The IESO is introducing a new framework for identifying and mitigating the exercise of market power in the IESO-administered markets through the Market Renewal Project (“MRP”). This framework guards against Market Participants unilaterally increasing market prices or out-of-market uplifts payments to their own benefit through the use of market power.
As part of the framework, the IESO determines estimates for what a Market Participant might offer for each of their resources in the energy and operating reserve markets if those resources were subject to unrestricted competition. These estimates are called reference levels and reference quantities. Reference levels may be of a financial or non-financial nature.
Financial reference levels are comprised of estimates of a resource’s short-run marginal costs, including actual fuel, opportunity and operations and maintenance (“O&M”) costs that a participant would incur when starting the resource, operating in each hour, producing incremental energy or supplying stand-by operating reserve. Non-financial reference levels are benchmarks of operational capabilities of a resource under competitive conditions. Reference quantities are methodologies used to form an estimate of the available supply of energy or operating reserve available to a resource for a particular dispatch date.
Reference levels and reference quantities for a resource are determined by the IESO in consultation with the relevant Market Participant.
Market participants may request that an independent consultant (a “Vendor of Record”) review their reference levels, reference quantities, any component thereof and/or the documentation used to support a requested reference level or reference quantity or any component thereof. This process is called the Independent Review Process (“IRP”).
