Infrmatin Dcument Energy and Ancillary Services Offsets fr Assets Infrmatin Dcuments are nt authritative. Infrmatin Dcuments are fr infrmatin purpses nly and are intended t prvide guidance. In the event f any discrepancy between an Infrmatin Dcument and any Authritative Dcument(s) 1 in effect, the Authritative Dcument(s) gverns. 1 Purpse This Infrmatin Dcument relates t the fllwing Authritative Dcument: Sectin 206.11 f the ISO rules, Energy and Ancillary Services Offsets fr Assets ( Sectin 206.11 ). The purpse f this Infrmatin Dcument is t help market participants understand the apprach the AESO will use t calculate the Energy and Ancillary Services ffset fr assets. This rule will be applied t assets: seeking relief frm the default ffer cap and seeking apprval t delist n a temprary basis fr ecnmic reasns The values determined frm the apprach will be deducted frm the ging frward csts f the assets t establish an asset specific price cap when seeking relief frm the default ffer cap and a delist ffer price when seeking apprval t delist n a temprary basis fr ecnmic reasns fr the asset t be used in an auctin fr the relevant bligatin perid. 2 Backgrund The AESO needs an apprach t determine the expected energy and ancillary ffset fr assets seeking t establish the net g frward csts fr assets seeking an asset specific ffer cap r fr thse seeking t temprarily ecnmically delist. T cmplete this assessment the AESO will establish a cmmn and systematic apprach t be used fr all assets seeking these treatments. The energy and ancillary services ffset will be expressed in $/kw-year. 3 Apprach The apprach t determining the energy and ancillary services ffset fr an asset will generally be similar t the methdlgy used t estimate the energy and ancillary services ffset fr the reference unit and can be summarized as: Frward Prduct Energy The AESO will select the Frward Pwer Price based n the frward market pwer prices that best represent the peratinal expectatins f the asset fr that bligatin year. All prices will be surced frm the data published by NGX fr the AESO indexed swap prducts. The fllwing cnsideratins will be made: The values crrespnding t frward pwer price and frward prduct energy depend n the frward prduct the AESO selects fr each bligatin perid. The AESO cnducts a liquidity and prfitability assessment t determine which frward prduct type is suitable fr each bligatin perid. This assessment will nt be disclsed t capacity market participants t prevent undue influence in frward trades. The Capacity Market Auctin Guidelines released fr each auctin specify the frward prducts used fr the bligatin perid in questin. The AESO will calculate the Frward Pwer Price using a weighted average f the settlements matching the bligatin perid in questin. Specifically, the AESO estimates a weighted average f Nvember and December f calendar year n with January t 1 Authritative Dcuments is the general name given by the AESO t categries f dcuments made by the AESO under the authrity f the Electric Utilities Act and assciated regulatins, and that cntain binding legal requirements fr either market participants r the AESO, r bth. AESO Authritative Dcuments include: the ISO rules, the Alberta reliability standards, and the ISO tariff. Psting Date: xxxx-xx-xx Page 1 f 7 Public
Infrmatin Dcument Energy and Ancillary Services Offsets fr Assets Octber f calendar year n+1. The data cllectin prcess will be cntinuus and nging. The selectin f the sample perid f cllectin will nt be disclsed t market participants t prevent undue influence in frward trades. The Capacity Market Auctin Guidelines released fr each auctin prvides ex pst details n the sample perid and the calculatin f Frward Pwer Price. Until there is a reliable frward market price published fr ancillary services, the AESO will nt cnsider ancillary service revenues in the energy and ancillary services ffset calculatin. In all the situatins nted belw, the AESO will select the Frward Pwer Price that prvides the highest Energy and Ancillary Services ffset fr the bligatin perid while als crrespnding t the expected hurs that the asset will run. If the frward curve fr pwer and natural gas, r the asset specific fuel cst as prvided by the capacity market participant if the fuel is nt natural gas, wuld suggest that the asset wuld run mst ecnmically fr all hurs f the bligatin perid the AESO Flat curve will be used t determine the energy revenue. If the frward curve fr pwer and natural gas, r the asset specific fuel cst as prvided by the capacity market participant if the fuel is nt natural gas, wuld suggest that the asset wuld run mst ecnmically during the On Peak hurs, the AESO On Peak curve will be used t determine the energy revenue. Fr hydr, wind, strage, slar and all thermal assets with an availability factr less than 50% the AESO will apply a scaling factr t the flat energy price fr the bligatin perid t better represent the expected realized revenue frm these assets. The scaling factr will be the assets realized pl price frm the last bligatin perid divided by the all-hurs average pl price frm the last bligatin perid. Fr these assets, the capacity market participant will be required t prvide the MWh prductin assumptins f the asset fr the bligatin perid. The capacity market participant will be required t prvide the AESO with sufficient detailed infrmatin t substantiate the prductin expectatins. The detailed infrmatin may include histrical peratinal data and mdeled expectatins f future asset energy prductin based n deterministic r prbabilistic methds. The example belw is a simplified illustratin f hw the apprach will be cnducted. The histrically bserved rati f realized prices relative t the flat annual average will be applied t the flat frward price fr the bligatin perid t determine an estimate f future expected energy revenue.. Psting Date: xxxx-xx-xx Page 2 f 7 Public
Infrmatin Dcument Energy and Ancillary Services Offsets fr Assets Hur in year Pl Price Generatin Generatin * Pl Price 1 $ 18.37 0 $ - 2 $ 31.00 0 $ - 3 $ 27.19 0 $ - 4 $ 29.55 0 $ - 5 $ 29.86 55 $ 1,642.30 6 $ 31.62 60 $ 1,897.20 7 $ 29.58 68 $ 2,011.44 8 $ 33.26 0 $ - 9 $ 33.26 53 $ 1,762.78 10 $ 35.97 25 $ 899.25 11 $ 46.18 17 $ 785.06 12 $ 75.93 0 $ - 13 $ 45.97 0 $ - 14 $ 45.97 0 $ - 15 $ 45.89 0 $ - 16 $ 45.97 48 $ 2,206.56 17 $ 44.28 55 $ 2,435.40 18 $ 39.17 66 $ 2,585.22 19 $ 33.67 0 $ - 20 $ 43.64 0 $ - Summary Statistics a Average Pl Price $ 38.32 b Ttal Geneatin 447 c Realized Revenue $ 16,225.21 c / b Realized Revenue / MWh $ 36.30 d Frward Price scaling factr (c / b) / a 94.7% Frward Energy Price f Flat Energy Price $ 40.00 d * f Expected Realized Frward Price $ 37.89 All expenses prvided t supprt the energy market expenses variable in the energy and ancillary services ffset fr assets must relate nly t the variable csts related t the prductin f expected energy in the bligatin perid. Fixed csts r ther csts that d nt vary with the vlume f energy prduced will nt be included by the AESO in the determinatin f the energy market expense variable. Where inputs fr energy market expenses are nt available thrugh public indices 2 the inputs t allw the AESO t calculate the energy market expenses will be prvided by the capacity market participant. The market participant shuld prvide sufficient detail t supprt these estimated csts. The variable csts prvided must be cnsistent with the variable csts the capacity market participant uses t supprt Bard f Directr r senir management apprvals f budgets related t the asset fr that bligatin perid. Nn-electricity market revenues 2 Generating assets using natural gas as a fuel will use the index published by NGX, supplemented with the cmmdity fuel charge as nted in rule 206.11 Psting Date: xxxx-xx-xx Page 3 f 7 Public
Infrmatin Dcument Energy and Ancillary Services Offsets fr Assets The energy and ancillary services ffset fr assets will be used t determine the net g frward csts f the asset. Other surces f revenue the asset may be eligible t receive during the bligatin perid shuld be deducted frm the g frward csts f the asset. T the extent the asset has ther surces f revenue a descriptin and value assciated with thse revenue streams must be prvided t the AESO. Frward hedging gains r lsses fr the asset will nt be included as nn-electricity market revenues. While the list is nt exhaustive, examples f these revenue streams may include the fllwing: sale f green attributes sale f prductin by-prducts such as fly ash [NTD: The AESO ntes that it is currently cnsidering mving the prvisin f infrmatin regarding ther revenue streams t the AESO t Sectin 206.11 f the ISO rules, Energy and Ancillary Services Offset fr Assets] 4 Calculatin Examples The fllwing is an example calculatin fr a nn-thermal asset with a frward price determined using a scaling factr. Frward Pwer Price Frward energy price ($/MWh) $ 40.00 a bserved Expected Realized Frward Price based n scaling factr ($/MWh) $ 37.89 b calculated Transmissin lss rate (%/ MWh) 4% c bserved Frward carbn price ($/t) $ 30.00 d bserved Nameplate capacity f asset (MW) 100 e bserved UCAP (MW) 82 f calculated Frward Prduct Energy prvided by capacity market participant (MWh) 262,800 g prvided variable peratins and maintenance ($/MWh) 1.23 h prvided water rent ($/MWh) 0.05 i prvided pl trading charge ($/MWh) 0.25 j bserved transmissin lsses ($/MWh) 1.52 k = b * c calculated Nn-electric market revenues Sale f green attributes ($) $ 7,884,000 l = g * d calculated Expected realized frward price - Energy market expenses ($/MWh) 34.85 m = b - h - i - j - k calculated Revenue prir t nn electricity market revenues ($) $ 9,157,820.56 n = m * g calculated Expected net revenue fr bligatin perid ($) $ 17,041,820.56 = n + l calculated EAS Offset in $/kw-year $ 207.83 / (f * 1000) calculated Psting Date: xxxx-xx-xx Page 4 f 7 Public
Infrmatin Dcument Energy and Ancillary Services Offsets fr Assets The fllwing is an example calculatin fr a thermal, natural gas asset. Frward Market Csts Frward energy price Flat ($/MWh) $ 40.00 a bserved Frward energy price On Peak ($/MWh) $ 45.00 b bserved Frward natural gas price ($/GJ) $ 1.90 c bserved Cmmdity fuel charge (%/ GJ) 1.50% d bserved Frward carbn price ($/t) $ 30.00 e bserved Transmissin lss rate (%/ MWh) 4% f bserved Established emissins benchmark(t/mwh) 0.40 g bserved Pl trading charge ($/MWh) $ 0.25 h bserved Asset attributes Nameplate capacity f asset (MW) 90 i prvided Asset UCAP (MW) 75 j calculated Asset heat rate (GJ/MWh) 9.677 k prvided Asset emissins intensity (t/ MWh) 0.50 l prvided Asset derating/ utage rate (%) 12% m prvided Implied asset prductin Flat (MWh) 693,792 n = i * (1 - m) * 8760 calculated Implied asset prductin On Peak (MWh) 395,366 = i * (1 - m) * 6 * 16 * 52 calculated Fuel cst ($/MWh) $ 18.66 p = (c * (1 + d)) * k calculated variable peratins and maintenance ($/MWh) $ 0.25 q prvided Transmissin lsses flat ($/MWh) $ 1.60 r = a * f calculated Transmissin lsses n peak ($/MWh) $ 1.80 s = b * f calculated Emissins Csts ($/MWh) $ 3.00 t = (l - g) * e calculated Pl trading charge ($/MWh) $ 0.25 u bserved All in perating csts f asset flat ($/MWh ) $ 23.76 v = p + q + r + t + u calculated All in perating csts f asset n peak ($/MWh ) $ 23.96 w = p + q + s + t + u calculated Implied margin Flat $ 16.24 x = a - v calculated Implied margin On Peak $ 21.24 y = b - x calculated Nn-electric market revenues Nn- electricity market revenues ($) $ - z prvided Implied Revenue Flat ($) $ 11,265,729 aa = n * x + z calculated Implied Revenue On Peak ($) $ 8,396,754 bb = * y + z calculated Assessed Revenue ($) $ 11,265,729 cc: aa > bb calculated EAS Offset in $/kw-year $ 150.21 cc = aa / (j * 1000) calculated Psting Date: xxxx-xx-xx Page 5 f 7 Public
Infrmatin Dcument Energy and Ancillary Services Offsets fr Assets The fllwing is a scaling factr and EAS ffset fr a thermal asset with prductin less than 50% thrughut the frward bligatin perid. Hur in year Pl Price Generatin Generatin * Pl Price 1 $ 18.37 0 $ - 2 $ 31.00 0 $ - 3 $ 27.19 0 $ - 4 $ 29.55 0 $ - 5 $ 29.86 0 $ - 6 $ 31.62 0 $ - 7 $ 29.58 0 $ - 8 $ 33.26 0 $ - 9 $ 33.26 0 $ - 10 $ 35.97 25 $ 899.25 11 $ 46.18 17 $ 785.06 12 $ 75.93 65 $ 4,935.45 13 $ 45.97 65 $ 2,988.05 14 $ 45.97 70 $ 3,217.90 15 $ 45.89 76 $ 3,487.64 16 $ 45.97 48 $ 2,206.56 17 $ 44.28 55 $ 2,435.40 18 $ 39.17 0 $ - 19 $ 33.67 0 $ - 20 $ 43.64 70 $ 3,054.80 Summary Statistics a Average Pl Price $ 38.32 b Ttal Generatin 491 c Realized Revenue $ 24,010.11 c / b Realized Revenue / MWh $ 48.90 d Frward Price sclaing factr (c / b) / a 127.6% Frward Energy Price f Flat Energy Price $ 40.00 d * f Expected Realized Frward Price $ 51.05 Psting Date: xxxx-xx-xx Page 6 f 7 Public
Infrmatin Dcument Energy and Ancillary Services Offsets fr Assets Frward Market Csts Frward energy price Flat ($/MWh) $ 40.00 a bserved Scaled Energy Price ($/MWh) $ 51.04 b calculated Frward natural gas price ($/GJ) $ 1.90 c bserved Cmmdity fuel charge (%/ GJ) 1.50% d bserved Frward carbn price ($/t) $ 30.00 e bserved Transmissin lss rate (%/ MWh) 4% f bserved Established emissins benchmark(t/mwh) 0.40 g bserved Pl trading charge ($/MWh) $ 0.25 h bserved Asset attributes Nameplate capacity f asset (MW) 90 i prvided Asset UCAP (MW) 75 j calculated Asset heat rate (GJ/MWh) 9.677 k prvided Asset emissins intensity (t/ MWh) 0.50 l prvided Asset derating/ utage rate (%) (implied in prvided prductin) n/a m n/a Implied asset prductin Flat (MWh) 283,824 n prvided Implied asset prductin On Peak (MWh) n/a n/a Fuel cst ($/MWh) $ 18.66 p = (c * (1 + d)) * k calculated variable peratins and maintenance ($/MWh) $ 0.25 q prvided Transmissin lsses flat ($/MWh) $ 2.04 r = b * f calculated Transmissin lsses n peak ($/MWh) n/a s n/a Emissins Csts ($/MWh) $ 3.00 t = (l - g) * e calculated Pl trading charge ($/MWh) $ 0.25 u bserved All in perating csts f asset flat ($/MWh ) $ 24.20 v = p + q + r + t + u calculated All in perating csts f asset n peak ($/MWh ) n/a w n/a Implied margin Flat $ 26.84 x = b - v calculated Implied margin On Peak n/a y n/a Nn-electric market revenues Nn- electricity market revenues ($) $ - z prvided Implied Revenue Flat ($) $ 7,616,788 aa = n * x + z calculated Implied Revenue On Peak ($) $ - bb = * y + z calculated Assessed Revenue ($) $ 7,616,788 cc: bb > aa calculated EAS Offset in $/kw-year $ 101.56 cc = aa / (j * 1000) calculated Revisin Histry Psting Date Descriptin f Changes Initial release Psting Date: xxxx-xx-xx Page 7 f 7 Public