Capacity Market Design: Update on the Length of the Delivery Period

A few weeks ago we told you about capacity market design in Alberta, and the debate going on over the length of the delivery period that will apply in the capacity market for new facilities.  Yesterday the AESO issued SAM 3.0.  It describes the provisional recommendations of the 5 stakeholder working groups struck by the AESO to provide feedback on various capacity market design issues.  With respect to the delivery period issue, SAM 3.0 says the following:

The WG [Working Group] recommended that the obligation [a.k.a. delivery] period will be one year for all resource types. A one-year term for all was viewed as the best and lowest-cost option and would be non-discriminatory between asset types, would provide better liquidity in the market and would reduce the risk of over-procurement. There was considerable discussion regarding this key design element and the recommendation was passed with eight votes for and six against. Those who voted against the recommendation preferred a seven-year obligation period for new assets. They were concerned that a one-year obligation period would not be long enough to attract new entrants and it would increase financing costs for new resources, which may result in higher capacity market costs for consumers. (emphasis added)

 

Interestingly, we did not see anywhere else in SAM 3.0 where a vote on a particular design issue was recorded and reported on by the AESO. This is not the end of this matter.  The working group’s recommendation on the length of the delivery period will now be considered by the AESO as it develops and releases its first draft of a comprehensive capacity market design for Alberta early in 2018.

Kent Howie

Kent Howie is the head of the Electricity Markets Group at the Calgary, Alberta office of the national law firm Borden Ladner Gervais LLP.  He is also the editor of and regular contributor to AlbertaPowerMarket.com. The views expressed in this article are the personal views of the author, and not the views of Borden Ladner Gervais LLP.

3 thoughts on “Capacity Market Design: Update on the Length of the Delivery Period

    1. Happy Holidays Ken. If your municipality does not own any generation facilities then the only thing that comes to mind is the revenue that a municipality receives under its franchise agreement with the local electric distribution company. Municipalities enter into franchise agreements with these utilities granting to them the exclusive right to distribute power in the municipality. Those agreements typically require the utility to pay the municipality a fee for having the exclusive right (might say a fee for access to municipal land to construct system (poles, etc.)). It is often a percentage (but might have a fixed and variable component) of the distribution charge that the utility charges customers in the municipality for electricity. The fee, collected by the utility from customers, is paid to the municipality – it is a flow through. You will see this charge on your power bill as a “Local Access Fee”. “Transmission Credits” is not a great description, but if we are correct, what you are describing is the credits (payments) the municipality receives from its distribution utility. For your town, you should be able to find the amount on your bill, or by searching the website of the utility that owns the distribution system in your town (e.g. ATCO, Fortis, EPCOR) and looking for your particular municipality, as each municipality determines what it will charge the utility subject to Alberta Utility Commission limits. Hope that helps. Again, Happy Holidays.

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