An overview of the operation of Ontario's electricity market

The Ontario electricity market, which opened on May 1, 2002, consists of physical markets for energy and operating reserves as well as a financial market for transmission rights, administered by the independent electricity market operator (IMO). Bids for energy and operating reserves from inside Ontario are settled based on a uniform pricing mechanism; however, import/export of electricity and applicable operating reserves through 12 intertie zones from/to New York, Michigan, Minnesota, Manitoba and Quebec control areas are priced differently. Energy and operating reserves markets are designed based on two time-frames, pre-dispatch and real-time, as well as two optimization procedures, unconstrained and constrained. Financial transmission rights are auctioned for short-term (one month) and long-term (one year), and provide a limited risk-hedging mechanism for holders. In this paper an overview of the market structure, basic features and the operational aspects of the Ontario market is discussed.