Alberta Energy - Capacity Market Framework Engagement December 2017

Transcription

1 Capacity Market Cost Allocation - Response Template The engagement is seeking stakeholder feedback on the questions below. Please submit your responses to these questions, and any additional input on this topic, to the Submission Library for the Capacity Market Framework engagement at: Submissions will be accepted on this topic until January 2, 2018 Submitted by: Name Organization Jay Dyson ENMAX Question Cost Allocation Criteria 1. Do the criteria presented in the discussion document fully reflect the elements required in a capacity cost allocation methodology? Response (Y/N) Explanation/Further Details No Cost allocation and the level of procurement (setting reliability targets and the shape of the demand curve) are significantly interdependent. The two ends of the spectrum of allocation are one hour coincident peak (1CP), and energy consumption. If the government sets a 1CP allocation, then the fact that many large industrials can load shift away from the 1CP hour needs to be reflected in the level of procurement. If it is not, it will lead to residential and small commercial customers bearing significant portions of the capacity market obligations and it will effectively create cross-subsidization of large, flexible loads by smaller customers. At the other end of the spectrum, if the government chose an energy consumption based allocation, the procurement cost will be spread across customer classes based on consumers consumption. ENMAX does not support a 1CP methodology nor a pure consumption (energy) allocation. The right balance is important, cost allocation must create a sufficient price signal to drive efficient consumption Page 1

2 2. Are there other criteria not included in the discussion document that should be considered? No behavior, but not so much that it leads to cross subsidization across customer classes. ENMAX notes the importance of the billing framework used to recover the capacity costs to consumers and stresses that these discussions should have been included in the current cost allocation process. The results of this discussion will have a large impact to ENMAX and our load customers. It is very important from a contract/confirmation and billing perspective that we have these answers as soon as possible. ENMAX supports that elements like energy efficiency, carbon output, etc. not be included in the cost allocation discussions. These elements are managed through other Alberta Energy initiatives and should not be included in cost allocation. Capacity Cost Allocation Options 3. Do the options presented in the discussion document accurately reflect the choices available for capacity cost allocation in Alberta? Yes ENMAX supports a 12 Coincident Peak (CP) and Weighted Energy option, however, we view the Total Energy option as ineffective at driving appropriate optimization behaviour. ENMAX also would like to reiterate that the reliability target needs to be sensitive to cost allocation. Cost allocation must be done in a way that prevents cross subsidization across customer classes. Page 2

3 4. Is there another viable option (methodology) to allocate capacity costs in Alberta that should be considered? No Consumer Behaviour 5. Do you believe that electricity consumption patterns of the following consumer groups will change as a result of the capacity cost allocation option selected: Residential? Most residential customers lack the technology to tailor their usage to avoid coincident peaks. Even for customers utilizing AMI, it may be difficult for them to change their usage profile. Farm/Irrigation? The seasonal nature of farm/irrigation loads should limit their ability to optimize within the cost allocation option selected. Small Commercial & Industrial? Small commercial will look like residential if they have cumulative meters. Even with interval meters, their consumption will likely be driven by inflexible business needs. These customers are more likely to have a lack of expertise and low resilience to relatively high capital costs for optimizing their businesses around electricity costs. Page 3

4 Large Commercial & Industrial? Larger customers are more likely to be able to change consumption patterns or alter business practices, as electricity is more likely to be a large portion of total costs and they will have the requisite metering, expertise and financial ability to optimize their businesses in relation to electricity costs. 6. Do you believe that your organization s electricity consumption pattern will change as a result of the capacity cost allocation option selected? 7. To which of the consumer groups above does your organization belong? ENMAX is moving forward with the installation of innovative technologies to improve energy efficiency outside of the capacity market framework. ENMAX will attempt to respond to market signals in order to improve our environmental footprint. ENMAX is an active participant in all aspects of the Alberta electricity market, including; Retailer (Mass-Market/Residential, Small Commercial & Industrial, Large Commercial & Industrial), Generator, Load, Wires Service Provider. Evaluation of Cost Allocation Options 8. Please rank the Coincident Peak Allocation Option for each of the assessment criteria: Criterion Ranking Rationale Economic Efficiency It depends A 12CP allocation should create efficient price signals without creating other inefficiencies such as cross-subsidization. A 1CP allocation may be individually efficient for some business, but inefficient as a whole as it may create cross- subsidization of larger customers by smaller customers (depending on procurement levels). Page 4

5 Equity It depends It depends on how CP is implemented. A 1CP allocation could be very inequitable and create cross-subsidization. A 12CP would score much higher on the equity criterion. Stability It depends A 1CP system could create significant volatility and cost shifting for certain customer classes (smaller customers). A 12CP system would be more stable, and would capture capacity usage across the year across customer classes. Practicality High A 12CP system is relatively is straightforward to implement. 9. Please rank the Total Energy Allocation Option for each of the assessment criteria: Criterion Ranking Rationale Economic Efficiency Low Pure energy allocation will produce the weakest price signal and lowest level economic efficiency of all methodologies considered. Page 5

6 Equity Low Stability Low Practicality High A Total Energy allocation option would be relatively simple to implement. 10. Please rank the Weighted Energy Allocation Option for each of the assessment criteria: Criterion Ranking Rationale Economic Efficiency High An appropriately designed weighted energy allocation should produce an efficient price signal while avoiding inefficiencies created by cross subsidization. Page 6

7 Equity High Weighted energy should be able to promote equity among load classes. Stability High Weighted energy would provide a balanced approach to cost allocation, minimizing the degree of true-ups. Practicality High A weighted energy system is relatively is straightforward to implement. Preferred Option 11. Which capacity cost allocation option do you think is most suitable for Alberta? Why have you selected that option? ENMAX supports a monthly 12 CP methodology (CP of each month) or a weighted energy methodology. Additional Input Page 7

8 12. Do you have additional input? ENMAX reiterates the importance of coordinating cost allocation and the level of procurement (setting reliability targets and the shape of the demand curve) are significantly interconnected. Alberta Energy and the AESO must coordinate the allocation method and amount procured. As stated above, the right balance is important, cost allocation must create a sufficient price signal to drive efficient consumption behavior, but not so much that it leads to cross subsidization across customer classes. There will need to be a mechanism where the AESO can adjust procurement volumes if, under a CP option, significant volumes of load are able to adjust their usage. A balanced, monthly CP format would reduce certain customer classes from being able to avoid all CPs, however, an adjustment mechanism will still be required. Information submitted to Alberta Energy through this site is being collected for the purpose of the Capacity Market Technical Engagement Process. The Freedom of Information and Protection of Privacy Act, s. 33 (c) governs Alberta Energy s collection of personal information which may be included in the submissions. Please direct questions about the collection and use of this information to Alberta Energy,5 th Floor, Amec Place Building, Avenue S.W., Calgary, Alberta, T2P 3W2, (403) Page 8