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AESO Application for AESO 2015 Transmission Constraint Rebalancing Charge and Approval to Amend the ISO Tariff Pursuant to Decisions 2013-135 and 3528-D01-2015 (Decision 20623-D01-2015)

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Transmission Constraint Rebalancing Charge – ISO Tariff Amendment

The Alberta Electric System Operator (“AESO”) applied to the AUC for approval of amendments to demand transmission service (“Rate DTS”), Fort Nelson demand transmission service (“Rate FTS”) and its deferral account adjustment rider (“Rider C”) in the Independent System Operator tariff (the “ISO Tariff”).

The AESO submitted that approval of its application would enable the recovery of transmission constraint rebalancing (“TCR”) costs through the ISO Tariff. The AESO submitted that TCR costs are incurred when the interconnected electric system lacks the capability to deliver electricity to a given load area without contravening system reliability requirements. The purpose of TCR is to restore the energy balance on the interconnected electric system downstream of a system constraint.

The AESO proposed to recover TCR costs from Rate DTS and Rate FTS, as these are the primary rates used in the ISO Tariff to recover costs from load market participants. The AESO excluded TCR cost recovery from demand opportunity service and export opportunity merchant service, on the basis that the applicable incremental costs are expressed as a fixed $/MWh amount which is not subject to hourly variation.

TCR payments are made to market participants in accordance with the recently revised Section 302.1 of the ISO rules, Real Time Transmission Constraint Management (the “TCM Rule”) as set out in Decision 3528-D01-2015. The AESO had originally been directed to revise the TCM Rule as a result of Decision 2013-135. The AESO, in turn, proposed to use TCR as a replacement for “real-time transmission must run” to avoid conflating “real-time transmission must run” with “transmission must run” in the ISO Tariff.

The AESO submitted that the recovery of the TCR costs was assessed to be consistent with principles of cost causation as it is a primary consideration in rate design. The AESO noted that, pursuant to section 47(a)(i) of the Transmission Regulation, since these costs arise for transmission reasons and are costs of the transmission system, they are charged to load under the ISO Tariff.

The AESO noted that transmission outages do not correlate strongly to periods of peak system loads, and therefore submitted it would not be appropriate to recover TCR costs based on coincidence with system peak usage. As a result, the AESO proposed to recover TCR costs through a usage charge (charged in $/MWh). The AESO reasoned that a fixed usage charge would provide a price signal in all hours, including those in which constraints occur, which may lead to reduced energy consumption in hours where transmission constraints occur. The AESO submitted that this would allow market participants to respond by making decisions to maintain or adjust usage based on the value of service received.

The AUC held that the proposed adjustments for recovery of TCR charges were reasonable on the basis that:

(a) The adjustments would provide a clearer and more transparent price signal;

(b) The adjustments would apply equally to Rate DTS and Rate FTS;

(c) TCR costs are properly classified as transmission costs and must therefore be charged to load customers under the ISO Tariff; and

(d) The AUC was satisfied with the AESO stakeholder consultation respecting the recovery of TCR costs through the ISO Tariff.

Accordingly, the AUC approved the AESO’s proposed ISO Tariff amendments to implement a TCR cost effective November 26, 2016 on a final basis.

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