Market Rule Amendment Submission

For IESO Use Only MR-00407-Q00

IESOTP 274-3c

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Market Rule Amendment Submission

This form is used to request an amendment to, or clarification of, the Market Rules. Please complete the first four parts of this form and submit the completed form by email or fax to the following:

Email Address:
Fax No.: (416) 506-2847 Attention: Market Rules Group
Subject: Market Rule Amendment Submission

All information submitted in this process will be used by the IESO solely in support of its obligations under the Electricity Act, 1998, the Ontario Energy Board Act, 1998, the Market Rules and associated policies, standards and procedures and its licence. All submitted information will be assigned the confidentiality classification of “Public” upon receipt. You should be aware that the IESO will publish this amendment submission if the Technical Panel determines it warrants consideration and may invite public comment.

Terms and acronyms used in this Form that are italicized have the meanings ascribed thereto in Chapter 11 of the Market Rules.

Part 1 – Submitter’s Information

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Please enter contact information in full.
Name: IESO Staff
(if applicable) Market Participant /
Metering Service Provider No.[1]: N/A / Market Participant Class: N/A
Telephone: 905-855-4128 / Fax: 905-855-6371
E-mail Address:

Part 2 – Market Rule Amendment Submission Information

Subject: Compliance
Title: General Conduct Rule
Nature of Request (please indicate with x)
Alteration Deletion Addition Clarification
Chapter: TBD / Appendix: / Sections: TBD
Sub-sections proposed for amending/clarifying:

Part 3 – Description of the Issue

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Provide a brief description of the issue and reason for the proposed amendment. If possible, provide a qualitative and quantitative assessment of the impacts of the issue on you and the IESO-administered markets. Include the Chapter and Section number of the relevant market rules.
Summary
The IESO proposes to amend the market rules by introducing a general conduct rule to support the well-functioning of the IESO-administered markets.
Specifically, the amendments will:
·  Require market participants to conduct themselves in a manner consistent with the efficient, fair, competitive and reliable operation of the IESO-administered markets and of the IESO-controlled grid;
·  Prohibit conduct that a market participant knew or ought reasonably to have known would undermine, or likely undermine, the efficient, fair, competitive or reliable operation of the IESO-administered markets or of the IESO-controlled grid; and
·  Allow market participants whose conduct is alleged to have breached the general conduct rule to establish a legitimate business purpose defense for its conduct.
This proposal is based on stakeholder consultation as part of SE-112 General Conduct Rule.
Further information on SE-112 can be found on the IESO’s website at:
http://www.ieso.ca/imoweb/consult/consult_se112.asp
Background
Electricity markets are complex by nature, and the market rules must evolve as the market design and other factors, such as the nature and behaviour of market participants, evolve. It is very difficult, perhaps impossible, for market rule designers to contemplate all possible scenarios and every specific desired proscription/prohibition in advance. Notably absent from the current market rules is a provision that invokes the larger objectives of the market rules of promoting an efficient, competitive and reliable market for the wholesale sale and purchase of electricity and ancillary services in Ontario.[1]
A general conduct rule fills in gaps which may cause or allow harmful conduct, identifies undesirable conduct going beyond any other single rule, and sets a baseline for discretionary conduct in all scenarios. By not having such a rule, the Ontario market stands alone from its counterparts in North America.
Examples of market activities which are representative of undesirable behavior, or which generate or aim to generate undesirable market outcomes include gaming, manipulation, circumvention and anti-competitive behavior. Costs of these activities are ultimately passed on to consumers through higher prices and/or uplifts and global adjustment. Such conduct can also undermine confidence in the energy markets, thereby failing to promote economic efficiency and sustainability.
Although conduct identified after the fact can, if not captured by an existing market rule, be addressed by a market rule amendment, rule amendments lag evolving circumstances. After the fact amendments to address identified issues have been used by the IESO in its rule-making capacity, and have proven a means to fill in gaps or holes in existing rules once identified. However, such an approach does not allow for sufficient accountability to be imposed for the undesirable behavior identified above and puts the IESO in a position of chasing certain conduct.
The proposed rule amendment is consistent with existing market rule language. The market rules hold a number of provisions which proscribe/prohibit specific conduct, as well as prohibitions with more generalized language. The general conduct rule would be a complement to the continued enforcement of specific rules, and would allow for an investigative process and resulting enforcement actions per existing authorities under Chapter 3, section 6 of the market rules.
The concepts and language of the proposed rules are analogous to similar provisions regulated by FERC (CAISO, NYISO, ISO-NE, PJM, MISO), Alberta and Texas, and are intended to allow the IESO to address conduct that is inconsistent with the larger market objectives of the market rules.
For further information on General Conduct Rules for Electricity Markets in North America, please refer to the following SE-112 link:
Link to Position Paper II, Sept 19, 2013 – Appendix A – General Conduct Rules for Electricity Markets in North America (pgs 11-16): Actual Rules Language and Elements for Finding a Rule Breach.

Part 4 – Proposal (by submitter)

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Provide your proposed amendment. If possible, provide suggested wording of proposed amendment.
Initial, conceptual rules language for reference only – to be discussed with stakeholders through SE-112 General Conduct Rule:
1.0  General Conduct Rule
1.1 Market participants shall conduct themselves in a manner consistent with the efficient, fair, competitive and reliable operation of the IESO-administered markets and of the IESO-controlled grid.
1.2 Subject to section 1.3, conduct that the market participant knew or ought reasonably to have known would undermine, or likely undermine, the efficient, fair, competitive or reliable operation of the IESO-administered markets or of the IESO-controlled grid is a breach of section 1.1. This includes, without limiting the generality of the foregoing, conduct, whether taken directly or indirectly, by a market participant acting alone or with another person, that
1.2.1 exploits or attempts to exploit any of the market rules, including any gap or defect in the market rules;
1.2.2 circumvents or attempts to circumvent any of the market rules;
1.2.3 undermines or attempts to undermine through any means the ability of the IESO to carry out its powers, duties and functions under the Electricity Act, 1998 and the market rules; or
1.2.4 through manipulation, abuse of market power or other means, undermines or attempts to undermine the determination of a market price or dispatch outcome by competitive market forces.
1.3 Where a market participant establishes that its conduct was carried out entirely or predominantly for a legitimate business purpose consistent with the efficient, fair, competitive and reliable operation of the IESO-administered markets and of the IESO-controlled grid, the conduct will be deemed to be consistent with the requirement set out in section 1.1.
1.4 For the purposes of this section “conduct” includes acts and omissions; and
“undermine” means to damage, defeat, disrupt, harm, hinder, impair, interfere, injure,
lessen, obstruct, prevent or subvert.

Part 5 – For IESO Use Only

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Technical Panel Decision on Rule Amendment Submission:

MR Number:
Date Submitted to Technical Panel:
Accepted by Technical Panel as: (please indicate with x)
General Urgent Minor / Date:
Criteria for Acceptance:
Priority:
Criteria for Assigning Priority:
Not Accepted (please indicate with x):
Clarification/Interpretation Required (please indicate with x):
Technical Panel Minutes Reference:
Technical Panel Comments:

IMO-FORM-1466 v.6.0 Public Page 3 of 4
REV-05-09

[1] This number is a maximum of 12 characters and does not include any spaces or underscore.

[1] IESO market rules, Chapter 1, section 3.1.1