The IESO Technical Panel approved for posting rule changes to reduce unfulfilled capacity commitments by making it easier for participants to transfer their obligations and harder to buy them out.

The panel on June 10 approved posting the revisions for comment by voice vote with no objections or abstentions.

IESO conducts a capacity auction once a year, and suppliers can bid on obligations for either of two periods — summer (defined as May 1 to Oct. 31) or winter (Nov. 1 to April 30) — or for both. Auctions are conducted in late November for the capacity periods beginning the next year. This year’s auction will be held Nov. 26-27 for the periods beginning May 1 and Nov. 1, 2026, with results posted Dec. 4. 

Resources are expected to participate in the energy market during the periods for which they purchased obligations through the auction, or they can buy out or transfer their obligations. Buyouts are subject to a charge equal to 30% of the total obligation value. 

According to IESO, the market saw its “highest level of competition ever” in 2024, with 2,122.2 MW secured for summer and 1,524.6 MW for winter at $332.39/MW-day and $139/MW-day, respectively. It said it secured 15% more capacity than in 2023’s auction, at lower prices. 

But Adam Cumming, IESO market rules adviser, told the Technical Panel that every year “a small number of resources” — representing about 100 MW, according to the ISO — are unable to fulfill their obligations “for a variety of reasons.” Among these is simply not completing the necessary registration requirements during the forward period (after the auction but before the obligation period) by the posted deadlines. 

Unfulfilled obligations reduce “the capacity available to the IESO and distorts auction clearing price signals,” the ISO said in a presentation in May. 

Among the changes the panel approved for posting is an increase in the buyout charge to 50%, intended to deter participants from taking on commitments they cannot meet and incentivize those with obligations to fulfill them. “Hopefully with the increased costs, people will be a little bit more careful in choosing their obligation size,” Cumming said. 

Suppliers who fail to complete the registration process no longer would have the option of simply forfeiting their deposits and would be required to buy out their obligations. “This change will ensure that all instances of unfulfilled commitments are subject to the buyout charge process,” the ISO said. 

The revisions also would remove the requirement that obligations can only be transferred between resources with the same attributes. 

IESO told the panel that stakeholders are supportive of the changes after working on them for over a year; in the case of the buyout charge increase, the figure was proposed by capacity market participants themselves, it said. 

The revisions will be open for comment until June 24. The panel will vote July 15 on recommending them to the Board of Directors for approval at its meeting in August.