Comments on Revised straw proposal

1. Please provide a summary of your organization’s general comments on the Revised Straw Proposal (RSP) and the meeting and materials shared on September 11th.

The California Community Choice Association (CalCCA) appreciates the opportunity to provide comments on the California Independent System Operator’s (CAISO’s) RSP and the September 11, 2024, stakeholder meeting. CalCCA supports the CAISO's revised schedule, recognition of this effort as an interim solution, and commitment to conducting a subsequent effort to more comprehensively review storage bid cost recovery (BCR) issues. CalCCA supports the direction of the RSP, which allows for the exploration of the CAISO’s proposed solution and alternatives presented by parties. More holistic solutions are likely necessary to ensure storage resources can fully represent real-time conditions in their bids.

2. Please provide your organization’s comments regarding the changes on the RSP relative to the Issue Paper & Straw Proposal (IPSP).

CalCCA supports the direction of the CAISO’s RSP. The RSP does not advance a single proposed solution. Instead, it recognizes the impacts the multi-interval optimization (MIO) and market power mitigation (MPM) can have on the dispatch of storage and puts forth multiple options for stakeholders to consider, including the CAISO’s proposed solution and alternative solutions put forth by stakeholders. The CAISO has legitimate concerns that (1) storage assets are not exposed to real-time prices for deviating from day-ahead schedules, and (2) storage assets are incentivized to bid strategically to maximize the combined BCR and market payment.[1] The CAISO’s proposed solution and the alternative solutions should be evaluated based upon how well they can address these concerns in the interim. More holistic solutions are likely necessary to fully resolve these concerns, however, by ensuring storage resources can fully represent real-time conditions in their bids.

The CAISO’s proposed solution to redefine dispatch that is unavailable due to state-of-charge (SOC) constraints as ineligible for BCR has the “fundamental assumption” that storage dispatch is optimal for the binding interval, which is not always the case under the MIO. The result, the CAISO explains, is that the Proposed Solution would not significantly reduce BCR payments and would be challenging to implement. Additionally, CalCCA is still concerned that the CAISO’s proposal does not explicitly target instances when BCR is unwarranted.[2] For these reasons, CalCCA supports the parties with alternative proposals working together to identify areas of alignment among their alternatives, which appear numerous, and areas of unalignment (e.g., whether to apply the alternative calculations in all intervals or only the binding interval and whether to use default energy bid (DEB) values in the calculation) so that the CAISO and parties can work towards building a consensus proposal.

[1]            RSP at 9.

[2]            CalCCA Comments on Alternative Proposals (Aug. 26, 2024): https://stakeholdercenter.caiso.com/Comments/AllComments/6a3c5d4b-3018-4a56-91bb-9d0b341caac2#org-adb2662f-ca44-469e-9452-b6a7a59b7f95.

3. Please provide your organization's comments regarding the ISO Proposed Solution and the relevant discussion in sections 5 and 6 of the RSP.

See response in Section 2.

4. Please provide your organization's comments regarding the CESA Alternative Solution, its variations, and the relevant discussion in sections 5 and 6 of the RSP.

See response in Section 2.

5. Please provide your organization's comments regarding the Vistra Alternative Solution and the relevant discussion in sections 5 and 6 of the RSP.

See response in Section 2.

6. Please provide your organization's comments regarding the issues related to local market power mitigation (LMPM) as described in the RSP and in the September 11th materials.

CalCCA appreciates the analysis provided by DMM related to LMPM and its impacts on storage bids and dispatches. The data revealed that the increase in storage dispatch due to mitigation is small, especially in the hours prior to the net load peak hours. BCR could be warranted in these cases, even if infrequent, and the CAISO’s solution should consider these cases. Until the CAISO can develop improved storage DEBs that better reflect potential opportunity costs of dispatching storage in real-time in advance of day-ahead schedules, the CAISO should consider instances of mitigation when determining if BCR is warranted. CalCCA agrees with CAISO that the way the CAISO considers mitigation “will be largely dependent on further analysis and the solution pursued.”[1]

[1]            RSP at 21.

7. Please provide your organization's comments regarding the issues related to applicable intervals and multi-interval optimization (MIO) as described in the RSP and in the September 11th materials.

CalCCA appreciates the examples presented by CAISO explaining the issues for storage BCR related to the MIO and the analysis presented by DMM demonstrating the drivers of real-time BCR from SOC induced buy/sell backs. DMMs’ analysis demonstrates that BCR for battery storage with SOC induced buy/sell backs is primarily driven by negative revenues, not the resources’ bid costs. This analysis highlights the importance of ensuring the solution recognizes when BCR is warranted or unwarranted. For example, if the CAISO market charges a storage resource out-of-market based on advisory prices that do not materialize later in the day and this results in negative revenues, the MIO could be driving warranted BCR.

8. Please provide any other proposals or variations of a proposal that your organization considers the ISO should assess. Please include as much detail as possible.

CalCCA has no other proposals at this time.

9. Please provide your organization’s comments regarding the Governance Classification.

CalCCA supports this initiative’s Joint Authority Governance Classification.

10. Please provide any additional comments, feedback, or examples regarding the stakeholder meeting. You may upload examples or data using the “Attachments” field below.

CalCCA has no additional comments at this time.

1. Please provide a summary of your organization’s general comments on the Revised Straw Proposal (RSP) and the meeting and materials shared on September 11th.

Please see the attached Comments from the Department of Market Monitoring.

2. Please provide your organization’s comments regarding the changes on the RSP relative to the Issue Paper & Straw Proposal (IPSP).

Please see the attached Comments from the Department of Market Monitoring.

3. Please provide your organization's comments regarding the ISO Proposed Solution and the relevant discussion in sections 5 and 6 of the RSP.

Please see the attached Comments from the Department of Market Monitoring.

4. Please provide your organization's comments regarding the CESA Alternative Solution, its variations, and the relevant discussion in sections 5 and 6 of the RSP.

Please see the attached Comments from the Department of Market Monitoring.

5. Please provide your organization's comments regarding the Vistra Alternative Solution and the relevant discussion in sections 5 and 6 of the RSP.

Please see the attached Comments from the Department of Market Monitoring.

6. Please provide your organization's comments regarding the issues related to local market power mitigation (LMPM) as described in the RSP and in the September 11th materials.

Please see the attached Comments from the Department of Market Monitoring.

7. Please provide your organization's comments regarding the issues related to applicable intervals and multi-interval optimization (MIO) as described in the RSP and in the September 11th materials.

Please see the attached Comments from the Department of Market Monitoring.

8. Please provide any other proposals or variations of a proposal that your organization considers the ISO should assess. Please include as much detail as possible.

Please see the attached Comments from the Department of Market Monitoring.

9. Please provide your organization’s comments regarding the Governance Classification.

Please see the attached Comments from the Department of Market Monitoring.

10. Please provide any additional comments, feedback, or examples regarding the stakeholder meeting. You may upload examples or data using the “Attachments” field below.

Please see the attached Comments from the Department of Market Monitoring.

1. Please provide a summary of your organization’s general comments on the Revised Straw Proposal (RSP) and the meeting and materials shared on September 11th.

Energy Division (ED) Staff appreciate the opportunity to comment on the RSP and the stakeholder process.

In reviewing the RSP, ED Staff finds that although it provides some useful analysis and examples, unfortunately the proposed alternative solutions would not address the problem statement CAISO laid out for this initiative and could actually lead to considerable confusion.

The initial stakeholder workshop defined this initiative’s objective as working “with stakeholders to identify the cases where BCR should be paid by developing a robust set of provisions that recognize the unique characteristics of storage resources.”[1] In other words, the aim was to determine the circumstances under which storage should and should not receive BCR. 

However, the alternative solutions proposed in the RSP would only slightly reduce unwarranted BCR payments, rather than eliminate them. This would not address the stated aim of the stakeholder process – determining when BCR was warranted – but would instead simply determine the magnitude of BCR payments. Furthermore, the alternative solutions would only minimally reduce the magnitude of the BCR payments – for example, the CESA proposals would only reduce a BCR payment by 5-10% or less and would thereby leave customers exposed to potentially higher and perhaps unwarranted costs. Finally, if the alternative solutions do not eliminate unwarranted BCR payments but simply reduce them, then this outcome would still result in inefficient outcomes that could pose a risk to reliability.

ED Staff continues to support CAISO’s initial proposed solution to redefine dispatch unavailable due to state of charge constraints as “non-optimal energy,” which would be ineligible for BCR payments. ED staff supports this solution as it would ensure that the unavailable energy from a storage asset is treated equally to unavailable energy from a conventional thermal asset. If, however, CAISO moves forward on the alternative proposals, then it should clearly explain that the initiative’s objective has changed and why, and clearly state what the new objective is.

[1] Storage Bid Cost Recovery (BCR) and Default Energy Bid (DEB) Enhancements Initial Workshop, July 8, 2024, p.14.

2. Please provide your organization’s comments regarding the changes on the RSP relative to the Issue Paper & Straw Proposal (IPSP).

3. Please provide your organization's comments regarding the ISO Proposed Solution and the relevant discussion in sections 5 and 6 of the RSP.

4. Please provide your organization's comments regarding the CESA Alternative Solution, its variations, and the relevant discussion in sections 5 and 6 of the RSP.

5. Please provide your organization's comments regarding the Vistra Alternative Solution and the relevant discussion in sections 5 and 6 of the RSP.

6. Please provide your organization's comments regarding the issues related to local market power mitigation (LMPM) as described in the RSP and in the September 11th materials.

7. Please provide your organization's comments regarding the issues related to applicable intervals and multi-interval optimization (MIO) as described in the RSP and in the September 11th materials.

8. Please provide any other proposals or variations of a proposal that your organization considers the ISO should assess. Please include as much detail as possible.

9. Please provide your organization’s comments regarding the Governance Classification.

10. Please provide any additional comments, feedback, or examples regarding the stakeholder meeting. You may upload examples or data using the “Attachments” field below.

1. Please provide a summary of your organization’s general comments on the Revised Straw Proposal (RSP) and the meeting and materials shared on September 11th.

The Public Advocates Office at the California Public Utilities Commission (Cal Advocates) appreciates the opportunity to comment on the California Independent System Operator Corporation’s (CAISO) September 4, 2024 Revised Straw Proposal for Track 1 (RSP).  Cal Advocates’ interest in this initiative is to protect ratepayers from unwarranted bid-cost recovery (BCR) payments, to ensure that storage resources are properly incentivized to operate efficiently, effectively, and at the lowest cost, and to prevent market gaming that would further inflate BCR costs that ratepayers must bear.

Cal Advocates strongly supports CAISO’s objective to eliminate BCR for energy storage resources when operator bidding behavior results in a state-of-charge (SOC) that is insufficient to meet day-ahead (DA) awards.[1]  Energy storage currently enjoys a shield from real-time (RT) locational marginal prices (LMPs).  This protection from risk removes incentives in the RT market for energy storage resources to bid in a manner that maintains SOC to deliver on DA market awards.[2]   Cal Advocates also appreciates CAISO’s expeditious efforts to eliminate the possibility that BCR payments can be gamed through the manipulation of real-time (RT) bids to maximize BCR payments.[3]

However, CAISO’s revised proposal to apply a modified BCR formula to all RT intervals fails to resolve the fundamental concern of unwarranted BCR, as CAISO acknowledges.[4]  Analysis from the Department of Market Monitoring (DMM) at CAISO shows that large BCR payments driven by differences in DA and RT LMPs will persist under CAISO’s revised proposal.[5]  As such, Cal Advocates opposes the RSP.

Instead, CAISO should adopt DMM’s ready-to-hand recommendation[6] to eliminate most RT BCR for energy storage as an interim solution.  The DMM’s recommendation is the only remaining near-term solution that would simultaneously resolve the concerns of unwarranted BCR payments due to insufficient SOC and gaming to unduly inflate BCR payments.  Cal Advocates would support a sunset provision for the interim rule to encourage CAISO and parties to work to develop a mutually agreeable solution to comprehensively reform BCR rules.  CAISO should adopt the DMM’s recommendation and use Track 2 of this initiative to design a solution that appropriately corresponds to the unique characteristics of energy storage resources, such as energy limitation, fast response, and lack of commitment costs. 

Cal Advocates opposes the various proposals by the California Energy Storage Alliance (CESA), Vistra, LLC (Vistra), Pacific Gas and Electric and Electric Company (PG&E), and the Western Power Trading Forum (WPTF),[7] because under those proposals energy storage would retain its eligibility for unwarranted BCR payments.  Unwarranted BCR payments under any of the proposed modifications to the BCR formula will be significant when there is a large difference between the RT LMP and the DA LMP or the default energy bid (DEB).  Moreover, the fixed DA DEB should not be used in any modified BCR formula until the DEB captures time-dependent opportunity costs before and after peak hours.  CAISO should conduct reform of storage DEBs in Track 2 in parallel with reform of storage BCR rules and DEBs should ultimately reflect dynamic opportunity costs, as recommended by the DMM.[8]

[1] CAISO, Storge Bid Cost Recovery and Default Energy Bid Enhancements, Revised Straw Proposal for Track 1, September 4, 2024 (RSP) at 9.  Available at: https://stakeholdercenter.caiso.com/InitiativeDocuments/Revised-Straw-Proposal-Storage-Bid-Cost-Recovery-and-Default-Energy-Bids-Enhancements-Sep-04-2024.pdf.

[2] CAISO, Storage Bid Cost Recovery and Default Energy Bid Enhancements, Issue Paper & Straw Proposal for Track 1, July 26, 2024 (IPSP) at 9.  Available at: https://stakeholdercenter.caiso.com/InitiativeDocuments/Issue-Paper-and-Straw-Proposal-Storage-Bid-Cost-Recovery-and-Default-Energy-Bids-Enhancements-Jul-26-2024.pdf.

[3] IPSP at 9. 

[4] RSP at 13.

[5] Department of Market Monitoring, Analysis of battery bid cost recovery and bid mitigation issues, Meeting on Revised Straw Proposal, September 11, 2024 (DMM RSP Presentation) at 3.  Available at: https://stakeholdercenter.caiso.com/InitiativeDocuments/Presentation-Battery-Bid-Cost-Recovery-and-Mitigation-Data-DMM-Sep-11-2024.pdf.

[6] Department of Market Monitoring, Battery BCR Issues and Recommendations, Storage BCR and DEB Enhancements Initial Workshop, July 8, 2024 (DMM Initial Workshop Presentation) at 8.  Available at: https://stakeholdercenter.caiso.com/InitiativeDocuments/Presentation-Battery-Bid-Cost-Recovery-and-Recommendations-DMM-Jul-8-2024.pdf.

[7] CAISO, Revised Straw Proposal Storage BCR and DEB Enhancements Stakeholder Meeting, September 11, 2024 (RSP Presentation) at slides 17, 21, and 25.  Available at: https://stakeholdercenter.caiso.com/InitiativeDocuments/Presentation-Storage-Bid-Cost-Recovery-and-Default-Energy-Bids-Enhancements-Sep-11-2024.pdf.

[8] Department of Market Monitoring, Comments on the July 8, 2024 BCR and DEB workshop, July 18, 2024 at 5.  Available at: https://stakeholdercenter.caiso.com/Comments/AllComments/f7f6fb35-66cd-4279-821d-8711799e4468.

2. Please provide your organization’s comments regarding the changes on the RSP relative to the Issue Paper & Straw Proposal (IPSP).

Cal Advocates supported CAISO’s proposal in the ISPS to reclassify energy associated with SOC constraints during the real-time binding interval as non-optimal, and thus ineligible for BCR, when the SOC is at its minimum or maximum value at the start of the RT binding interval.[1]  Relative to the DMM’s recommendation to eliminate most RT BCR for energy storage resources,[2] Cal Advocates considered the CAISO proposal to be “a measured and sufficiently well-targeted approach.”[3]

However, CAISO subsequently determined that the minimum or maximum SOC triggering condition may not occur due to the complex inter-temporal dynamics of multi-interval optimization (MIO).  The MIO may hold a SOC close to its minimum or maximum for one or more intervals, even when uneconomic, to dispatch the resource in future advisory intervals.[4]  CAISO states that it is possible for a storage asset to be near its SOC constraint in the binding interval but not actually reach the limit for several intervals.[5]

As an alternative, CAISO proposes to apply a modified BCR formula to all intervals, rather than just the binding RT interval.[6]  Although the modified formula may eliminate or mitigate the impact of the RT bid on the calculated BCR payment, storage would remain eligible for BCR payments when unable to meet DA schedules due to insufficient SOC, and thus remain shielded from RT prices.   Consequently, unwarranted BCR would still be paid to storage when storage is unable to perform to meet DA schedules due to insufficient SOC. This unwarranted cost would be shifted to ratepayers.

The modified BCR formula CAISO proposes would be of the form:

RT BCR = (RT dispatch – DA schedule) * ((RT Bid Proxy) – RT LMP),

where RT dispatch and DA schedule are in megawatts (MW), and the RT Bid Proxy and the RT LMP are in dollars per megawatt-hour ($/MWh).

The CESA proposal would set the RT Bid Proxy to the maximum of the DA LMP, RT DEB, or RT Bid in the case of the buy-back of a discharge DA schedule.[7]  The PG&E proposal would set the RT Bid Proxy to maximum of the DA LMP or RT Bid.[8]  The Vistra proposal would set the RT Bid Proxy to the DEB,[9] and the WPTF proposal would replace with RT Bid with either the DEB or the DA LMP.[10]

However, CAISO has observed that RT LMPs remain significantly higher than DA LMPs for a significant portion of the day under stressed grid conditions.[11]  CAISO analysis of a set of high priced days between 2022 and 2024 also indicates that the DEB does not regularly rise above $1,000/MWh during conditions when RT prices rise above $1,000/MWh.[12]  DMM’s analysis confirms these observations that the majority of BCR payments induced by insufficient SOC result from differences in the DA LMP and the RT LMP, rather than from differences between RT Bids and RT LMPs.[13]  As such, CAISO’s proposal to rely on the modified BCR formula would not mitigate large and unwarranted BCR payments.

Cal Advocates is also concerned that CESA and PG&E retain the RT Bid as a formula parameter.  While application of the “maximum” operator to the RT Bid, DEB, and DA LMP would mitigate the impact of the RT Bid, it would not eliminate it.  The CESA and PG&E proposals would incentivize storage resources to bid as close to the DEB or the DA LMP as possible to maximize BCR payments, rather than in a manner to fully represent their opportunity costs and to maintain sufficient SOC to meet their DA awards.   These insufficient incentives invite strategic bidding while continuing to shield storage resources from RT prices.

Cal Advocates opposes CAISO’s RSP because it does not comprehensively address unwarranted storage BCR.  Instead, CAISO should adopt the DMM’s recommendation to eliminate most RT BCR payments to storage as an interim solution.[14]  The DMM’s recommendation is the only viable near-term option to address CAISO’s dual concerns of unwarranted BCR and gaming.  Cal Advocates recommends that CAISO implement the DMM solution on an interim basis with a sunset provision because the DMM solution affords the most protection against unwarranted BCR and unreasonable shifts of BCR costs to ratepayers.  Thereafter, CAISO should set out a schedule for Track 2 of this initiative in which stakeholders can consider a comprehensive solution in a timely manner to develop BCR rules that are appropriate for the unique characteristics of energy storage.  CAISO and stakeholders should focus on developing methodologies in the MIO to identify the intervals that contribute to SOC insufficiency.  This would enable CAISO to implement its original proposal to classify energy as non-optimal in binding and advisory intervals when associated with SOC constraints.  CAISO states that similar methodologies were successfully applied to implement the Ancillary Services SOC constraint (ASSOC) and should also be possible to implement for BCR.[15]

If CAISO adopts the revised proposal in the RSP, at a minimum CAISO should include three key components.  First, CAISO should remove the RT Bid parameter in the modified bid formula and should apply the formula to all intervals.  Second, CAISO should not use the DEB in the modified BCR formula because it does not represent hourly storage opportunity costs, and in particular may under-represent opportunity costs leading up to peak demand hours.  Instead, the hourly DA LMP offers a superior, if still imperfect, representation of dynamic opportunity costs because it captures the optimized dispatch of storage resources in the 24-hour DA timeframe.  Third, CAISO should apply the minimum or maximum SOC trigger condition at the start of the binding interval.  Although the condition may not identify all intervals in which unwarranted BCR occurs, it would provide an additional layer of protection against unwarranted BCR when the condition is triggered.

[1] Cal Advocates comments on the IPSP, August 8, 2024 (Cal Advocates Comments on IPSP) at 1.  Available at: https://stakeholdercenter.caiso.com/Comments/AllComments/0fd91812-9653-4034-853c-d7f32a932919.

[2] DMM Initial Workshop Presentation, July 8, 2024 at 8. 

[3] Cal Advocates Comments on IPSP at 1.

[4] RSP at 21.

[5] RSP at 23.

[6] RSP at 23-24.

[7] RSP Presentation at 17.

[8] RSP Presentation at 21.

[9] RSP Presentation at 26.

[10] RSP Presentation at 24.

[11] CAISO, Energy Storage and Distributed Resource Phase 4 Final Proposal, August 21, 2020 (ESDER 4 Final Proposal) at 30-31, available at: https://stakeholdercenter.caiso.com/StakeholderInitiatives/Energy-storage-and-distributed-energy-resources; and Rule for Bidding Above the Soft Offer Cap Final Proposal, May 17, 2024 (Soft Offer Cap Final Proposal) at 16, available at: https://stakeholdercenter.caiso.com/InitiativeDocuments/Final-Proposal-Price-Formation-Enhancements-May17-2024.pdf.

[12] Soft Offer Cap Final Proposal at 16.  With the elimination of the soft offer bid cap for strorage in the RT market, RT prices may more frequently reach the hard offer cap of $2,000/MWh due to storage bidding behavior.

[13] DMM RSP Presentation at 3.

[14] DMM Initial Workshop Presentation at slide 8.

[15] RSP at 23.

3. Please provide your organization's comments regarding the ISO Proposed Solution and the relevant discussion in sections 5 and 6 of the RSP.

See Cal Advocates’ response to Question 2.

4. Please provide your organization's comments regarding the CESA Alternative Solution, its variations, and the relevant discussion in sections 5 and 6 of the RSP.

See Cal Advocates’ response to Question 2.

5. Please provide your organization's comments regarding the Vistra Alternative Solution and the relevant discussion in sections 5 and 6 of the RSP.

See Cal Advocates’ response to Question 2.

6. Please provide your organization's comments regarding the issues related to local market power mitigation (LMPM) as described in the RSP and in the September 11th materials.

DMM’s analysis continues to indicate that incremental RT energy associated with bids that were lowered in the LMPM process was very low in 2022 and 2023.[1]  CAISO’s analysis of mitigation in 2023 and 2024 is consistent with DMM’s conclusion.[2]  As such, mitigation of storage resource bids may not significantly impact storage BCRs.  In any case, consideration of mitigation issues should not delay the implementation of CAISO’s proposed solution.  It is appropriate to consider how bid mitigation or other CAISO market actions could impact storage SOC and BCR, but these issues should be considered in the subsequent track of this initiative in parallel with modifications to DEBs and as part of a long-term, durable, and fundamental reform of storage BCR.

[1] DMM, 2023 Annual Report on Market Issues and Performance, July 29, 2024 at 208.  Available at: https://www.caiso.com/documents/2023-annual-report-on-market-issues-and-performance.pdf; and DMM RSP Presentation at 2.   

[2] CAISO, BCR and DEB workshop, August 19, 2024 at 30.  Available at: https://stakeholdercenter.caiso.com/InitiativeDocuments/Presentation-Storage-Bid-Cost-Recovery-and-Default-Energy-Bids-Enhancements-Aug-19-2024.pdf.

7. Please provide your organization's comments regarding the issues related to applicable intervals and multi-interval optimization (MIO) as described in the RSP and in the September 11th materials.

See Cal Advocates’ response to Question 2.

8. Please provide any other proposals or variations of a proposal that your organization considers the ISO should assess. Please include as much detail as possible.

See Cal Advocates’ response to Question 2.

9. Please provide your organization’s comments regarding the Governance Classification.

Cal Advocates does not have comments at this time.

10. Please provide any additional comments, feedback, or examples regarding the stakeholder meeting. You may upload examples or data using the “Attachments” field below.

 Cal Advocates does not have additional comments or feedback at this time.

1. Please provide a summary of your organization’s general comments on the Revised Straw Proposal (RSP) and the meeting and materials shared on September 11th.

The California Energy Storage Alliance appreciates the opportunity to comment on the Storage BCR and DEB Enhancements revised straw proposal.

As stated at the beginning of this initiative, BCR is a very complex market design that is not conducive to an accelerated stakeholder process.  The CAISO’s near-term focus should be on developing a settlement rule that prevents inflated BCR payments when the generic SOC constraint is binding whether caused by strategic bidding or inadvertently.  The alternative proposals with additional improvements can address this issue.  The CAISO must then holistically review storage BCR, storage real-time DEBs, and the energy storage enhancements initiative to ensure that scheduling coordinators of storage resource can represent real-time conditions in their real-time energy bids.

2. Please provide your organization’s comments regarding the changes on the RSP relative to the Issue Paper & Straw Proposal (IPSP).

No comment. 

3. Please provide your organization's comments regarding the ISO Proposed Solution and the relevant discussion in sections 5 and 6 of the RSP.

CESA does not believe observing the SOC is an implementable trigger for settlements calculations.  In addition, simply looking for instances where the SOC is 0% or 100% is overly simplistic.

4. Please provide your organization's comments regarding the CESA Alternative Solution, its variations, and the relevant discussion in sections 5 and 6 of the RSP.

CESA reiterates that its proposal recommended identifying 5-minute intervals where the buy-back or sell-back is caused by the generic SOC constraint binding when the dispatch condition meets three criteria, not by observing the actual SOC.  The CESA proposal did not look at the storage resource’s SOC.  An interval where a buy-back of a day-ahead discharge schedule occurred needs to meet three conditions: (1) a day-ahead schedule or base schedule to discharge, (2) the real-time dispatch to discharge is lower than the day-ahead or base schedule, and (3) the real-time dispatch does not charge the resource.  Likewise, an interval where a sell-back of a day-ahead charge schedule occurred needs to meet three conditions: (1) a day-ahead schedule or base schedule to charge, (2) the real-time dispatch to charge is lower than the day-ahead or base schedule, and (3) the real-time dispatch does not discharge the resource.

5. Please provide your organization's comments regarding the Vistra Alternative Solution and the relevant discussion in sections 5 and 6 of the RSP.

No comment.

6. Please provide your organization's comments regarding the issues related to local market power mitigation (LMPM) as described in the RSP and in the September 11th materials.

Market power mitigation is one of the justifications for providing BCR to storage resources.  If a resource is mitigated due to changes in congestion relative to the day-ahead market results, the change in system conditions is outside the control of the storage resource and thus the storage resource should be eligible for BCR.  

7. Please provide your organization's comments regarding the issues related to applicable intervals and multi-interval optimization (MIO) as described in the RSP and in the September 11th materials.

The MIO is one of the justifications for providing BCR to storage resources.  If a storage resource is dispatched out of merit in the binding interval to support an advisory dispatch later in the horizon, it is appropriate to provide BCR if the CAISO forecast of net load changes and the advisory dispatch or price does not materialize.  

8. Please provide any other proposals or variations of a proposal that your organization considers the ISO should assess. Please include as much detail as possible.

CESA proposes a modification to its original formulation to ensure that if the real-time bid would have resulted in a surplus in an interval that the surplus is maintained, but eliminate a surplus by using the day-ahead price or real-time DEB.

In the near term, CAISO should address the potential for inflated BCR payments as follows:

To address buy-back replace RT Bid with MAX [RT Bid, MIN (DA LMP, discharge portion of RT DEB, RT LMP)] in RT BCR equation under the following conditions:

1. Day-ahead schedule/base schedule to discharge,
2. RTD discharge dispatch < day-ahead discharge schedule, and
3. RTD discharge dispatch >= zero

To address sell-back replace RT Bid with MIN [RT Bid, MAX (DA LMP, charge portion of RT DEB, RT LMP)] in RT BCR equation under the following conditions:

1. Day-ahead schedule/base schedule to charge,
2. RTD charge dispatch > day-ahead charge schedule, and
3. RTD charge dispatch <= zero

For WEIM storage resources, use a null value in the RT BCR equation in lieu of DA LMP

The CAISO should immediately launch the Energy Storage Enhancements (ESE) initiative to holistically review bid cost recovery and improvements in modeling for storage resources.  The initiative must include refinements to Storage DEB and may include changes to outage management, energy bid parameters, SOC telemetry, and AGC signal.

9. Please provide your organization’s comments regarding the Governance Classification.

Support. 

10. Please provide any additional comments, feedback, or examples regarding the stakeholder meeting. You may upload examples or data using the “Attachments” field below.

No comment.

1. Please provide a summary of your organization’s general comments on the Revised Straw Proposal (RSP) and the meeting and materials shared on September 11th.

PG&E appreciates all the hard work the CAISO and Department of Market Monitoring (DMM) have put into the RSP and advancing this initiative. PG&E’s comments can be summarized as the following:

• PG&E supports an implementable interim solution that closes potential loopholes for strategic bidding and maintains appropriate incentives for energy storage providers. 
• Based on PG&E’s current understanding from CAISO and stakeholder discussions, the best proposal that meets these criteria is the modified version of the CESA proposal (which can differentiate between periods of buy-back and sell-back).
• PG&E supports extending the modified CESA proposal to intervals with no Day-Ahead (DA) schedules to charge/discharge, however requests more information from the CAISO on implementation feasibility.
• To the extent that the modified CESA proposal proves to be infeasible, PG&E is open to further iteration on the CESA and CAISO proposals in order to find the best compromise solution that is implementable, eliminates strategic bidding, and maintains appropriate incentives for energy storage.
• Upon implementation of Track 1, PG&E recommends the CAISO launch a comprehensive storage enhancements initiative similar to Energy Storage Enhancements (ESE) which includes refinements to the energy storage default energy bid (DEB).

2. Please provide your organization’s comments regarding the changes on the RSP relative to the Issue Paper & Straw Proposal (IPSP).

PG&E appreciates the CASIO initiating a discussion on the challenges with multi-interval optimization and appreciates the DMM for studying the root causes of the BCR issue, along with the effect local market power mitigation (LMPM) has on the issue.

3. Please provide your organization's comments regarding the ISO Proposed Solution and the relevant discussion in sections 5 and 6 of the RSP.

PG&E agrees with many stakeholders on the call who expressed the complexity of both BCR Settlements and the multi-interval optimization issue. PG&E also appreciates the CAISO for recognizing the challenges with their initial proposed solution. The robust discussion that ensued on these topics convinced PG&E that a modified version of the CESA proposal is the simplest and most appropriate approach for the interim Track 1 implementation.  

4. Please provide your organization's comments regarding the CESA Alternative Solution, its variations, and the relevant discussion in sections 5 and 6 of the RSP.

PG&E supports the RT BCR equation to be modified as follows:

1. Buy-back:

From: (RT dispatch – DA schedule) * (RT bid – RT LMP)

To: (RT dispatch – DA schedule) * (Max[RT Bid, Min(DA LMP, discharging portion of RT DEB)] – RT LMP) under the following conditions:

• • Day-ahead schedule/base schedule to discharge
  • RTD discharge dispatch < day-ahead discharge schedule
  • RTD discharge dispatch >= zero

2. Sell-back:

From: (RT dispatch – DA schedule) * (RT bid – RT LMP)

To: (RT dispatch – DA schedule) * (Min[RT Bid, Max(DA LMP, charging portion of RT DEB)] - RT LMP) under the following conditions:

• • Day-ahead schedule/base schedule to charge
  • RTD charge dispatch > day-ahead charge schedule
  • RTD charge dispatch <= zero

During the September 11^th stakeholder call, the CAISO suggested applying the modified CESA BCR equation to all intervals, not just hours with DA awards. PG&E supports this idea, however has the following questions:

1. Can the CAISO integrate logic to use a different RT BCR equation for intervals with no DA schedules?
2. Can the CAISO integrate SOC data into the Settlements process in the Track 1 implementation timeline?

5. Please provide your organization's comments regarding the Vistra Alternative Solution and the relevant discussion in sections 5 and 6 of the RSP.

No comments.

6. Please provide your organization's comments regarding the issues related to local market power mitigation (LMPM) as described in the RSP and in the September 11th materials.

No comments.

7. Please provide your organization's comments regarding the issues related to applicable intervals and multi-interval optimization (MIO) as described in the RSP and in the September 11th materials.

See comments #2 and #3.

8. Please provide any other proposals or variations of a proposal that your organization considers the ISO should assess. Please include as much detail as possible.

To the extent that the modified CESA proposal proves to be infeasible, PG&E is open to further iteration on the CESA and CAISO proposals in order to find the best compromise solution that is implementable, eliminates strategic bidding, and maintains appropriate incentives for energy storage.

9. Please provide your organization’s comments regarding the Governance Classification.

No comments.

10. Please provide any additional comments, feedback, or examples regarding the stakeholder meeting. You may upload examples or data using the “Attachments” field below.

Upon implementation of Track 1 of this initiative, PG&E recommends the CAISO launch a comprehensive storage enhancements initiative similar to Energy Storage Enhancements (ESE) in lieu of, or in combination with, a Track 2. This initiative must include refinements to the Storage default energy bid (DEB) since its importance has been demonstrated through both this initiative and Price Formation Enhancements. The new initiative may also include other storage topics such as: changes to outage management, energy bid parameters, SOC telemetry, and AGC signal.

1. Please provide a summary of your organization’s general comments on the Revised Straw Proposal (RSP) and the meeting and materials shared on September 11th.

Portland General Electric (“PGE”) directionally supports the PG&E modifications to CESA’s proposal. PGE would like to ensure that both the interim and long-term solutions consider stakeholders that do not currently bid into the California ISO’s DA market. This includes entities working towards EDAM implementation, those publicly leaning towards EDAM, and Western EIM entities alike.

2. Please provide your organization’s comments regarding the changes on the RSP relative to the Issue Paper & Straw Proposal (IPSP).

PGE supports the RSP because the revisions are more considerate of stakeholders who are not DA participants. As originally proposed in the IPSP, PGE is concerned that the design might not provide parity for BCR across the region, especially for WEIM participants. To that end, the PG&E revisions are a step in the right direction.

3. Please provide your organization's comments regarding the ISO Proposed Solution and the relevant discussion in sections 5 and 6 of the RSP.

While PGE supports the efforts to revise the current BCR design, PGE believes that both interim and long-term solutions should consider design impacts to market participants that are RT-only.

4. Please provide your organization's comments regarding the CESA Alternative Solution, its variations, and the relevant discussion in sections 5 and 6 of the RSP.

PGE is supportive of the design discussion, but requests more granularity on impacts to WEIM entities with batteries that are not participating on DA basis. Based on PGE’s evaluation of the current proposal, PGE believes that it would be problematic for the BCR design to principally benefit participants with a DA schedule while those participating only in the RT market would be left outside of the solution.

5. Please provide your organization's comments regarding the Vistra Alternative Solution and the relevant discussion in sections 5 and 6 of the RSP.

No further comment at this time.

6. Please provide your organization's comments regarding the issues related to local market power mitigation (LMPM) as described in the RSP and in the September 11th materials.

No further comment at this time.

7. Please provide your organization's comments regarding the issues related to applicable intervals and multi-interval optimization (MIO) as described in the RSP and in the September 11th materials.

No further comment at this time.

8. Please provide any other proposals or variations of a proposal that your organization considers the ISO should assess. Please include as much detail as possible.

PGE supports proposals that afford parity for entities without DA schedules or otherwise avoid one-for-one replacing of RT bids with DA or DEB values. Entities participating only in RT should have a mechanism that is more responsive to RT market conditions and includes flexibility to adjust to unforeseen SOC limitations with appropriate adjustments. 

9. Please provide your organization’s comments regarding the Governance Classification.

PGE agrees with the CAISO that this initiative falls under the joint authority governance classification.

10. Please provide any additional comments, feedback, or examples regarding the stakeholder meeting. You may upload examples or data using the “Attachments” field below.

PGE appreciates the work of the CAISO staff to address the BCR enhancements. PGE asks that all working group participants continue working towards a long-term revision that affords RT-only participants appropriate access to BCR.

1. Please provide a summary of your organization’s general comments on the Revised Straw Proposal (RSP) and the meeting and materials shared on September 11th.

Salt River Project Agricultural Improvement and Power District (SRP) appreciates the opportunity to provide feedback on the RSP and the materials shared on September 11. SRP encourages the CAISO to provide further clarification if there is any additional consequence to re-defining dispatch unavailable due to State of Charge (SOC) constraints as "non-optimal energy" beyond rendering it ineligible for BCR. SRP also encourages the CAISO to ensure the proposal addresses both operational and financial needs for storage resources.

2. Please provide your organization’s comments regarding the changes on the RSP relative to the Issue Paper & Straw Proposal (IPSP).

SRP recognizes the RSP has been refined in an effort to improve the BCR formula (Concern 2). Although it appears that it does not fully address Concern 1, which involves ensuring that all storage resources are treated equitably and their operational realities are thoroughly considered, especially for those participating in the real-time market without access to day-ahead LMPs. The stakeholder proposals, including CESA and Vistra, appear to be focusing only on adjusting the BCR formula, mainly substituting different alternatives for real-time LMP, without addressing issues identified in Concern 1. While these proposals could potentially be an interim solution, SRP is concerned that diluting the recovery of lost opportunity due to early deployment could incentivize participants to incorporate a risk premium in their bids or withhold bids during certain periods as a risk management strategy. Such behavior could potentially have negative impacts on market efficiency and reliability. SRP encourages the CAISO to consider modifications that address both concerns.

3. Please provide your organization's comments regarding the ISO Proposed Solution and the relevant discussion in sections 5 and 6 of the RSP.

4. Please provide your organization's comments regarding the CESA Alternative Solution, its variations, and the relevant discussion in sections 5 and 6 of the RSP.

5. Please provide your organization's comments regarding the Vistra Alternative Solution and the relevant discussion in sections 5 and 6 of the RSP.

6. Please provide your organization's comments regarding the issues related to local market power mitigation (LMPM) as described in the RSP and in the September 11th materials.

SRP notes that when LMPM is in effect, there is a higher potential for unanticipated real-time deployment of battery resources, which could lead to both more frequent and larger BCR payments, especially if real-time LMPs are elevated. To better understand the impact of LMPM on storage resource operations and financial outcomes, SRP recommends conducting an analysis of historical profiles under LMPM conditions. Additionally, SRP requests further analysis of how different DEB calculation methods affect incentives, since DEB calculations can influence operational behavior and financial outcomes for storage resources.

7. Please provide your organization's comments regarding the issues related to applicable intervals and multi-interval optimization (MIO) as described in the RSP and in the September 11th materials.

SRP acknowledges the inclusion of the MIO in the RSP. However, SRP would appreciate additional clarity and detailed examples to better understand how MIO will impact the dispatch and financial outcomes of storage resources under different market conditions. For example, additional analysis and scenarios may help stakeholders understand how the MIO may impact storage resources during tight conditions and does not disadvantage the resources.

8. Please provide any other proposals or variations of a proposal that your organization considers the ISO should assess. Please include as much detail as possible.

9. Please provide your organization’s comments regarding the Governance Classification.

With the approval of the Pathways Initiative - step1, SRP supports transitioning the Storage Bids Cost Recovery and Default Energy Bid Enhancements initiative to the WEM Governing Body primary authority, this will ensure that the initiative is governed under the appropriate framework.

10. Please provide any additional comments, feedback, or examples regarding the stakeholder meeting. You may upload examples or data using the “Attachments” field below.

SRP has no additional comments at this time.

1. Please provide a summary of your organization’s general comments on the Revised Straw Proposal (RSP) and the meeting and materials shared on September 11th.

 SDG&E thanks the CAISO for their continued engagement with stakeholders to tackle complex issues within the bid cost recovery provisions as they relate to battery storage resources. In the RSP, CAISO walked stakeholders through several numerical examples of storage BCR as well as a more comprehensive summary of the stakeholder alternative proposals. In addition, in the September 11th stakeholder meeting, the Department of Market Monitoring (DMM) walked stakeholders through analysis of bid-cost recovery metrics and the impact of local market mitigation on dispatch of batteries. SDG&E appreciates the perspectives presented within the materials provided and at the stakeholder meeting, which encompass a wide range of expertise for stakeholders to consider while working through this issue.

Overall, SDG&E supports CAISO’s intention to focus Track 1 of the initiative on Concern 2: Strategic Bidding. SDG&E believes this approach is reasonable given the evidence presented thus far in the proposals and at the stakeholder meetings. Any near-term solution should be simple and implementable, providing stakeholders with a clear understanding of how it would be applied and its impact on storage resources. Although some stakeholders have presented opposition to implementing interim measures that only address gaming concerns, adopting alternative logic in the near-term would minimize the impact of this bidding behavior while simultaneously allowing the development of a more robust and holistic solution that rethinks storage BCR rules to address both market efficiency and reliability in Track 2.

2. Please provide your organization’s comments regarding the changes on the RSP relative to the Issue Paper & Straw Proposal (IPSP).

SDG&E appreciates CAISO’s efforts to collaborate with stakeholders and consider alternatives to the original proposal. More detailed comments on the changes in the RSP are included in the following responses.

3. Please provide your organization's comments regarding the ISO Proposed Solution and the relevant discussion in sections 5 and 6 of the RSP.

 SDG&E appreciates the progress of this stakeholder group towards a more robust solution for storage resources receiving bid-cost recovery when a state of charge (SOC) constraint binds. As discussed by stakeholders and SDG&E in its prior comments, there are instances when it is appropriate for a resource with a binding SOC constraint to receive BCR. While the CAISO’s proposed solution is not our preferred approach, SDG&E believes that adding additional logic to better identify what intervals should be flagged for this alternative treatment would be an improvement and moves CAISO’s proposal more in line with the other stakeholder suggested solutions.

As such, SDG&E agrees with the suggested modifications (with one edit to condition 3) proposed by WPTF in their August 26 comments that limit application of this logic only to intervals where certain additional conditions are met. Namely: (1) the resource’s SOC in the 5-min market is at the min or max SOC value going into that interval, (2) the resource has a day-ahead or base schedule that it cannot support due to the SOC value, and (3) the resource was not mitigated or exceptionally dispatched in a prior interval. However, SDG&E remains concerned that application of CAISO’s proposed solution to eliminate all BCR when an SOC constraint binds, even with additional triggering conditions, may result in an unbalanced outcome for storage resources.

4. Please provide your organization's comments regarding the CESA Alternative Solution, its variations, and the relevant discussion in sections 5 and 6 of the RSP.

SDG&E believes a version or elements of the CESA proposal could be applied in the interim to protect against unwarranted BCR payments while providing fair compensation for storage resources. Although SDG&E is still weighing the variations presented to stakeholders, we offer the following questions and comments:

• While using formulation proposed by CESA (the maximum or minimum of the DA LMP, RT DEB, and RT Bid) reduces our concerns with using the RT DEB in the BCR calculation, SDG&E is not convinced it would be suitable to use the DEB prior to addressing the ongoing issues with its formulation.
• SDG&E would like further information on what operational and financial impact would there be from applying CESA’s modified BCR calculation in all intervals if it is only triggered when an interval fulfills the three alternative triggering conditions they proposed, and requests additional detail in the next iteration of the proposal.
• SDG&E mirrors the concerns raised by PG&E regarding the WEIM-only resources but believes this discussion would be more suitable for Track 2 of this initiative.

5. Please provide your organization's comments regarding the Vistra Alternative Solution and the relevant discussion in sections 5 and 6 of the RSP.

 SDG&E appreciates Vistra providing an alternative solution and the robust discussion at the September 11 meeting. At this point however, SDG&E suggests focusing on the other alternative solutions for strategic bidding, as there appears to be more consensus behind those proposals as near-term solutions.

6. Please provide your organization's comments regarding the issues related to local market power mitigation (LMPM) as described in the RSP and in the September 11th materials.

No comment at this time.

7. Please provide your organization's comments regarding the issues related to applicable intervals and multi-interval optimization (MIO) as described in the RSP and in the September 11th materials.

SDG&E acknowledges this is a complex issue and would like more information on the MIO and its interplay with the CESA proposal (especially with the alternative triggering conditions) and a modified CAISO proposal with additional triggering conditions (as proposed by WPTF and modified by SDG&E in Question 3). It is our understanding that under the CESA (and CESA variation) proposals, a modified BCR calculation would be applied only when certain agreed-upon criteria are met. It would be helpful to get further clarity on whether the CESA and/or CAISO enhancements address the concerns with the multi-interval optimization when applied across all intervals.

8. Please provide any other proposals or variations of a proposal that your organization considers the ISO should assess. Please include as much detail as possible.

No comment at this time.

9. Please provide your organization’s comments regarding the Governance Classification.

No comment at this time.

10. Please provide any additional comments, feedback, or examples regarding the stakeholder meeting. You may upload examples or data using the “Attachments” field below.

No comment at this time.

1. Please provide a summary of your organization’s general comments on the Revised Straw Proposal (RSP) and the meeting and materials shared on September 11th.

In general, the Six Cities support the CAISO’s proposal to extend the timeline for consideration of the issues in this initiative, and they continue to support adoption of an interim solution to accommodate adequate time to fully assess long term options to address the issues that the CAISO has identified regarding Bid Cost Recovery (“BCR”) by energy storage resources.  At the same time, the Six Cities are increasingly concerned that the extended timeline for this initiative may still be inadequate to fully consider the range of issues that have emerged, including the implications of the concerns that the CAISO has highlighted relating to the solutions under consideration and the multi-interval optimization (“MIO”).  The Six Cities understand this newly-identified complexity arising from the MIO has implications for the solution that the CAISO previously proposed.

At this time, the Six Cities appreciate that there are a range of options on the table as possibilities to address the issue of unwarranted BCR recovery, but the Six Cities understand that none of them may be viewed as comprehensive, and each includes benefits and drawbacks.  It is apparent that attempting to develop a long-term fix on an expedited basis is infeasible, and it is critical that the CAISO and stakeholders take adequate time to consider long term approaches.  The Six Cities remain concerned about the prospect of strategic bidding by resources seeking inflated BCR payments, and they are likewise concerned by the continuing prospect of premature dispatch of storage resources.  It may be that changes related to the MIO, such as to extend the look ahead period, are needed to comprehensively address these concerns, and such changes cannot be vetted between now and November. 

There are several options—or variations on options—under consideration for interim solutions, and several stakeholders discussed during the stakeholder meeting approaches to further refining those proposals.  Pending any updates to those options, the Six Cities request that the CAISO provide stakeholders with an updated analysis of which among these proposals is best able to address the identified concerns and can be adopted and put in place promptly.  It would be valuable for the Department of Market Monitoring and the Market Surveillance Committee to weigh in on any preferred approach.  Once an interim—albeit imperfect--solution is identified, it is critical that the CAISO take adequate time to fully and comprehensively address issues of BCR, Default Energy Bids, and dispatch practices and requirements for storage resources more broadly, either as an extension of this initiative or in a separate stakeholder process. 

2. Please provide your organization’s comments regarding the changes on the RSP relative to the Issue Paper & Straw Proposal (IPSP).

Please see the comments provided above in response to question no. 1.

3. Please provide your organization's comments regarding the ISO Proposed Solution and the relevant discussion in sections 5 and 6 of the RSP.

Please see the comments provided above in response to question no. 1.

4. Please provide your organization's comments regarding the CESA Alternative Solution, its variations, and the relevant discussion in sections 5 and 6 of the RSP.

Please see the comments provided above in response to question no. 1.

5. Please provide your organization's comments regarding the Vistra Alternative Solution and the relevant discussion in sections 5 and 6 of the RSP.

Please see the comments provided above in response to question no. 1.

6. Please provide your organization's comments regarding the issues related to local market power mitigation (LMPM) as described in the RSP and in the September 11th materials.

Please see the comments provided above in response to question no. 1.

7. Please provide your organization's comments regarding the issues related to applicable intervals and multi-interval optimization (MIO) as described in the RSP and in the September 11th materials.

Please see the comments provided above in response to question no. 1.

8. Please provide any other proposals or variations of a proposal that your organization considers the ISO should assess. Please include as much detail as possible.

The Six Cities do not have alternative proposals to provide at this time.

9. Please provide your organization’s comments regarding the Governance Classification.

The Six Cities do not oppose the governance classification as joint authority.

10. Please provide any additional comments, feedback, or examples regarding the stakeholder meeting. You may upload examples or data using the “Attachments” field below.

The Six Cities have no additional comments at this time.

1. Please provide a summary of your organization’s general comments on the Revised Straw Proposal (RSP) and the meeting and materials shared on September 11th.

SCE is concerned by the Department of Market Monitoring’s (DMM) position that default energy bids (DEB) do not need to be addressed prior to addressing bid cost recovery (BCR). The DEB is a prerequisite to any market power mitigation (MPM). If a DEB is inaccurate, then the results of any MPM will also be inaccurate.

According to the DMM’s 2023 special report[1], 11,200 MW of storage participated in 6/2024. However, the DMM states that “A significant portion of batteries (~1,200 MW) have chosen very low cost-based DEB option instead of storage DEB designed for batteries”[2]. Thus, only 10.7% of storage are choosing a lower cost DEB option instead of the CAISO’s default. 89.3% of storage are choosing the default storage DEB option.

Assuming that the current DEB based on the 4^th highest day ahead (DA) locational marginal price (LMP) is higher than the true DEB of storage, naturally the outcome of MPM would be inaccurate and consequently there may be minimal/no relation between mitigation and dispatch, as the DMM is observing.

DEBs that are not representative of true costs will, at minimum, lead to inaccurate MPM. Further, a market that is not based on true costs will be inefficient (non-maximization of surplus). In turn, price signals in this market are questionable. SCE urges the CAISO to address DEBs first before committing to a BCR solution that may need to be revisited since the DEBs that inform such a solution are likely incorrect.

[1] https://www.caiso.com/documents/2023-special-report-on-battery-storage-jul-16-2024.pdf

[2] https://stakeholdercenter.caiso.com/InitiativeDocuments/Presentation-Battery-Bid-Cost-Recovery-and-Mitigation-Data-DMM-Sep-11-2024.pdf

2. Please provide your organization’s comments regarding the changes on the RSP relative to the Issue Paper & Straw Proposal (IPSP).

SCE supports the changes proposed by CAISO. SCE is appreciative of the fact that CAISO is aware of the challenges in Multi-Interval Optimization (MIO) and is willing to accommodate a BCR proposal most likely modelled on the CESA proposal.

3. Please provide your organization's comments regarding the ISO Proposed Solution and the relevant discussion in sections 5 and 6 of the RSP.

SCE is broadly supportive of the comments in Section 5 and 6.

4. Please provide your organization's comments regarding the CESA Alternative Solution, its variations, and the relevant discussion in sections 5 and 6 of the RSP.

SCE broadly supports CESA’s proposal with some minor adjustments. Some market participants felt very strongly that the CESA formula should only apply for hours of buyback or sellback. Based on the CAISO example, the current methodology could result in excess BCR, whereas completely scrapping BCR would go to the other extreme. Additionally, SCE supports using the CESA formula for all hours as CAISO has said that it is operationally much easier to implement than only in the buyback and sellback hours. Applying the formula to all hours should also result in less BCR than using the formula in only the buyback and sellback hours.  If this formula is used, CAISO would be effectively using a relatively high discharge bid and a relatively low charge bid for BCR calculations for all hours. Knowing that this formula exists for all hours would incentivize market participants to bid accordingly especially for hours that don’t have a corresponding Day-Ahead award.

Additionally, SCE supports PG&E’s modification for the BCR calculation that excludes the use of RT DEB as it limits BCR to DA/RT price difference and, as mentioned in SCE’s comments to the first question, more work needs to be performed around storage DEBs.
So as to further address concern 1, SCE supports WPTF’s proposal that a storage resource should not be eligible for BCR if its state of charge is empty prior to forced buyback due to a DA discharge award or full due to a forced sellback due to a DA charge award except if there was bid mitigation by the CAISO (something which seems to be rare). Buyback associated with an empty battery, or a sellback associated with a full battery should be deemed non-optimal energy.

5. Please provide your organization's comments regarding the Vistra Alternative Solution and the relevant discussion in sections 5 and 6 of the RSP.

6. Please provide your organization's comments regarding the issues related to local market power mitigation (LMPM) as described in the RSP and in the September 11th materials.

SCE appreciates the issues raised regarding LMPM. However, if a CESA like formula is applied for all hours, it would temporarily address the BCR issue. It would be easier and more equitable than scrapping BCR altogether and then trying to carve out an appropriate exception for those storage resources with mitigated bids.

7. Please provide your organization's comments regarding the issues related to applicable intervals and multi-interval optimization (MIO) as described in the RSP and in the September 11th materials.

SCE broadly agrees with the issue of MIO that CAISO has described. As mentioned earlier, SCE supports using the CESA formula across all hours as a reasonable workaround.

8. Please provide any other proposals or variations of a proposal that your organization considers the ISO should assess. Please include as much detail as possible.

SCE suggests a combination of the CESA solution but applied for all hours, combined with WPTF’s recommendation that the SOC must not be zero or full for the respective intervals so as to get BCR.

9. Please provide your organization’s comments regarding the Governance Classification.

SCE does not have any comments on the governance classification.

10. Please provide any additional comments, feedback, or examples regarding the stakeholder meeting. You may upload examples or data using the “Attachments” field below.

1. Please provide a summary of your organization’s general comments on the Revised Straw Proposal (RSP) and the meeting and materials shared on September 11th.

There appears to be a growing consensus across the stakeholder community that the current uplift approach using Bid Cost Recovery (BCR) is less relevant to storage assets that are designed to optimize its use across the day in exchange for the bid-in charge spread. However, the CAISO has indicated that an uplift replacement framework cannot be accomplished in Track 1 and that it must implement Track 1 interim solution to mitigate risks of unwarranted BCR. Vistra requests the CAISO commit to proceeding to designing the holistic uplift replacement framework as soon as possible after Track 1 is finalized.

Vistra supports the CAISO moving forward with an interim solution that applies a modified BCR calculation in identified intervals where there is a reasonable expectation that the CAISO’s concern that there are real-time buy-back or sell-back schedules occurring due to constrained dispatch and not market economics or market design. The modified BCR formulation should apply a bid floor or bid cap based on reasonable proxy cost for purposes of the modified BCR calculation only in intervals that there is a credible risk of the concern materializing. The approach should minimize the risk that the modified formula may inadvertently calculate a surplus that would then offset warranted shortfalls in other intervals while addressing the need to minimize shortfall if potentially unwarranted. See response to #8.

Additionally, stakeholders and the Department of Market Monitoring also share a consensus view that the real-time Default Energy Bid (DEB) does not serve as a reasonable estimate of opportunity costs in real-time and where reference level adjustments are not supported. Until the CAISO improves the DEB methodology and allows for reference level adjustments, there will continue to be challenges ensuring that bids result in the ability to meet its day-ahead charge awards needed to have sufficient SOC level to meet its day-ahead discharge awards. Vistra requests the CAISO commit to proceeding to develop a DEB and reference level adjustment proposal as soon as possible after Track 1 is finalized. 

2. Please provide your organization’s comments regarding the changes on the RSP relative to the Issue Paper & Straw Proposal (IPSP).

Vistra appreciates the CAISO extending the timeline and providing clarifications and examples in the Revised Straw Proposal which will both aid stakeholders with additional time and information to evaluate the proposals. Vistra requests greater clarity on whether CAISO will pursue Track 1 on an interim basis in the next iteration. The Track 1 solution should be interim. The long-term solution will not be achieved until a storage uplift replacement framework is implemented to replace BCR. We believe an uplift framework unique to non-generator resources should be explored to replace BC that leverages concepts from the existing hold SOC exceptional dispatch settlement rules.

3. Please provide your organization's comments regarding the ISO Proposed Solution and the relevant discussion in sections 5 and 6 of the RSP.

CAISO proposes to “identify whether storage resources can support their awards and schedules in the real-time binding interval on a resource-by-resource basis” and to redefine its “dispatch [as] unavailable due to SOC constraints in the binding interval as “non-optimal energy,”.[1] At a high-level, Vistra believes there is consensus that the CAISO should identify whether storage resources can support their awards and schedules in the real-time binding interval and if it can’t whether the inability to support the award is due to SOC constraining the dispatch in that interval. The elements that remain to be further refined are (1) what is the right approach for identifying intervals that meet this condition while minimizing capturing intervals not being constrained and (2) whether in that interval it will be made ineligible for BCR or if it will use a modified BCR calculation.

CAISO’s revised straw proposal seems to imply that it is considering pivoting its proposal to explore modified BCR calculations but in all hours. Vistra does not support the CAISO modifying BCR in all hours. CAISO should adopt conditions for applying a modified BCR solution based on CESA’s dispatch trigger with additional SOC constrained dispatch trigger, or if found infeasible to implement then another indicator for constrained dispatch, while also excluding intervals associated with real-time incremental Ancillary Services (AS) or Flexible Ramping Product (FRP) award. See response to #4, #7, and #8 for additional details.

[1] Revised Straw Proposal at 11.

4. Please provide your organization's comments regarding the CESA Alternative Solution, its variations, and the relevant discussion in sections 5 and 6 of the RSP.

Vistra’s previous proposal for the third element is a variation of the CESA proposal. Vistra appreciates CESA proposing alternative design concept that reduces the punitive impacts of CAISO’s proposal that would make storage ineligible for BCR in intervals and improve the identification of those intervals. As we continue to collaborate with stakeholders and CAISO, it appears that there is also growing consensus that CESA’s proposal with modifications would address CAISO’s concern while avoiding overly punitive implementation. CESA clarified that its proposal to modify the BCR calculation would only apply in intervals that meet dispatch condition (i.e., dispatch trigger). Vistra supports CAISO pursuing a modified CESA proposal as described in response to #8 with additional context from response to #7. 

5. Please provide your organization's comments regarding the Vistra Alternative Solution and the relevant discussion in sections 5 and 6 of the RSP.

Vistra responds to question #4, #7, and #8 with our view of a modified CESA proposal that would be workable as an interim solution. In this section, Vistra responds to the elements of our proposal that are focused on ensuring CAISO settlements classifies energy as derate or rerate energy when SOC range is adjusted through the minimum energy or maximum energy outage card parameter and when bids would act like a self-schedule BCR is disqualified. Below is Vistra’s inventory of potential outages, self-schedules, or biddable parameters that may impact ability to meet day-ahead award or base schedules.

6. Please provide your organization's comments regarding the issues related to local market power mitigation (LMPM) as described in the RSP and in the September 11th materials.

The issues with LMPM leading to mitigating charge bids causing challenges with the ability to charge to support day-ahead schedules as well as mitigating discharge offers such that it increases the risk of being used in hours that are less constrained than the expected real-time needs are well known. Vistra appreciates that CAISO acknowledged in its Revised Straw Proposal how mitigation in hours prior to the hour of concern can be leading to the inability to support its day-ahead schedule in that hour. Vistra is comfortable with the interim solution inadvertently capturing this condition as long as in that interval BCR is modified to a reasonable calculation rather than being made ineligible. Given that any interim solution will capture intervals that are caused by CAISO market including mitigation it is critical that the change to the BCR calculation is not overly punitive. Once Track 1 is complete, Vistra requests CAISO immediately begin stakeholdering improvements to the Default Energy Bid (DEB) and reference level adjustment functionality to address the concerns that the real-time DEB is not a good estimate of opportunity costs.

7. Please provide your organization's comments regarding the issues related to applicable intervals and multi-interval optimization (MIO) as described in the RSP and in the September 11th materials.

Vistra’s previous comments discussed various reasons that the market engine could be driving outcome where a storage resource cannot meet its day-ahead schedules or base schedules. We incorporate by reference our comments on the CAISO’s Straw Proposal. Given these complexities, Vistra appreciates CAISO acknowledging the challenges that may arise from its market design that could drive differences between day-ahead and real-time market results. These explanations provide further support for why simply making any intervals flagged ineligible for BCR would be overly punitive and unjust and unreasonable as it is likely that any flag will capture intervals where the dispatch is constrained due to no fault of the SC. Further these examples support a more targeted interim solution where it would not be appropriate to apply the interim solution to all intervals within the market horizon. Vistra requests CAISO propose an approach that only applies to intervals based on conditions described in response to #8.

In addition to the market optimization issues raised by CAISO, Vistra is concerned that other competing needs or operator actions taken in real-time could be driving the differences between the day-ahead and real-time results. CAISO should evaluate whether incremental Ancillary Service awards or Flexible Ramping awards could be driving optimal outcomes when storage is optimal for those services instead of its day-ahead energy awards. AS or FRP awards will result in a portion of storage capacity being reserved for these services in real-time instead of the day-ahead result without these requirements, and consequently it will have a lower discharge schedule or higher charge schedule than the day-ahead results depending on the direction of the award. Further questions around how the use of load conformance may be driving outcomes to deviate in Fifteen Minute Market relative to day-ahead results merit investigation as well. Given these additional challenges, Vistra recommends CAISO ensure intervals where a real-time AS award or FRP up or down award has been received use the status quo BCR calculation not a modified calculation.

CAISO explains that in many instances it is possible for a storage asset to be near having a binding SOC constraint in the binding interval, but for it to not actually bind in the binding intervals. Based on this information, Vistra believes that the alternative trigger proposed by Western Power Trading Forum and Vistra to flag intervals where the SOC could not support its day-ahead award or base schedule is superior approach to implement CAISO’s intent to “identify whether storage resources can support their awards and schedules in the real-time binding interval on a resource-by-resource basis”. Vistra requests CAISO include an SOC constrained dispatch flag as a refinement to CESA’s dispatch trigger conditions proposed to identify intervals where the SOC levels constrained the market result and apply the modified BCR calculation. 

8. Please provide any other proposals or variations of a proposal that your organization considers the ISO should assess. Please include as much detail as possible.

There appears to be growing consensus supporting an interim solution that applies a modified BCR calculation in identified intervals. The below approach refines CESA’s proposal based on the variations proposed by Vistra, PG&E, and WPTF. The below has not benefited from CAISO vetting whether it is implementable at this time and if any element is infeasible for Track 1 could be refined.

The proposal would adopt an interim approach to apply only to Limited Energy Storage Resources (LESR) participating through Non-Generating Resource non-Regulation Energy Management (NGR non-REM) participation model. It would identify intervals where either of the two sets of conditions are met shown below:

In the identified settlement intervals, the BCR formula should be modified to minimize the risk of BCR at levels inconsistent with a reasonable proxy (unwarranted BCR risk) and the risk that the approach will overly punish storage. We believe applying in the BCR calculation a “bid floor” on the Constrained Dispatch Buy-Back interval and a “bid cap” on the Constrained Dispatch Sell-Back interval will best address concerns with unwarranted BCR fairly.

The modified BCR calculation should revise the RT Bid up or down to a reasonable proxy as follows:

[1] For WEIM resources that submit base schedule the day-ahead locational marginal price would be null value.

[2] Bid Cost Recovery calculation calculates the bid cost for a net revenue calculation for both the Fifteen Minute Market (FMM) and Five Minute Market (5MM) depending on whether the Instructed Imbalance Energy is due to FMM or 5MM results. In the proposed calculation, the RT LMP would be the LMP applicable for the relevant IIE – FMM or 5MM.

[3] Id.

9. Please provide your organization’s comments regarding the Governance Classification.

Vistra supports this as joint authority.

10. Please provide any additional comments, feedback, or examples regarding the stakeholder meeting. You may upload examples or data using the “Attachments” field below.

Vistra requests the CAISO allow SC to initiate a dispute for BCR eligibility review if an SC identifies that it believes its losses were driven by mitigation so that intervals that were flagged for the modified BCR formula could be treated as eligible if CAISO agrees mitigation caused the results. While mitigation is the primary focus of our request, the CAISO should adopt a more general rule to allow disputes to be considered if CAISO agrees the results were out of the market participants control.

1. Please provide a summary of your organization’s general comments on the Revised Straw Proposal (RSP) and the meeting and materials shared on September 11th.

WPTF would first like to take this opportunity and thank the CAISO and all the stakeholders for the time and effort put into this process over a short period of time. We truly believe there is a growing general consensus around a workable solution, which is a testament to the effort being put forth by all.

WPTF supports the CAISO moving forward with an interim solution that applies a modified BCR calculation in identified intervals where there is a reasonable expectation that the buy-back/sell-back is occurring due to a constrained dispatch and not market economics or market design features. The solution is described in response to #8 below. The modified BCR formulation should attempt to replace the real-time bid component with a reasonable proxy cost, while controlling for instances where the modified formulation not only eliminates the shortfall in that interval but also inadvertently calculates a significant surplus that would then offset warranted shortfalls in other intervals.

WPTF has also proposed a few triggers to be used in identifying which intervals the modified BCR formulation should apply. While ideally all of these conditions would be implemented, we do understand the need to balance implementation complexity with incremental benefit of each trigger, especially given this is an interim solution. Thus, we ask that the CAISO identify if, from an implementation perspective, any of the triggers are infeasible to consider. To the extent that they are infeasible, we ask that the CAISO consider if there is a reasonable replacement trigger to use.

Lastly, we strongly encourage the CAISO to continue with the momentum gained in these conversations and, after Board approval of the interim solution, immediately progress into the next track of this effort or an effort where the outstanding storage related enhancements (including BCR, DEBs, and reference level adjustments) can continue. Regarding the on-going BCR discussion, we also ask that in the holistic review of storage BCR the CAISO include consideration of other make-whole frameworks for storage resources and not just focus on ways to bend the existing framework to force a better outcome.

2. Please provide your organization’s comments regarding the changes on the RSP relative to the Issue Paper & Straw Proposal (IPSP).

Please see response to #3 below.

3. Please provide your organization's comments regarding the ISO Proposed Solution and the relevant discussion in sections 5 and 6 of the RSP.

We appreciate CAISO for changing its proposal to an interim solution and for committing to ongoing discussions. It is essential that these discussions continue immediately following the Board's approval of the interim solution, allowing us to capitalize on the momentum generated. We strongly encourage that these conversations are not narrowly focused solely on modifying the existing BCR formulation and its application to storage. Instead, we believe it is crucial to also explore whether other approaches to make-whole payments could be more appropriately applied to storage.

WPTF does not support the expansion of the modified BCR calculation to advisory intervals in the MIO or applied to all intervals in the day. Uneconomic dispatch in binding intervals can occur for several reasons, including awarded ancillary services in future intervals, self-scheduled energy, the end-of-hour state-of-charge (SOC) biddable parameter, advisory prices, and awarded FRP. As discussed in detail in our response to question #7, it is our understanding that the first three factors are already addressed by CAISO's existing BCR rules, but welcome any clarification, leaving advisory prices and awarded FRP as the remaining drivers for uneconomic dispatch in the binding interval. However, those drivers are reasons why a co-optimized market needs an uplift framework where currently BCR is the only uplift mechanism available. To be clear, WPTF does not see any reason why we need additional BCR modification to intervals other than the binding intervals that meet a certain set of criteria as discussed in response to #8.

WPTF acknowledges that instances where SOC is at the minimum or maximum value do not occur frequently, thus warranting that trigger originally proposed by CAISO as essentially ineffective. As noted in our response to question #8, we propose an alternative that would still capture the essence of the concern. Specifically, this alternative would identify situations where the SOC does not support the day-ahead schedule. In other words, it does not necessarily have to be at the min or max SOC value but rather insufficient to support the day-ahead schedule. This would then indicate that a buy-back or sell-back in that interval can be reasonably assumed to be due, at least in part, to insufficient SOC rather than other economic factors or market design features that create anomalies warranting BCR.

Additionally, we encourage CAISO to consider implementing a flag for mitigation. Specifically, if mitigation occurred in a prior interval, it would not be flagged as an interval meeting the criteria and thus triggering the modified BCR formulation. However, if this approach proves too complex, we understand that the added benefit may not justify the implementation challenges, especially for an interim solution and if the CAISO’s and DMM’s analysis shows mitigation is not a major factor driving buy-back/sell-back conditions occurring.

4. Please provide your organization's comments regarding the CESA Alternative Solution, its variations, and the relevant discussion in sections 5 and 6 of the RSP.

We appreciate the time and effort CESA dedicated to developing a proposal for consideration. We view this as a positive step forward, and with a few adjustments, we believe it can serve as a foundation for a workable interim solution. In response to question #8 below, we provide a more detailed discussion of this interim solution.

The clarification of CESA’s proposal during the call was extremely helpful. We believe it is imperative that any interim solution be applied only in the identified intervals, which aligns with CESA’s proposal.

5. Please provide your organization's comments regarding the Vistra Alternative Solution and the relevant discussion in sections 5 and 6 of the RSP.

WPTF appreciates the time and effort Vistra has invested in developing an alternative solution for consideration. Similar to CESA’s proposal, we believe that features of Vistra's solution can be combined with CESA’s to create a workable approach, as described in #8.

We also want to emphasize the importance of CAISO clarifying how outages and the biddable parameters for minimum and maximum state of charge (SOC) are accounted for in BCR eligibility. It is crucial that these factors are appropriately classified. We do not want to hinder the progress of the interim solution of focusing on modifying the BCR formulation in specific intervals. Therefore, we support including the topics of outages and biddable parameters in the ongoing discussions that aim for a holistic review of storage BCR in the spirit of not delaying the interim solution.

6. Please provide your organization's comments regarding the issues related to local market power mitigation (LMPM) as described in the RSP and in the September 11th materials.

WPTF believes the CAISO could consider adding a condition whereby an interval is not flagged to receive the modified BCR treatment if the resource had been mitigated (i.e., bid actually changed) in a prior market run. However, if this feature is too complex from an implementation perspective to add to the interim solution and the analysis shows mitigation is not a significant factor to uneconomic buy-back/sell-back intervals, then the added cost is not worth the benefit especially for an interim solution.  

7. Please provide your organization's comments regarding the issues related to applicable intervals and multi-interval optimization (MIO) as described in the RSP and in the September 11th materials.

We appreciate CAISO for providing a discussion around the complexities of the Multi-Interval Optimization (MIO) and how it impacts the binding schedules of storage resources. However, we do not agree that the MIO justifies applying the interim solution to all intervals within the MIO horizon, whether binding or advisory. The interim solution should also not be applied universally across all intervals 24/7.

There are several reasons why a resource may receive an uneconomic schedule in the binding interval due to the MIO, but not all of these reasons justify applying a modified BCR formulation. In fact, some of these factors actually support the need for BCR. It’s also important to note that per our understanding, the CAISO’s existing BCR rules already address cases that could create unwarranted BCR by making those intervals ineligible for BCR. WPTF provides a brief discussion below of several drivers that may result in an uneconomic dispatch in the binding interval and if/how the CAISO’s BCR rules already address any concerns. The first four drivers are already addressed by being deemed ineligible for BCR. The following is based on our understanding of how the CAISO implemented storage-related BCR rules; thus we welcome any needed clarification.

1. ASSOC: The Ancillary Service State-of-Charge (ASSOC) ensures a resource has sufficient SOC to meet awarded ancillary services. As a result, the market may uneconomically schedule a resource in the binding interval to ensure that the ASSOC in a future interval within the MIO horizon is respected. When this occurs, CAISO’s existing BCR rules already make the resource ineligible for BCR in those specific intervals.

2. Self-Schedule within the Horizon: If a storage resource has a self-schedule to charge or discharge in a future interval that is within the MIO horizon, the market may need to uneconomically schedule the resource in the binding interval to accommodate this upcoming self-schedule. However, in such cases, both the hour of the self-schedule and the prior hour are already ineligible for BCR according to existing BCR rules.

3. Self-Schedule out of the Horizon: If a storage resource has a self-schedule to charge or discharge in a future interval that is outside the MIO horizon, the market will calculate a SOC requirement that the resource must meet by the last interval in the MIO horizon to ensure it can fulfill the self-schedule. Our understanding is that this scenario is also ineligible for BCR, but we would appreciate CAISO's confirmation on this.

4. End of Hour SOC: When a storage resource submits the end-of-hour SOC biddable parameter for an interval within the MIO horizon, the market may dispatch the resource uneconomically in the binding interval to meet the end-of-hour SOC. According to existing BCR rules, both the hour with the end-of-hour SOC and the prior hour are ineligible for BCR.

5. FRP: The market may award a storage resource a Flexible Ramping Product Up or Down (FRU or FRD) award, which reserves some capacity for either upward or downward movement in future interval from its energy schedule in that interval. Since FRP operates only in real-time, the market may find it more economical to schedule the resource to discharge at a lower level compared to the day-ahead schedule so it can award FRU, leading to a buy-back of its day-ahead schedule and potentially BCR. We believe this scenario warrants BCR, especially given the significant increase in storage resources being awarded FRU and the negligible revenue received when awarded FRU.

6. Market Economics: The MIO may create what appears to be an uneconomic schedule in the binding interval because it predicts prices in the MIO horizon that collectively make the dispatch economically viable across the horizon. However, the advisory prices initially supporting the dispatch in the binding interval do not always materialize in its binding interval, leaving the storage resource with an overall uneconomic schedule, which results in BCR. Dispatch in the binding interval may fall below a day-ahead schedule for discharge or exceed it for charge, simply because real-time market conditions differ from those anticipated in the day-ahead market. The differences between real-time market and day-ahead market can be exacerbated when CAISO market operators use load conformance that vary between the Fifteen Minute Market or Five Minute Market. Flagging such intervals for modified BCR treatment is inappropriate, as they are based on economic predictions that ultimately do not materialize due to the MIO or due to market operator actions through load conformance done to manage interties rather than correct for load forecast error. These conditions clearly warrant BCR.

8. Please provide any other proposals or variations of a proposal that your organization considers the ISO should assess. Please include as much detail as possible.

WPTF continues to support the effort to address the concerns raised by the CAISO as it relates to the application of BCR to storage resources. We believe there is general consensus to move forward with an interim solution that applies a modified BCR calculation in identified intervals. Thus, there are two aspects of this design – (1) what intervals to identify and (2) what modified BCR calculation should be used in identified intervals. The proposed approach below represents a combination of the proposals, and variations thereof, put forth in previous comments by CESA, Vistra, PG&E, and WPTF, and strikes an appropriate balance of addressing the concern of inflated BCR raised by CAISO as an interim solution while not being overly punitive. Also to the extent any condition used in identifying intervals for the modified BCR treatment is infeasible from an implementation perspective, we would appreciate the CAISO informing us of that complexity.

The proposal below is broken down into when a buy-back occurs and when a sell-back occurs for ease of discussion.

Buy-Back

Identify intervals where:

1. Resource has day-ahead discharge award or submitted discharge base schedule
2. Real-time discharge schedule is less than day-ahead or base schedule to discharge
3. Real-time schedule is not negative
4. Real-time SOC is not sufficiently high enough to support day-ahead or base schedule
5. Resource has not had discharge bid reduced due to mitigation in prior interval
6. Resource was not awarded incremental upward A/S or FRU

In the identified intervals, the BCR formulation replaces the RT Bid component with:

Max(RT Bid, Min(DA LMP, RT DEB Discharge, RT LMP))

Sell-Back

Identify intervals where:

1. Resource has day-ahead charge award or submitted charge base schedule
2. RTD charge schedule is greater than day-ahead schedule to charge
3. RTD charge schedule is not positive
4. Real-time SOC is not sufficiently low enough to support day-ahead schedule to charge
5. Resource was not awarded incremental regulation down or FRD

In the identified intervals, the BCR formulation replaces the RT Bid component with:

Min(RT Bid, Max(DA LMP, RT DEB Charge, RT LMP))

In both cases, when there is a resource with a base-schedule, the DA LMP component would be null.

Including the last trigger for both buy-back and sell-back conditions acknowledge that storage resources can and do receive incremental AS in real-time as well as FRU/FRD. The market decision to award AS and/or FRU/FRD is based on economics and to the extent that then results in the market determining it is more optimal for the resource to have a lower energy schedule to discharge in real-time (buy-back) and reserve the additional capacity for FRU, it should not be flagged as an interval for modified BCR. This is further supported by recent data the CAISO presented as discussed in more detail in response to #10 below.

Lastly, during the last call there was discussion around the use of SOC as a condition. It is our understanding that the CAISO indicated the SOC should not be used as a trigger because when the trigger is SOC equals min or max, it rarely binds; it was not because using the SOC as a trigger is infeasible. However, we would like the CAISO to confirm that from an implementation perspective, we can consider using SOC in a trigger. If it is infeasible, then we support replacing the SOC condition with something that further screens out intervals where the buy-back/sell-back is driven by economics, not due to a constrained dispatch.

9. Please provide your organization’s comments regarding the Governance Classification.

No comment.

10. Please provide any additional comments, feedback, or examples regarding the stakeholder meeting. You may upload examples or data using the “Attachments” field below.

CAISO has recently presented data related to storage BCR that further justifies moving forward with an interim solution focused on a narrow set of identified intervals.

First, the DMM's analysis was particularly interesting, revealing that the majority of BCR payments to storage resources come from the revenue side of the calculation, which uses real-time locational marginal prices (RT LMPs), rather than the cost side, which relies on real-time bids. At the outset of this effort, CAISO expressed concerns about storage resources bidding in ways that could inflate BCR (for example, by submitting low RT bid prices when the state of charge (SOC) is binding), leading to buy-back/sell-back conditions and thus high BCR payments. However, it appears that the RT bid does not significantly drive high BCR payments to storage resources. That being said, we still agree that action is needed to address the potential for extracting excessive BCR and continue to support the move toward an interim solution.

Second, CAISO shared compelling data on Flexible Ramping Product (FRP) and storage resources during the MPPF on September 18. This data indicates a major shift in the resources being awarded FRP. Most of the data was focused on FRU. Starting around late summer 2023, FRU has predominantly been awarded to storage resources within the CAISO Balancing Authority Area (BAA), whereas previously, it was mostly awarded to hydro resources in the Pacific Northwest. This timing aligns with the observed increase in BCR payments to storage resources. We know correlation does not mean causation, but it does flag another scenario where the market design may create a buy-back/sell-back situation that warrants BCR.

When a resource is awarded FRU/FRD, the market essentially preserves capacity on that resource in either direction, similar to how capacity is preserved when awarding ancillary services. For example, if a storage resource has a day-ahead schedule to discharge, but the market finds it more economical in real-time to award it FRU, its energy schedule may be reduced to accomodate the FRU award. This scenario would be considered a buy-back situation. Since FRP is not a biddable product, there is no associated cost factored into the BCR formulation. Furthermore, FRU/FRD prices are negligible and do not meaningfully contribute to the revenue side of BCR.

Consequently, we wonder how often resources encounter situations where it receives BCR because the market has determined it is more optimal to schedule it for a lower discharge amount compared to the day-ahead schedule while preserving its additional discharge capacity for FRU. These cases should not be flagged for receiving the modified BCR formulation, as they are driven purely by market economics and design features, rather than actions taken by a scheduling coordinator.