Issue 10: Systemic Over-forecasting of Pre-dispatch Demand

Description The Market Surveillance Panel (MSP), in all of its periodic reports, noted that the one-hour ahead pre-dispatch demand is persistently higher than the real-time peak demand. In its latest report, the MSP has further noted that this upward bias in demand forecasting is most prevalent in certain key hours, namely hours 23 and 24. The MSP has identified this persistent over-forecast of demand as a problem for the following reasons. First, the persistent over-forecast of the realtime peak-demand in pre-dispatch results in a persistent positive difference between the pre-dispatch price and the real-time prices (HOEP or even peak MCP). This provides market participants with an inaccurate market signal from which to plan their operations. Second, the persistent over-forecast of demand means that too many imports (too few exports) may be schedule in pre-dispatch than what are required (efficient) in real-time. Similarly, the over-forecast of demand may affect the start (shut-down) decision of fossil units with the units either starting sooner or shutting down later than is efficient given their start-up costs and speed-no load costs. Finally, persistent and predictable differences in the pre-dispatch demand may induce off-setting flows of imports and exports that do not contribute towards the efficient operation of the market and result in unnecessary Intertie Offer Guarantee payments.1