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General Conduct Rule

The General Conduct Rule (GCR) is intended to help market participants understand their obligation to abstain from conduct that undermines the well-functioning of the IESO-administered markets. It creates a fair playing ground for everyone involved.

Background

Electricity markets are complex, and the IESO-administered market in Ontario is no exception. It’s important for the Market Rules to evolve as the market design, grid and behaviour of market participants evolve. But it’s impossible for market rule designers to foresee all possible conduct which may lead to undesirable outcomes. This leaves the real possibility of unintended gaps in the Market Rules. ​

The IESO’s authority to enforce compliance is limited to existing Market Rules and reliability standards, which until the passing of the GCR, in many instances, were focused on discrete matters and not explicitly aimed at the larger objectives of the market. Conduct which runs counter to the larger objects can undermine confidence in the energy markets, and would fail to promote economic efficiency and sustainability. Costs and losses imposed by such conduct are ultimately passed on to consumers through higher prices and/or uplifts. The GCR captures such circumstances, and speaks in broad terms in order to be applicable across a wide array of possible scenarios. It’s designed specifically to address exploitation, circumvention, manipulation or anti-competitive conduct.

The General Conduct Rule:

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,

  • exploits the IESO-administered markets, including by, without limitation, exploiting any gap or defect in the market rules;

  • circumvents any of the market rules;

  • manipulates any of the IESO-administered markets, including by, without limitation, manipulating the determination of a settlement amount;

  • undermines through any means the ability of the IESO to carry out its powers, duties or functions under the Electricity Act, 1998 or the market rules; or interferes with the determination of a market price or dispatch outcome by competitive market forces.

(SOURCE: http://www.ieso.ca/Documents/Amend/mr2014/MR-00407-R00.pdf)

Consistency with other jurisdictions

The possibility of harmful conduct transcends any particular market design and until now, Ontario was the only electricity market in North America without such a rule. The establishment of a GCR in Ontario is consistent with approaches taken in other jurisdictions and markets. Moreover, many Ontario market participants operate in other electricity markets, and indeed transact between Ontario and those other markets, and are already subject to similar principle based rules elsewhere.

Closing the enforcement gap

The GCR establishes a clear enforcement path under the Market Rules with principle-based prohibitions, including exploitation and manipulation, allowing for sanctions to be applied that enhance accountability and deter non-compliance.

GCR Stakeholder Engagement Process

A rigorous stakeholder engagement process informed the development of the GCR. The process (SE-112) involved a number of stakeholders as well as numerous meetings with the IESO's Technical Panel.   

It began with the development of a position paper , detailing the objectives of a general conduct rule and why such rules are commonly employed in electricity markets. Input from market participants was a significant part of this process, to ensure that the rule was workable and understood by all.

A chronology of activities related to the GCR stakeholder engagement process is available here.

Dispute Resolution Process

An alternative dispute resolution mechanism  gives market participants the option to make a one-time election to either pursue arbitration under the market rules or to request the IESO apply to the Ontario Energy Board (OEB) to determine whether a breach has occurred under the GCR.

The Ontario Energy Board (OEB) issued a Decision and Order, approving amendments to the IESO's licence, to enable this process for potential breaches of the GCR