Market Efficiency - Pricing Framework

Review of Price Cap, Price Floor and Shortage Pricing

On Aug. 28, 2020 we posted our Pricing Framework Recommendation to the Minister report as well as the Minister’s letter accepting the AESO’s recommendation that no change is required to the energy-only market pricing framework at this time. The report reflects the AESO’s view that ensuring certainty and stability in the market is essential to achieve the appropriate level of investment to meet future electricity needs, while ensuring reliability. To review the report, click here.

In order to meet the government’s direction, while also ensuring stability and certainty in the energy-only market structure, the AESO evaluated the ability of the current pricing framework in the energy market to maintain resource adequacy and economic efficiency in both the short and long term, and explore options to address deficiencies or increase efficiency in the current energy-only market pricing framework. Administrative price mechanisms, such as the current price cap, offer cap and price floor, must be set at levels to allow for efficient market outcomes while also protecting consumers from cost risk.

Additional information on the 2020-2021 Plan for Market-Related Initiatives is available here.