IESO and Hydro-Québec to Negotiate New Capacity Sharing Agreement
August 31, 2023
As growing demand and the energy transition emphasize the importance of collaboration and jurisdictional partnerships, Ontario and Quebec are leveraging the complementary nature of their respective electricity systems to provide ratepayer value and enhance reliability for both provinces.
IESO and Hydro-Québec have set out their intention to negotiate a new Capacity Sharing Agreement in a Memorandum of Understanding (MOU) that will see a straight swap of a minimum of 600 MW of capacity per season, without the standard capacity costs charged for ensuring supply will be available.
The agreement, if entered into, would work by promising the delivery of energy to support system reliability for both provinces on days when tight conditions are expected on the grid. It will lock in firm excess summer capacity from Quebec, giving system operators the assurance that the supply is available if needed, and helping them to operate the system more efficiently. It will also insure against the risk created by potential project development delays from newly procured generation, aging/retiring assets and adverse events such as unexpected supply shortfalls.
The swap will have no impact on the targets of the IESO’s upcoming Capacity Auction or Long-Term 1 procurement. The proposed agreement would simply secure a portion of that energy that is already imported on a daily basis, guaranteeing that a minimum 600 MW of supply will be available when needed most.
The agreement would likely begin in the winter 2024-2025 season and run to October 31, 2031 with an option for extension for an additional three years.