Clarification of Local Market Power Rules

September 11, 2006

(MR-295)

The IESO Board approved amendments to clarify the local market power rules. The purpose of the amendments is to clarify that the local market power rules are not a "fault-based" or "punitive" regime whereby participants are penalized for intentionally abusing local market power. Rather, the amendments confirm that the purpose of the rules is to remedy the impacts of local market power by clawing-back congestion management settlement credit (CMSC) payments in cases where local market power exists and has been exercised (albeit unintentionally). To date, IESO staff has made CMSC adjustments (without a financial penalty) where local market power screens have indicated that participants' offer/bid prices were not consistent with their costs, including opportunity costs. The IESO has only considered imposing a financial penalty where there was evidence that a participant had intentionally sought to exercise local market power (although to date no such financial penalties have been imposed). Under the amendments, all references to the term "abuse" in the local market power rules will be removed. As well, the IESO's authority to impose a financial penalty for the intentional exercise of local market power will be removed (it being acknowledged that the investigation of abuse of market power is the responsibility of the Market Surveillance Panel, not the IESO). As such, under the amendment the IESO's authority will be limited to solely making CMSC payment adjustment where local market power has been exercised. In addition to clarifying the intent of the local market power rules, the amendments will also more explicitly identify the conditions and criteria necessary for determining whether local market power exists and whether a CMSC adjustment is warranted.

Links: 

IESO Board Decision
Technical Panel Recommendation on Amendment Proposal
Amendment Proposal R00 Request for Stakeholder Review and Comment
Amendment Submission

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