. Hwever, exprt is nt cnsidered a valid demand respnse asset. A prequalificatin applicatin fr a demand respnse asset must include: (a) evidence that the demand respnse asset is r will be a retail r self-retail asset belnging t a valid pl participant; (b) a descriptin f: i. the type f demand respnse (i.e., guaranteed lad reductin r firm cnsumptin level); ii. hw the demand respnse asset will reduce demand during a delivery perid and by hw much; iii. wh the likely cntributrs (sites) are and hw and when they will be prcured 1 ; and iv. the data acquisitin prcedure. (c) evidence f the cntributrs vlume fr up t at least 75% f the assets bligatin, t be prvided t the AESO prir t the secnd rebalancing auctin fr the bligatin perid. (d) if the asset prvides firm cnsumptin level demand respnse, an estimate f the qualified baseline: 1 Demand respnse aggregatrs will be required t maintain recrds fr all cntributrs as well as activatin ntices sent t their cntributrs specifying the start time, stp times, and dates f demand respnse activatins, in additin t a recrd f cntributrs demnstrating the eligible prtin f the demand respnse asset that the cntributr is prviding t the demand respnse aggregatr. Page 2 f 9

14 i. fr new lads with n cnsumptin histry in Alberta, the qualified baseline will be declared by the applicant; r ii. fr existing sites with cnsumptin histry in Alberta, the qualified baseline will be determined based n histrical cnsumptin data f the cmpnent site(s). (e) ne f the fllwing: i. a firm cnsumptin level that the capacity asset will reduce t when dispatched; r ii. a prpsed UCAP representing the guaranteed lad reductin. (f) the prpsed date fr a physical cmmissining test that demnstrates the cntrl systems and prcesses fr dispatch, and als checks that a relatinship exists between the prvider and the cntributing resurce(s) that results in reduced lad; and (g) site IDs, if the demand respnse asset is existing lad External capacity assets. An external capacity asset will be an imprt asset and may prequalify t participate in the Alberta capacity market. A prequalificatin applicatin fr an external capacity asset must include: (a) evidence f firm transmissin service frm the external capacity asset t the brder f Alberta; (b) evidence that the external capacity asset, r prtins theref which are seeking t participate in the capacity market, will nt be used as nn-recallable assets in anther resurce adequacy prgram in any ther jurisdictin; and (c) evidence frm the balancing authrity in which the asset is lcated that capacity deliveries frm the external asset will nly be curtailed n a pr-rata basis when firm lad is curtailed in the balancing authrity Strage assets. A strage asset may prequalify t participate in the Alberta capacity market. A prequalificatin applicatin fr a strage asset must include evidence that the asset can maintain its energy prductin at its estimated UCAP level fr at least 4 hurs Aggregated capacity assets. Separate resurces in multiple lcatins may aggregate and participate in the Alberta capacity market as a single asset, including assets which have a UCAP less than 1 MW. A single capacity market participant will act n behalf f the resurce cmpnents f the aggregate. If the aggregated capacity asset is cmprised f individual cmpnent resurces in multiple lad settlement znes, a retail asset must be created fr each settlement zne and the aggregated capacity asset is then the aggregatin f the retail assets. All sites within the retail asset will be cnsidered individual cmpnent resurces fr the aggregated capacity asset. The capacity f individual cmpnent resurces within the aggregatin cannt be ffered separately int a capacity auctin. A prequalificatin package fr an aggregated capacity asset must include: (a) an itemized list f all the cnfirmed r pssible individual cmpnent resurces f the aggregated asset; (b) evidence that the estimated sum f the UCAP ratings fr individual cmpnent resurces is equal t r greater than the minimum UCAP size f 1 MW and less than the maximum UCAP size equal t the largest existing generating asset UCAP; (c) evidence that individual cmpnent resurces f the aggregated capacity asset meet the necessary asset-specific requirements based n its fuel type; and (d) evidence that each individual cmpnent resurce f the aggregated capacity asset has r will have apprpriate interval metering. Page 3 f 9

15 Refurbished capacity asset. A capacity asset is a refurbished capacity asset if any f the fllwing apply prir t the start f the bligatin perid fr a capacity auctin: (a) retrfits have been made t the capacity asset that will result, by the cmmencement f the bligatin perid, in an increase in maximum capability by an amunt exceeding the greater f: r, i. 15%f the capacity asset s mst recent maximum capability; r ii. 40 MW abve the capacity asset s mst recent maximum capability; (b) the amunt f capital required t retrfit the capacity asset will be equal t r greater than $200 per kilwatt f the whle capacity asset s mst recent maximum capability after refurbishment multiplied by the current capital cst escalatin rate. Investment csts may include the csts assciated with reactivating a capacity asset that was previusly temprarily delisted and in which investment in the asset was undertaken prir t reactivatin. A prequalificatin package fr a refurbished capacity asset must include the cst data assciated with the prject in sufficient detail t allw the AESO t determine whether the relevant cst threshld is met. A crprate fficer must attest that the submitted csts fr refurbishment are accurate If a capacity market participant that is subject t capacity market pwer mitigatin submits a prequalificatin applicatin t refurbish ne r mre f its assets, it must indicate as part f the prequalificatin applicatin fr each asset frm the ptins belw what it intends t d if the asset fails t clear the capacity auctin: (a) permanently physically delist the refurbished capacity asset; r (b) nt permanently delist the refurbished capacity asset (i.e., cntinue t perate) and submit in the auctin an unmitigated, inflexible single blck ffer and, an additinal ffer t be used in the capacity auctin at r belw the mitigated ffer price in the event the unmitigated ffer des nt clear. In ther wrds, if a capacity market participant that is subject t capacity market mitigatin chses ptin (b) it must submit tw independent ffers int the capacity auctin: ne inflexible single blck ffer based n the desired price needed t refurbish (i.e., the unmitigated ffer), the ther based n the price the capacity market participant wuld have submitted had they nt submitted a refurbishment plan (i.e., the mitigated ffer). As described in subsectin f Sectin 5, Base Auctin, the auctin will use a multi-stage clearing mechanism taking int accunt the unmitigated ffer first. If the unmitigated ffer des nt clear, then the mitigated ffer is used. A capacity market participant will nly be able t ffer in this manner a maximum f ne time befre the end f the asset life. That is, a capacity asset which elects ptin (b) and then des nt clear will nt be able t select that ptin again fr future auctins. In any future auctins, shuld the capacity market participant re-file a prequalificatin applicatin t refurbish, the capacity market participant must chse ptin (a) and permanently delist the asset if it fails t clear in the auctin Incremental capacity asset. The capacity market participant may elect t add an increase in UCAP in assciatin with an increase in maximum capability abve that used t calculate the asset s mst recent UCAP. Such incremental vlume will nt be subject t market pwer mitigatin in accrdance with Sectin 7, Capacity Market Mitigatin and Mnitring, if the increase in the capacity asset s mst recent maximum capability is 1 MW r greater. Page 4 f 9

16 A prequalificatin applicatin fr an incremental capacity asset must include: (a) the new maximum capabilityin whle number MW that is at least 1 MW greater than the current maximum capability registered with the AESO; and (b) an indicatin shuld the asset fail t receive an bligatin in the auctin as t whether the asset s maximum capability reverts back t the previus registered value r will remain as declared in the prequalificatin applicatin. In the event that the incremental capacity asset fails t clear the auctin and receive an bligatin, and the capacity market participant chses t use the maximum capability declared in the prequalificatin applicatin fr future capacity auctins, the incremental capacity will: (a) be subject t the must ffer requirement fr future capacity auctins; and (b) remain unmitigated until it clears a future auctin and receives an bligatin. Security requirement fr a new capacity asset A capacity market participant must pst security fr a new asset befre the asset can participate in its first capacity auctin. As described abve in subsectin 2.1.1, a new capacity asset includes brand new assets, as well as incremental and refurbished capacity assets that meet the qualificatin threshlds stated in subsectins and Given the cst and increase in UCAP threshlds required t qualify as a new asset, refurbishments prjects are deemed new assets and will be required t prvide security in rder t mitigate the delivery risk. The amunt f security will be calculated in accrdance with the fllwing frmula: (a) Security requirement fr brand new assets = (CONE * 1/CRF new ) * 5% where CONE equals the grss CONE value used fr the reference unit in the demand curve determinatin; and CRF = {i(1 + i)^n} / {[(1 + i)^n]-1}, where i = discunt rate used in the grss CONE determinatin and n = 20 year plant life. (b) Security requirement fr refurbished assets = $200/kW * escalatin rate * 5%. (c) Security requirement fr incremental assets = $100/kW * escalatin rate * 5%. As the asset demnstrates achievement f prject milestnes prgressing tward cmmercial peratin fr the bligatin perid, the security requirement will decline. The declining security requirement will be calculated as fllws: (a) Security requirement rate = security requirement divided by maximum number f auctins befre the bligatin perid. (b) Declining security requirement = security requirement rate * bligatin * number f remaining auctins befre the bligatin perid. The full financial security will nt be returned t the capacity market participant until the asset attains cmmercial peratin t the bligatin vlume. Guidelines gverning payment fr the security requirement fr new capacity assets is described in subsectin 9.6 f Sectin 9, Settlement and Financial Security Requirements. Prequalificatin f a new capacity asset The AESO will review all cmplete prequalificatin applicatins submitted within the timelines prescribed in the auctin guidelines. The AESO has the right t verify any infrmatin in a prequalificatin applicatin, including technical, financial, and peratinal data, thrugh audits, requests fr additinal infrmatin, site visits and any ther means that it deems necessary The AESO will prequalify a new capacity asset that meets: (a) the minimum size requirement f 1 MW; (b) the evidentiary requirements set ut in subsectins t , as applicable; and Page 5 f 9

17 (c) the security requirements fr a new capacity asset set ut in subsectin The AESO must ntify all applicants f the prequalificatin results. Prequalified capacity assets will prceed t the qualificatin perid. Please refer t Sectin 3, Calculatin f Unfrced Capacity (UCAP) Ratings fr mre infrmatin. Prequalificatin fr subsequent auctins A prequalified capacity asset will remain prequalified fr each subsequent capacity auctin unless: (a) the capacity market participant lses capacity market participant status; r (b) the capacity market participant: i. fails t submit sufficient evidence t the AESO that certain prject milestnes have been achieved during the frward perid; ii. iii. iv. perfrms retrfits t the asset that meet r exceed the threshlds fr a refurbished capacity asset in subsectin r the threshlds fr an incremental capacity assets in subsectin ; changes its self-supply designatin; delists the asset; r v. fr an external capacity asset, n lnger hlds firm transmissin fr the bligatin perid fr the UCAP f the asset. 2.2 Self-supply designatins The fllwing are required t self-supply capacity: (a) the City f Medicine Hat; (b) a site with nsite generatin 2 that is nly net-metered; 3 and (c) a site with nsite generatin that is net-metered and cannt physically flw its grss vlumes due t system cnnectin limitatins A site where lad is served by n-site generatin that can physically flw its grss vlumes t the intercnnected electric system has the ptin t self-supply capacity if it has a bi-directinal net-interval meter at the cnnectin pint t the intercnnected electric system. Legal wners seeking a self-supplier designatin must submit a request t the AESO within the timelines prescribed in the auctin guidelines The AESO will review self-supply designatin requests and apprve thse that meet the criteria in subsectin Self-supply designatins will remain in effect fr at least 4 years. Self-suppliers may submit a change in self-supply status inside f 4 years prvided the participant can demnstrate a physical change t the peratin f the site. Sites wh intend t self-supply r n lnger self-supply must declare its intentin t the AESO within the timelines prescribed in the auctin guidelines The AESO will determine the vlume f self-supply capacity by subtracting the sites net lad frm its grss lad in the 250 tightest supply cushin hurs per year fr the past 5 years. If the net lad equals zer the entire site lad is self-supplied. 2 3 Sites with nsite generatin include Industrial System Designatin sites and sites under the Duplicatin Avidance Tariff. Net meters measure electricity at the cnnectin t the grid. Grss meters measure electricity at the electric terminus f the generatr. Page 6 f 9

18 2.2.5 The excess lad (i.e., net lad) in a self-supply arrangement may apply t the AESO t prequalify as a demand respnse asset, in accrdance with subsectin Hwever, a self-supply site cannt participate as bth a demand respnse asset and a generating capacity asset in the same bligatin perid. 2.3 Delisting A capacity market participant with an asset that is unable t participate in the Alberta capacity, energy and ancillary services markets fr physical r ecnmic reasns must submit a temprary delist request r a permanent delist ntificatin, as applicable, t the AESO within the timelines prescribed in the auctin guidelines A capacity market participant with an asset that is currently n an extended mthball utage pursuant t Sectin f the ISO rules, Mthball Outage Reprting must submit a temprary delist request r permanent delist ntificatin if they want t remain mthballed fr the first applicable capacity bligatin perid. AESO review f impacts t the reliability f the intercnnected electric system The AESO may cnduct a reliability review fr a temprary delist requests r a permanent delist ntificatin t determine whether the capacity assciated with such delist is needed t maintain the reliability f the intercnnected electric system during the bligatin perid (e.g., thermal verlads, vltage, etc.) The AESO will nly review impacts n supply adequacy t assess whether there is sufficient amunt f capacity available t ensure the minimum target n the demand curve is met. If the results f the reliability review identify reliability cncerns, the AESO may cnsult with the capacity market participant wh submitted the request prir t finalizing its assessment f the temprary delist request r permanent delist ntificatin. Temprary delist request fr ecnmic reasns A capacity market participant may submit a temprary ecnmic delist request t the AESO during the prequalificatin perid fr the secnd rebalancing auctin fr the crrespnding bligatin perid. The capacity market participant must specify the capacity prpsed t be ecnmically delisted and prvide net avidable cst infrmatin fr further assessment, as utlined in subsectin f Sectin 7, Capacity Market Mnitring and Mitigatin. A crprate fficer must attest that the submitted csts fr the ecnmic delist r the utage duratins fr physical delists are accurate In additin t cmpleting the reliability review described in subsectin 2.3.3, the AESO will, fr each request as per subsectin abve, review and apprve the net avidable cst infrmatin based n whether such csts are ecnmically justifiable. The temprary ecnmic delisting request must include the avidable cst data that the ecnmic delisting decisin was based upn and a crprate fficer's attestatin t the accuracy f the avidable cst data 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. The temprary ecnmic delist request must specify which cntinuus mnths during the bligatin perid the capacity asset wuld be participating in the energy and ancillary services markets. The avidable cst data assciated with the temprary ecnmic delist request must accunt fr the fact that the capacity asset will be nline fr the specified perid in the bligatin perid The AESO will allw temprarily ecnmically delisted capacity assets t delay the start f the utage r return t the energy market befre the end f its utage term if: the AESO determines an immediate need, n a shrt term basis, fr services prvided by certain assets t maintain the necessary level f reliability r adequacy and there is a high prbability that the situatin cannt be alleviated thrugh the rdinary curse peratin f the energy market. Page 7 f 9

19 2.3.9 The AESO will determine a UCAP fr a capacity asset that temprarily ecnmically delists and has an utage duratin that is adjusted due t the circumstances listed in subsectin The UCAP will be fr use in asset substitutin fr the perid f time the capacity asset is available t prduce energy during the bligatin perid resulting frm a return t service related t the circumstances listed in subsectin If the AESO apprves the avidable csts, the capacity market participant must ffer at the net avidable csts f the capacity asset int the capacity auctin. If the capacity asset des nt clear the auctin, the capacity market participant will be required t temprary delist the capacity asset fr the bligatin perid fr which the capacity auctin is cnducted. That is, the capacity asset must be remved frm the energy and ancillary service markets fr the bligatin perid, except fr the perid specified in the temprary delisting request when the capacity asset will be made available t prvide energy and ancillary services in accrdance with subsectin A capacity asset may nt ecnmically delist fr mre than tw cnsecutive bligatin perids. A capacity market participant must submit a temprary delist request fr each capacity auctin Any capacity bligatins attributed t a capacity asset that temprarily ecnmically delists will cntinue t be attributable t the capacity asset. Unless the bligatins are ffset thrugh the repricing bids in a rebalancing auctin as described in Sectin 6, Rebalancing Auctins, the capacity asset will be subject t the supply bligatins nted in Sectin 8, Supply Obligatins and Perfrmance Assessments. Temprary delist request fr physical reasns A capacity market participant must submit a temprary physical delist request during the prequalificatin perid f a capacity auctin if it is expected that the capacity asset will be physically unavailable t meet its bligatin fr a perid equal t r greater than 5 cntinuus mnths in any ne bligatin perid. A temprary physical delist request must include: (a) an explanatin f the physical limitatin accmpanied by supprting dcumentatin as evidence f ne r mre f the fllwing: r, i. a significant physical peratinal restrictin; ii. iii. iv. majr repair(s) that will extend int the applicable bligatin perid fr mre than 5 cntinuus mnths. Temprary delisting fr physical reasns will nt be allwed if the capacity asset is physically unavailable t meet its bligatin fr a perid less than 5 cntinuus mnths in any ne bligatin perid; an rder, decisin, final rule, pinin r final directive frm a regulatry authrity specifically mandating the retirement r derating f the capacity asset; r asset retirement beginning part-way thrugh an bligatin perid; (b) a written, swrn and ntarized statement f a crprate fficer certifying that a new capacity asset, which did nt clear in the capacity auctin fr the bligatin perid prir t the bligatin perid f the relevant capacity auctin, will nt be in full cmmercial peratin prir t the upcming bligatin perid The AESO will apprve a temprary physical delist request if the AESO is satisfied that the capacity asset is physically unable t functin fr a perid equal t r greater than 5 cntinuus mnths in any ne bligatin perid. An apprved temprary physical delist request fr physical reasns fr a prtin f an bligatin perid will delist the capacity asset frm the capacity market fr the entire bligatin perid. The capacity asset will be required t participate in the energy and ancillary services market fr the remainder f the bligatin perid nt included in the temprary physical delist request The AESO will allw temprarily physically delisted capacity assets t delay the start f the utage r return t the energy market befre the end f its utage term if the AESO determines Page 8 f 9

20 an immediate need n a shrt term basis fr services prvided by certain surce assets t maintain the necessary level f reliability r adequacy, and there is a high prbability that the situatin will nt be alleviated thrugh the rdinary curse peratin f the energy market The AESO will determine a UCAP fr a capacity asset that temprarily physically delists and has an utage duratin that is adjusted due t the circumstances listed in subsectin The UCAP will be fr use in asset substitutin fr the perid f time the capacity asset is available t prduce energy during the bligatin perid resulting frm a return t service related t the circumstances listed in subsectin A capacity market participant will nt be allwed t temprarily delist a capacity asset fr physical reasns fr mre than tw cnsecutive bligatin perids Any capacity bligatins attributed t a capacity asset that temprarily physical delists will cntinue t be attributable t the capacity asset. Unless the bligatins are ffset thrugh the repricing bids in a rebalancing auctin as described in Sectin 6, Rebalancing Auctins, the capacity asset will be subject t the supply bligatins nted in Sectin 8, Supply Obligatins and Perfrmance Assessments. Permanent delist ntificatins A capacity market participant may submit a permanent delist ntificatin t the AESO during the prequalificatin perid f a capacity auctin, excluding hwever, during the last rebalancing auctin fr the crrespnding bligatin perid. Once the permanent delist ntificatin is received by the AESO it cannt be withdrawn A capacity market participant that is currently participating in the energy market and is intending t permanently delist, if the asset has a must ffer requirement in the energy r ancillary services markets, must participate in the energy market until the physical retirement f the asset An external capacity and demand respnse assets which permanently delist may re-enter the capacity market by submitting a prequalificatin applicatin fr a new asset The AESO will review each permanent delist ntificatin fr reliability cncerns as utlined in subsectin If there are n reliability cncerns, the capacity asset (r prtin f such asset) will be required t fully and permanently retire and will nt be eligible t participate in any capacity auctins. Reprting f delisted MW Ahead f a capacity auctin, the AESO will publish n its website the ttal delisted MW differentiating between permanent and temprary delists. 2.4 Physical bilateral transactins A physical bilateral transactin is a cntractual arrangement between a lad market participant and a capacity asset which leverages the transmissin r distributin system t physically delivery f all r a prtin f the lad s capacity needs, remving bth the supply and demand vlumes frm the AESO administered capacity market. Physical bilateral transactins will nt be permitted; hwever, a site may chse t self-supply capacity prvided the site is eligible t self-supply as described in subsectin 2.2 abve. Page 9 f 9

21 3 Calculatin f Unfrced Capacity (UCAP) This sectin addresses the methdlgies fr calculating unfrced capacity (UCAP) f capacity assets 3.1 Calculatin f UCAP The reliability cntributin (UCAP) f a capacity asset will be evaluated based n set methdlgies, as described belw. The UCAP determined fr a capacity asset is representative f the capacity asset s physical reliability during tight supply market cnditins Befre every base auctin and rebalancing auctin, the AESO will calculate and assign an annual UCAP and UCAP range fr each prequalified capacity asset The AESO will nt calculate UCAP fr thse assets identified in subsectins and f Sectin 2, Supply Participatin (i.e., Renewable Energy Prgram rund 1, 2 and 3 resurces, and energy efficiency) The capacity market participant may elect a UCAP within a range f the AESO calculated UCAP. Prir t a capacity auctin, the AESO will prvide each prequalified capacity asset a UCAP range equal t the greater f the fllwing: (a) the asset-specific UCAP range set ut in subsectin belw; (b) +/- 2% multiplied by the asset s maximum capability. These values will be added and subtracted t the UCAP f the asset; r (c) +/- 1 MW f the asset s UCAP. The AESO will nt prvide a UCAP range that will enable the legal wner f the capacity asset t select a UCAP abve the maximum capability f the asset r belw 1 MW f UCAP The UCAP range will nt be applicable t external capacity assets, demand respnse capacity assets r new capacity assets The AESO will calculate asset-specific UCAP ranges using the fllwing methdlgy: The upper limit fr the UCAP range will be determined by remving 5% f the 1250 tightest supply cushin hurs in which the asset s availability factr r capacity factr was the lwest, and averaging the remaining data. This value will be multiplied by the assets maximum capability t determine the UCAP upper limit. The lwer limit fr the UCAP range will be determined by remving 5% f the 1250 tightest supply cushin hurs in which the asset s bserved perfrmance was the highest, and averaging the remaining data,. This value will be multiplied by the assets maximum capability t determine the UCAP lwer limit The AESO will autmatically qualify all prequalified capacity assets that have a UCAP greater than r equal t 1 MW. If the UCAP f a prequalified capacity asset drps belw 1 MW prir t a base r rebalancing auctin, the capacity market participant will nt be required t delist the capacity asset in accrdance with subsectin 2.3 f Sectin 2, Supply Participatin. Hwever, the capacity asset will nt be qualified t participate in a subsequent capacity auctin except as may be required t buy back a previusly sld bligatin vlume Final asset level UCAPs will be shared publicly during the preauctin activities described in sectin 5.2. UCAP values will be published n the AESO s website. Page 1 f 9

22 UCAP fr capacity assets with availability r prductin data that meet the minimum threshld fr calculating UCAP per sectin A UCAP fr a capacity asset with histrical generatin r cnsumptin data in Alberta will generally be based n ne f tw methdlgies: (a) Availability factr. Generally, a straight average availability factr apprach will be used t calculate UCAP fr capacity assets whse generatin r lad metered vlumes align with the dispatch levels in the energy market. An hurly availability factr will be calculated using duratin weighted available capability as bserved in the Energy Trading System divided by maximum capability fr each f the 250 tightest supply cushin hurs per year fr the past five years. Availability factrs will incrprate histrical derates, frced utages, planned utages and frce majeure utages. Distributin system cnstraints and transmissin utages that result in an asset being electrically discnnected frm the transmissin system will nt be excluded frm the availability factr. AAAA tt = nn ii=1 ww iiiiaaaa iiii MMMM tt nn ii=1 ww iiii Where AAAA tt is the availability factr fr hur t, and MMMM tt is the capacity asset s maximum capability in the hur. ww iiii is the duratin f time that the availability f the asset has been equal t AAAA iiii. The numeratr (in parenthesis) represents duratin-weighted average f available capability ver all available capability declaratins within the ne-hur settlement interval. The hurly availability factrs will be averaged t create a straight average availability factr fr the capacity asset: SSSSSSSS = NN tt=1 AAAA tt NN Where SSSSSSSS is the straight average availability factr and N is the number f bserved hurs. The straight average availability factr multiplied by the capacity asset s maximum capability anticipated fr the bligatin perid will yield the UCAP: UUUUUUUU = SSSSSSSS MMMM (b) Capacity factr. In the majrity f cases, a capacity factr apprach will be used t calculate UCAP fr a capacity asset whse generatin r lad metered vlumes d nt align with the dispatch levels in the energy market. Capacity factrs will incrprate histrical derates, frced utages, planned utages and frce majeure utages. An hurly capacity factr (CCCC tt ) will be calculated using histrical metered vlumes, plus any applicable ancillary services vlumes f the capacity asset, divided by maximum capability fr each f the 250 tightest supply cushin hurs per year fr the past five years: CCCC tt = MMMM tt + AAAAAAAA tt MMMM tt Where MMMM tt is the metered vlume at hur t that represents the amunt f energy delivered t the grid ver a ne-hur settlement interval. AAAAAAAA tt is the Applicable Ancillary Services Vlume within the hur. The hurly capacity factrs will be averaged t create a straight average capacity factr fr the capacity asset: SSSSSSSS = NN tt=1 CCCC tt NN Page 2 f 9

23 Where SSSSSSSS is the straight average capacity factr and N is the number f bserved hurs. The straight average capacity factr, when multiplied by the capacity asset s maximum capability anticipated fr the bligatin perid, will yield the UCAP f the capacity asset: UUUUUUUU = SSSSSSSS MMMM UCAP fr capacity assets that d nt meet the minimum threshld hurs fr calculating UCAP as per Sectin Until perating histry becmes available, the AESO will use ne f the fllwing appraches t supplement data fr the UCAP calculatin fr a capacity asset that des nt meet the minimum threshld hurs fr calculating UCAP: (a) Class-averages. Class averages are based n perating data fr similarly designed r gegraphically lcated envirnmental assets (such as wind r slar). The class-average will be based n average energy prductin r available capability declaratins as bserved during the 250 tightest supply cushin hurs per year. The AESO will calculate class-average capacity factrs fr each f the previus five years. (b) Prductin r lad estimates. In the absence f cmparable assets t frm a class average, the AESO will review prductin and/r lad estimates based n engineering data and histrical meterlgical studies (fr wind and slar assets withut gegraphically lcated cmparatrs) submitted by the legal wner f the capacity asset, if apprpriate, t determine an availability r capacity factr. (c) Jurisdictinal Review. In the absence f a class average r cmparable class estimate, the AESO will examine hw similar assets r an asset class has perfrmance in ther capacity market jurisdictins during tight system cnditins As perating histry becmes available, the AESO will calculate UCAP using a cmbinatin f class-average data, prductin r lad estimates, r data based n a jurisdictinal review and the capacity asset s bserved capability (r prductin data fr capacity factr assets) during the tightest supply cushin hurs until the pint in time the asset reaches the required minimum number f tight supply cushin hurs fr calculating UCAP using slely the capacity asset s histrical data, as fllws: Variable capacity assets, such as wind, slar and run f river hydr assets, are required t have prductin data in a minimum f 300 tightest supply cushin hurs. All ther capacity asset types, apart frm variable capacity assets, will require prductin r available capability data, depending n if the asset is a capacity factr r availability factr asset, in a minimum f 250 tightest supply cushin hurs. Asset-specific UCAP methdlgies Table 1 belw cntains the asset-specific UCAP methdlgies and cnsideratins fr the calculatin f UCAP. Page 3 f 9

24 Table 1 Asset-specific UCAP Methdlgies 1 Asset Type Wind, slar and run f river hydr Thermal (including cal-t-gas cnversins and netdispatched cgeneratin) Asset-specific UCAP Methdlgy A capacity factr will be established fr wind, slar and run f river hydr assets. An availability factr will be established fr thermal assets. Strage An availability factr will be established fr strage assets. The UCAP f a strage asset will be capped at its maximum sustainable 4 hur discharge capability. Self-supply dispatched net-t-grid Self-supply dispatched grss-t-grid An availability factr will be established fr self-supply assets that are dispatched net t grid. An availability factr determined thrugh a linear regressin apprach will be established fr self-supply market participants that are dispatched grss t the grid using the fllwing apprach: The AESO will perfrm a linear regressin f the net t grid metered utput f the self-supply site relative t the weighted average energy market dispatches issued t the generating asset(s) n the self supply site as bserved in each f the 250 tightest supply cushin hurs per year fr the past five years. The AESO will establish a grss UCAP fr the generating asset(s) as described abve in a. This value will be the x variable t be used in the linear regressin frmula y=m*x + B The AESO will determine the availability factr linear regressin UCAP value fr the asset using the utput frm the linear regressin frmula and the slpe calculatin. Hydr An availability factr will be established fr existing hydr assets the Bw River system, Brazeau and Big Hrn assets. Demand respnse Firm cnsumptin level Until FCL capacity assets have perfrmance data in a minimum f 250 tightest supply cushin hurs, the UCAP level will be calculated as fllws: UCAP = CC * (1-derate factr) The capacity cntributin (CC) f new firm cnsumptin level assets will be measured as the difference between the qualified baseline (QB) 2 and the firm cnsumptin level f the demand respnse capacity asset: CC = QB FCL 1 2 References t existing and new in Table 1 mean capacity assets with and withut 5-year histrical generatin r cnsumptin data in Alberta, respectively. As described in subparagraph 2.1.7(c) f Sectin 2, Supply Participatin, new FCL lads with n cnsumptin histry in Alberta will declare their qualified baseline t the AESO during the prequalificatin perid. Page 4 f 9

25 Asset Type Asset-specific UCAP Methdlgy Derating Factr: Until Alberta capacity market perfrmance data can be bservered, demand respnse assets will have a derating factr f 9% r an availability factr f 91%. When Alberta capacity market perfrmance data is available, a new firm cnsumptin level capacity asset will receive the classaverage availability factr fr all demand respnse assets. Once an FCL capacity asset has had a capacity market bligatin in a minimum f 250 tightest supply cushin hurs, UCAP will be calculated as: UCAP = QB - FCL The value the AESO will use t determine the qualified baseline in each tight supply cushin hur will use the fllwing methdlgy: a. Average the lad cnsumed in like hurs n: the 15 day nn-hliday weekdays prir t the tight supply cushin hur ; if tight supply cushin hur fell n nnhliday weekday. the 10 day weekend and hliday days prir t the tight supply cushin hur. If tight supply cushin hur fell n weekend r hliday. b. Days with tight supply cushin hurs and perfrmance event days will be excluded frm the adjusted qualified baseline: The FCL will be declared by the wner f the asset during prequalificatin. The asset must demnstrate the ability t reduce dwn t its firm cnsumptin level during a perfrmance event. If the asset is nt capable f demnstrating an ability t reduce dwn t its firm cnsumptin level the AESO will physically test the asset. If after the first bligatin perid there have nt been any perfrmance events then the asset is t demnstrate a reductin dwn t its firm cnsumptin level via a physical test, the capacity asset will need t demnstrate lad reductin at r belw the firm cnsumptin level value, and maintain the reductin fr 1 hur. Failure t perfrm t meet the physical test successfully will result in UCAP reductin fr subsequent capacity auctins. The firm cnsumptin level will be adjusted t reflect the bserved lad reductin. Demand respnse Guaranteed lad reductin UCAP = CC * (1-derate factr) CC = GLR The capacity cntributin (CC) fr new guaranteed lad reductin demand respnse is the guaranteed lad reductin declared by the legal wner during the prequalificatin perid. Page 5 f 9

26 Asset Type Derating Factr: Asset-specific UCAP Methdlgy As with FCL assets, in the first three bligatin perids demand respnse assets will have a derating factr f 9% r an availability factr f 91%. When Alberta capacity market perfrmance data is available,a new guaranteed lad reductin capacity asset will receive the classaverage availability factr fr ther Alberta guaranteed lad reductin assets. When Alberta capacity market perfrmance data is available,, individual asset perfrmance will be established using availability factr methdlgy. Aggregated assets Depending n the fuel-type f the aggregated capacity asset, an availability factr r a capacity factr may be established. If the assets are bth availability factr assets, an availablitiy factr UCAP methdlgy will be used. If the assets are capacity factr r a cmbinatin f capacity factr and availability factr assets a capacity factr methdlgy will be applied. The UCAP fr an existing aggregated capacity asset will be based n the cmbined histrical perfrmance f the individual cmpnent resurces during the 250 tightest supply cushin hurs during the previus five years. The UCAP fr an aggregated capacity asset that is cmbining tw r mre new assets will be based n the individual assets cmbined asset class-average prductin during the 250 tightest supply cushin hurs during the previus five years. External assets Determinatin f capacity limit f each Alberta intertie During a capacity auctin, the capacity prcured frm external capacity assets will nt exceed the capacity limits f the BC intertie, MATL intertie, the cmbined BC/MATL path, and the Saskatchewan intertie. The capacity limits are determined as fllws: (a) The hurly capacity limits f the BC intertie will be determined using the minimum f the hurly BC t Alberta imprt ATC and the ttal firm transmissin service n the BC intertie fr each f the 250 tightest supply cushin hurs per year fr the past five years. The capacity limit f the BC intertie will then be calculated by averaging the hurly capacity limits fr the BC intertie. (b) The hurly capacity limits f the MATL intertie will be determined using the minimum f the hurly MATL t Alberta imprt ATC and the ttal firm transmissin service n the MATL intertie fr each f the 250 tightest supply cushin hurs per year fr the past five years. The capacity limit f the MATL intertie will then be calculated by averaging the hurly capacity limits fr the MATL intertie. (c) The hurly capacity limits f the cmbined BC/MATL interties will be determined using the minimum f cmbined firm transmissin fr the BC and MATL interties, and the cmbined BC/MATL ATC prir t LSSi arming fr each f the 250 tightest supply cushin hurs per year fr the past five years. The capacity limit f the BC/MATL interties will then Page 6 f 9

27 Asset Type Mthballed r temprary delisted assets Asset-specific UCAP Methdlgy be calculated by averaging the hurly capacity limits fr the BC/MATL intertie. (d) The hurly capacity limits f the Saskatchewan intertie will be determined using the minimum f firm transmissin service n the Saskatchewan intertie, and the Saskatchewan t Alberta imprt ATC fr each f the 250 tightest supply cushin hurs per year fr the past five years. The capacity limit f the Saskatchewan intertie will then be calculated by averaging the hurly capacity limits fr the Saskatchewan intertie. External asset UCAP determinatin The fllwing methdlgies apply fr determining the UCAP f external capacity assets. New external assets New external assets must declare the external capacity vlume it is willing t sell, and demnstrate that the external asset has firm transmissin in the amunt f the vlume declared.. The declared capacity vlume must be frm a nn-recallable surce equal r greater in size than the vlume declared. The AESO will derate the declared vlume t reflect the frequency f time during histrical supply cushin hurs that the respective intertie was ut f service with 0 available transfer capability, t determine the UCAP vlume f the external asset. Existing external assets Fr existing external assets, an availability r capacity factr apprach will be used t determine UCAP, in the same manner as an internal capacity asset. Until Alberta capacity market perfrmance data is available,, the UCAP fr all external resurces will be determined based n the UCAP methdlgy fr new external assets. The UCAP fr capacity assets that have been mthballed pursuant t Sectin f the ISO rules, Mthball Outage Reprting r temprarily delisted in accrdance with the prcess utlined in subsectin 2.3 f Sectin 2, Supply Participatin will be determined using the fllwing methdlgy: (a) The AESO will require at least 250 hurs f bserved asset perfrmance during tight supply cushin hurs t calculate the UCAP fr all assets, apart frm variable assets (wind, slar, run f river hydr), fr which 300 hurs are required. i. If the delisted capacity asset has the minimum hurly amunt f bserved asset perfrmance data available, the AESO will average the asset s availability r capability during each hur t determine the UCAP fr the asset. ii. If the delisted capacity asset has data available fr less than the minimum hurly amunt f bserved asset perfrmance data available, the AESO will use the asset s actual availability r capability ver the bserved tight supply cushin hurs t determine the UCAP fr the asset. Page 7 f 9

28 Asset Type Lng Lead Time Assets, Type 2 Asset-specific UCAP Methdlgy The hurs that the asset s perfrmance culd nt be bserved will be supplemented with a class average fr similarly-designed assets during each f the unbserved hurs such that a ttal f 250 data pints is btained. A simple average f the asset-specific and class average availability r capability will be used t determine the UCAP f the asset. The AESO will calculate UCAP fr a lng-lead time asset type 2 3, based n the asset s availability during the 1250 tightest supply cushin hurs. An availability factr methdlgy will be utilized, as applicable t the capacity asset. Hurs where availability was reduced due t a lng lead time cnfiguratin fr ecnmic purpses will be excluded frm the sample set used t create the final asset capacity value. T cnfirm that availability was reduced due t a lng lead time claim fr ecnmic purpses, the AESO will review the fllwing: (a) The participant cmment in ETS indicating that the unit was ffline fr a lng lead time cnfiguratin. (b) The cst assessment fr the asset in cmparisn t pl price during that perid. The number f hurs t establish a statistically significant UCAP fr thermal assets will be equal r greater than 250 hurs. If a lng lead time asset has less than the 250 tight supply cushin hurs the asset s availability will be supplemented with a class average fr similarly designed assets. In rder t avid underestimating the reliability f lng lead time type 2 assets, the availability factr calculatin will nly include hurs that were nt impacted by the lng lead time cnfiguratin. 3.2 UCAP refinement prcess In advance f a capacity auctin, the AESO will publish n its website the tightest supply cushin hurs it will use t calculate UCAP and prvide a preliminary UCAP and UCAP range t each capacity market participant The capacity market participant may review the preliminary UCAP and UCAP range prvided by the AESO and submit a refinement request, alng with supprting evidence, t the AESO fr the fllwing exemptins: (a) the metering r Energy Trading System data during the tight supply cushins hurs that the AESO evaluated des nt accurately reflect the available capability f the capacity asset due t: i. events such as market suspensin, limited markets peratins, war, invasin, armed cnflict, blckade, act f public enemy, rit, revlutin, insurrectin, act f 3 As defined in the AESO CADG definitin f lng lead time asset and clarified in Infrmatin Dcument # (R), Lng Lead Time Energy. Page 8 f 9

29 (b) (c) ii. terrrism, sabtage, act f vandalism, fire, lightning, explsin, earthquake and fld; r reductins t available capability due t Alberta bulk electric system cnstraint; the capacity asset has r will underg physical changes befre the start f the bligatin perid that will increase r decrease the peratinal capability f the capacity asset cmpared t hw it perfrmed histrically. The minimum change in peratinal capability f the capacity asset must be at least 1 MW; r the class average data, prductin r lad estimates and/r jurisdicatinal assessment used in calculating the UCAP fr an asset that des nt meet the minimum threshld as per sectin , des nt create a cmparable representatin f the capacity asset s future perfrmance. Any request must be supprted with sufficient evidence t supprt the refinement request The AESO will review UCAP refinement requests and, if the AESO is satisfied with the evidence prvided by the capacity market participant, prvide a revised UCAP and UCAP range t the capacity market participant.if a capacity market participant des nt agree with the AESO s determinatin r revised UCAP, the capacity market participant may file a dispute thrugh the dispute reslutin prcess as described in subsectin 5.3 f Sectin 5, Base Auctin. Page 9 f 9

30 4 Calculatin f Demand Curve Parameters This sectin addresses the demand curve fr the Alberta capacity market, including the calculatins fr the cmpnents f the demand curve. 4.1 Resurce adequacy standard The Gvernment f Alberta annunced it will legislate a minimum resurce adequacy standard. This value represents a maximum f % unserved energy, described as nrmalized expected unserved energy. The AESO will develp the demand curve t meet this minimum resurce adequacy standard. 4.2 Resurce adequacy mdel & prcurement vlume determinatin The AESO will develp and run a resurce adequacy mdel (RAM), which perfrms a Mnte Carl simulatin t prbabilistically mdel hundreds f inputs t cnsider supply adequacy factrs and understand their impacts n reliability. The simulatin tl fr perfrming the RAM is a cmputer prgram that uses data inputs, methdlgies and assumptins t identify the relatinship between expected unserved energy (EUE) and installed capacity (ICAP). The RAM will cnsider factrs that impact the supply and demand balance in Alberta, such as: (a) Lad frecast. The AESO s frecast f grss lad includes multiple annual hurly lad prfiles based n histrical hurly weather patterns f the past 30 years and a set f ecnmic grwth scenaris. (b) Supply availability. Current and anticipated generatin and demand respnse assets with maximum capability f 5 megawatts (MW) r greater are included in the RAM irrespective f technlgy type r eligibility t participate in the Alberta capacity market. (c) Characteristics f thermal assets. Thermal assets are mdelled using market simulatin input assumptins and will be dispatched t lad and ptimized fr bth energy and ancillary services. Histrical available capability data infrms planned utage perids, frced utage rates and temperature derates: 1 i. Frced utages a seasnal distributin f time-t-fail hurs (TTF) and time-t-repair (TTR) hurs will be calculated fr each generating unit t capture histrical estimated frced utage rates in the RAM, which are then used in simulating unit frced utage events. ii. Planned utages hurs n planned maintenance will either be calculated as a percentage maintenance rate r manually scheduled based n histrical data. This infrmatin will then be used t schedule maintenance events in the RAM. 1 At this time, transmissin cnstraints within Alberta will nt be cnsidered as a factr that will impact resurce availability. Page 1 f 6

31 iii. Seasnal utage technlgy utput curves that are calculated using histrical available capability data and crrespnding weather data t capture ambient temperature derates. Such curves will be used t mdel weather related derates fr cmbined cycle and simple cycle units. The RAM references the curve t an hurly temperature value t lk up an assciated capacity multiplier t determine the utput capacity f a unit. (d) Lad served by nsite generatin. The grss availability f generating assets which serve lad nsite (typically large industrial facilities that prduce electricity and steam fr ther prcesses) in aggregate is crrelated t grss lad. Using histrical hurly data, the daily grss peak lad and daily grss peak generatin availability can be calculated in aggregate and gruped int a number f different nrmalized lad levels with a number f distributin pints. The distributins will be defined seasnally t accunt fr seasnal variances in availability within annual industrial prductin. The RAM will estimate grss availability in the hurly simulatin by drawing an utput frm the daily grss availability distributin based n the daily peak lad. (e) EEA event measurement. Fr purpses f the RAM, an EEA event will be defined as the activatin and utilizatin f cntingency reserves t meet demand when there is n remaining available supply. The RAM will begin measuring simulated firm lad shed nce estimated cntingency reserves are depleted. In the estimatin f unserved energy, regulating reserves will be maintained during lad shed events. (f) Renewable prfiles. Wind and slar hurly utput prfiles will be develped t accunt fr gegraphical diversities and technlgical advancements: i. Wind the RAM maps wind resurce prfiles t the same weather year used fr the lad prfiles in rder t capture the crrelatin between lad and intermittent wind generatin. Wind prfiles are develped by using metered utput frm existing wind farms and simulated fr weather years fr which there is n histrical metered utput. Crrelatins between aggregated wind znes are maintained. ii. Slar the RAM maps slar resurce prfiles t the same weather year used fr the lad prfiles in rder t capture the crrelatin between lad and intermittent slar generatin. Slar prfiles are develped using the Natinal Renewable Energy Labratries data and simulated fr weather years fr which there is n data. (g) Hydrelectric generatin. Hydr is mdelled using histrical values t develp dispatch schemes s that the simulated dispatch f the hydr fleet clsely mimics the actual dispatch f the fleet, taking int accunt the hydrlgical nature f a year, mnth, and system cnditins. (h) Imprts. Histrical available transfer capacity (ATC) data is used t develp a distributin f transmissin availability t mdel the impact f imprt capability frm neighburing pwer grids and capture the effects f transmissin cnstraints and utages. In additin t histrical ATC, the AESO will als use histrical grss ffers t develp a distributin f supply availability ver the Saskatchewan intertie. Fr this intercnnectin, ATC alne des nt accurately represent the availability f supply during tight supply situatins The AESO will add r subtract vlumes f ICAP t identify the relatinship between capacity and resurce adequacy (i.e., EUE). The type and characteristics f the capacity added t the RAM will align with the characteristics f the reference technlgy. The AESO will identify the apprpriate ICAP values that meet resurce adequacy requirements based n the ICAP-EUE relatinship. Page 2 f 6

32 4.2.3 The AESO will use a frmula t translate the ICAP values int fleet-wide unfrced capacity values. The frmula will align with the UCAP calculatin apprach defined in subsectin f Sectin 3, Calculatin f Unfrced Capacity (UCAP) t ensure cnsistency f the resurce adequacy requirements frm the RAM and the resurce adequacy cntributin f the varius capacity assets. The AESO reduces the fleet-wide unfrced capacity value by the prequalified vlume f self-supply and ineligible assets t determine the prcurement vlume fr the capacity auctin. 4.3 Calculatin f grss-cone & net-cone Reference technlgy The AESO will select a reference technlgy fr use in the develpment f the demand curve. During the transitin perid, the reference technlgy fr the capacity auctins will be a natural gas-fired technlgy determined thrugh detailed cst screening. The technlgies that will be assessed in greater detail include: (a) an aerderivative simple-cycle gas turbine generatin facility, cmprised f tw LM6000 turbines; (b) a simple-cycle frame gas turbine generatin facility, cmprised f ne F-class turbine; and (c) a cmbined-cycle frame gas turbine generatin facility, cmprised f ne H-class gas turbine and ne steam turbine. Additinal details n the reference technlgy will be develped by the AESO and subject t further cnsultatin The AESO will use the fllwing selectin criteria t determine the reference technlgy during each demand curve review cycle (i.e., every fur t five years): (a) Frequency f develpment. An assessment f the histrical develpment activities f multiple generatin assets, that are the same r a similar type f technlgy, prvides an indicatin f a generatin develper s ptimal chice f asset fr the Alberta market. This assessment will take int accunt factrs such as verall ecnmics, system requirements and envirnmental requirements. (b) Impact t market. An assessment f whether an asset is a suitable new entrant int the Alberta market given the market size and unique market characteristics, as understd by the AESO. (c) Reference plant csts. An assessment f the grss and net cst f a new asset will prvide an indicatin f the ptential future ecnmic viability f a new asset in the Alberta pwer market. The assessment f net cst will cnsider energy margins and factrs such as envirnmental csts and peratinal limitatins. (d) Generatin surce f last resrt / fastest time t energizatin (mnths). An assessment f the ability t add new capacity in the timeline required t meet the frward perid bligatin. Apprach t grss-cone estimate The AESO will cntract with an independent cnsultant that has Alberta-specific experience in pwer plant develpment, engineering/cnstructin and finance t develp apprpriate cst, and financing assumptins fr the reference technlgy. Page 3 f 6

33 4.3.4 The independent cnsultant will prvide the AESO with a credible grss-cone estimate, reflecting the plant develpment and financing csts fr the reference technlgy in Alberta. Plant develpment csts will incrprate, amng ther things, equipment, cnstructin labur and materials, emissins cntrl, and related wner csts. Financing csts fr the reference technlgy will be measured as an after-tax weighted average cst f capital (ATWACC). ATWACC will be cmpsed f equity and debt rate cmpnents that are weighted accrding t a debt/equity split. The ATWACC will be used t calculate the levelized annual return n, and return f, capital assciated with the reference technlgy. The levelized annual return will be added t the annual fixed perating and maintenance csts fr the reference technlgy t arrive at the annual grss-cone value. Additinal details n grss-cone will be develped by the AESO and subject t further cnsultatin The AESO will submit an updated grss-cone study during each demand curve review cycle. In between review cycles, the AESO will fllw a defined prcess t adjust the grss-cone estimate, annually, using applicable cst indices and interest rates. Apprach t energy and ancillary services ffset T calculate the energy and ancillary services ffset (EAS ffset) that will then be used t estimate net-cone, the AESO will use a frward market methdlgy that is cnducted in accrdance with the fllwing assumptins: (a) the new entrant will be a stand-alne entity nt within a prtfli f assets; (b) the EAS ffset will be estimated using an apprach as if the new entrant will use frward pwer and natural gas prices t generate a frward cmmdity margin in the energy market; 2 (c) the EAS ffset will initially exclude revenues frm ancillary services; and (d) the new entrant will assess different frward prducts (i.e., baselad versus peak prducts) t maximize its ffsets. Additinal details n the EAS ffset will be develped by the AESO and subject t further cnsultatin. Apprach t net-cone estimate The AESO will determine net-cone by subtracting the EAS ffset frm the grss-cone: net-cone = grss-cone EAS ffset The net-cone will have a minimum f zer and a maximum f grss-cone. The net-cone estimate will measure the capacity market based revenue required t ensure the reference technlgy will recver an annualized return n and f capital. The inflectin pint and the capacity price cap n the demand curve will be set in reference t net-cone. 2 Other cmpnents f the cmmdity margin will include but nt be limited t carbn csts, variable peratins and maintenance and lsses. Page 4 f 6

34 4.4 Shape f the demand curve The demand curve fr the Alberta capacity market will be a dwnward-slping, cnvex curve cnsisting f three segments: (i) hrizntal sectin frm zer t the minimum quantity; (ii) dwnward-slping sectin frm the minimum quantity t inflectin pint; and (iii) dwnward-slping sectin frm inflectin pint t the ft, at zer price. (a) In rder t achieve a cnvex shape, the slpe n the minimum-t-inflectin segment f the curve will be steeper than the slpe f the inflectin-t-ft segment. (b) The Y-axis pints fr the demand curve will be set in reference t price and will be expressed as a multiple f net-cone and/r grss-cone. Prices will be expressed in units f dllars per kw (UCAP) per year ($/kw-yr). (c) The ft will be set at a price f zer. (d) The X-axis pints fr the demand curve will be set in reference t the quantity f UCAP MW f capacity and will be expressed as a multiple f the quantity crrespnding t the maximum acceptable EUE. (e) The ft and inflectin pint f the demand curve will be set at prices and quantities that balance the cmbined bjectives f clearing at prcurement vlumes abve the minimum level at least 95% f the time, cntrlling capacity price vlatility and keeping custmer cst lw The prpsed demand curve shape is described belw and in Table 1 and illustrated in Figure 1: (a) The minimum quantity pint will be set at a value f capacity equivalent t achieving the Gvernment set minimum f % f EUE (fr the first auctin this is expected t be 964 MWh) in ne year, based n the utput f the RAM, which is translated int UCAP vlume and reduced by ineligible REP capacity (see peach-clured line in Figure 1). The minimum acceptable quantity pint will be defined in terms f the grss supply in the market (i.e., including self-supply MWs). The pint will be left-shifted by the self-supply MWs prir t each auctin (i.e., the self-supply MWs will be subtracted frm the 964 MWh EUE quantity). (b) The AESO has determined that the quantity prcured in the base auctin shuld nly fall belw the Gvernment s minimum reliability level, at mst, 5% f years. In years where the base auctin clears belw the minimum, the AESO will be able t achieve the Gvernment s minimum thrugh the rebalancing auctins and, n rare ccasins, ut-fmarket prcurements. (c) 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. (d) The inflectin pint is set at x net-cone, at a quantity 7% abve the minimum acceptable quantity. The inflectin pint will be defined relative t the minimum acceptable quantity in terms f the grss supply in the market (i.e., including self-supply MWs). The inflectin pint will be left-shifted by the self-supply MWs prir t each auctin (i.e., the self-supply MWs will be subtracted frm the inflectin pint based n grss supply). (e) The ft is set at 18% abve the minimum acceptable quantity, at a price f zer. Page 5 f 6

35 Table 1 Candidate curve pints Pint Price Grss Quantity Net Quantity fr Auctin Price Cap Max (1.75 x net-cone, 100% x Minimum Acceptable UCAP MW 100% x (Minimum Acceptable UCAP MW Self-Supply MW) 0.5 x grss-cone) Inflectin Pint x net-cone 107% x Minimum Acceptable UCAP MW 107% x (Minimum Acceptable UCAP MW Self-Supply MW) Ft 0 118% x Minimum Acceptable UCAP MW 118% x (Minimum Acceptable UCAP MW Self-Supply MW) Figure 1 Illustratin f prpsed demand curve 4.5 Demand curve fr rebalancing auctins The rebalancing demand curve will have the same shape as the base auctin demand curve and it will be based n the same net-cone. Hwever, the prcurement vlume will be updated using an updated resurce adequacy assessment cmpleted prir t the cmmencement f each rebalancing auctin. Page 6 f 6

36 5 Base Auctin This sectin addresses the specific timeline, frmat and mechanics fr a base auctin 5.1 Auctin frward perid and timeline The AESO will cnduct the base auctin three years befre the start f the bligatin perid with the exceptin f the transitin perid The AESO will cmmence the implementatin f the Alberta capacity market by utilizing a transitin perid. This transitin perid will cmmence with prequalificatin fr the first base auctin in Nvember 2019 and will cntinue until the cnclusin f the Octber 2021 base auctin. Fllwing the first base auctin, tw subsequent base auctins will be held at apprximately six mnth intervals. One base auctin will be cmpleted in January 2021 with an apprximately 21 mnth frward perid, and anther base auctin will be cmpleted in June f 2021 with an apprximately 28 mnth frward perid. The Octber 2021 base auctin, fr the 2024/25 bligatin perid, will be the first auctin cnducted with the full three-year frward perid. The transitin timeline t the three-year frward perid is shwn in Table 1 belw. The dates with asterisks will be finalized in the implementatin stage. Table 1 Timeline fr base auctin Pre-qualificatin Starts Auctin Date Obligatin Perid Nv Jun. 2020* 2021/22 (Nv. Oct.) May 2020* Jan /23 (Nv. Oct.) Nv. 2020* Jun /24 (Nv. Oct.) Mar. 2021* Oct /25 (Nv. Oct.) 5.2 Base auctin guidelines and schedule Prir t the cmmencement f each capacity auctin, the AESO will publish: (a) auctin guidelines that cntain the auctin frmat, details n hw t prequalify fr the capacity auctin, the timetable fr submissin f applicatins, IT system infrmatin, prvisinal parameters and ther general auctin infrmatin; and (b) a schedule identifying the key activities that will be undertaken fr each base auctin. Figure 1 is an illustratin f the key activities and the timeline f a base auctin. The timeline will be refined in the implementatin stage. Page 1 f 5

37 Figure 1 Anticipated base auctin timeline pst transitin perid Once the prequalificatin is cmpleted, the AESO will assign each capacity asset a specific UCAP rating in accrdance with Sectin 3, Calculatin f Unfrced Capacity (UCAP) The AESO will cmpile capacity ffer cntrl infrmatin declared by capacity market participants and ntify capacity market participants if any prtin f their capacity assets is under ffer cntrl f a firm that is subject t market pwer mitigatin measures in accrdance with the prcess utlined in Sectin 7, Capacity Market Mnitring and Mitigatin The AESO will prvide ntice f the base auctin parameters in accrdance with the prcess utlined in Sectin 4, Calculatin f Demand Curve Parameters A capacity market participant r a firm which has ffer cntrl f a capacity asset may have an pprtunity t dispute determinatins made by the AESO, per the dispute reslutin prcess utlined in subsectin 5.3 belw The AESO will review and reprt the auctin results fllwing auctin clearing and pst the results shrtly after the auctin is cmpleted. 5.3 Dispute reslutin The AESO will determine a dispute reslutin prcess such that a capacity market participant r a firm which has ffer cntrl f a capacity asset may have an pprtunity t dispute determinatins made by the AESO, such as determinatins made in respect f the fllwing: (a) prequalificatin assessments; (b) UCAP; (c) Delisting; (d) self-supply; and/r (e) market pwer mitigatin The AESO is cntinuing t assess and evaluate an apprpriate framewrk with respect t the reslutin f all capacity market related disputes. Page 2 f 5

38 5.4 Obligatin perid Each bligatin perid will be ne year in duratin, starting n Nvember 1 and cntinuing thrugh t and including Octber 31 f the fllwing year. 5.5 Supply participatin and ffer frmat Each qualified capacity asset may submit up t seven blcks and must specify, in its ffer, a number f characteristics that will be used t facilitate the clearing prcess. Offers must include the fllwing: (a) Capacity asset ID. The capacity asset ID is the unique identifier assigned t a capacity asset. (b) Flexibility. Whether a blck is flexible r inflexible. The first blck f a qualified capacity asset ffer may be designated as inflexible r flexible. All the ther ffers frm that qualified capacity asset with higher ffer prices than the inflexible blck must be flexible. If bth existing capacity and incremental capacity are ffered frm the same capacity asset, they may use up t seven blcks in ttal and the fllwing rules will apply with respect t flexibility f blcks: the first blck that cntains existing capacity may be designated as inflexible r flexible; all blcks with higher ffer prices cntaining existing capacity must be flexible; the first blck that cntains incremental capacity may be designated as inflexible r flexible; and all blcks with higher ffer prices cntaining incremental capacity must be flexible. (c) Price. The price in $/kw-year fr each blck. (d) Quantity. The quantity in UCAP MWs fr each blck Other requirements that will apply t the submissin f ffers in a capacity auctin include: (a) ffer prices in a base auctin will be bund by a minimum f $0/kW-year and a maximum f the price cap established by the demand curve; (b) the minimum blck size will be ne MW; (c) each ffer blck must identify the firm that has the capacity ffer cntrl f the blck; and (d) the ffer curve f each qualified capacity asset frmed with price-quantity pairs is required t be mntnically increasing A capacity market participant must ffer the entire qualified UCAP fr its qualified capacity assets in each base auctin. 5.6 Out-f-market capacity payments N adjustments will be made t capacity market ffers frm qualified capacity assets fr the purpses f adjusting fr ut-f-market payments Resurces frm REP Runds 1, 2, and 3 will nt be eligible t participate in the capacity market. Page 3 f 5

39 5.7 Single-rund unifrm price auctin A sealed-bid, single-rund, unifrm pricing auctin will be utilized fr each capacity auctin When an auctin clears in an uncnstrained manner, a single capacity price will be established fr all qualified capacity assets that clear the market. 5.8 Auctin clearing and price setting The AESO will utilize a capacity market auctin clearing algrithm that will seek t maximize scial surplus and in s ding, minimize deadweight lss The AESO will utilize a capacity market auctin clearing algrithm that will, where the market cannt clear at the intersectin f the supply and demand curve, clear the capacity ffers that maximize scial surplus The AESO will set the capacity market clearing price at the demand curve where the entire supply curve is belw the demand curve, r where the entire prcurement vlume is belw the demand curve. Fr clarity, the capacity market clearing price will be set at the intersectin between the vertical line drawn frm the prcured vlume and the demand curve as set ut in Figure 2 belw: Figure 2 Auctin price setting when entire supply curve is belw demand curve In the event that a capacity market participant submits ffers as utlined in subsectin f Sectin 2, Supply Participatin, the auctin clearing prcess utlined in subsectin abve may take multiple iteratins befre establishing the final clearing price. The prcedures described in subsectins wuld apply in each iteratin In the event there are transmissin cnstraints that limit the full selectin f a capacity ffer at r belw the uncnstrained clearing price, the capacity market clearing price will be set at the uncnstrained price level established withut cnsideratin f transmissin cnstraints. A qualified capacity asset ffering capacity vlume at prices higher than the uncnstrained price level, where such capacity vlume is required t satisfy the ttal vlume determined thrugh uncnstrained market clearing, will receive an uplift payment fr such capacity vlume equal t the difference between their ffer price and the uncnstrained clearing price. Page 4 f 5

40 5.9 Addressing intertie transmissin cnstraints Prir t each base auctin, the AESO will estimate the jint scheduling limits acrss interties expected during the relevant bligatin perid as per the methdlgy referenced in subsectin f Sectin 3, Calculatin f Unfrced Capacity (UCAP). Shuld a cnstraint be identified which prevents the simultaneus delivery f external capacity assets acrss multiple interties, external capacity assets will nt have their individual UCAP ratings reduced. Capacity ffers will generally be cleared as fllws subject t the principle f maximizing scial surplus: (a) lwer-priced capacity ffers will be cleared with pririty t higher-priced capacity ffers; (b) when there are multiple external capacity assets with the same capacity ffer price at the cnstraint vlume level, external capacity asset ffers that maximize the scial surplus in the auctin will be cleared first. This will prvide pririty t ffers that are cmpsed f flexible blcks; (c) shuld qualified capacity asset vlumes in additin t thse in (a) and (b) be available then capacity ffers will be cleared n a pr rata basis; and (d) vlumes remaining after the cnstraint level has been reached will be cnsidered nt t have cleared the market and will nt receive a capacity bligatin. All capacity-cmmitted assets will receive the verall capacity market clearing price set in accrdance with subsectin Addressing internal transmissin cnstraints Prir t each auctin, the AESO will identify the lcatin and impact f any intra-alberta transmissin cnstraints that are anticipated t impact the ability fr capacity t be delivered during the relevant bligatin perid Clearing f qualified capacity assets that are lcated behind an identified transmissin cnstraint will be dne based n qualified capacity asset UCAP levels up until the level f the cnstraint. Capacity ffers will generally be cleared as fllws subject t the principle f maximizing scial surplus: (a) lwer-priced capacity ffers will be cleared with pririty t higher-priced capacity ffers; (b) when there are multiple external capacity assets with the same capacity ffer price at the cnstraint vlume level, external capacity asset ffers that maximize the scial surplus in the auctin will be cleared first. This will prvide pririty t ffers that are cmpsed f flexible blcks; (c) shuld qualified capacity asset vlumes in additin t thse in (a) and (b) be available then capacity ffers will be cleared n a pr rata basis; and (d) vlumes remaining after the cnstraint level has been reached will be cnsidered nt t have cleared the market and will nt receive a capacity bligatin. All capacity-cmmitted assets will receive the verall capacity market clearing price set in accrdance with subsectin 5.8. Page 5 f 5

41 6 Rebalancing Auctins This sectin addresses the rebalancing auctins that will enable the AESO t purchase additinal capacity and prvide pprtunities fr capacity assets t either increase r reduce their capacity cmmitments 6.1 Rebalancing auctin timeline and prcedures The AESO will utilize a rebalancing auctin t enable the purchase r sale f capacity t reflect changes t expected capacity vlume requirements, enable a capacity-cmmitted asset t rebalance an bligatin vlume based n UCAP redeterminatin r prject milestnes, enable a capacity-cmmitted asset t reduce r exit a capacity cmmitment, and enable new r previusly uncmmitted capacity asset vlumes t establish a capacity cmmitment The AESO will, in the initial stages f Alberta s capacity market, utilize a transitin perid during which auctins are cnducted n a cmpressed schedule whereby ne base auctin and ne rebalancing auctin will be held fr each bligatin perid. Table 1 shws the rebalancing auctin timeline in the transitin perid. The dates with asterisks will be finalized in the implementatin stage. Table 1 Timeline fr rebalancing auctin in the transitin perid Rebalancing Auctin Qualificatin Starts Rebalancing Auctin Finalized Date Obligatin Perid Dec. 2020* Jul /22 (Nv. Oct.) Dec. 2021* Jul /23 (Nv. Oct.) Dec. 2022* Jul /24 (Nv. Oct.) Fllwing cmpletin f the transitin perid, the AESO will cnduct tw rebalancing auctins after the base auctin, at eighteen and three mnths prir t the start f an bligatin perid. Table 2 prvides an indicative schedule fr the base auctin and rebalancing auctins with respect t the 2024/25 bligatin perid. Table 2 Timeline fr rebalancing auctins fr bligatin perid f 2024/25 Auctin Finalized Date Frward Perid Auctin Type Oct Mnths Base Capacity Auctin Apr Mnths First Rebalancing Auctin Jul Mnths Secnd Rebalancing Auctin Nv N/A Start f Obligatin Perid Page 1 f 8

42 6.1.4 The AESO will cnduct rebalancing auctins in a similar manner t the prcess t be used fr a base auctin, which is described in Sectin 5, Base Auctin. Figure 1 belw prvides an indicative timeline f activities cntemplated fr a rebalancing auctin. A rebalancing auctin will include bth prequalificatin and qualificatin stages, cmmencing apprximately eight mnths ahead f the auctin The AESO will ntify participants f the auctin results shrtly after the submissin windw clses. Figure 1 Timeline fr rebalancing auctins 6.2 Bids and ffers by capacity market participants Capacity market participants will have the pprtunity t participate in rebalancing auctins t adjust their psitins ahead f the bligatin perid. In additin t the AESO, nly capacity suppliers with capacity cmmitments can buy capacity in a rebalancing auctin. Capacity assets that did nt clear the prir auctin(s), capacity available frm uprates and UCAP increases made available subsequent t the prir auctin(s) r capacity frm new capacity assets that may have been qualified fr a rebalancing auctin must submit ffers t sell int a rebalancing auctin. Capacity suppliers that wish t reduce their capacity cmmitments may d s by submitting repricing bids t buy ut f their capacity cmmitments. Capacity suppliers that are bligated t reduce their capacity cmmitment due t a UCAP reductin must submit a UCAP reductin bid A capacity cmmitted asset that is physically unable t meet its capacity cmmitment due t UCAP reductins r because it has nt achieved develpment milestnes (and therefre will nt be peratinal by the cmmencement f the bligatin perid) by the time the secnd rebalancing auctin is cnducted will be required t participate in a rebalancing auctin by submitting a bid price marginally abve the price cap t ensure they clear in that rebalancing auctin. Each capacity cmmitted asset that des nt submit a repricing r UCAP reductin bid will be treated as a price-taker in the rebalancing auctin and will nt be subject t rebalancing auctin clearing r capacity market settlement. The types f rebalancing transactins are described in mre detail belw: (a) Incremental sell ffers. The must ffer requirement will apply t a rebalancing auctin. All qualified capacity vlumes that have nt previusly cleared in an auctin fr the bligatin perid have a must ffer requirement, subject t delisting. Page 2 f 8

43 (b) Repricing (buy-ut) bids. Capacity cmmitted assets that have a capacity cmmitment and wish t reduce their capacity cmmitment can submit repricing bids. If a rebalancing auctin price clears belw r at the bid price f that capacity cmmitted asset the bligatin vlume will be reduced by the vlume cleared. If a rebalancing auctin clears at a price abve the bid price, the capacity cmmitted asset will retain its bligatin vlume and will nt be subject t capacity market settlement as a result f the rebalancing auctin. (c) UCAP reductin bids (incrprated in supply ffers under grss clearing). A capacity cmmitted asset that is physically unable t deliver n a prir capacity cmmitment must submit a UCAP reductin bid. The reductin bid will be priced marginally abve the price cap. This type f bid will be used fr: (a) a new capacity asset that has nt achieved develpment milestnes and therefre is required t buy ut f its capacity cmmitment, and (b) cases in which a UCAP reductin has caused the existing bligatin vlume f an existing capacity asset t be greater than its final UCAP. The final UCAP f a capacity asset is determined in accrdance t Sectin 3, Calculatin f Unfrced Capacity (UCAP). If in the last rebalancing auctin, capacity assets have nt remedied a situatin where an asset s bligatin vlume exceeds the asset s UCAP, the AESO will pst a UCAP reductin bid fr the UCAP deficit at a price marginally abve the price cap. The capacity supplier will be respnsible fr all the csts assciated with cvering the capacity cmmitment caused by such UCAP reductin. Unless participating as described in (a) (c) abve, it will be assumed that a capacity cmmitted asset that has already taken n a capacity cmmitment des nt wish t adjust its capacity cmmitment and will nt participate in a rebalancing auctin. Fr auctin clearing purpses, all such capacity cmmitted assets will be accunted fr in auctin clearing but will nt be subject t any capacity market settlements as a result f the rebalancing auctin nr will that asset s capacity cmmitments be adjusted Capacity supplier repricing bids shall be asset specific. The accumulated vlume f the bids assciated with a capacity cmmitted asset shall nt exceed the capacity cmmitment established during prir capacity auctins fr the same bligatin perid. Bid quantities in each price-quantity pair shall be incremental quantities, such that the aggregate UCAP bid vlume acrss all price-quantity pairs submitted decreases mntnically with increasing price Each capacity cmmitted asset is allwed t submit up t seven bid blcks. The lwest priced bid blck may be designated as inflexible r flexible. All higher priced bid blcks must be flexible. Each qualified capacity asset in a rebalancing auctin is allwed t submit up t seven ffer blcks. The first ffer blck may be designated as inflexible r flexible. All higher priced ffer blcks must be flexible. If bth existing capacity and incremental capacity are ffered frm the same capacity asset, they may use up t seven blcks in ttal and the fllwing rules will apply with respect t flexibility f blcks: the first blck that cntains existing capacity may be designated as inflexible r flexible; all blcks with higher ffer prices cntaining existing capacity must be flexible; the first blck that cntains incremental capacity may be designated as inflexible r flexible; and all blcks with higher ffer prices cntaining incremental capacity must be flexible. 6.3 AESO s bids and ffers In a rebalancing auctin, the AESO's bids and ffers are implied in the rebalancing auctin demand curve. Page 3 f 8

44 6.4 Auctin clearing, price setting, and settlement The AESO will clear a rebalancing auctin n a grss basis and settle n a net settlement basis (i.e. settled nly based n vlume changes frm the previus auctin). All f the AESO s bids and ffers will be reflected in the demand curve, as described in subsectin f Sectin 4, Calculatin f Demand Curve Parameters. All bids t buy ut capacity cmmitments and ffers t sell capacity will be represented n the supply curve. Cleared assets frm the prir auctin(s) that d nt submit bids will be treated as price takers in the rebalancing auctin. The rebalancing auctin will clear using the same mechanics as the base auctin, as described in subsectin 5.8 f Sectin 5, Base Auctins. The resulting rebalancing auctin clearing price will be used t settle differences between cleared vlumes in a rebalancing auctin and the prir auctin(s) fr the same bligatin perid The five examples belw illustrate hw the first rebalancing auctin will functin after a base auctin is cmpleted. Nte that the same principles apply t the secnd rebalancing auctin after the cmpletin f the base and first rebalancing auctin. (a) Scenari 1: N change in demand curve; a capacity cmmitted asset buys ut; and the AESO releases previusly prcured capacity. The AESO s lad frecast is unchanged relative t the base auctin, and all else equal, the rebalancing auctin demand curve is the same as the base auctin demand curve. A capacity cmmitted asset fully buys ut f its capacity cmmitment. A capacity asset that has nt cleared in the base auctin sets the market clearing price f the rebalancing auctin, which is higher than the base auctin clearing price. The capacity cmmitted asset that buys ut pays the rebalancing auctin clearing price multiplied by its rebalancing cleared vlume. Because it als receives the base auctin clearing price multiplied by its previusly cleared vlume, this results in net payment frm the asset that buys ut f its capacity cmmitment frm the base auctin fr the vlume bught ut. The AESO releases sme f the previusly prcured vlume and receives the rebalancing auctin clearing price multiplied by its released vlume. The capacity asset that was nt cleared in the base auctin but sets the clearing price in the rebalancing auctin receives the rebalancing auctin clearing price multiplied by its vlume cleared in the rebalancing auctin. Capacity market settlements fr all capacity cmmitted assets that did nt buy ut in the rebalancing auctin are unaffected. Page 4 f 8

45 Figure 2 Auctin price setting fr scenari 1 (b) Scenari 2: Lad frecast increases; a new capacity asset sells and partially clears; and the AESO prcures additinal vlume. The AESO s lad frecast increases relative t the base auctin, and all else equal, this shifts the rebalancing auctin demand curve t the right. A new capacity asset ffers, and partially clears, setting the rebalancing auctin clearing price abve the base auctin clearing price. The AESO pays the rebalancing auctin clearing price multiplied by its additinal vlume prcured in the rebalancing auctin. The new capacity asset receives the rebalancing auctin clearing price multiplied by its vlume cleared in the rebalancing auctin. Capacity market settlements fr all previusly cleared capacity cmmitted assets are unaffected by the rebalancing auctin. Figure 3 Auctin price setting fr scenari 2 Page 5 f 8

46 (c) Scenari 3: N change in demand curve; a new capacity asset sells and partially clears; a capacity cmmitted asset buys ut; and the AESO prcures additinal vlume. The AESO s lad frecast is unchanged relative t the base auctin, and all else equal, the rebalancing auctin demand curve is the same as the base auctin demand curve. A capacity cmmitted asset fully buys ut f its capacity cmmitment. A new capacity asset ffers, and partially clears, setting the rebalancing auctin clearing price belw the base auctin clearing price. The capacity cmmitted asset that buys ut pays the rebalancing auctin clearing price multiplied by its rebalancing cleared vlume. Because it als receives the base auctin clearing price multiplied by its previusly cleared vlume, this results in net revenue t the asset that buys ut its capacity cmmitment frm the base auctin fr the vlume bught ut. The AESO buys an additinal vlume. The AESO pays the rebalancing auctin clearing price multiplied by its additinal vlume prcured in the rebalancing auctin. The new capacity asset receives the rebalancing auctin clearing price multiplied by its vlume cleared in the rebalancing auctin. Capacity market settlements fr all capacity cmmitted assets that did nt buy ut in the rebalancing auctin are unaffected. Figure 4 Auctin price setting fr scenari 3 (d) Scenari 4: Lad frecast decreases; a capacity cmmitted asset buys ut; and the AESO releases previusly prcured capacity. The AESOs lad frecast decreases relative t the base auctin, and all else equal, this shifts the rebalancing auctin demand curve t the left. A capacity cmmitted asset submits a UCAP reductin bid abve the price cap, and fully buys ut f its capacity cmmitment. The rebalancing auctin clearing price is belw the base auctin clearing price. Page 6 f 8

47 The capacity cmmitted asset that buys ut pays the rebalancing auctin clearing price multiplied by its vlume cleared in the rebalancing auctin. Because it als receives the base auctin clearing price multiplied by its previusly cleared vlume, this results in net revenue t the asset that buys ut f its capacity cmmitment frm the base auctin fr the vlume bught ut. The AESO releases sme f the previusly prcured vlume and receives the rebalancing auctin clearing price multiplied by its released vlume. Capacity market settlements fr all capacity cmmitted assets that did nt buy ut in the rebalancing auctin are unaffected. Figure 5 Auctin price setting fr scenari 4 (e) Scenari 5: Lad frecast decreases; a new capacity asset sells and partially clears; a capacity cmmitted asset buys ut; and the AESO releases previusly prcured capacity. The AESOs lad frecast decreases relative t the base auctin, and all else equal, this shifts the rebalancing auctin demand curve t the left. A capacity cmmitted asset buys ut f its capacity cmmitment. A new capacity asset sells and partially clears, setting the rebalancing auctin clearing price belw the base auctin clearing price. The capacity cmmitted asset that buys ut pays the rebalancing auctin clearing price multiplied by its rebalancing cleared vlume. Because it als receives the base auctin clearing price multiplied by its previusly cleared vlume, this results in net revenue fr the asset that buys ut its capacity cmmitment frm the base auctin fr the vlume bught ut. The AESO releases sme f the previusly prcured vlume and receives the rebalancing auctin clearing price multiplied by its released vlume. The new capacity asset receives the rebalancing auctin clearing price multiplied by its vlume cleared in the rebalancing auctin. Page 7 f 8

48 Capacity market settlements fr all capacity cmmitted assets that did nt buy ut in the rebalancing auctin are unaffected. Figure 6 Auctin price setting fr scenari Anticipated transmissin cnstraints Individual and simultaneus imprt limits frm adjacent areas will be updated t reflect the mst up-t-date infrmatin as f the cmmencement f a rebalancing auctin. (a) if intertie transmissin cnstraints prevent delivery f all impacted incremental supply ffers, incremental supply ffers behind the cnstraint will be ratined in the manner described in Sectin 5, Base Auctins; (b) if intertie transmissin cnstraints prevent delivery f cmmitments frm the prir auctin(s), thse capacity cmmitments cleared in the prir auctin(s) will be ratined in the manner described in Sectin 5, Base Auctins; and (c) an external asset with a capacity cmmitment that is n lnger able t deliver its capacity cmmitment due t a reductin in intra-prvincial transmissin capability will nt be subject t reduced capacity payments but will have its cleared vlumes reduced t reflect the updated transmissin capabilities Intra-Alberta transmissin cnstraints will be updated t reflect the mst up-t-date infrmatin as f the cmmencement f the rebalancing auctin. (a) if intra-alberta transmissin cnstraints prevent delivery f all impacted incremental supply ffers, incremental supply ffers behind the cnstraint will be ratined in the manner described in Sectin 5, Base Auctins; (b) if intra-alberta transmissin cnstraints prevent delivery f cmmitments frm the prir auctin(s), thse capacity cmmitments cleared in the prir auctins will be ratined in the manner described in Sectin 5, Base Auctins; and (c) a capacity cmmitted asset that is n lnger able t deliver its capacity cmmitments due t a reductin in intra-alberta transmissin capability will nt be subject t reduced capacity payments but will have its cleared vlumes reduced t reflect the updated transmissin capabilities. The reductin in intra-alberta transmissin capacity des nt refer t issues ccurring in ther jurisdictins r related t distributin system limitatins. Page 8 f 8