June 28, 2004
NOTICE TO MARKET PARTICIPANTS
RE: TRADING PRACTICES GUIDELINE AND INFORMATION DISCLOSURE PROCEDURE INITIATIVES
The Market Surveillance Administrator (MSA) has been actively working to find solutions to information asymmetry for well over a year. During this period we have sought input from market participants as well as holding a number of discussions with interested parties. The MSA wishes to thank market participants for their effort and contribution through the development and implementation of the Trading Practices Guideline (TPG) and proposed Information Disclosure Procedure (IDP)
We are nearing completion of the final phase of the implementation process. Our intention is to commence publishing asset outage information on July 5, 2004. In terms of finalizing the IDP, the MSA recently held a workshop with market participants to obtain input to help us resolve a number of outstanding matters. The purpose of this Notice is threefold:
1) To convey the MSA’s conclusions regarding the questions that were open for discussion at the June 10, 2004 workshop;1
2) To address matters which were raised by market participants in the written submissions which followed the workshop; and
3) To briefly describe the MSA’s future activities concerning the TPG and IDP.
For your information, the final IDP report can be accessed directly on the MSA’s website by following the link –
On February 18, 2004 the MSA issued a report setting out a Trading Practices Guideline (TPG). Essentially, the TPG states that market participants should not trade on non-public outage information until that information has been disclosed. We published a follow up report on March 1, 2004 that dealt with the proposed Information Disclosure Procedure, that is, the procedure to be used by market participants to assure compliance with the TPG. The MSA requested and received written submissions from market participants that were summarized into a comment matrix which was posted to the MSA’s website on March 31, 2004.
During the April 6 to 16, 2004 time period, the MSA conducted a test of several outage report formats and requested feedback from market participants regarding the reports ability to maintain unit confidentiality and at the same time, provide useful information to the market at large. In addition to the test of report formats, the MSA also requested feedback from market participants concerning a number of questions we posed about matters related to the IDP. The MSA received written comments from nine market participants prior to the April 30, 2004 submission date. The views of the submitters were summarized in a comment matrix and posted to the MSA website on May 11, 2004.
Further to a commitment made in a May 10, 2004 TPG/IDP status report, the MSA invited interested parties to participate in a facilitated workshop that was held on June 10, 2004. The purpose of the workshop was to solicit additional comments from participants related to specific IDP issues where there was a divergence of views expressed in the written submissions.
Following the workshop on June 10, 2004, the MSA encouraged participants who had any comments that were not expressed during the workshop to bring them forward by June 18, 2004. Information obtained from the workshop discussion, subsequent material provided by interested parties and all previous comments were considered by the MSA in developing the final IDP.
A summary of the issues discussed at the workshop and follow-up submissions can be viewed on the MSA website at: http://www.albertamsa.ca/files/TPG_IDP_Workshop_Summary.pdf.
OUTSTANDING MATTERS DISCUSSED AT THE WORKSHOP
This section deals only with the outstanding questions that were discussed at the workshop. Market participants are referred to the workshop material for further information on the issues where there was consensus amongst participants.
Should certain participants be exempt from the IDP? For example, should the capacity threshold be set at 40 MW or some other amount?
The MSA proposed that all generators, load, transmission facility owners, and interconnected members with assets equal to or greater than 40 MW would be required to submit information about outages in excess of 40 MW. In addition, for the purpose of TPG compliance, the MSA would adopt a minimum requirement to report outages equal to or greater than 40 MW.
Respondents expressed divergent views concerning the capacity threshold. The MSA received comments that ranged from all participants (1 MW) up to anyone greater than 65 MW. During the workshop, a number of questions were asked concerning how the IDP would apply to transmission and inter-tie assets. In addition, some loads felt that they should only have to submit planned outage information rather than forced outage information.
The TPG applies to any market participant who has preferential access to outage information on assets that have the ability to materially affect forward prices. All generators, load, transmission facility owners, and interconnected members with assets having a capacity equal to or greater than 40 MW are expected to submit information. Market participants who have generation and demand on a single site are expected to individually submit outage information concerning the state of both their demand and generation assets.
The suggestion that there should be various MW reporting levels for different assets types is not being considered at this time. The MSA will monitor reporting over the next several months and determine if any adjustments are needed. Based on participant’s feedback, the MSA’s analysis which was presented at the workshop and the pre-existing 40 MW threshold level contained in the AESO’s OPP 601, a capacity level of 40 MW was determined to strike the best balance between utility, equity and effort. At a minimum the MSA will publish outage information in excess of 40 MW.
The TPG/IDP applies to load assets equal to or greater than 40 MW. Currently, the MSA has limited visibility of load assets that are operating on the Alberta Integrated Electric System. Over the next several months we will be working with the LSAs in order to identify relevant load assets. For the purpose of reporting on July 5, 2004, the focus will be on the load assets we have identified, to date.
What entity should be responsible for submission of information, e.g. asset owner, affiliates or agents?
The asset owner or its designate should be responsible for submitting outage information. Regardless of who submits the information, all parties who have knowledge of the event are still bound by the conditions of the TPG until it becomes public.
Market participants expressed divergent opinions on who should be responsible for submitting outage information. In particular, there was a difference of opinion as to what PPA party should be submitting outage information – the PPA Owner or the PPA Buyer. A number of concerns were expressed by PPA Owners and PPA Buyers about how one party could negatively affect the other.
The AESO’s OPP 601 states that the responsibility for disclosure of outage information rests with the market participant who is the STS contracting party. Typically this implies to the asset owner who submits offer information to the System Controller but in the case of the PPAs, the STS contract holder is the PPA Buyer. On this basis, the MSA concludes that it is the PPA Buyer who would submit outage information pertaining to the IDP.
In terms of load, the MSA will look to the holder of the DTS contract or it’s designate to submit outage information. Transmission and inter-tie participants should submit outage information pursuant to OPP 601.
The MSA takes the position that market participants who are involved in existing contractual arrangements are free to determine how best to comply with the TPG. However, regardless of who submits the information, all parties who have knowledge of the event are bound by the conditions of the TPG until it becomes public. Consistent with OPP 601 and other relevant protocols, disclosure of outage information would be expected to occur on a timely basis and not be unreasonably withheld by a market participant. In this fashion, all parties affected by the information should receive the full benefit of disclosure. Any effort to harm another party through incomplete, inaccurate or untimely disclosure would be viewed by the MSA as conduct not consistent with the fair, efficient and openly competitive operation of the market. Such conduct might also breach ISO Rules or other specific conduct requirements.
What is the appropriate time frame for submitting outage information?
The information required by the MSA would be consistent with the AESO’s OPP 601, which requires planned outages to be submitted out to the end of the next calendar year prior to October 31 of the current year.
The MSA is concerned that market participants may not have understood the intent of the question. Essentially the MSA was asking participants’ views on how far into the future would an asset owner be required to submit outage information. A number of workshop participants expressed concerns that the utility of information projections declines significantly as the term increases.
The information required by the MSA is consistent with the AESO’s OPP 601 which requires that planned outage schedules pertaining to the next calendar year (January 01 through December 31), should be submitted on or before October 31 of the current year For example; outages planned for the calendar year 2005 have to be submitted to the AESO no later than Oct. 31 of 2004. Any changes to planned outages during the next calendar year must be reported.
What level of information publication would balance the rights and needs of individual asset owners and the rights and needs of the market at large with respect to the furtherance of a fair, efficient and openly competitive forward market?
The MSA suggested two different methods of aggregating the outage data provided to the AESO. During the trial publication period, the MSA produced outage charts with aggregation by fuel type. On April 15, 2004, the MSA included a second proposed methodology using a generator’s capacity factor.
Most of the comments received concerning the aggregation centered on the confidentiality of an individual outage. The responses were polarized with the asset owners wanting more aggregation and other participants looking for increased granularity. Of the comments received concerning the aggregation methodology, all most all favored the capacity factor version.
Although a number of workshop participants favored the capacity factor version, the MSA has been unable to develop a satisfactory methodology that can be applied to all units for calculating an assets capacity factor. Any algorithm tested appeared to result in capacity factor calculations for various types of units that were not always consistent. The MSA will continue to investigate a single method that works for all units and accurately reflects the operating characteristics of each unit.
The fuel type methodology will be used to produce the aggregated outage charts. The MSA believes this method will provide a reasonable balance between protecting the identity of specific assets and providing useful information to the market at large. In particular, the fuel type methodology will provide consistent computational results.
In response to concerns raised by market participants about protecting the identity of specific assets, the MSA will not publish the day over day change outage graph that was included in the bottom of the trial publishing documents. The decision was made based on the fact that the value of the graph did not outweigh the reduction in disguise. The risk is higher in this graph as it was the only place in which an outage may be displayed without the benefit of aggregation.
During the workshop, there was an extensive discussion about how the IDP pertains to transmission and inter-tie assets. Incorporating transmission outages has proven to be a challenge due to the complex nature of the transmission system and how events on the system affect market price. The MSA will continue to work with the AESO on identifying the types of transmission assets and events that should be incorporated into the IDP. For the purpose of publishing outage reports starting on July 5, 2004, we will focus our efforts on single contingency lines where a line outage has a direct impact on a generating facility.
Any transmission outages that are scheduled will not be displayed on the graphs but will be conveyed in table format similar to the example contained in the workshop material.
Over the past several months, market participants have consistently raised concerns about the inter-tie and its impact on Pool price. Initially we will focus on the level of ATC; however, as part of another initiative the MSA plans to undertake further analysis on the inter-tie.
What are the appropriate time periods for publishing outage information?
During the trial period, the MSA published the outage information to the website by 9:00 A.M. each business day, but ultimately the publishing of outage information would be as near to real-time as possible.
Market participants expressed a wide range of views such as the current time periods required by AESO OPP 601 are appropriate, publishing outage information should be synonymous with such information being made public, and posting outage information six months or a year in advance will give market participants the perception of future supply/demand certainty and thereby create more conflict. A number of participants commented on the need to have reporting as close to real time as possible.
The MSA will publish the outage information to the website by the end each business day and update the outage information the following morning as required. Ultimately the publishing of outage information would be as near real time as possible. The MSA will work with the AESO to develop the required systems to facilitate a web based system capable of being updated anytime there is a change in the amount of outages scheduled.
The MSA will track reporting (in particular, the timing of information reporting) and accuracy on a routine basis and report to the market on overall accuracy of outage reporting for the purpose of confidence building. The MSA will follow up on weak reporting with individual companies for the purpose of understanding reasons and may conduct periodic/random surveillance/audit/etc of participant trading activity with respect to outage reporting.
What performance indicators should be used by the MSA?
The MSA indicated that over the course of the next year, the MSA will monitor market liquidity to determine if it has materially improved and is showing a positive trend. At a minimum, the MSA will consider:
• Bid/ask spreads;
• Liquidity based on term structure and size;
• Number of active players; and
• Convergence behaviour of forward and real time prices.
All of the participants that responded to this question agreed in general with the performance indicators outlined in the conclusion. Most participants thought that the metrics lacked clarity and that clear performance measures need to be specified to determine if the TPG is having the desired effect on the market. During the workshop the MSA requested written feedback from participants regarding potential metrics to be used as measures for success but to date the MSA has not received any responses concerning this issue.
The MSA is currently developing two types of performance metrics; one type to deal with TPG performance and the other type to deal with data quality. Generally, TPG performance metrics are focused on measures of market liquidity while metrics concerning data quality will deal with the timing and accuracy of outage information submitted by market participants.
In terms of the metrics related to TPG performance, the MSA’s objective is measure the impact of the TPG/IDP. The MSA recognizes that forward market liquidity is a function of numerous factors. At this time, we are not attempting to measure how these factors may impact liquidity.
It is worth noting that one of the data quality metrics will focus on the amount of time it takes for the MSA to publish the outage information once it has been received. Over time, it is one of the MSA’s objectives to publish the outage information as close to real time as reasonably practical.
Suggestions for coordination of the outage information requirement for System Control, AESO
Outage Coordination and the MSA? What is the point at which information about an outage
should be submitted?
For example, at what point is a bona fide decision made with respect to scheduling an outage?
Outage information is to be submitted when it becomes known by the asset owner. Depending on the type of outage (e.g., changes to planned outages, maintenance, and forced outages) the time frame for reporting outages is defined in OPP 601.
In written submissions, most respondents agreed that the outage needs to be reported to the AESO as soon as a bona fide decision is made. A clear definition of what event or act constitutes a bona fide decision was not offered by any of the parties that provided responses. During the workshop, the MSA was asked how outage probabilities and uncertain timing would be incorporated into the IDP. One party suggested that when asset information is communicated to someone who can act on that information, particularly through trading, the information should be disclosed at that time.
Outage information is to be submitted when it becomes known and actionable by the asset owner and/or party responsible for submitting the outage information. The terms “known” and “actionable” are considered to be compatible with the AESO’s “decision” criteria as used in Section 4.3 of OPP 601. In any case, trading on outage information should not occur unless the information has first been disclosed.
OTHER MATTERS ARISING DURING THE WORKSHOP
Purpose of the TPG
A number of participants in the workshop were of the opinion that liquidity was the market fundamental that the TPG is trying to address. The fundamental purpose of the TPG is to address the information asymmetry that exists in Alberta concerning outage information and applies to situations where an asset is physically unavailable. Forward market liquidity is the measure by which the MSA will test the efficacy of the TPG. An improvement in forward market liquidity is an indication of a healthy, robust market and an indication of the confidence level of market participants.
Basis of the TPG
The basis of the TPG is derived from the MSA’s legislative mandate concerning the fair, efficient, and openly competitive operation of the Alberta electricity market. Information asymmetry and use of non-public outage information are considered to be contrary to the spirit of a competitive market.
Scope of the TPG
The TPG/IDP is directed at the inappropriate use of non-public outage information. Market participants have raised a number of questions concerning whether the TPG applies to other forms of non-public information such as rumors of regulatory changes. The MSA wishes to confirm to market participants that, at the present time, the TPG only applies to outage and derate information. In the event that other types of information sharing issues develop in the future, the MSA will assess the issue and determine whether the scope of the TPG should be expanded.
Operational or Commercial Strategies
Market participants raised a number of questions about specific operational or commercial strategies that may or may not be covered by the TPG. In addition, they indicated a desire for “greater clarity” and suggested that the MSA should develop a list of behaviours which are unacceptable. We have carefully considered this matter and have concluded that due the dynamic and constantly evolving nature of the market, specifying a list of prohibited practices may not be in the best interests of the market. Rather, the MSA has determined that a better approach is to provide market participants with a number of “principles” that they can use to determine whether specific operational or commercial strategies will be off-side the TPG. The MSA also refers market participants to the MSA Investigation and Assessment Guidelines which outline the criteria which the MSA will use to investigate breaches of the TPG.3 In addition, the MSA invites market participants to consult with us regarding specific strategies where there is some concern they may not be acceptable.
Quality of Outage Information
Workshop participants raised a number of questions related to the probability of an impending outage, the quality of outage information, and the liability related to inaccurate outage information. In general, the MSA has adopted a principle-based approach to dealing with data quality issues. Moreover, we have adopted an approach that is, to some extent, based on the market policing itself. The MSA understands the challenge of predicting outages accurately and will use its discretion and forbearance in this regard. With respect to liability, the MSA notes that market participants are well acquainted with the fact that outages are subject to change for a host of reasons. In this regard, any outage information published by the MSA should be used by market participants with the recognition that there is an element of uncertainty. Furthermore, the MSA advises that sole reliance on its outage reports is not a substitute for careful and diligent analysis by market participants.
Consistent with the Electric Utilities Act and the Market Surveillance Regulation, the MSA is entitled to use records obtained from market participants for the purposes of its mandate. In doing so, the MSA is obliged to keep such records confidential and to use them only in relation to its mandate. The publication of outage information in aggregate form meets these requirements. The MSA is seeking to foster the ability of market participants to monitor and report behaviour not in accordance with the fair, efficient and openly competitive operation of the market, and thus to help reduce or eliminate conduct harmful to the market. At the same time the information is carefully aggregated to protect against unnecessary disclosure.
It is not practical or even possible to guarantee that unit specific information cannot somehow be gleaned from the combination of publicly available data and the aggregated information being published by the MSA. In any event, that is not the standard required. The MSA will continue to make reasonable efforts to keep the records confidential while using the related information for the purposes of its mandate; in doing so, the MSA will have met the standard set out in the Act and regulation.
By way of analogy, the same standard would apply to data stored by the MSA in its systems. That is, the MSA cannot and does not have to absolutely guarantee the continued confidentiality of such records. The MSA will have acted in a fair and responsible manner by taking reasonable steps to ensure the security of the data against occurrences such as computer hacking and inadvertent disclosure.
It is also important to note that in some circumstances the MSA may actually be required by its mandate to disclose confidential information. An obvious example would be disclosure through the tribunal process. The MSA is required to meet its mandate, and therefore reserves its discretion around disclosure.
Comparison of AESO OPP 601 and the IDP
In response to a request that came from the workshop the following is a summary of the differences between the MSA procedures and the AESO’s OPP 601:
1. The MSA is primarily interested in outages that are 40 MW or greater as compared to OPP 601 which requires reporting of any outage related to assets 40 MW or larger. However, the MSA will aggregate and publish all the outage information it receives from the AESO.
2. OPP 601 does not require outage information from demand (load) assets
3. For the purpose of the IDP, the MSA’s minimum expectation is that all generators load, transmission facility owners, and interconnected members with assets equal to or greater than 40 MW are expected to submit information about single event outages in excess of 40 MW. The MSA’s minimum reporting requirement does not affect the reporting requirements of those parties who are required to submit outage information pursuant to AESO rules.
4. The IDP expects that market participants who have generation and demand on a single site are required to individually submit outage information concerning the state of both their demand and generation assets.
5. The generation outage coordination process as detailed in OPP 601 applies to generating units or plants with installed capacities of 40 MW or higher except in the case of special circumstances as such as units that can be designated as “Transmission Must Run”, some hydro units, etc., where smaller units could included. The IDP does not distinguish between classifications of similar types of assets.
1. OPP 601 requires that asset owners submit outage information when a “decision” has been made with respect to scheduling an outage. The AESO’s operating policy doers not define “decision" and effectively leaves it to the discretion of the asset owner. Without the benefit of a definition for the term “decision”, the MSA will use the criteria “known and actionable” to determine when outage information should be submitted for purposes of the IDP. Fundamentally, outage information should be submitted when it becomes good enough to trade on (i.e., known and actionable).
2. During the workshop, some participants suggested that the probability of occurrence should be attached to outage information in order to reflect the uncertain nature of outages. The MSA considers this concept to have some intellectual appeal; it is inconsistent with the intent and practical operation of OPP 601 and the IDP.
3. OPP 601 requires that outage information should be submitted to the ISO as soon as possible after the decision is taken to correct an anomalous operating situation. The IDP requires that outage information be submitted before an asset owner trades on that information.
FUTURE ACTIVITIES CONCERNING THE TPG AND IDP
As an outcome of the workshop and subsequent filing from interested parties, the MSA will continue to work on a number of outstanding matters and report back to market participants, as appropriate.
The outstanding matters include:
1. The MSA will continue to investigate a single data aggregation methodology that works for all units and accurately reflects the operating characteristics of each unit.
2. The MSA will continue to work with the AESO on identifying the types of transmission assets and events that should be incorporated into the IDP.
3. Over the next several months the MSA will be working with the LSAs in order to identify relevant load assets.
4. The MSA will monitor the 40 MW threshold level as it pertains to load.
5. The MSA will work with the AESO to develop the required systems to facilitate a web based system capable of being updated anytime there is a change in the amount of outages scheduled.
The MSA appreciates the patience and effort that market participants have made concerning the development and implementation of the Trading Practices Guideline and Information Disclosure Procedure and we look forward to the timely completion of this initiative. Market participants are encouraged to bring forward any matters which require further discussion and which would have the benefit of improving the TPG and IDP.
MARKET SURVEILLANCE ADMINISTRATOR
“Original signed by Wes Green”