Comments on Working group session 16 - Fast-Start Pricing

1. Please provide your feedback and perspectives on the value and need for Fast Start Pricing within ISO markets, including perspectives on the Fast-Start Pricing analysis provided in Working Group Session #16.

Bonneville appreciates the analysis that the CAISO has shared regarding the impacts of fast start pricing on WEIM results. While the CAISO is the only FERC-jurisdictional organized market operator not to incorporate fast-start pricing in its market design, the benefits of evaluating and implementing such a change to the market must be weighed against the CAISO’s bandwidth to address all pressing topics in scope for the Price Formation Enhancement Initiative.

Bonneville believes there are merits to further exploring design analysis and implementation impacts of a fast-start pricing methodology; maintaining its importance in the Price Formation Enhancement Initiative effort should be preserved.  Additionally, Bonneville continues its primary focus on the issues regarding FERC Order 831 implementation for bid-capped resources, scarcity pricing, market power mitigation, and even topics outside of the price formation scope, such as improvements to the Greenhouse Gas design.

2. Please provide your organizations level of priority (High, Medium, Low) as it relates to further policy development for Fast-Start Pricing.

 Medium to high priority.

3. Please provide any additional feedback.

It would be helpful to better understand how the broader stakeholder group is prioritizing this topic amongst the other pressing issues in scope for the Price Formation Enhancements initiative. It would be helpful to revisit the prioritization, along with expected timelines of when such topics could be expected to be worked through and approximate expectations regarding implementation.

1. Please provide your feedback and perspectives on the value and need for Fast Start Pricing within ISO markets, including perspectives on the Fast-Start Pricing analysis provided in Working Group Session #16.

The California Community Choice Association (CalCCA) appreciates the opportunity to comment on the fast-start pricing analysis presented in working group #16. The analysis is helpful for understanding the impact of fast-start pricing on market prices, including seasonal trends, daily trends, and locational trends. The California Independent System Operator’s (CAISO) analysis demonstrates that fast-start pricing could impact the price in up to 25 percent of the intervals and, under extreme summer and gas conditions, up to a monthly average of $8.70 per megawatt-hour. While this analysis is helpful for understanding the cost impacts of fast-start pricing, discussions in the working group have not demonstrated sufficient benefits associated with fast-start pricing to justify these cost increases.

The CAISO has other mechanisms for ensuring fast-start resources recover their costs without the customer cost impacts associated with fast-start pricing. The CAISO compensates fast-start resources for their start-up costs outside the market rather than in the locational marginal price. Under fast-start pricing, fast-start resources’ total compensation would remain the same, but the market clearing price would rise to include start-up costs and award that higher price to all resources that clear the market.

The CAISO, the Department of Market Monitoring, and stakeholders have raised a series of concerns with fast-start pricing within the Federal Energy Regulatory Commission Notice of Proposed Rulemaking in Docket RM17-3 and within the Price Formation Enhancements Working Groups thus far. These concerns stem from the fact that elements of the CAISO’s market, like the flexible ramping product, make it unique from other independent system operators’ or regional transmission organizations’ markets, and are incompatible with fast-start pricing. Fast-start pricing would undermine the CAISO’s efforts to procure flexible resources in real-time, result in infeasible dispatches, and weaken price signals to provide ramping capability when coupled with the flexible ramping product. The CAISO should not ignore these concerns in favor of implementing a seemingly unnecessary pricing structure that would increase customer costs for an unclear benefit.

For these reasons, CalCCA continues to oppose the implementation of fast-start pricing in the CAISO’s market unless any perceived benefits associated with the costs of fast-start pricing can be clearly articulated and quantified.

2. Please provide your organizations level of priority (High, Medium, Low) as it relates to further policy development for Fast-Start Pricing.

Fast-start pricing is a low priority for CalCCA. For the reasons described in Section 1, the CAISO should not move forward with developing fast-start pricing for its markets.

3. Please provide any additional feedback.

 CalCCA has no additional feedback at this time.

1. Please provide your feedback and perspectives on the value and need for Fast Start Pricing within ISO markets, including perspectives on the Fast-Start Pricing analysis provided in Working Group Session #16.

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

2. Please provide your organizations level of priority (High, Medium, Low) as it relates to further policy development for Fast-Start Pricing.

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

3. Please provide any additional feedback.

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

1. Please provide your feedback and perspectives on the value and need for Fast Start Pricing within ISO markets, including perspectives on the Fast-Start Pricing analysis provided in Working Group Session #16.

Please see attachment

2. Please provide your organizations level of priority (High, Medium, Low) as it relates to further policy development for Fast-Start Pricing.

Please see attachment

3. Please provide any additional feedback.

Please see attachment

1. Please provide your feedback and perspectives on the value and need for Fast Start Pricing within ISO markets, including perspectives on the Fast-Start Pricing analysis provided in Working Group Session #16.

The Public Advocates Office at the California Public Utilities Commission (Cal Advocates) is the state-appointed independent ratepayer advocate at the California Public Utilities Commission (CPUC).  Our goal is to ensure that California ratepayers have affordable, safe, and reliable utility services while advancing the state’s environmental goals.  Our efforts to protect ratepayers include energy, water, and communications regulation advocacy. 

The California Independent System Operator (CAISO) should not implement Fast Start Pricing (FSP)

The CAISO is re-evaluating FSP given the existence of a diverse resources fleet in a broad regional market.[1]  The CAISO’s recent analysis identified increases to market costs if FSP is adopted,[2] consistent with the findings of other grid operators.[3]  The CAISO has stated that FSP may provide benefits; namely, to enable certain fast-start resources (FSRs) to inform energy market price formation if those FSRs are dispatched on the margin but fail to meet the entire need of marginal load.[4]  Today, FSRs that do not inform the LMP when dispatched for marginal load receive bid cost recovery (BCR) payments to be made whole with respect to their economic bid.[5]  FSP’s ability to decrease BCR payments has not been studied in the analysis, though the CAISO discussed that BCR costs would not be significantly offset by FSP.[6]

Given that FSP does not appear to benefit grid reliability and would increase costs to ratepayers, Cal Advocates continues to oppose the adoption of FSP in the CAISO real-time market and its inclusion in the scope of the Price Formations Enhancement (PFE) initiative.[7]  The CAISO should instead maintain the status quo of using BCR payments to ensure dispatched generation is made whole when appropriate, as this approach is relatively cheaper to FSP and provides the same result of dispatching energy when needed.

However, Cal Advocates provides feedback and several recommendations on the April Analysis if the CAISO continues to develop an FSP mechanism.

1. FSP costs and net benefits must be clarified and further developed.

The April Analysis determined that FSP may result in incremental costs of up to $380,000 per month on an average annual basis.[8]  The previous December Analysis found that incremental costs could be as high as $13.5 million per month on an average annual basis.[9]  Powerex and the Public Power Council (PPC) estimated FSP costs of $1.3 billion per year.[10]  Cal Advocates requests that the CAISO clarify the differences leading to the disparity in estimated costs for its own analyses.

Additionally, the net costs of FSP should be better understood.  The CAISO has not yet determined the magnitude of potential reductions in BCR costs due to adoption of an FSP.  The Department of Market Monitoring (DMM) determined that potential FSRs receive $18-$32 of BCR payments today; however, DMM was unable to state what amount would be mitigated by an FSP structure in the real-time market.[11]  DMM also noted that reductions in BCR payments “may be offset” by increased BCR payments to other units caused by FSP.[12]  DMM’s concern that BCR payments may in fact increase due to FSP is consistent with PJM’s experience with FSP.  In PJM, the adoption of FSP led to additional uplift costs as well as distorted price incentives.[13]  As the CAISO narrows the analytical scope of the FSP track, the CAISO should provide additional information showing the potential impact of FSP on BCR payment reduction as well as potential BCR payment increases.

2. CAISO should narrow the analytical scope to focus on the lowest-impact fast start pricing (FSP) options by discontinuing analysis of the constant amortization methodology and discontinuing analysis of sensitivities involving startup times over 30 minutes and minimum up times over 60 minutes; and consider analyzing sensitivities involving resources with startup times less than or equal to 15 minutes.

Cal Advocates appreciates the twelve sensitivity scenarios and attendant data exploration and analysis presented at the April 8, 2024 Working Group.[14]  The overview was helpful for understanding potential permutations and some of the tradeoffs involved with the options.  In particular, the analysis demonstrates that the constant amortization methodology is likely to yield the highest cost impacts—roughly double that of the other two amortization approaches.[15]  Focusing the analysis on fewer sensitivities would allow stakeholders to examine the options in greater depth and understand the detailed tradeoffs between FSP mechanisms. 

If the CAISO proceeds with FSP development, the CAISO should focus the analytical scope in three ways.  First, CAISO staff should discontinue analysis of the sensitivities utilizing the constant amortization methodology, which would eliminate four sensitivities.  Based on the CAISO’s analysis, the constant amortization methodology would result in the:

• Highest average price increases;[16]
• Highest hourly price spikes in 2022-2023;[17]
• Highest intra-CAISO monthly price impacts;[18]  
• Most pronounced skew in the distribution of price changes in CAISO and in the system-wide market arrangement,[19] and;
• Largest increases in costs of supply with FSP for CAISO and in the system-wide market arrangement.[20]

Conversely, the other two amortization methodologies (average and adjusted) consistently lead to smaller cost increases.  However, between the average and adjusted methodologies, one is not always less costly than the other.  Thus, the CAISO should focus its analysis on the average and adjusted amortization methodologies to examine the methodologies in comparative detail and identify the best outcome for ratepayers. 

Second, CAISO staff should discontinue analysis of sensitivities involving startup times (STUT) over 30 minutes and Minimum Up Times[21] (MUT) over 60 minutes, which would eliminate an additional four sensitivities.  CAISO analysis indicates that utilizing STUT ≤ 60 minutes is more costly than a STUT ≤ 30 (although the differences are less pronounced than the difference between using constant amortization methodology and the other options).[22]  Likewise, the CAISO noted that “[a]ll other [independent system operator (ISO)] FSP models use definitions of 60 minutes or less for start-up and minimum run time”[23] while no other ISO uses an MUT greater than one hour.[24]  Narrowing the scope of analysis to resources with STUT that are between 0 and 30 minutes and MUT that are between 0 and 60 minutes would still include 19% of gas resource megawatts in the Western Energy Imbalance Market (WEIM) footprint.[25] 

Third, if CAISO staff decide to analyze additional sensitivities, Cal Advocates requests analysis of a STUT ≤ 15 minutes option.  One slide of the CAISO’s presentation identified the subset of gas resources which would fit a STUT ≤ 15 minutes and MUT ≤ 60 minutes definition, suggesting that analysis of a  STUT ≤ 15 minutes option is viable within the current scope.[26]  The Southwest Power Pool provides precedent for utilizing an even narrower definition for its FSP resources, at STUT ≤ 10 minutes.[27]  Cal Advocates requests this analysis to understand whether utilizing an FSP definition of STUT ≤ 15 minutes and MUT ≤ 60 minutes would reduce impacts to ratepayer costs. 

3. The CAISO should clarify if the market dimension is a policy question.

The CAISO’s April Analysis presentation identified three dimensions for analyzing FSP, including market configuration.  The slides note that market configuration “is only for analysis set up to determine if price setting is at each [Balancing Authority Area] individually or at a single system wide area.”[28]  The comparison of Balancing Authority Area (BAA)-level pricing against system-wide pricing is certainly useful for inferring the differential impacts of FSP on individual BAAs, including the CAISO.  However, the discussion during the Working Group was unclear as to whether this dimension is intended as a policy question for stakeholders.  The system-wide pricing approach consistently yielded smaller cost increases compared to when pricing was determined within the CAISO only, across all amortization methodologies and STUT configurations.  This is an intuitive result when considering that the system-wide pricing approach would increase competition among the WEIM-wide set of FSP resources and the system-wide price would be set by the lowest-priced marginal FSP resource available across a larger portfolio.  Insofar as the market configuration dimension may be up for consideration, Cal Advocates urges the CAISO to utilize the system-wide pricing approach because this approach is likely to lead to lower ratepayer costs. 

4. FSP analysis should consider the risk of gaming.

The CAISO’s outside expert, Michael Cadwalader, presented on several topics during the Working Group.  Of note, Cadwalader highlighted the potential for gaming FSP depending on the configuration selected, and stakeholder discussion highlighted possible avenues for gaming.[29]  As the CAISO narrows the FSP options considered by stakeholders, CAISO staff should also commit their efforts and stakeholder discussion time to “minimize the susceptibility to gaming.”[30]

[1] In 2016, the CAISO argued that FSP would be “unlikely to improve price formation in the CAISO’s market.”  Price Formation Enhancements: Stakeholder Workshop, June 9, 2022 at 9.  Available at: https://www.caiso.com/InitiativeDocuments/Presentation-PriceFormationEnhancementsWorkshop-June9-2022.pdf.

[2] Price Formation Enhancements: Analysis on Fast Start Pricing, April 8, 2024 (April Analysis) at 10 and 74.  Available at: https://www.caiso.com/InitiativeDocuments/Presentation-Price-Formation-Enhancements-Apr8-2024.pdf.

[3] The Midcontinent Independent System Operator (MISO) found that FSP increased prices between $0.50 and $1.45/megawatt-hour (Potomac Economics, 2022 State of the Market Report for the MISO Electricity Markets, June 15, 2023 at 41.  Available at: https://www.potomaceconomics.com/wp-content/uploads/2023/06/2022-MISO-SOM_Report_Body-Final.pdf.).  The Pennsylvania-New Jersey-Maryland Interconnection (PJM) found that FSP increased prices as well as increased reliance on uplift payments (Monitoring Analytics, LLC, State of the Market Report for PJM: Volume 1, 2023, March 14, 2024 at 21 and 30-32.  Available at: https://www.monitoringanalytics.com/reports/PJM_State_of_the_Market/2023/2023-som-pjm-vol1.pdf.).

[4] Price Formation Enhancements: Working Group Session #6, October 12, 2023 at 11-17.  Available at: https://www.caiso.com/InitiativeDocuments/Presentation-Price-Formation-Enhancements-Oct12-2023.pdf.

[5] Price Formation Enhancements: Working Group Session #9, December 11, 2023 (December Analysis) at 17.  Available at: https://www.caiso.com/InitiativeDocuments/Presentation-Price-Formation-Enhancements-Dec12-2023.pdf.

[6] Price formation Enhancements Working Group Recording, April 8, 2024 at 2:08:40-2:10:20.  Available at: https://www.youtube.com/watch?v=4ULeI0pAo20&t=7714s.

[7] Cal Advocates previously recommended that the CAISO remove FSP from the scope of the PFE initiative, citing that the CAISO’s findings to not adopt FSP in 2016 remain relevant today in addition to unnecessary increased costs to ratepayers.  Cal Advocates, Comments on Price Formation Enhancements Working Group 6, November 3, 2023.  Available at: https://stakeholdercenter.caiso.com/Comments/AllComments/6705ab14-132f-4a74-a0db-4ad6ba98b9b5#org-20bc9248-0b32-4d23-b075-70bbd48cf411.

[8] Based on incremental real-time energy supply relative to day-ahead schedules.  April Analysis at 74.

[9] Based on total demand and an FSP-informed clearing price.  December Analysis at 42.

[10] Powerex and PPC, The Importance of Fast-Start Pricing in Market Design, June 2022 at 2.  Available at: https://www.caiso.com/InitiativeDocuments/Powerex-and-Public-Power-Council-Report-Importance-of-Fast-Start-Pricing-in-Market-Design.pdf.

[11] DMM, Comments on Price Formation Enhancements October 12, 2023 Working Group, November 2, 2023 (DMM October WG Comments) at 2.  Available at: https://stakeholdercenter.caiso.com/Common/DownloadFile/f821f8da-a367-4da5-b833-74915608c5cb.

[12] DMM October WG Comments at 2.

[13] “The differences between the actual LMP and the fast start LMP will distort the incentive for market participants to behave competitively and to follow PJM's dispatch instructions.  PJM is paying new forms of uplift in an attempt to counter the distorted incentives inherent in fast start pricing.”  Monitoring Analytics, LLC, State of the Market Report for PJM: Volume 1, 2021, March 10, 2022 at 30.  Available at: https://www.monitoringanalytics.com/reports/PJM_State_of_the_Market/2021/2021-som-pjm-vol1.pdf.

[14] April Analysis at 69.

[15] April Analysis at 9.  

[16] April Analysis at 71

[17] Assuming a 60-minute startup time.  April Analysis at 72-73

[18] Including the highest differences relative to if prices were calculated using system-wide dispatch.  April Analysis at 75-79.

[19] More skew indicates more price increases due to FSP.  April Analysis at 80-86

[20] April Analysis at 87-98.

[21] Also referred to as “minimum run time.”

[22] For example, the incremental costs per month for using STUT ≤ 60 minutes are $25,000 to $29,000 higher than using STUT ≤ 30 minutes across all three amortization methodologies.  April Analysis at 74.

[23] April Analysis at 9.

[24] April Analysis 17.

[25] April Analysis at 50.

[26] April Analysis at 51.

[27] April Analysis at 9 and 17. 

[28] April Analysis at 43.

[29] April Analysis at 108.

[30] April Analysis at 108.

2. Please provide your organizations level of priority (High, Medium, Low) as it relates to further policy development for Fast-Start Pricing.

For the reasons stated above, Cal Advocates recommends that the CAISO remove FSP from the scope of this initiative.

3. Please provide any additional feedback.

Cal Advocates has no additional feedback at this time.

1. Please provide your feedback and perspectives on the value and need for Fast Start Pricing within ISO markets, including perspectives on the Fast-Start Pricing analysis provided in Working Group Session #16.

2. Please provide your organizations level of priority (High, Medium, Low) as it relates to further policy development for Fast-Start Pricing.

3. Please provide any additional feedback.

1. Please provide your feedback and perspectives on the value and need for Fast Start Pricing within ISO markets, including perspectives on the Fast-Start Pricing analysis provided in Working Group Session #16.

NCPA believes the analysis provided in WG 16 confirms NCPA’s position that Fast Start Pricing is not necessary or appropriate for the CAISO market. The analysis concluded that the impact of FSP implementation would be minimal and FSP implemented in other RTOs may not be a plug and play implementation in CAISO. NCPA does not support FSP implementation in CAISO due to the limited benefits weighed against potential risks of unintended consequences.  

2. Please provide your organizations level of priority (High, Medium, Low) as it relates to further policy development for Fast-Start Pricing.

NCPA asks that CAISO cease further policy development of Fast Start Pricing for reasons stated above.  

3. Please provide any additional feedback.

None at this time.  

1. Please provide your feedback and perspectives on the value and need for Fast Start Pricing within ISO markets, including perspectives on the Fast-Start Pricing analysis provided in Working Group Session #16.

PG&E supports any efforts that improve market efficiency and reliability. The analyses conducted by the CAISO suggest that the cost impacts of FSP are “relatively moderate,” and the decrease in BCR caused by FS resources is minimal, implying limited benefits in incentivizing resources to respond during tight system conditions. PG&E seeks additional clarifications that justify the benefits of FSP for California and the broader western market, including quantifying the additional supply that will be available during tight conditions.      

2. Please provide your organizations level of priority (High, Medium, Low) as it relates to further policy development for Fast-Start Pricing.

PG&E believes that FSP should be assigned a lower priority compared to BAA-level Market Power Mitigation and Scarcity Pricing efforts.

3. Please provide any additional feedback.

• PG&E supports CAISO’s analysis assumption that Fast Start Pricing (FSP) should be applied solely in the Real-Time Markets. However, PG&E is concerned that implementing FSP in the Day-Ahead Markets may offer limited benefits in incentivizing Fast Start (FS) resources to respond during real-time tight system conditions, while potentially increasing costs for load consumers.

• PG&E believes that the effective and efficient performance of FSP demands a clear definition for qualified resources. Alongside time-related characteristics such as start-up time and minimum runtime, qualification criteria should include minimum output power (Pmin) and unit commitment costs. Including these requirements would optimize FSP’s benefits by accurately reflecting commitment costs of block-loaded units in market prices, while mitigating potential price distortion due to the deviation from the Locational Marginal Pricing (LMP) model.   

• PG&E encourages CAISO to engage in discussions regarding the assumptions necessary for FSP analyses of resources, particularly those with commitment cost representing opportunity costs, such as PDR, Hydro, pump storage, and storage resources with charging/discharging transition costs. It remains unclear in CAISO’s analyses whether the opportunity costs of these resources are considered as “commitment cost” and, if so, how they are amortized in bids.

• PG&E requests CAISO to clarify how Market Power Mitigation (MPM) has been applied in the FSP analyses and how it would be applied in markets with FSP. Specifically, PG&E seeks clarification on (1) whether bid curves of FS resources would be amortized before or after the MPM run, and (2) whether and how CCDEBE (Commitment Cost and Default Energy Bids Enhancements) will be incorporated into the MPM.  

1. Please provide your feedback and perspectives on the value and need for Fast Start Pricing within ISO markets, including perspectives on the Fast-Start Pricing analysis provided in Working Group Session #16.

PacifiCorp appreciates the CAISO providing and explaining the data analysis performed on fast-start pricing. The analysis was robust and gives stakeholders a better understanding of how fast-start pricing may impact the WEIM. While PacifiCorp is not opposed to further discussing fast-start pricing in stakeholder meetings, it is unclear whether it is needed for the WEIM. The analysis shows there would be a reduction in bid cost recovery (BCR) payments to fast-start generators, which indicates improvements in market efficiency, but the reduction in BCR payments would be small compared to the total BCR payments made in the CAISO markets. The analysis also shows that increases in LMPs would be moderate and affect a low percentage of intervals. This leads to the overall increase in payments to WEIM generators to be small. In PacifiCorp’s view, it seems the trade-off is a marginal increase in market efficiency for a slight increase in system costs. However, the policy design and implementation of FSP in the WEIM does not seem like it will be a simple process due to the complexity of the WEIM and potential interactions with the imbalance reserve and flexible ramping products. In PacifiCorp’s view, there may be other initiatives the CAISO and stakeholders should focus on to improve the WEIM before embarking on a complex initiative to implement FSP. PacifiCorp is open to further discussing FSP with the CAISO and stakeholders and would like to hear perspectives from other stakeholders that believe FSP is needed in the WEIM.

2. Please provide your organizations level of priority (High, Medium, Low) as it relates to further policy development for Fast-Start Pricing.

Further policy development of FSP for the WEIM is a low priority for PacifiCorp. There are other on-going working groups and initiatives, such as greenhouse gas, gas resource management, scarcity pricing, and BAA-level market power mitigation, that should take precedence over FSP. There were also proposals submitted in the Annual Policy Catalog Roadmap Process, such as WEIM RSE and demand response submission process enhancements, that PacifiCorp believes should take higher priority than FSP because they represent more immediate challenges present in the WEIM that can be improved.

3. Please provide any additional feedback.

1. Please provide your feedback and perspectives on the value and need for Fast Start Pricing within ISO markets, including perspectives on the Fast-Start Pricing analysis provided in Working Group Session #16.

Portland General Electric (“PGE”) appreciates the engagement and work by the ISO on this topic as it is important to some WEIM participants. Although this is a low priority to PGE (discussed below), PGE only sees value in continuing further discussion on Fast-Start Pricing if it is important to other stakeholders based on their generation portfolio. In addition, PGE would like clarification from the ISO on how supporting this discussion impacts other initiatives (from a resource perspective) as there are certain policy issues, such as scarcity pricing, that PGE considers important prior to implementing the EDAM. 

2. Please provide your organizations level of priority (High, Medium, Low) as it relates to further policy development for Fast-Start Pricing.

As noted above, this is a low priority to PGE and not considered important when joining the EDAM. Scarcity pricing is of the highest priority and PGE would like a solution prior to EDAM implementation.

3. Please provide any additional feedback.

No additional comments at this time.

1. Please provide your feedback and perspectives on the value and need for Fast Start Pricing within ISO markets, including perspectives on the Fast-Start Pricing analysis provided in Working Group Session #16.

PGP appreciates the analysis provided on this topic and the time and expertise that has been dedicated to further understanding the potential benefits, impacts, and design considerations of adding Fast-Start Pricing to CAISO markets. PGP supports Fast-Start Pricing as a means to improve the accuracy of pricing when fast-start resources are required to serve load, while recognizing this may add computational complexity to the market solution and have impacts on other products and market design features that need to be carefully considered.

To balance the resource needs of this topic related to other critical dialogue progressing through the Price Formation Enhancements group, PGP is supportive of a process that leans heavily on the work that has already been done to determine most accurate and compatible design features for a CAISO Fast-Start design. Such a process could include further development of the novel design to address interactions with FRP that was introduced last fall. This process should also incorporate adoption of recommendations from the independent experts Susan Pope and Michael Cadwalader regarding design features that may introduce the most efficient designs and lessons learned from other markets and/or improve compatibility with CAISO markets. We are also interested in further understanding the computational needs of adding the separate pricing run, and if this provides opportunities for other design features such as improvements to intra-day opportunity cost pricing, or if, conversely, it has the potential to add computational complexity which inhibits the ability to address new issues that are arising due to the increasing penetration of storage and renewables on the system. This additional information may help to inform the prioritization and sequencing question for when to re-focus on this topic.

2. Please provide your organizations level of priority (High, Medium, Low) as it relates to further policy development for Fast-Start Pricing.

Medium- While interested in Fast-Start, PGP recognizes other issues within the PFE initiative as higher priority, including scarcity design, BAA MPM improvements, and additional work on the 831 bidding rules. All of these topics have potentially significant scope and need to have final designs in advance of EDAM implementation. PGP is also interested in further scoping of the Extended FRP horizon or other enhancements to FRP in advance of implementation of Fast-Start. In general, our prioritization aligns with prior stakeholder dialogue, and still fits within the phasing plan introduced last year[1], while we would place Scarcity Pricing and the MPM improvements as a higher priority than Fast-Start in the initiative overall.

[1] See PFE Presentation from November 16^th, 2022: PowerPoint Presentation (caiso.com)

3. Please provide any additional feedback.

Given the number of inter-related priority topics that are encompassed in this Price Formation Enhancements initiative scope, and some new items for consideration that have been raised through recent dialogue in the stakeholder discretionary initiatives process, PGP would like to see a review of the PFE initiative scope and topics (including those raised recently or within the policy roadmap process) so that this can be included in the plan at the appropriate time based on it’s priority in relation to other critical design improvements.

1. Please provide your feedback and perspectives on the value and need for Fast Start Pricing within ISO markets, including perspectives on the Fast-Start Pricing analysis provided in Working Group Session #16.

PPC appreciates the CAISO’s work to educate stakeholders on Fast-Start Pricing and the thorough analysis on the subject that has accompanied the price-formation enhancements policy initiative.  As described in previous comments and our issue paper developed in partnership with Powerex, PPC believes the lack of Fast-Start Pricing in the markets operated by the California ISO results in energy prices that do not fully reflect the marginal costs of meeting demand when peaking units are running.  Incorporating Fast-Start Pricing in the ISO markets would improve outcomes as compared to the status-quo, specifically:

1. Fast-Start Pricing ensures equitable compensation for across different resource types.  Currently, resources other than peaking units receive less compensation for providing the same contribution to meeting demand in a given hour.  This includes imported hydro and batteries whose output is often shaped into the same morning and evening net-load peaks as peaking units.  Adopting Fast-Start Pricing addresses this inequity and remedies intra-regional cost shifts that are the result of price formation policies that diverge from standard ISO and RTO market design.
2. Fast-Start Pricing restores appropriate price signals for the displacement of higher emitting and higher cost resources.   When the full compensation of a marginal resource is not reflected in the wholesale market prices, one of the detrimental consequences is that the market prices will fail to attract alternative resources that might be available to meet demand at a lower cost.  Adopting Fast-Start Pricing will help ensure access to a broader pool of clean and flexible supply from other regions such as Northwest hydro systems.
3. Fast-Start Pricing reinforces state Green House Gas Pricing Programs.   When the calculation of wholesale market prices excludes the costs of starting and operating a natural gas peaking unit, it also excludes the cost of the GHG emissions of those units.  Natural gas peaking units tend to be relatively inefficient and emitting, as they burn more fuel per unit of electricity relative to other types of generation.  A lack of Fast-Start Pricing results in market prices that do not accurately reflect GHG emissions during high net-load hours when those GHG emissions are likely to be the greatest, undermining efforts to reduce emissions and the environmental policy objectives that GHG pricing is intended to achieve.  PPC expects these impacts will only grow as more states implement GHG pricing programs and the price of allowances increase. 

PPC would also like to emphasize many of the observations shared by the WEIM Governing Body market expert at the WEIM Governing Body Meeting General Session on March 19, 2024.  First, the flexible ramping product and shortage pricing address separate issues than Fast-Start Pricing.  Historically, much of the discussion around Fast-Start Pricing has been framed around creating incentives for flexible generation to be available and responsive to grid conditions and needs and whether flexible ramping products met this need.  While Fast-Start Pricing can and likely will increase the available pool of supply, it more importantly results in prices that better reflect the cost of meeting demand when peaking units are dispatched and is not duplicitive of flex ramp.  PPC agrees with the prosepctive impacts from implementing Fast-Start Pricing as summarized by the WEIM Governing Body market expert including:

• improved price signal for efficient real-time imports, exports and price responsive load.
• More efficient performance incentive for supply resources and imports scheduled day-ahead.
• Decreased costs and emissions due to fewer starts of fast-start units
• Changes in bid cost recovery payments (primarily decreases, but also increases)

2. Please provide your organizations level of priority (High, Medium, Low) as it relates to further policy development for Fast-Start Pricing.

For the reasons outlined above, PPC continues to see a high level of priority related to further policy development for Fast-Start Pricing.  PPC understands there are many high-priority initiatives currently underway and CAISO staff may have limited ability to fully explore all issued identified as high-priority by stakeholders.  PPC would appreciate additional detail on the level of policy and implementation work needed to adopt Fast-Start Pricing to better inform our perspective of where Fast-Start belongs among many competing high-priority initiatives.

3. Please provide any additional feedback.

PPC appreciates the CAISO’s efforts exploring Fast-Start Pricing. 

1. Please provide your feedback and perspectives on the value and need for Fast Start Pricing within ISO markets, including perspectives on the Fast-Start Pricing analysis provided in Working Group Session #16.

The Salt River Project Agricultural Improvement and Power District (SRP) appreciates the opportunity to provide feedback on the value and need for Fast Start Pricing within the ISO and Working Group Session #16. In Arizona, natural gas peaking units start during the evening peak hours year-round. It is of importance to include the cost of starting and operating natural gas peaking units in the calculation. Without fast-start pricing, the cost will not be recovered, and it could cause economic harm to rate payers and inefficient use of resources. Furthermore, without the fast-pricing implementation, it will fail to attract alternative resources that might be available and have a lower cost.

We appreciate CAISO performing the analysis based on stakeholder feedback from session #6 and #9. Further study on the storage SOC and BCR impacts would be valuable.

2. Please provide your organizations level of priority (High, Medium, Low) as it relates to further policy development for Fast-Start Pricing.

According to the analysis, about 19% of WEIM gas capacity qualifies as fast start with 60 minutes or less start up and run times. SRP has many resources in this category. Based on the sensitivity scenario, areas in the Southwest and CAISO observed the largest price changes, with up to monthly average of $8.70/MWh during extreme summer and gas conditions.

SRP would like to value the priority as High as it relates to further policy development for Fast-Start pricing.

3. Please provide any additional feedback.

No additional feedback at this time.

1. Please provide your feedback and perspectives on the value and need for Fast Start Pricing within ISO markets, including perspectives on the Fast-Start Pricing analysis provided in Working Group Session #16.

City Light appreciates the time and analysis that has been dedicated to Fast-Start Pricing (FSP) both by CAISO staff and stakeholders participating in the Price Formation Enhancements (PFE) stakeholder initiative. This issue is of particular importance to entities in the Pacific Northwest with hydro resources.

Overall, City Light supports FSP as a means of improving the accuracy of price signals as well as compensation for attributes required to meet reliability.  We also recognize that there are limitations on the impact that FSP might have based on the resource mix of the footprint as well as other market design elements and products.  We appreciate the CAISO staff’s analysis providing additional insight into the potential impacts that FSP might have on WEIM pricing, as well as the potential complexities of implementation.

City Light believes that FSP is a topic worthy of additional consideration, as a means of continuing to build toward a market design inclusive of elements ensuring resources can participate on a level-playing field with other resources in the bid stack. However, City Light also recognizes that there are competing priorities for both staff and stakeholder time, and that there are other elements under consideration in PFE that may be better positioned to address key pricing concerns and interests that may be more immediately impactful for WEIM and other market participants.

In light of this, we recommend that other items should be prioritized for immediate attention in the PFE Stakeholder Initiative, but ask that CAISO work with stakeholders to develop a roadmap for how FSP can be continued to be considered as a key element of the Initiative either in an ongoing, lower-priority manner, or to be picked up again soon. As a part of this, CAISO and stakeholders should identify any additional aspects of FSP that may need further or different analysis. We also request that CAISO work with stakeholders to develop an estimate of the potential timelines for when the various PFE topics might be addressed as well as an estimate of when they might be implemented.

City Light believes that even if FSP is not the highest priority in the PFE stakeholder initiative, it quite important that CAISO (1) continue to identify it as an area of priority in the next phases of the PFE initiative and (2) work with stakeholders to develop an understanding of when it might be revisited as well an idea of the potential implementation timelines. FSP has been a heavily scrutinized market design component in the discussions of potential day-ahead markets. City Light believes that creating a common understanding among stakeholders that allows us to move toward resolution of this topic would be helpful for regional cooperation and coordination. This common understanding could be used to inform stakeholder evaluations of potential DAM options as well as potential timeframes for go-live.

2. Please provide your organizations level of priority (High, Medium, Low) as it relates to further policy development for Fast-Start Pricing.

Medium. As indicated above, FSP is not City Light’s highest priority; it is secondary to the larger Scarcity Pricing and Market-Power Mitigation (MPM) efforts. Additionally, City Light has been a strong advocate of changes to the storage bid cap (which is a part of the Scarcity Pricing topic) and we have already asked CAISO staff to prioritize both an interim resolution (to be implemented this summer), as well as a longer-term, durable solution to be developed over the coming months. Beyond these items, City Light believes that improvements to the Flexible Ramping Product may be worthwhile to explore.

3. Please provide any additional feedback.

City Light supports the ask made by Vistra for the CAISO to provide an overarching plan mapping all aspects of PFE and when each would reach the policy initiative and implementation phase. This will help stakeholders be able to better track and engage in the PFE initiative.

1. Please provide your feedback and perspectives on the value and need for Fast Start Pricing within ISO markets, including perspectives on the Fast-Start Pricing analysis provided in Working Group Session #16.

Based on the analyses discussed during the working group, while the costs of fast-start pricing are estimated by the CAISO to be moderate, it is also not clear that there is a compelling case for pursuing development of fast-start pricing within the CAISO markets at this time.  While certain additional analyses, as discussed by the CAISO’s consulting expert during the working group meeting, could be informative, in the absence of a clear policy imperative and in light of the limited costs and benefits demonstrated in the CAISO’s study results to date, performing further studies may not be constructive at this time, and certainly not on an expedited timeframe.  It appears preferable to focus efforts in this initiative on consideration of issues around scarcity pricing and market power mitigation and to revisit fast-start pricing at a later time.  Additionally, if and to the extent that proponents of fast-start pricing have identified countervailing information or data that the CAISO should consider in light of its assessment results as presented during the working group meeting, a discussion of whether the CAISO’s analyses would benefit from refinement or expansion may be appropriate.   

2. Please provide your organizations level of priority (High, Medium, Low) as it relates to further policy development for Fast-Start Pricing.

Consistent with the comments provided immediately above, it appears that further policy development should be a low priority.  The Six Cities do not oppose refinement or expansion of the study work that has occurred to date, in case additional analysis of fast-start pricing would be informative to stakeholders. 

3. Please provide any additional feedback.

The Six Cities have no additional comments at this time. 

1. Please provide your feedback and perspectives on the value and need for Fast Start Pricing within ISO markets, including perspectives on the Fast-Start Pricing analysis provided in Working Group Session #16.

SCE thanks the CAISO for its thorough analysis. Given the average prices in the CAISO markets[1], the $8.70 markup[2] which only occurs 3%-25% of the time, it appears that there should not be significant impacts of FSP on the CAISO markets.

[1] https://www.caiso.com/Documents/2022-Annual-Report-on-Market-Issues-and-Performance-Jul-11-2023.pdf

[2] https://www.caiso.com/InitiativeDocuments/Presentation-Price-Formation-Enhancements-Apr8-2024.pdf

2. Please provide your organizations level of priority (High, Medium, Low) as it relates to further policy development for Fast-Start Pricing.

Low 

3. Please provide any additional feedback.

1. Please provide your feedback and perspectives on the value and need for Fast Start Pricing within ISO markets, including perspectives on the Fast-Start Pricing analysis provided in Working Group Session #16.

Tacoma Power thanks CAISO for conducting an investigation into Fast Start Pricing, and for performing substantial analysis around the potential market mechanism as part of Working Group Session #16. 

2. Please provide your organizations level of priority (High, Medium, Low) as it relates to further policy development for Fast-Start Pricing.

Tacoma Power believes that Fast-Start Pricing is an important market mechanism worthy of continued policy development. We also view it as a high priority matter but acknowledge that implementation of Fast-Start Pricing cannot occur in isolation and that its effect on other market elements would need to be thoughtfully considered and addressed.

Tacoma Power agrees with the objective of Fast-Start Pricing as stated by Susan Pope in the March 19^th presentation to the WEIM Governing Body that under a Fast-Start Pricing regime, “price better reflects cost of meeting load when fast-start units [are] dispatched to meet load.”  By including minimum load, start-up, and transition costs in LMPs, we believe that Fast-Start Pricing appropriately reflects marginal costs in market prices. In our view, it also provides a meaningful price incentive for investment and participation of non-emitting flexible resources, such as hydro and storage resources, to compete during peak hours with natural gas-fired resources, which “are largely the main recipient of bid cost recovery” as shown on Slide 55 of CAISO’s April 8^th presentation.

Tacoma Power thanks CAISO for the analysis it performed on the effect of Fast Start-Pricing on the WEIM. We accept its results as valid, including indication that the pricing effect of Fast Start-Pricing in the Pacific Northwest and the Tacoma Power BAA in particular is zero or near zero for the WEIM. Given the resource mix of the region and transfer constraints between the Pacific Northwest and CAISO or the Southwest, this result isn’t entirely surprising especially when the study is conducted on the real-time market. However, we are interested in determining if the analysis would change if it considered the effect on the day-ahead market, RUC, and EDAM. We also interpret the result as being only applicable to the impact of Fast-Start Pricing on the Tacoma Power WEIM entity and WEIM scheduling coordinator. Through bilateral trading paired with firm transmission rights, we believe that our organization could realize some of the pricing impacts of Fast-Start Pricing in other regions.

Finally, Tacoma Power has perceived Fast Start-Pricing, along with fundamentals of market governance, as being key distinguishing features between the markets administered by CAISO and SPP, which has driven Tacoma Power’s support for the development of Markets+.  As an owner of flexible hydro resources, we assess a market without Fast-Start Pricing as likely undercompensating for energy produced by hydro resources when the market is simultaneously committing fast-start resources and offering those resources cost recovery payments that are not reflected in LMPs. Accordingly, we prefer market designs that maintain Fast-Start Pricing.

3. Please provide any additional feedback.