Ontario Energy Trading International Corp. and the Ontario independent electricity market operator (IMO) are fighting back against charges made by Consumers Energy Co. that the IMO is failing to offer participants in the province’s newly deregulated electricity market open access transmission service on a comparable, non-discriminatory basis.

The spat stems in part from a decision issued by the Federal Energy Regulatory Commission in April of this year in which it conditionally granted Ontario Energy Trading market-based rate authority. Ontario Energy Trading is a power marketing subsidiary of Ontario Power Generation.

Also in play is the structural unbundling of Ontario Hydro, a government-owned utility that formerly provided generation, transmission and distribution services within Ontario on a bundled basis. Ontario Hydro transferred its generation assets to Ontario Power Generation and its transmission assets to Hydro One.

In seeking rehearing of FERC’s April order, Consumers Energy said that while the province of Ontario may have functionally unbundled the former Ontario Hydro, it has done so in a way that has allowed it to retain control of that entity’s assets. Consumers Energy points out, for example, that the province alone has the power to appoint IMO’s board of directors.

Consumers Energy told FERC that Ontario Energy Trading is affiliated with both Hydro One and the IMO. In addition, the utility argued that Ontario Energy Trading has not demonstrated that the IMO will offer reciprocal, open access transmission service and therefore the Commission should have rejected Ontario Energy Trading’s application for market-based rates.

Consumers Energy believes that the design of the IMO-administered, bid-based markets does not allow for the reservation of long-term firm transmission capacity at a fixed price.

FERC in early July said that it would allow for the filing of briefs to address the issue of whether IMO offers open access transmission service on a comparable, non-discriminatory basis for wheeling through and out of Ontario.

In response, Ontario Energy Trading told the Commission that, as far as it knows, Consumers Energy is the only entity to complain about the availability of open access transmission under IMO’s market rules. According to Ontario Energy Trading, Consumers Energy submitted a transmission request “in a format that it should have known was incompatible with the market rules and then filed its protest regarding transmission access.”

Ontario Energy Trading said that IMO’s web site shows that Consumers Energy has not actively participated in either the Ontario energy or transmission rights markets. “Ontario Energy [Trading] believes that Consumers has no real interest in obtaining transmission service from the IMO, but rather is focused on protecting itself from competition from OPG [Ontario Power Generation] by making baseless allegations regarding the IMO.”

Ontario Energy Trading said that FERC’s policy is to encourage competition in the U.S., “not to protect United States entities from competition.” The Canadian power marketer said that the “facts clearly show” that the IMO market rules offer comparable, nondiscriminatory open access transmission.

The IMO itself also offered up a vigorous defense of the market it oversees. IMO said that the essence of Consumers Energy’s argument “appears to be that any market design that does not allow explicit reservation of transmission service is somehow discriminatory and unacceptable.” But the grid operator said that the “evidence shows a different picture.”

Specifically, IMO pointed out that there are 27 U.S.-based entities that already hold or have applied to the Ontario Energy Board (OEB) for a wholesale marketer’s license. In addition, eight of the 27 U.S.-based entities either holding a license or awaiting OEB approval are active in the IMO-administered markets.

Moreover, IMO said that Consumers Energy’s assertions about the grid operator not offering transmission reservation service on a reciprocal, nondiscriminatory basis “reflects Consumers’ persistent refusal to understand, or even acknowledge, that the Ontario market design offers the desired service by a different process than” it describes. While Consumers Energy is correct in its “narrow interpretation” that the Ontario market design does not include separate transmission reservation, the company is “totally incorrect” on the broader issue of open access, IMO said.

IMO pointed out that its market design is a bid-based market. “As such, market participants gain access to the transmission system by successfully bidding to inject or withdraw from the energy market.” The grid operator believes that this approach is a “superior method to provide transmission service to meet the needs of diverse groups of transmission customers.”

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