IESOTP 276-4b General Conduct Rule (SE-112) Technical Panel - - PowerPoint PPT Presentation

General Conduct Rule (SE-112)

Technical Panel February 25, 2014

IESOTP 276-4b

Agenda

• The SE-112 Process, Recap
• Stakeholder Feedback: 12 Major Themes, and IESO

considerations of that feedback

• Proposed Market Rule

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The SE-112 Process, Recap

• In Fall, 2013, stakeholders, through written submissions, provided the IESO

with input on rule elements which the IESO advised would likely provide the framework for the general conduct rule.

• Using that input, the IESO drafted a strawman general conduct rule, to assist

stakeholder evaluation, which was first presented to the Technical Panel on December 3, 2013. This has been referred to as the “conceptual rule”.

• Since the November 29, 2013 meeting of SE-112, the SE process was extended to

allow stakeholders to provide further feedback regarding the IESO’s conceptual rule through written submissions, bilateral discussions and an additional meeting of SE-112 (February 14, 2014).

• The IESO’s responses and positions described in this presentation and the

proposed general conduct rule, result in part from the valuable feedback gained in SE-112.

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Stakeholder Feedback on Proposed General Conduct Rule Framework

Stakeholder feedback incorporated directly into proposed GCR language:

1. Enforcement Framework for the General Conduct Rule 2. Efficient, Fair, Competitive and Reliable 3. Legitimate Business Purpose 4. Rule Applicability 5. The IESO-Controlled Grid 6. “Or Other Means” 7. “Attempts” 8. ”Abuse of Market Power”

Stakeholder feedback under consideration outside of proposed GCR language:

1. Use of a Specific Rule 2. Addressing Gaps in the Market Rules 3. Limitation Period 4. Guidelines and Clarifications

Today’s discussion will summarize for Technical Panel’s benefit the critical points made by stakeholders in each of these areas and IESO decisions as it affects rule language

For the complete set of IESO responses to stakeholder comments please visit the SE-112 Webpage. 4

Stakeholder Feedback Incorporated Directly into Proposed GCR Language

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• 1. Enforcement Framework for the

General Conduct Rule (1 of 2)

• Discussions have continued on the question of

how enforcement of the GCR will be conducted – the “governance” discussions.

• APPrO, IESO and OEB representatives have

participated.

• An agreement in principle has been reached that

the IESO believes is satisfactory to the parties involved.

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• 1. Enforcement Framework for the

General Conduct Rule (2 of 2)

Proposed General Conduct Rule Enforcement Process

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For additional details on the proposed general conduct rule enforcement process, please follow this link to the SE-112 website.

• 2. Efficient, Fair, Competitive

and Reliable (1 of 2)

• Stakeholders have concerns that the words

“efficient, fair, competitive and reliable…” are unclear and present participants with significant risk and uncertainty, specifically with reference to this language, should it remain within a positive obligation component of the general conduct rule.

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• 2. Efficient, Fair, Competitive

and Reliable (2 of 2)

On the basis of stakeholder comments the IESO has removed the positive obligation language from the proposed market rule. Additionally, all references to “efficient, fair, competitive and reliable” have been omitted. The IESO has instead framed the proposed market rule, in response to stakeholder comments, more as a set of more specific prohibitions.

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• 3. Legitimate Business Purpose

(1 of 2)

• Some stakeholders believe that a legitimate business purpose

defense clause should be part of the general conduct rule and that it should be explicit in stating that OPA procurement contracts and OEB regulation are legitimate defenses for market participant conduct.

• More specifically, one stakeholder requested that language

should explicitly state that legitimate business purposes include conduct that is ‘required or relatable to’ either procurement contracts as identified in the Electricity Act, 1998

• r a regulation or order of the Ontario Energy Board made in

accordance with s. 78.1 of the Ontario Energy Board Act, 1998.

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• 3. Legitimate Business Purpose

(2 of 2)

The IESO has provided an explicit clause for conduct entirely or predominately connected to the provisions of an OPA contract or OEB regulation. The IESO believes that the explicit incorporation of an LBP clause within the rule itself is an exceptional measure. It also believes that entities subject to investigation under the GCR would have an

• pportunity to argue LBP, in any event.

As discussed with stakeholders, conduct ‘relatable to’ OPA procurement contracts or OEB regulation is considered by the IESO to be overly broad.

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• 4. Rule Applicability

(1 of 2)

• Some stakeholders commented that the general

conduct rule should be applicable to the IESO and expressed questions regarding the possible exclusion of the IESO, OPA and OEFC.

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• 4. Rule Applicability

(2 of 2)

It is not the IESO’s intention to expressly exclude any market participants from the application of this rule, nor however is the general conduct rule intended to concern itself with policy actions of government agencies. To the extent that the OPA and OEFC

• perate in the market as market participants, they could be captured

by the general conduct rule. In light of considerations brought forth by stakeholders through written comments and in meetings with stakeholders, it has been decided that the general conduct rule can be applicable to the IESO. As noted above, the proposed general conduct rule would not apply to policy actions of the IESO, including its role in market rule amendments.

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• 5. IESO-Controlled Grid

(1 of 2)

• A stakeholder did not support the general conduct

rule’s initial application to the reliable operation of the IESO-controlled grid.

• The stakeholder has the position that the operation
• f the IESO-controlled grid is already subject to

‘good utility practice’ – another general rule - and therefore the general conduct rule need not apply to the IESO-controlled grid.

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• 5. IESO-Controlled Grid

(2 of 2)

After consultation with stakeholders on this subject, the IESO has omitted reference to the operation of the IESO- controlled grid from the proposed general conduct rule. While the good utility practice and general conduct rules share similarities, they do not completely overlap. However, the rule is properly situated in relation to conduct relevant to markets.

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• 6. “Or Other Means” (1 of 2)
• Stakeholders commented on section 1.2.4 of the

conceptual general conduct rule, specifically on the inclusion of the phrase “or other means”. Some stakeholders requested that the IESO remove the phrase “or other means” from section 1.2.4 describing the term as “open-ended”, “too broad and vague” and “confusing”.

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• 6. “Or Other Means” (2 of 2)

Acknowledging stakeholders’ concerns on this topic, the IESO has eliminated the “or other means” phrase from the proposed general conduct rule. In order to make the proposed rule language more clear for market participants, sections 10A.1.1 to 10A.1.5 of the proposed rule describe conduct which is specifically prohibited.

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• 7. “Attempts” (1 of 1)
• A stakeholder commented that the concept of

“attempts” of prohibited conduct should be removed from section 1.2. As discussed at the November 29, 2013 meeting of SE-112, and again at the February 14, 2014 meeting, in some circumstances, an attempt to undermine the IESO- administered markets may be conduct that the IESO believes should be addressed, in some circumstances.

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• 8. “Abuse of Market Power” (1 of 2)
• Some stakeholders have expressed concern as to

the precision and pejorative nature of the concept

• f an abuse of market power and have suggested

that the IESO include a definition of ‘market power’ within the language of the general conduct rule, if the concept remains in the rule.

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• 8. “Abuse of Market Power” (2 of 2)

After consultation with stakeholders, the IESO has removed language pertaining to “abuse of market power” from the proposed general conduct rule.

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Stakeholder Feedback Under Consideration Outside of Proposed GCR Language

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• 1. Use of a Specific Rule (1 of 1)
• Stakeholders have requested that the IESO pursue specific

violations of the Market Rules prior to alleging a violation

• f the general conduct rule. In other words, stakeholders

have requested that the IESO be compelled to use the general conduct rule only as a ‘rule of last resort’.

The IESO’s enforcement approach will continue to be guided toward using the rule or rules that best fits the circumstances.

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• 2. Addressing Gaps

in the Market Rules (1 of 2)

• Stakeholders commented that the IESO should continue to

create market rules that prohibit specific behaviour in

• rder to avoid reliance on the use of the general conduct

rule as a ‘catch-all’ type rule.

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• 2. Addressing Gaps

in the Market Rules (2 of 2)

The proposed general conduct rule is not intended to act as an alternative to the refinement of rules which are designed to discretely address a particular matter. It is in the interest of both market participants and the IESO for rules to be specific, where reasonably possible. In addition to the inclusion of a general conduct rule to the Market Rules, as per its current practice, the IESO, through the Technical Panel process, will continue to create market rules, as appropriate, which are explicit with respect to prohibited conduct.

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• 3. Limitation Period

(1 of 2)

• Stakeholders have requested that the IESO include

a limitation period, for example, two years, for the general conduct rule.

• One stakeholder also proposed that the general

conduct rule expressly not have retroactive effect.

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• 3. Limitation Period

(2 of 2)

The IESO recognizes stakeholder requests for a limitation period to be included in the general conduct rule and agrees that a limitation period is a reasonable consideration. However, the IESO has stated that a limitation period should be applicable to all Market Rules, not just the general conduct rule, and should be considered and developed in that context. Additionally, the IESO again confirms that the general conduct rule will not apply retroactive to its implementation date.

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• 4. Guidelines and Clarifications

(1 of 2)

• One stakeholder wrote in support of a well

defined process where market participants may seek clarifications to the General Conduct Rule.

• Discussions have taken place in the SE process

related to the pros and cons of providing different types of advance guidance in specific and general cases.

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• 4. Guidelines and Clarifications

(2 of 2)

The IESO is aware of different options for providing interpretations and guidance and is actively considering whether and how to develop such processes.

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Proposed Market Rule

10A. General Conduct 10A.1 Market participants and the IESO shall not directly or indirectly engage or attempt to engage in conduct, alone or with another person, that they know, or ought reasonably to know, 10A.1.1 exploits the IESO-administered markets, including by, without limitation, exploiting any gap or defect in the market rules; 10A.1.2 circumvents any of the market rules; 10A.1.3 manipulates any of the IESO-administered markets, including by, without limitation, manipulating the determination of a settlement amount; 10A.1.4 undermines 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 10A.1.5 interferes with the determination of a market price or dispatch outcome by competitive market forces. 10A.2 Nothing in section 10A.1 prohibits conduct entirely or predominantly connected to the provisions of 10A.2.1 a procurement contract as defined in the Electricity Act, 1998; or 10A.2.2 a regulation or order of the Ontario Energy Board made in accordance with s. 78.1 of the Ontario Energy Board Act, 1998. For greater certainty, the party alleged to be in breach shall have the burden of establishing any such connection under this section. 10A.3 For the purposes of this section 10A, “conduct” includes acts and omissions, but with respect to the IESO, OPA and OEFC does not include market design, policy, rulemaking or other such initiatives in furtherance of the respective powers, duties and functions of each body under the Electricity Act, 1998 or the market rules.

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Additional Information: Link to SE-112 webpage Link to SE-112 Feb 14, 2014 presentation

Questions?

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