Marketplace Training

Locational Marginal Prices (LMP): reflect the value of electricity at almost 1,000 locations on Ontario’s grid, accounting for system constraints and losses. Only certain market participants -generators, dispatchable loads, price-responsive loads, and intertie traders - are paid or charged the LMP. LDC customers are not billed for electricity using locational marginal pricing.

Day-Ahead Ontario Zonal Price (DA-OZP): is the hourly, load-weighted average of day-ahead locational marginal prices calculated for non-dispatchable loads in the province. Most energy supply in the province is settled in the day-ahead market, making the DA-OZP a good indication of the final price.

Ontario Price, or Ontario Electricity Market Price: is charged to local distribution companies (LDCs) and their wholesale customers as well as non-dispatchable loads in the IESO electricity market. It comprises the Day-Ahead Ontario Zonal Price and the Load Forecast Deviation Adjustment (LFDA).

Load Forecast Deviation Adjustment (LFDA): is applied to the Day-Ahead Ontario Zonal Price to account for the financial impact of differences between day-ahead and real-time schedules. Real-time prices are applied to variances between day-ahead schedules, which are based on a demand forecast, and actual real-time operations. The LFDA is then used as an adjustment added to the DA-OZP to create the Ontario Price.

Real-Time Ontario Zonal Price: is a five-minute load-weighted average of real-time locational marginal prices calculated for non-dispatchable loads. If the Day Ahead Market fails to run, the Real-Time Ontario Zonal Price will be used in place of the Day Ahead OZP. Otherwise, it is not a price that will appear on bills.

Reference Bus Price: is the marginal cost of energy (without line losses or congestion) at a single “reference bus” location on the system. It forms the basis for all prices on the system. Richview is the current reference bus in the IESO market.

Intertie Price: is applied to transactions with neighbouring jurisdictions settled through the day-ahead and real-time markets. It comprises the Intertie Border Price (IBP), or the LMP at the Ontario side of the intertie, plus an Intertie Congestion Price.

Four-Area Demand Forecast Areas: complement the provincial forecast and provide more granularity as a result of the addition of new weather station locations and weather data in the development of the forecasts.

Peak Tracker: provides frequent updates to the demand forecast as well as actual demand conditions from the Control Room.

Price-Responsive Load: is a new participation type that enables large customers to lock in a price in the day-ahead market without needing to commit to consuming a pre-determined amount.

Virtual Trader: bids or offers energy in the day-ahead market, settles at the day-ahead price, and then is settled for the opposite transaction for the same amount of energy at the real-time price. No physical delivery or consumption of energy is required. These transactions help narrow differences in prices between the two markets which in turn encourages participants to offer and bid into the day-ahead market as accurately as possible.

Virtual Zone Price: is used to settle virtual transactions and is calculated as the load-weighted average of the locational marginal prices at all non-dispatchable load points within the zone.

Single schedule market (SSM): ensures that market prices paid for electricity are aligned with the dispatch schedule – leading to greater price transparency and efficiency. The SSM replaces the previous two schedule market that used an unconstrained schedule to set the price without taking into account system conditions, and a separate constrained dispatch schedule for the actual delivery of supply. By introducing the SSM, the IESO is able to reduce out-of-market payments that were needed to resolve differences between the price and dispatch schedules in the old system.

Market Power Mitigation: is a streamlined and more transparent approach to managing situations where one or more market participants could use market power to impact prices. Checks are now embedded within existing processes – from registration to settlement – protecting the integrity of the price as it is published and settled. New terms include:

• Reference quantities: estimates of the supply that a resource has available on a particular day.
• Reference levels for financial parameters: are equations reflecting the short-run marginal costs of a resource and are set during the registration process (e.g. energy and operating reserve offers).
• Reference levels for non-financial parameters: take into account a participant's operational characteristics, such as minimum loading point and ramp rates.
• Physical withholding: when available supply is not offered into the market.