Bonneville Power Administration
Submitted 08/18/2021, 04:01 pm
1.
Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) second revised straw proposal:
The Bonneville Power Administration (Bonneville)[1] appreciates the opportunity to submit comments on CAISO’s Day-Ahead Market Enhancements (DAME) Second Revised Straw Proposal dated July 21, 2021 and subsequent stakeholder workshop held on July 28, 2021. In particular, we strongly support the development of an imbalance reserve product that is co-optimized with energy and ancillary services in the integrated forward market (IFM) and also support development of a reliability capacity down product. These products are important additions to the CAISO’s day-ahead market that will support reliability by better positioning resources capable of addressing the significant uncertainty that manifests between the day-ahead and fifteen-minute market timeframes.
However, there are several elements of the proposal Bonneville does not support. Specifically we find the modifications to market power mitigation to be inappropriate, unnecessary complications, and implementation risks to this important market enhancement. In summary:
- We do not support the proposed changes to the Market Power Mitigation (MPM) pass for the IFM.
- Energy bids should be mitigated based on bid-in demand, rather than imbalance reserve deployment scenarios.
- CAISO should proceed cautiously with new market power mitigation measures and draw upon previous FERC determinations of appropriate market power mitigation measures.
- We support the use of a quantile regression approach for determining the imbalance reserve requirements and request more detail regarding the specifics of the calculation.
- We request the CAISO enable market participants to submit imbalance reserve bid curves that allow for different imbalance reserve bids for different quantities.
- We do not support MPM for the residual unit commitment (RUC) process, consistent with FERC’s September 21, 2006 Order.
- We request clarification on what net demand forecast will be used in RUC and which resources can participate in RUC.
- The proposed method to account for energy offer cost in upward capacity procurement appears reasonable, but a solution is needed for when there are insufficient eligible resources to meet 100% procurement of imbalance reserves.
- Any future default capacity bid calculations must accurately reflect opportunity costs for hydro resources.
- To be eligible to provide imbalance reserves or reliability capacity, there needs to be a high degree of confidence that a resource’s output will be consistent with its award. As such, we do not support the eligibility of variable energy resources to provide imbalance reserves up and reliability capacity up.
- The transition period should end on January 1, 2024 regardless of whether EIM entities onboard into an extended day-ahead market or not.
- We strongly support the EIM Governing Body having an advisory role for this initiative.
[1] Bonneville is a federal power marketing administration within the U.S. Department of Energy that markets electric power from 31 federal hydroelectric projects and some non-federal projects in the Pacific Northwest with a nameplate capacity of 22,500 MW. Bonneville currently supplies around 30 percent of the power consumed in the Northwest. Bonneville also operates 15,000 miles of high voltage transmission that interconnects most of the other transmission systems in the Northwest with Canada and California. Bonneville is obligated by statute to serve Northwest municipalities, public utility districts, cooperatives and then other regional entities prior to selling power out of the region.
2.
Please provide your organization’s comments on the proposed changes to the market power mitigation (MPM) pass for the integrated forward market (IFM):
Bonneville does not support the proposed changes to the MPM pass for the IFM. Energy bids should not be mitigated based on imbalance reserve deployment scenarios and we recommend CAISO monitor market power conditions for imbalance reserves during the transition period to assess the need for mitigation.
We understand that the CAISO is proposing to evaluate the competitiveness of bids in the IFM for three scenarios: (1) the base scenario (cleared bid-in load), (2) the imbalance reserve up deployment scenario, and (3) the imbalance reserve down deployment scenario. If any of these scenarios are determined to be uncompetitive, energy bids will be mitigated. If either of the imbalance reserve deployment scenarios is determined to be uncompetitive, imbalance reserve bids will also be mitigated.
While the imbalance reserve product is being added to the IFM, day-ahead energy will still clear at the bid-in load. The imbalance reserve deployment scenarios address the outer ends of the distribution of requirements (97.5 and 2.5 percentiles). To mitigate energy prices based upon uncompetitive conditions in these scenarios would impose mitigation of day-ahead energy bids for the potential of a rare circumstance occurring in real-time. Additionally, resources that receive an imbalance reserve product award or an ancillary service award must economically offer energy into the real-time market. And the real-time market has its own MPM pass that mitigates real-time energy bids when conditions are uncompetitive.
FERC has already determined that using bid-in demand is the appropriate basis for market power mitigation in the day-ahead market. In its September 21, 2006 Order, the Commission required the CAISO to use bid-in demand rather than forecast demand as the basis for market power mitigation in the day-ahead market, agreeing with commenters that using the CAISO forecasted demand would cause the CAISO to over-mitigate suppliers[1]. The imbalance reserve requirements are neither based on bid-in demand, nor the forecast demand, but rather based on bid-in demand plus reliability capacity plus a historical level of uncertainty between the day-ahead and the real-time market. Therefore, mitigating the imbalance reserve deployment scenarios would result in systemic over-mitigation beyond the bid-in demand, which could discourage bids from the very supply that this product is attempting to procure. For all of these reasons, Bonneville strongly opposes mitigation of energy bids based on the deployment scenarios and recommends the CAISO continue using the base scenario (using bid-in demand) as the basis for market power mitigation of energy bids in the day-ahead market, consistent with FERC’s September 21, 2006 Order.
Regarding the mitigation of imbalance reserve bids, Bonneville struggles to understand the need for mitigation when resource adequacy resources are required to bid in $0 during the transition period. The CAISO has indicated that the resource adequacy requirements will have to ensure that resource adequacy resources provide sufficient imbalance reserve capacity bids to meet the imbalance reserve requirements. As such, the marginal price for imbalance reserves should be zero in most cases. Bonneville does not believe mitigation of imbalance reserve bids is necessary or appropriate, especially during the transition period, and recommends the CAISO instead monitor the imbalance reserve product and assess the need for mitigation before implementing mitigation measures. The CAISO could consider a bid cap as an alternative, similar to what is done for ancillary services. A bid cap would reduce complexity of implementation and be consistent with the FERC Commission’s findings that a bid cap provides sufficient mitigation of any potential power for RUC availability bids, which are also mostly composed of resource adequacy resources[2].
Over-mitigation of bids (energy or capacity) harms the seller and discourages participation in the CAISO markets, particularly from external supply. The CAISO should proceed cautiously with new market power mitigation measures and draw upon previous FERC determinations of appropriate market power mitigation measures.
[1] Paragraph 1089 of FERC Order Conditionally Accepting the CAISO’s Electric Tariff Filing to Reflect Market Redesign and Technology Upgrade Issued September 21, 2006. (Sept. 21, 2006 FERC Order)
[2] Paragraph 137 of FERC Order Conditionally Accepting the CAISO’s Electric Tariff Filing to Reflect Market Redesign and Technology Upgrade Issued September 21, 2006.
3.
Please provide your organization’s comments on the proposed changes to the IFM:
Bonneville requests more information regarding the quantile regression approach to determining imbalance reserves and requests the CAISO enable market participants to submit imbalance reserve bid curves that allow for different imbalance reserve bids for different quantities.
Bonneville continues to strongly support the development of the imbalance reserve up and imbalance reserve down products to meet net load uncertainty between the day-ahead and real-time markets and minimize the need for out-of-market actions by the market operator and/or balancing authority. We expressly support the following features of the imbalance reserve product:
- Imbalance reserves are co-optimized and procured in the IFM
- The market optimization will consider transmission constraints to ensure imbalance reserves are deliverable using imbalance reserve deployment scenarios.
- The market will price imbalance reserves at each node reflecting deliverability constraints.
- The CAISO will procure 100 percent of the imbalance reserve requirement in the IFM.
Bonneville is also supportive of the CAISO using a quantile regression approach to determining the imbalance reserve requirements but would like to better understand the specifics of the methodology and data being used. CAISO has stated that the quantile regression methodology for determining the imbalance reserve requirements will closely resemble the quantile regression methodology used for the flexible ramping product[1]. Bonneville requests clarity regarding the following:
- Is a 15-minute deviation of the RTPD forecast from the day-ahead forecast used? For example, will a given historical hour provide four observations for the associated quantile regression, one each from intervals A, B, C, and D (where the RTPD forecast varies over these intervals, and the day-ahead forecast is constant over these intervals)?
- What is the historical scope (seasonality, months, hours) of the data that will be included in the quantile regression for each hour?
- What specifically is the unit of observation in the quantile regression for imbalance reserves?
Bonneville requests the CAISO produce a document for the imbalance reserve quantile regression that is analogous to the quantile regression approach for the flexible ramping product.
Bonneville understands that resources offering imbalance reserves can submit only a single price offer for a single quantity for imbalance reserve capacity. However this limitation on imbalance reserve bidding does not allow suppliers to offer imbalance reserves based on additional costs, including opportunity costs and/or transmission costs, as the amount of imbalance reserves offered increases. This will likely result in suppliers offering a lower quantity of imbalance reserves than they would otherwise if resources were allowed to price differentiate their quantity offers. To maximize participation for the imbalance reserve products, Bonneville requests the CAISO enable market participants to submit imbalance reserve bid curves that allow for different imbalance reserve bids for different quantities.
[1] AppendixC-QuantileRegressionApproach-FlexibleRampingProductRequirements.pdf (caiso.com)
4.
Please provide your organization’s comments on the proposal for an additional market pass to perform MPM for the residual unit commitment (RUC) process:
Bonneville does not support MPM for the RUC process, consistent with FERC’s September 21, 2006 Order.
As noted above in response to mitigation of imbalance reserves, Bonneville struggles to understand the need for mitigation in the RUC process when resource adequacy resources are required to bid in $0 during the transition period. There has not been a demonstrated need to date for mitigation of resources in the RUC process and there does not appear to be a need for mitigation in the RUC process with the changes CAISO is proposing. Additionally, the issue of local market power mitigation for RUC availability bids was already addressed by the FERC Commission in its September 21, 2006 Order[1]:
- …the CAISO states that the concept of local market power mitigation of RUC availability bids was rejected by the Commission as “complicated and intrusive” in the July 2005 Order. For this reason, the CAISO explains, the MRTU Tariff does not include market power mitigation of RUC availability bids.”
- …we [the Commission] find that a $250/MWh bid cap on RUC availability bids provide sufficient mitigation of any potential for market power. Furthermore, we note that we would not ordinarily expect the CAISO to exhaust the resource adequacy capacity available for commitment in RUC, except in periods of extreme shortage. If such an extreme shortage were to occur, a RUC availability price near the bid cap could be an appropriate reflection of supply and demand fundamentals.”
In addition, Bonneville views this new process as inappropriate and an unnecessary complexity in both the implementation and execution phases of this proposal. Designing and implementing additional market passes is one of the reasons earlier proposals in this initiative had to be abandoned. If implementable, this new market pass would also add more time and a new process running after the IFM closes. This reduces the time available for market participants to schedule awards and could create other complications with scheduling energy and/or capacity awards.
[1] Paragraph 137 of FERC Order Conditionally Accepting the CAISO’s Electric Tariff Filing to Reflect Market Redesign and Technology Upgrade Issued September 21, 2006.
5.
Please provide your organization's comments on the proposed RUC process changes:
Bonneville requests clarification on what net demand forecast will be used in RUC and which resources can participate in RUC.
CAISO notes that the RUC process procures incremental capacity based on the forecast of CAISO net demand. Bonneville requests clarification regarding what net demand forecast will be used. Will CAISO continue to use a high confidence forecast in RUC similar to what is being used for summer 2021 or will CAISO revert back to using the expected net demand forecast? Bonneville understands that reducing out of market actions by CAISO operators has been a key driver of this initiative and we are anticipating RUC would procure reliability capacity up to an expected demand forecast.
Bonneville also requests clarification on which resources can participate in RUC and provide reliability capacity up and down. Section 31.5.1.1 of CAISO’s tariff states that “Capacity from Non-Dynamic System Resources that have not been designated Resource Adequacy Capacity is not eligible to participate in the RUC.” Our understanding then is that imports that are non-dynamic and have not been designated as resource adequacy capacity are not eligible to provide reliability capacity up and reliability capacity down. Will these eligibility requirements remain the same once DAME is implemented or is CAISO proposing to make modifications to the eligibility requirements for participation in the RUC as part of the DAME initiative?
6.
Please provide your organization's comments on the proposed real-time market ramp deviation settlement:
No comments.
7.
Please provide your organization's comments on the proposed method to account for energy offer cost in upward capacity procurement:
Bonneville finds the proposed method to account for energy offer cost in upward capacity procurement reasonable, but a solution is needed for when there are insufficient eligible resources to meet 100 percent procurement of imbalance reserves.
The CAISO proposes to estimate the marginal price of meeting the P97.5 net load forecast using all available day-ahead energy bids and proposes that resources would be ineligible for RCU and IRU awards on any capacity segment with an associated energy bid that exceeds the forecasted P97.5 price. Bonneville finds this proposal reasonable to the extent there are sufficient eligible bids to meet the IRU requirements. In instances where there are insufficient eligible resources to meet the IRU requirements, CAISO will need to determine a way to expand the pool of eligible IRU resources, such as allowing for a marginal price of meeting a higher net load forecast.
Bonneville requests the CAISO provide more information regarding the timing and calculation of the P97.5 net load forecast and associated marginal price. We also request that the forecast values and marginal prices be provided on an ongoing basis.
8.
Please provide your organization's comments on the proposed default capacity bid, including feedback on the appropriate price based on historical spinning reserve prices::
Any future default capacity bid calculations must accurately reflect opportunity costs for hydro resources.
Bonneville maintains its recommendation that CAISO should monitor the imbalance reserve products and RUC process during the transition period and assess the need for mitigation before implementing mitigation measures. However, Bonneville notes that any future development of a default capacity bid needs to accurately account for the unique costs, including opportunity costs, of different types of resources and consider the relevant features of the hydro default energy bid for hydro resources. Using the historical prices of spinning reserves as a reference point for a single default capacity bid is problematic for several reasons:
- Using historical prices do not account for rapidly changing market fundamentals. Using a backward-looking metric will not be able to adequately capture the value of capacity.
- Many spinning reserves are self-supplied.
- Spinning reserves procured through the market come from a smaller pool of resources.
9.
Please provide your organization's comments on the proposed variable energy resources eligibility to provide new products:
Seeking stakeholder input on setting a requirement to provide high sustainable limit for CAISO forecasted VERs.
Bonneville does not support the eligibility of variable energy resources to provide imbalance reserves up and reliability capacity up.
The CAISO proposes to allow “forecasted” variable energy resources to provide imbalance reserves up and reliability capacity up where a resource’s upper economic limit is set to the CAISO forecast to provide IRU and RCU. However, the imbalance reserve requirement is intended to meet the net load uncertainty between the day-ahead and real-time markets, which includes the uncertainty around the variable energy resources’ forecasted expected output. The CAISO is proposing to allow an uncertainty requirement to be met by a resource output that is uncertain. This in effect could negate the reliability improvements sought by the procurement of IRU and RCU. Suppose the CAISO forecast for a variable energy resource is 100 MW and the resource was awarded 75 MW of energy and 25 MW of imbalance reserves up or reliability capacity up. If in real-time the variable energy resource can only generate 75 MW, the CAISO BAA is left short 25 MW or must procure 25 MW from another resource yet having paid a day-ahead capacity premium to the variable energy resource for output it could not realize.
To be eligible to provide imbalance reserves or reliability capacity, there needs to be a high degree of confidence that a resource’s output will be consistent with its award. Bonneville recommends that variable energy resources not be eligible to provide IRU and RCU or be eligible for only the quantity that can be achieved with a high degree of confidence (i.e. P97.5 of forecasted output).
10.
Please provide your organization's comments on the proposed transition period for DAME enhancements:
Bonneville believes the transition period should end on January 1, 2024 regardless of whether EIM entities onboard into an extended day-ahead market or not.
Bonneville agrees with the CAISO and the Market Surveillance Committee that compensating resources for making capacity available through market bids, rather than through resource adequacy contract payments, is a more efficient way to allocate reliability capacity and imbalance reserve capacity. As CAISO has stated, this allows resources to reflect their costs of making capacity available through their bids; thus, market-clearing prices would better reflect market conditions, which would incentivize resources to provide reliability capacity and imbalance reserves when and where they are needed. Capturing these benefits and efficiencies should not be predicated on the onboarding of EIM entities into an extended day-ahead market.
11.
Please provide your organization's comments on the proposed treatment of metered subsystems, existing transmission contracts, and transmission owner rights:
No comments.
12.
Please provide your organization's comments on the proposed EIM Governing Body advisory role classification:
Bonneville strongly supports the EIM Governing Body having an advisory role for this initiative.
Bonneville agrees that these proposed changes to day-ahead market rules lay a foundation for the option to extend the day-ahead market to EIM Entities and that given the unique foundational nature of this initiative, it is appropriate for the EIM Governing Body to be given advisory authority over all aspects of this initiative.
13.
Please provide any additional comments on the DAME second revised straw proposal that have not previously been addressed:
Bonneville has no further comments.
California Community Choice Association
Submitted 08/18/2021, 03:30 pm
1.
Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) second revised straw proposal:
The California Community Choice Association (CalCCA) appreciates the opportunity to comment on the DAME second revised straw proposal. CalCCA supports this initiative’s objective of improving the day-ahead market’s ability to sufficiently schedule resources to cover net-load uncertainty and reduce the need for out-of-market actions. However, the must-offer obligation elements proposed in the transition period create significant concerns that the proposal will increase costs to ratepayers while limiting the California Independent System Operator’s (CAISO’s) access to resources already procured to meet real-time energy needs.
CalCCA offers the following comments on the second revised straw proposal:
- CalCCA supports applying market power mitigation to imbalance reserve offers in the IFM and reliability capacity offers in the RUC;
- The CAISO should consider basing the default capacity bid on opportunity costs rather than historical spinning reserve prices;
- CalCCA supports a mechanism to consider energy offer costs when awarding imbalance reserves and reliability capacity in the upward direction, but the proposed approach may not meet the objective of awarding imbalance reserves and reliability capacity to low energy cost resources; and
- The CAISO should (1) maintain the real-time must offer obligation for resource adequacy (RA) resources, and (2) require RA resources bid zero dollars for imbalance reserves and reliability capacity and evaluate the impacts of removing the zero-dollar bidding requirement within the Extended Day-Ahead Market (EDAM) initiative.
2.
Please provide your organization’s comments on the proposed changes to the market power mitigation (MPM) pass for the integrated forward market (IFM):
CalCCA supports applying market power mitigation to imbalance reserve offers in IFM and reliability capacity offers in RUC. However, as discussed in section 8, it is not clear historical spinning reserve prices will reflect costs of being available as imbalance reserves or reliability capacity.
3.
Please provide your organization’s comments on the proposed changes to the IFM:
No comments at this time.
4.
Please provide your organization’s comments on the proposal for an additional market pass to perform MPM for the residual unit commitment (RUC) process:
CalCCA supports applying market power mitigation to imbalance reserve offers in IFM and reliability capacity offers in RUC. However, as discussed in section 8, it is not clear historical spinning reserve prices will reflect costs of being available as imbalance reserves or reliability capacity.
5.
Please provide your organization's comments on the proposed RUC process changes:
No comments at this time.
6.
Please provide your organization's comments on the proposed real-time market ramp deviation settlement:
No comments at this time.
7.
Please provide your organization's comments on the proposed method to account for energy offer cost in upward capacity procurement:
CalCCA supports a mechanism to consider energy offer costs when awarding imbalance reserves and reliability capacity in the upward direction, but the proposed approach may not meet the objective of awarding imbalance reserves and reliability capacity to low energy cost resources. As a way to account for energy offer costs when procuring upward imbalance reserves or reliability capacity, the CAISO proposes to make resources ineligible to be awarded imbalance reserves or reliability capacity on any capacity segment with an associated energy bid that exceeds the forecasted price under P97.5 uncertainty. However, in real-time, a resource’s energy bid would not be capped at the forecasted price. This leaves the opportunity for resources to bid below the cap in day-ahead such that they are awarded imbalance reserves or reliability capacity in day-ahead and then bid for energy above the cap in real-time. This limits the ability of the CAISO’s proposal to meet the objective of awarding imbalance reserves and reliability capacity to lower energy cost resources. CAISO should consider capping real-time energy bids at the higher of forecasted P97.5 price or the resources default energy bid price to address concerns that real-time energy bid caps will dispatch resources below their marginal costs.
8.
Please provide your organization's comments on the proposed default capacity bid, including feedback on the appropriate price based on historical spinning reserve prices::
CalCCA supports developing market power mitigation measures for imbalance reserves and reliability capacity, but additional discussion is needed on how to establish the default capacity bid for those products. The CAISO proposes to use historical spinning reserve prices to inform the default capacity bid price, which would set the mitigated bid price for all resources except those with a negotiated price. However, it is not clear historical spinning reserve prices will appropriately reflect competitive prices for imbalance reserves and reliability capacity given imbalance reserves and reliability capacity will provide different services than spinning reserves and they will be used for different purposes. For capacity products, the default capacity bid should represent a resource’s opportunity cost for providing the product. Rather than basing the default capacity bid on historical spinning reserve prices, the default capacity bid should reflect opportunity costs.
In addition, the CAISO should clarify whether it is the CAISO’s intent to utilize the default capacity bid to insert bids for imbalance reserves and reliability capacity in day-ahead market. Currently, the CAISO inserts bids for RA resources at their default energy bid in both day-ahead and real-time in the event scheduling coordinators do not submit energy bids themselves. It is not yet clear how bid insertion will work in relation to the new products proposed in DAME. The CAISO should clarify if they will insert imbalance reserve and reliability capacity bids into day-ahead at the default capacity price. The CAISO should also clarify if resources with imbalance reserve or reliability capacity awards will have bids inserted for energy at their default energy bid if they do not bid themselves in real-time, as is done for RA resources today.
9.
Please provide your organization's comments on the proposed variable energy resources eligibility to provide new products:
Seeking stakeholder input on setting a requirement to provide high sustainable limit for CAISO forecasted VERs.
No comments at this time.
10.
Please provide your organization's comments on the proposed transition period for DAME enhancements:
CalCCA urges the CAISO to reconsider the modifications to the RA must offer obligations proposed in this initiative. Today, RA resources are obligated to submit RUC availability bids at zero dollars and are not paid the RUC clearing price if committed through the RUC process. RA resources must then bid into real-time, regardless of whether or not they are committed in day-ahead. This structure is in place because load-serving entities (LSEs) have already entered into contracts with RA resources paying for them to be available through real-time to provide energy. Under this initiative, the CAISO proposes a transition period that would last until the year of EDAM onboarding, in which RA resources would be required to bid zero for imbalance reserves and reliability capacity in the day-ahead market and would receive the marginal price for both products. RA resources would then be required to bid into the real-time market regardless of their imbalance reserve or reliability capacity awards. After the transition period, RA resources would no longer be required to bid zero for imbalance reserves or reliability capacity and would not be obligated to bid in real-time if they did not receive a day-ahead award. As described below, CalCCA recommends the CAISO maintain the real-time must offer obligation for RA resources and require RA resources bid zero dollars and not receive the marginal price for imbalance reserves and reliability capacity until the impacts of removing the zero-dollar bidding requirement can be evaluated within the EDAM initiative.
First, the CAISO should maintain the real-time RA must offer obligation given the cost and reliability impacts of removing it. LSEs in California have entered into RA contracts that procure capacity obligated to be available to the CAISO market to be turned into energy. Because RA resources are already paid to be available to provide energy through real-time, the CAISO should not release that capacity already paid for after the day-ahead market. The CAISO proposes the transition period in part to allow time for RA contracts to be updated to account for the removal of the zero-dollar bidding requirement. However, the ability for LSEs to renegotiate RA contracts already executed to account for this change will be difficult given tight supply conditions in the RA market. The CAISO’s Stack Analysis shows that total RA capacity is very limited, with little or no excess of system resources over coming years until additional resources come online through the Integrated Resource Planning process.[1] Such tightness in the RA market will make it difficult for LSEs to renegotiate RA contracts to reflect the new structure in which costs of real-time availability are recovered through the new DAME products rather than RA contracts. The result of implementing this change under current RA market conditions could result in LSEs paying for resources to be available to provide energy twice; first within the RA market when procuring RA capacity and second within the day-ahead market when procuring imbalance reserves and reliability capacity. As such, CalCCA has significant concerns around the feasibility of renegotiating RA contracts at a reasonable price to facilitate this structural change without significant increases in ratepayer costs.
Additionally, if RA resources are relieved of their must offer obligation after the day-ahead, the CAISO market would not receive the full benefit of having all resources and their attributes that have already been paid for available to meet grid needs. Relieving RA resources of their real-time must offer obligation after day ahead could result in the CAISO needing to rely on out-of-market actions to access the resource in the event conditions in real-time require additional resources beyond what is procured through the imbalance reserve or reliability capacity products to maintain grid reliability. Given the costs of making resources available through real-time are already covered in RA contracts, the CAISO should not limit its access to resources already procured to maintain grid reliability, and instead, should maintain the real-time must offer obligation for RA resources within this initiative.
CalCCA understands the rationale behind removing the zero-dollar bidding requirement under an EDAM where resources in other balancing authority areas would be bidding for the same products without the zero-dollar bidding requirement. However, given the difficulty LSEs will face renegotiating contracts under current RA market conditions, the CAISO should not consider removing the zero-dollar bidding requirement within the DAME initiative. Additionally, the CAISO should not pay RA resources the marginal price for imbalance reserves and reliability capacity since existing RA contracts already compensate resources for being available through real-time. Instead, the CAISO should maintain the zero-dollar bidding requirements and continue not to pay resources for capacity already accounted for in RA contracts indefinitely until this change can be evaluated within the EDAM initiative. This consideration should include potential alternatives to modifying the zero-dollar bid requirement given the double payment concerns and tight RA market conditions that exist today.
[1] Testimony of Jeff Billinton On Behalf of the California Independent System Operator, Rulemaking (R.) 20-11-003, Jan. 11, 2021, Table 2 at 12.
11.
Please provide your organization's comments on the proposed treatment of metered subsystems, existing transmission contracts, and transmission owner rights:
No comments at this time.
12.
Please provide your organization's comments on the proposed EIM Governing Body advisory role classification:
No comments at this time.
13.
Please provide any additional comments on the DAME second revised straw proposal that have not previously been addressed:
CalCCA is interested in how this proposal interacts with storage, co-located, and hybrid resources. Specifically, CalCCA asks how the individual components of co-located resources would be priced and dispatched under the current proposal for default capacity bids, and if and how the day-ahead market will award imbalance reserves and reliability capacity to co-located resources in accordance with their aggregate capability constraints.
California Public Utilities Commission - Public Advocates Office
Submitted 08/18/2021, 01:35 pm
1.
Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) second revised straw proposal:
The Public Advocates Office at the California Public Utilities Commission (Cal Advocates) appreciates the progress the California Independent System Operator (CAISO) has made in the development of the Day Ahead Market Enhancements Second Revised Straw Proposal of July 21, 2021, (Proposal). Cal Advocates provides the following recommendations:
- In future DAME proposals, the CAISO should provide estimates of the amount of each product the CAISO will seek to procure. Estimates of product amount would help the CAISO and stakeholders to better anticipate impacts to energy availability and impacts to day-ahead and real-time prices due to Imbalance Reserves Up/Down (IRU/D) and Reliability Capacity Up/Down (RCU/D) procurement requirements.
- Cal Advocates supports a transition period where Resource Adequacy (RA) resources would offer IRU/D and RCU/D at a $0/MWh price. However, the CAISO should re-evaluate the design and procurement strategies of the proposed products after the transition begins but before the products are available to Energy Imbalance Market (EIM) parties. The CAISO should also consider the administrative burden and potential higher costs when contemplating removing the $0/MWh obligation of RA resources for IRU/D and RCU/D.
- The CAISO should re-evaluate whether recent and ongoing market modifications already address the problems which IRU/D and RCU/D are intended to solve.
2.
Please provide your organization’s comments on the proposed changes to the market power mitigation (MPM) pass for the integrated forward market (IFM):
Cal Advocates has no comment on this topic at this time.
3.
Please provide your organization’s comments on the proposed changes to the IFM:
The proposed IRU/D product would address granularity differences between the 1-hour-interval day-ahead market (DAM) and the fifteen-minute real-time market (RTM), as well as address changes in forecasted load to be served between the DAM process and the fifteen-minute RTM process.[1] Any award of the Imbalance Reserve Up (IRU) product would proportionally reduce how much energy a resource may offer to the DAM since the IRU award would require the resource to increase its real-time generation above its DAM energy award.[2] The CAISO proposes to procure IRU from the market up to a defined requirement based on historical uncertainty between the DAM and RTM,[3] and RA resources would be required to offer IRU bids.[4] IRU awards may not result in actual energy dispatch[5] but would affect the DAM marginal price of energy since the total volume of day-ahead energy available to CAISO would decrease by the IRU requirement.[6] The Reliability Capacity Up (RCU) product would work the same way, but would affect RTM energy availability and prices instead of the DAM.
Since the upward products have the potential to increase the market cost of energy as a whole, it is important to estimate the amount of IRU and RCU the CAISO will procure to evaluate the magnitude of impact on energy prices. The current Proposal does not include any such estimation, though an earlier proposal implied the IRU requirement could be between 0 to 5,000 MW.[7]
The CAISO should estimate the amount of each product the CAISO anticipates needing in the next DAME proposal to forecast the cost impacts and compare the cost impacts to the benefits of IRU and RCU. The CAISO should also estimate how much the marginal price of energy would increase if IRU and RCU are adopted, given the reduction of available DAM and RTM energy supply that IRU and RCU would create. Lastly, the CAISO should explain if existing RUC products would be procured any less if IRU/D and RCU/D are implemented.
[1] The CAISO does not define “uncertainty requirements” in this proposal, which Cal Advocates interprets as differences in load forecasts between the DAM and the RTM. Proposal, p. 25.
[2] For example, a 100MW resource granted a 15MW IRU would only be able to receive an energy award up to 85MW. See also Proposal, pp. 50-51.
[3] Proposal, pp. 16, 25, 27.
[4] The amount of IRU/D and RCU/D RA resources must offer is not discussed in the current Proposal. Proposal, p. 22.
[5] Like some Residual Unit Capacity (RUC) products and ancillary services, IRU/D and RCU/D create an obligation to offer energy to the real-time market which may or may not be actually dispatched depending on market needs.
[6] To use a very simple example, the DAM may identify an energy need of 30,000 MW. The CAISO generally selects the lowest-price DAM energy bids to meet that energy need. If there are 31,000 MW of cheap resources and 10,000 MW of expensive resources, then the CAISO would procure 30,000 MW of cheap resources. However, if the IRU requirement is 4,000 MW, then 4,000 MW worth of the cheap resources could receive an IRU award, meaning the DAM would procure the remaining 27,000 MW of cheap resources and 3,000 MW of expensive resources. This would increase the cost to serve day-ahead load.
[7] These amounts were not stated verbatim but are implied in a graph. DAME Straw Proposal, February 3, 2020, p. 39. Available at: http://www.caiso.com/InitiativeDocuments/StrawProposal-Day-AheadMarketEnhancements.pdf.
4.
Please provide your organization’s comments on the proposal for an additional market pass to perform MPM for the residual unit commitment (RUC) process:
Cal Advocates has no comment on this topic at this time.
5.
Please provide your organization's comments on the proposed RUC process changes:
Cal Advocates has no comment on this topic at this time.
6.
Please provide your organization's comments on the proposed real-time market ramp deviation settlement:
Cal Advocates has no comment on this topic at this time.
7.
Please provide your organization's comments on the proposed method to account for energy offer cost in upward capacity procurement:
Cal Advocates has no comment on this topic at this time.
8.
Please provide your organization's comments on the proposed default capacity bid, including feedback on the appropriate price based on historical spinning reserve prices::
Cal Advocates has no comment on this topic at this time.
9.
Please provide your organization's comments on the proposed variable energy resources eligibility to provide new products:
Seeking stakeholder input on setting a requirement to provide high sustainable limit for CAISO forecasted VERs.
Cal Advocates has no comment on this topic at this time.
10.
Please provide your organization's comments on the proposed transition period for DAME enhancements:
The CAISO proposes a transition period in which IRU/D and RCU/D products would be implemented and RA resources would be required to offer the products at $0/MWh.[1] The transition period would last from fall 2022 until the EIM entities are able to procure the products, possibly January 1, 2024.[2] RA resources would submit economic bids rather than $0/MWh for the products at the end of the transition period.[3]
Cal Advocates supports a transition period that would allow the CAISO to evaluate the products and adjust the markets as necessary. However, the CAISO should include stakeholders in a re-evaluation of the products and any other implemented changes. This re-evaluation would allow stakeholders to consider the successes and failures of proposed changes and to recommend solutions before the products are made available to the EIM. A re-evaluation should include a report that, at a minimum, should detail the performance of the products, their volume and times of dispatch, and any obstacles or problems that arose due to the products’ existence.
A re-evaluation would also allow the CAISO and stakeholders to consider how concurrent initiatives and proceedings may warrant changes to the IRU/D and RCU/D products. This would include major structural changes such as the CPUC’s “Slice-of-Day” RA program redesign[4] and the CAISO’s own Unforced Capacity (UCAP) design,[5] as well as other CAISO initiatives and market trends that may arise in the future.
Finally, Cal Advocates disagrees with the CAISO that resource capacity be compensated through market bids rather than RA payments, which include the value of capacity offers through must-offer obligations. The CAISO states that paying for capacity through market bids “is a more efficient way to allocate reliability capacity and imbalance reserve capacity.”[6] Currently, RA resources are required to offer their capacity products in the RUC at a $0/MWh bid, though ancillary services may be bid above $0/MWh.[7] Cal Advocates is concerned that the CAISO has not completely considered the costs or feasibility of forcing load-serving entities to re-negotiate their RA contracts. Adding new capacity product obligations at a price other than $0/MWh could warrant re-negotiation of RA contracts since generators typically receive payments for their capacity value through RA contracts and payments for energy value through the CAISO markets. Alteration of must-offer obligations may also necessitate CPUC approval in accordance with California Public Utilities Code Section 380(a),[8] in addition to alteration of the CAISO Tariff.[9]
[1] Proposal, pp. 42-43.
[2] Proposal, p. 43.
[3] Proposal, p. 43.
[4] Slice-of-Day will fundamentally alter the CPUC’s RA program by adjusting must offer obligations and the basis of RA requirement volumes. Slice-of-Day is targeted for implementation in RA compliance year 2024. D.21-07-014 Decision on Track 3B.2 Issues, pp. 12-15.
[5] UCAP is a proposed component of the CAISO’s RA Enhancements initiative.
[6] Proposal, p. 43.
[7] CAISO Tariff 40.6.1.
[8] “The commission, in consultation with the Independent System Operator, shall establish resource adequacy requirements for all load-serving entities.”
[9] CAISO Tariff 40.6.1.
11.
Please provide your organization's comments on the proposed treatment of metered subsystems, existing transmission contracts, and transmission owner rights:
Cal Advocates has no comment on this topic at this time.
12.
Please provide your organization's comments on the proposed EIM Governing Body advisory role classification:
Cal Advocates has no comment on this topic at this time.
13.
Please provide any additional comments on the DAME second revised straw proposal that have not previously been addressed:
The Proposal states that IRU/D and RCU/D are market products to help the CAISO manage energy imbalances and avoid out-of-market actions that can lead to market dysfunctions.[1] The Proposal points to data from 2017 to early 2019 demonstrating sustained price divergence between day-ahead and real-time energy prices.[2] A September 2019 CAISO and Department of Market Monitoring (DMM) report (2019 Report) identifies “managing uncertainty from the DAM to RTM” as one way to mitigate price divergence, which the IRU/D and RCU/D seek to accomplish.[3] However, the 2019 Report identifies three other operational areas where price performance could be improved as well: modifications and enhancements to the Flexible Ramping Product (FRP), market timing and reservations of transmission rights, and variable energy resource (VER) bidding enhancements.[4] An FRP refinements initiative recently concluded, while a VER dispatch enhancement initiative is planned for 2022. The CAISO should demonstrate how these alternatives would be expected to lead to higher costs or fewer benefits than the current Proposal.
While out-of-market dispatches are still occurring at moderate levels and price divergence between the DAM and real-time prices of energy continue to occur in 2021,[5] it is not clear that the products and enhancements CAISO now proposes to adopt are still suitable for problems identified in 2019. The Proposal does not appear to consider market modifications conducted between 2019 and the present day, nor concurrent CAISO initiatives that alter the IFM and RUC processes. For example, in September 2020 the CAISO enhanced the RUC to remove a process which “was masking the effects of load under-scheduling and convergence bidding.”[6] This RUC enhancement may have decreased the need for load forecasting adjustments proposed here in the DAME initiative. Likewise, enhancements to the FRP that sought to address similar issues identified in the 2019 Report are being implemented in fall 2021.[7]
Since the Proposal would significantly change the IFM process by adding capacity products that could alter the market price of energy and necessitate major alterations of the RA must-offer-obligation, the CAISO should consider how implemented and on-going process changes could have reduced the need for IRU/D and RCU/D. The next DAME proposal should include the CAISO’s findings to either support continued development of the proposed capacity products or to delay or dismiss their development if prudent.
[1] Proposal, pp. 12-15.
[2] Proposal, pp. 13-15.
[3] CAISO Energy Markets Price Performance Report, September 23, 2019, p. 18. Available at: http://www.caiso.com/Documents/FinalReport-PricePerformanceAnalysis.pdf.
[4] CAISO Energy Markets Price Performance Report, September 23, 2019, pp. 17-19.
[5] Q1 2021 Report on Market Issues and Performance, June 9, 2021, pp. 2, 60-64. Available at: http://www.caiso.com/Documents/2021-First-Quarter-Report-on-Market-Issues-and-Performance-Jun-9-2021.pdf.
[6] Final Root Cause Analysis: Mid-August 2020 Extreme Heat Wave, January 13, 2021, p. 63. Available at: http://www.caiso.com/Documents/Final-Root-Cause-Analysis-Mid-August-2020-Extreme-Heat-Wave.pdf.
[7] Flexible Ramping Product Refinements: Final Proposal, August 31, 2020, p. 3. Available at: http://www.caiso.com/InitiativeDocuments/FinalProposal-FlexibleRampingProductRefinements.pdf.
Middle River Power, LLC
Submitted 08/18/2021, 02:25 pm
1.
Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) second revised straw proposal:
MRP generally supports the CAISO’s Second Revised Straw Proposal (“2RSP”). MRP continues to support the deployment of well-designed Imbalance Reserve (“IR”) and Reliability Capacity (“RC”) products. The introduction of market power mitigation proposals for both these capacity products and for the associated energy bids, however, introduces new layers of complexity and concern.
MRP also would like to better understand the implications of establishing a “binding configuration” for MSG resources in the RUC run (2RSP at page 8). In particular, MRP wants to understand whether, and to what extent, this “binding configuration” will affect a resource’s ability to serve as a supporting resource.
MRP supports the CAISO’s decision to procure 100% of the IR requirement in the Day-Ahead market instead of using a demand curve. This is a positive development, but it puts additional pressure on setting the IR requirements appropriately. The CAISO indicates that it will use “quantile regression” to set the IR targets. Though the CAISO represents that it is using quantile regression because of the “tail event” nature of setting these requirements, this regression technique is not especially familiar, and MRP would appreciate the CAISO providing numerical examples using small data sets showing how quantile regression will set the requirements and why this technique is preferable to other potential techniques.
2.
Please provide your organization’s comments on the proposed changes to the market power mitigation (MPM) pass for the integrated forward market (IFM):
MRP generally supports the products (Imbalance Reserves and Reliability Capacity) proposed in CAISO’s Second Revised Straw Proposal (“2RSP”). As will be discussed below, MRP does not yet support the CAISO’s proposal to mitigate the capacity and energy offers associated with these products.
3.
Please provide your organization’s comments on the proposed changes to the IFM:
MRP supports the CAISO’s proposal to secure 100 percent of its projected requirements for Imbalance Reserve Up (IRU) and Imbalance Reserve Down (IRD) in the Integrated Forward Market.
MRP also supports the CAISO’s proposal to set the penalty price for relaxing the IRU constraint higher than the penalty price for cutting LPT exports but lower than the penalty price for PT exports.
MRP also supports the CAISO’s proposal for using deployment scenarios to ensure IRU deliverability. MRP requests that the CAISO discuss whether and how such deployment scenarios could also be used to ensure deliverability of existing ancillary service products or the real-time flexible ramping product. Additionally, in MRP’s experience, real-time congestion can differ significantly from day-ahead congestion. This raises questions about the accuracy and value of day-ahead deployment scenarios. MRP requests the CAISO comment on this concern.
MRP is still evaluating the proposed settlement and no-pay proposals and has no comments on those proposals now.
4.
Please provide your organization’s comments on the proposal for an additional market pass to perform MPM for the residual unit commitment (RUC) process:
Please see MRP’s comments on item 8 below.
5.
Please provide your organization's comments on the proposed RUC process changes:
As MRP understands, IRU and IRD provide the CAISO with an “envelope” of operating capability that covers forecast uncertainty. RC up ensures additional capacity is committed to cover the CAISO’s forecast of demand if the IFM clears below that forecast. MRP does not yet fully grasp what function is provided by RC down that wouldn’t be provided by IR down. Could the CAISO please provide some examples of how RC down differs from IR down?
Given that the CAISO is proposing to set the “binding” configuration for MSG units in RUC, MRP requests the CAISO confirm that this “binding” configuration would not limit how much RA (or non-RA) capacity a resource can provide.
6.
Please provide your organization's comments on the proposed real-time market ramp deviation settlement:
MRP has no comment on this issue at this time.
7.
Please provide your organization's comments on the proposed method to account for energy offer cost in upward capacity procurement:
The CAISO has proposed that if it determines that the energy bids associated with IRU and RCU would cause the energy market to clear at a price above the price associated with clearing the market at the P97.5 net demand forecast, the CAISO will declare those capacity bids ineligible. (2RSP at pages 39-40.) As a threshold matter, this means that the CAISO would be rejecting offers not based on some criteria that is knowable a priori, but on its proprietary net demand forecast. The CAISO’s net demand forecast could be accurate, but it also could be inaccurate, leading to improperly rejecting market offers. Given this possible result, the CAISO should better justify why this proposed mitigation is necessary and reasonable.
The CAISO does not apply such subjective market power measures to its current ancillary service capacity products, but proposes to apply them to the IR and RC products, because the CAISO asserts there is a higher likelihood of dispatching energy from the IR and RC products (2RSP at page 39). Can the CAISO quantify the likelihood of having to dispatch energy from the IR products to the P97.5 net demand forecast level? Such a measure would help market participants better understand whether the proposal to reject market offers – a very serious mitigation – is reasonable.
Finally, in MRP’s view, the CAISO’s proposal to reject IRU and RCU offers whose associated energy bids cause projected prices to exceed the prices that would result from clearing the supply curve at the P97.5 net demand forecast prejudges and predetermines the outcome of an initiative that has not yet begin – the initiative to jointly consider system market power mitigation and scarcity pricing.
8.
Please provide your organization's comments on the proposed default capacity bid, including feedback on the appropriate price based on historical spinning reserve prices::
The CAISO has proposed that it would mitigate the capacity bids of every resource with a net positive marginal congestion contribution relative to binding transmission constraints (2RSP at page 30). MRP believes that additional discussion regarding the need to mitigate IR and RC capacity offers is warranted.
The CAISO posits market power mitigation is required because the IR and RC products will have nodal prices that reflect congestion due to binding transmission constraints. Transmission constraints do not bind because of the location of capacity; they bind because of the flow of energy. Consequently, MRP does not yet appreciate why IR and RC prices reflect energy congestion and why capacity offers must undergo local market power mitigation.
The CAISO mitigates the energy bids of resources that can provide counterflow to a non-competitive transmission constraint. However, the CAISO is securing IR for a purpose other than for providing counterflow to transmission constraints – IR is providing an “uncertainty envelope” to account for forecast error. The CAISO may be required to dispatch energy from certain resources to manage flow on a non-competitive transmission constraint, and so the desire to prevent those resources from exercising local market power relative to their energy supply can be understood. Given that the CAISO currently does not apply local market power mitigation to its capacity (i.e., ancillary service) products, which are procured on a system-wide basis, it is not yet apparent as to why the CAISO must apply local market power mitigation to the IR and RC capacity products, which will also be procured on a system-wide basis, especially given that the energy from any resource supplying these ancillary service products will be subject to local market power mitigation.
The CAISO intends to ensure that energy from the IR and RC products is deliverable (e.g., 2RSP at page 25). If transmission constraints do not allow the energy from certain resources to be delivered, it is reasonable to not product IR or RC products from those resources. Foregoing procurement to ensure deliverability, however, is something altogether different from mitigating market capacity offers.
Moreover, unlike with Default Energy Bids (“DEBs”), which are intended to approximate a resource’s marginal energy cost, the selection of a system-wide capacity default bid by selecting an “appropriate” percentile of the spinning reserve offer or clearing price distribution will be a highly arbitrary and subjective exercise. Unlike with DEBs, there will be no easy or organic way to link a resource’s “default” capacity offer to its costs. Again, this means that the selection of a default capacity offer will be a purely subjective administrative exercise, not a market exercise.
The CAISO offered Table 5 on 2RSP page 40 to frame the question: what level of spinning reserve offers or clearing prices should be selected as the default capacity bid? Given that there is no analytic basis for tying IR or RC offers to spinning reserve offer or clearing prices, let alone to picking any particular percentile of those prices, MRP offers that, if it necessary to mitigate capacity offers (a premise which MRP has not yet embraced) the right market solution to the question is to pick the highest percentile.
9.
Please provide your organization's comments on the proposed variable energy resources eligibility to provide new products:
Seeking stakeholder input on setting a requirement to provide high sustainable limit for CAISO forecasted VERs.
The 2RSP’s discussion of this topic focused on how Scheduling Coordinators can use virtual bids if their own forecasts of the VER’s output differs from that of the CAISO’s. Given the reliability implications for these products (IRs provide ISO operators with an “operating envelope” of capacity to account for forecast uncertainty), MRP requests that the CAISO further discuss, and provide some analysis regarding, the possibility of awarding VERs IRs that they cannot provide due to inaccurate VER forecasts. The CAISO should consider whether some restrictions, such as limiting the amount of IRU that VERs collectively can provide, should be implemented to avoid undue reliance on day-ahead forecasts of VER production.
The CAISO asserts that the proposed imbalance reserve products will “..ensure the day-ahead market schedules sufficient real-time dispatch capability to meet net load imbalances that materialize between the day-ahead and real-time markets.” (2RSP at page 5.) MRP notes that a significant source of the net load imbalances that these products are intended to address arises from the variability of these intermittent resources themselves. Allowing resources to provide a product intended to address the operational issues created by these resources is a novel approach. MRP encourages the CAISO to consider and more fully discuss this aspect of the proposal.
10.
Please provide your organization's comments on the proposed transition period for DAME enhancements:
MRP respectfully urges the CAISO to limit the transition period to as short a period as necessary to “shake out” the new enhancements. Given the proposed restrictions on bidding during the transition period, MRP expects there will be a great temptation for some entities to seek to extend the transition period for as long as possible.
11.
Please provide your organization's comments on the proposed treatment of metered subsystems, existing transmission contracts, and transmission owner rights:
MRP has no comment on this topic.
12.
Please provide your organization's comments on the proposed EIM Governing Body advisory role classification:
MRP supports the proposal for the EIMGB to have an advisory role.
13.
Please provide any additional comments on the DAME second revised straw proposal that have not previously been addressed:
Given the substantial market systems changes proposed, MRP finds the CAISO’s proposed schedule to be very aggressive.
MRP expects that the development of tariff language and business rules will take some time. MRP therefore urges the CAISO to include in the schedule the dates as to when those tariff development processes must be concluded to implement the DAME in Fall 2022. MRP also requests the CAISO identify a proposed date for submitting the proposed tariff language to FERC.
Finally, MRP respectfully requests that the CAISO discuss how the Flexible RA capacity product fits into the framework laid out in Figure 8 (2RSP at page 46) as proposed to be amended as described in the 2RSP.
PacifiCorp
Submitted 08/19/2021, 11:30 am
1.
Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) second revised straw proposal:
PacifiCorp appreciates the opportunity to comment on the CAISO’s second revised straw proposal for the Day-Ahead market enhancements. Included within these comments, PacifiCorp requests additional information and clarification on the changes that are proposed to be made to the deviation settlement for forecasted movement and an opinion for the classification for the EIM Governing Body depending on the additional information.
2.
Please provide your organization’s comments on the proposed changes to the market power mitigation (MPM) pass for the integrated forward market (IFM):
3.
Please provide your organization’s comments on the proposed changes to the IFM:
4.
Please provide your organization’s comments on the proposal for an additional market pass to perform MPM for the residual unit commitment (RUC) process:
5.
Please provide your organization's comments on the proposed RUC process changes:
6.
Please provide your organization's comments on the proposed real-time market ramp deviation settlement:
CAISO has proposed that the EIM would be subject to a FMM forecasted movement deviation settlement between the EIM Base Schedules and the FMM forecasted movement. More information is needed for stakeholders to fully comprehend the CAISO’s proposal. It would be helpful to understand whether CAISO is proposing a new settlement charge code, the reason behind this proposal, and the mechanics or settlement calculation highlighting the new proposed changes. PacifiCorp will not be able to provide meaningful stakeholder feedback or comments until additional details are known.
7.
Please provide your organization's comments on the proposed method to account for energy offer cost in upward capacity procurement:
8.
Please provide your organization's comments on the proposed default capacity bid, including feedback on the appropriate price based on historical spinning reserve prices::
9.
Please provide your organization's comments on the proposed variable energy resources eligibility to provide new products:
Seeking stakeholder input on setting a requirement to provide high sustainable limit for CAISO forecasted VERs.
10.
Please provide your organization's comments on the proposed transition period for DAME enhancements:
11.
Please provide your organization's comments on the proposed treatment of metered subsystems, existing transmission contracts, and transmission owner rights:
12.
Please provide your organization's comments on the proposed EIM Governing Body advisory role classification:
PacifiCorp is supportive of the proposed advisory EIM Governing Body role for the majority of the proposals in the day ahead market initiative. However, PacifiCorp does not support an advisory EIM Governing Body role if any new settlement charge codes result within these market enhancements for the new settlement charge code. If the enhancements result in a new EIM settlement charge code, then the EIM Governing Body should have a voting role on any new charge codes that arise in the EIM from the proposed market enhancements. These new EIM settlement charge codes should be severable to permit a vote by the EIM Governing Body.
13.
Please provide any additional comments on the DAME second revised straw proposal that have not previously been addressed:
PG&E
Submitted 08/25/2021, 12:01 pm
Submitted on behalf of
Pacific Gas and Electric
1.
Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) second revised straw proposal:
PG&E appreciates CAISO’s efforts on this initiative and notes improvements from the initial revised straw proposal. In general, PG&E supports market enhancements that reduce the amount of out-of-market actions.
PG&E cannot support the current proposal without significant concerns being addressed in the next iteration, especially regarding the fundamental justification of the initiative and what PG&E sees as design flaws. PG&E respectfully requests (1) the CAISO address concerns in several areas with the potential for undesirable consequences and (2) evidence showing how the benefits will exceed the costs:
- Impacts on RA enhancements: PG&E is opposed to removing Real-Time Must Offer Obligation (RT MOO) for RA resources. The current proposal could deteriorate the reliability of the system and result in increased redispatch and uplift costs. PG&E requests the CAISO demonstrates the need to remove the existing RT MOO and/or how the proposed IR products would manage local constraints in the Real-Time market, which have been the main driver of real-time congestion offset costs.
- Proposed Products: PG&E requests the CAISO provide further evidence and analysis to support the conclusion the proposed IR products and formulation will deliver a reduction in out-of-market actions and costs derived from the “large imbalance” between IFM and FMM. PG&E is concerned the current design could lead to undesired consequences, due to potential design flaws.
- Market Power Mitigation: PG&E requests the CAISO provide further evidence the RUC MPM phase is required under this or similar design and is concerned the proposed default capacity bid is not appropriate for a capacity market power mitigation process.
- New Resource Modeling: PG&E requests the CAISO provide additional detailed modeling on how NGR, both SOC-managed and hybrid, will be treated in both the IFM and RUC phases of the new DA market process.
In addition to the concerns identified, PG&E believes the preliminary analysis for costs and benefits of the proposed new products are not adequately justified. In order for stakeholders to collectively evaluate and potentially support, PG&E requests the CAISO provide a quantitative analysis prior to a final design proposal.
2.
Please provide your organization’s comments on the proposed changes to the market power mitigation (MPM) pass for the integrated forward market (IFM):
PG&E requests clarifications and/or additional analysis for the following:
- Explain why the MPM process is required or beneficial in the RUC process
- Explain why the MPM process proposed is not applied to other capacity products (i.e., operating reserves) on an equal basis
- Explain, in more detail including examples, how the default capacity bidding price will be calculated, and why MPM is not applied to other capacity products (i.e., operating reserves)
3.
Please provide your organization’s comments on the proposed changes to the IFM:
PG&E requests the CAISO provide further evidence and analysis to support the conclusion the proposed IR products and formulation will deliver a reduction in out-of-market actions and costs derived from the “large imbalance” between IFM and FMM. PG&E is concerned the current design could lead to undesired consequences, due to potential design flaws.
In this proposal, resources that are 15-minute dispatchable are eligible to submit bids for IR products. However, the IR requirements between IFM and FMM have been practically met by both 15-min and hourly dispatchable bids. Those hourly dispatchable resources in HASP are the source of operators’ exceptional dispatch and load bias measures taken outside of the market. Limiting IR products’ eligibility to 15-min dispatchable resources could lead to problems including the following:
- Insufficient fast ramping resources to meet the imbalance could cause the market optimization process to be infeasible. Since the IR products have higher priority than LPT exports, it could result in more frequent export curtailment in IFM.
- Over-procuring fast ramping resources may raise market prices in IFM.
In addition, PG&E requests that CAISO re-examine IR products’ deliverability in real time. When congestion patterns vary significantly from day ahead to real time, it is not evident that CAISO’s proposed deployment scenarios, which are based on day-ahead forecast, will effectively reserve sufficient transmission capacities for uncertainties realized in real time. Procuring IR products based on zonal requirements may be a more promising way to ensure real-time deliverability.
Finally, the proposal lacks details on the CRR allocation process related to the deployment scenarios. Those constraints may tend to bind frequently due to congestion that may not materialize, since upward and downward IR products are likely to offset and no intertemporal constraints are imposed on IR products. PG&E requests a better estimation of CRR revenue sufficiency and impact on existing long-term CRRs.
In general, PG&E supports market enhancements that reduce the amount of out-of-market actions. In order to support market enhancements, such as DAME, in which new market products are introduced and market execution time is increased to reduce out-of-market actions, a complete justification and analysis of the true costs and potential benefits are necessary. The CAISO has improved its support for the DAME initiative in the second revised straw proposal, but it still has not adequately quantified the potential impacts on (i) dispatching costs, (ii) price changes in both day-ahead and real-time markets, and (iii) the amount of out-of-market actions (i.e., reduction of load bias in RUC, exceptional dispatch, etc.) and associated costs for the proposed IR products in a way that can be collectively evaluated by stakeholders.
4.
Please provide your organization’s comments on the proposal for an additional market pass to perform MPM for the residual unit commitment (RUC) process:
PG&E is unconvinced that a RUC MPM phase is required under this or similar designs. If anything, quantities procured as upward capacity in the RUC phase should be smaller than those currently procured in RUC, and there has been no evidence of local market power in the current RUC process over more than a decade of day-ahead markets.
5.
Please provide your organization's comments on the proposed RUC process changes:
PG&E believes the incorporation of NGR into the RUC process is essential for adequate system reliability in the coming years. However, PG&E remains concerned the RUC process changes do not adequately account for either the flexibility available from NGR resources or the constraints on delivery that exist for such resources.
In particular, the formulation currently does not distinguish between downward flexibility while discharging and downward flexibility to charge while idle (and similarly, upward flexibility while charging and upward flexibility to discharge while idle), and does not capture cross-temporal effects of incremental charge or discharge (i.e., an incremental charge may require a paired incremental discharge to be feasible or vice versa).
6.
Please provide your organization's comments on the proposed real-time market ramp deviation settlement:
PG&E supports the CAISO on a need to introduce separate calculations for Ramp Deviation and No Pay situations and agrees with the proposed rate structures for both. The CAISO presented their proposed Day Ahead Market Enhancements settlement process, along with a supporting spreadsheet, at the May 21, 2021, Market Surveillance Committee Meeting.
PG&E is concerned, based on the review of the CAISO presentation of DAME settlements at the May 21, 2021, MSC Meeting and supporting spreadsheets, that the No Pay calculations do not correctly match the proposal’s intent and need refinement to ensure all No Pay capacity is treated consistently.
For example, based on the information provided PG&E believes a resource unable to provide the Real-Time capacity associated with their Day Ahead IRU/IRD award, either because of a unit outage/rerate or a failure to submit the necessary Real-Time bids would still receive a No-Pay settlement for only the subset of their IRU/IRD award, which equals to the award quantity less the unit’s Day-Ahead 5-minute ramp capability. This remaining 5-minute ramp capacity would instead be settled per the Ramp Deviation formulas and would therefore be protected from the No Pay rate structure, which does not properly reflect the proposals intent.
7.
Please provide your organization's comments on the proposed method to account for energy offer cost in upward capacity procurement:
PG&E does not believe the proposed method accounts for true energy offer cost effects in upward capacity procurement, because it does not constrain changes between day-ahead and real-time energy bids for resources awarded upward capacity.
PG&E believes the proposed method could create gaming opportunities and may result in inflation of real time energy prices. Resources could bid a low-price day ahead to receive an award and then having received an award, re-bid the energy at a higher price, which would have disqualified it in the day ahead procurement process. The proposed method could also lead to infeasibility through economically withholding capacity bids.
PG&E suggests the CAISO reconsider the use of real-time bidding business rules to constrain strategic bidding by resources receiving IRU awards or possibly look at more stringent after-the-fact penalties being imposed based on clear rules for real-time rebidding.
8.
Please provide your organization's comments on the proposed default capacity bid, including feedback on the appropriate price based on historical spinning reserve prices::
Given that upward capacity is procured based on the CAISO forecast load not procured in the IFM, PG&E does not believe the proposed default capacity bid is appropriate for a capacity market power mitigation process. PG&E would be more sympathetic to the definition of a capacity bid limit applied to all resources bidding into the capacity market, rather than potential mitigation applied only to areas where mitigation may be occurring due to strategic market participant behavior by parties not being themselves mitigated.
9.
Please provide your organization's comments on the proposed variable energy resources eligibility to provide new products:
Seeking stakeholder input on setting a requirement to provide high sustainable limit for CAISO forecasted VERs.
PG&E requests the CAISO provide more detailed modeling for how NGR, both SOC-managed and hybrid, will be treated in both the IFM and RUC phases of the new DA market process. PG&E expects these resources may make up a large part of CAISO’s resource mix in five years.
PG&E requests the CAISO address the following questions
- Will they be eligible to provide IR and RC? And what will be their qualifications to provide those products?
- How will RUC handle the arbitrage between the upward and downward capacity of those resources? Note that batteries have complications that do not exist for other RUC bids. For example, a downward reliability capacity bid can represent either reduced discharge, if the IFM has a discharge award, or charge if the IFM has no award, so that in effect two different types of capacity are being bid with a single bid (the charging efficiency doesn’t apply to decrement from discharge, for one thing).
- We also request more detailed modeling of those resources in the RUC. The constraints in the appendix (Section 3.12) might be insufficient in awarding reliability capacity to batteries that have no energy schedule since RUC is likely to see more capacity available from un-dispatched batteries than to expect.
10.
Please provide your organization's comments on the proposed transition period for DAME enhancements:
PG&E is concerned the CAISO has not effectively demonstrated the need for removing the existing RTM MOO or how the proposed IR products would manage local constraints in the Real-Time market. PG&E has expressed concern in the Resource Adequacy Enhancements initiative that not having RT MOO could deteriorate the reliability of the system and could result in increased redispatch and uplift costs. PG&E does not consider the issue of the RT MOO release to be merely one of transition, but more fundamental to the definition of RA.
PG&E believes this proposal needs to be better aligned with CPUC’s RA requirements. The impact on RAAIM and UCAP from RA enhancement remains unclear. PG&E requests the CAISO conduct thorough studies on long-term reliability consequences and cost to LSE’s existing and future RA contracts.
PG&E believes RT MOO should remain as a transition until the CAISO can demonstrate the new DAME products have a positive impact on redispatch needs between DAM and RTM. This analysis should include assessing the impact the redispatch needs have on the Real-Time Imbalance Offset costs and the Exceptional Dispatch needs.
11.
Please provide your organization's comments on the proposed treatment of metered subsystems, existing transmission contracts, and transmission owner rights:
12.
Please provide your organization's comments on the proposed EIM Governing Body advisory role classification:
13.
Please provide any additional comments on the DAME second revised straw proposal that have not previously been addressed:
Public Generating Pool
Submitted 08/12/2021, 04:19 pm
1.
Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) second revised straw proposal:
The Public Generating Pool (PGP[1]) appreciates the opportunity to comment on the Day-Ahead Market Enhancements (DAME) second revised straw proposal. PGP members are very interested in these enhancements that will not only improve market efficiency and decrease the need for CAISO to utilize out-of-market actions, but will also provide a mechanism for flexible resources to be compensated for providing capacity to the market.
While there are many issues to work through, PGP encourages CAISO to continue moving forward with this initiative.
[1] PGP represents eleven consumer-owned utilities in Washington and Oregon that own almost 8,000 MW of generation, approximately 7,000 MW of which is hydro and over 97% of which is carbon free. Four of the PGP members operate their own balancing authority areas (BAAs), while the remaining members have service territories within the Bonneville Power Administration’s (BPA) BAA. As a group, PGP members also purchase over 45 percent of BPA’s preference power.
2.
Please provide your organization’s comments on the proposed changes to the market power mitigation (MPM) pass for the integrated forward market (IFM):
CAISO’s previous proposal called for a single MPM pass prior to IFM that would mitigate energy, imbalance reserve, and reliability capacity offers. CAISO’s revised proposal would remove reliability capacity mitigation from the MPM pass prior to IFM and create a separate MPM pass prior to RUC to mitigate reliability capacity. CAISO proposes to calculate a “default capacity bid” and a “competitive capacity price”. The mitigated bid price will be the greater of the default capacity bid or the competitive capacity price, which will be applied when the imbalance reserve bid exceeds the mitigated bid price.
Until the transition period is over, PGP would like CAISO to consider using a fixed price cap (such as the $247/MW that was previously proposed) to limit capacity prices rather than develop an elaborate MPM process. Until then, resource adequacy (RA) resources will bid $0.00 for both reliability capacity and imbalance reserves, and CAISO has stated that “the marginal price should be zero in most cases” which indicates little need for MPM at this time. However, this should be monitored, and MPM can be implemented if a need for mitigation is identified.
3.
Please provide your organization’s comments on the proposed changes to the IFM:
PGP supports the procuring of imbalance reserves in the IFM process and supports procuring 100% of the requirement rather the previous proposal that determined the requirement from the demand curve. Not only does this product improve market efficiency and reliability, but will also provide a mechanism for flexible resources to be compensated for providing capacity to the market.
4.
Please provide your organization’s comments on the proposal for an additional market pass to perform MPM for the residual unit commitment (RUC) process:
CAISO’s previous proposal called for a single MPM pass prior to IFM that would mitigate energy, imbalance reserve, and reliability capacity offers. PGP understands that the previous proposal’s plan to run a single MPM pass prior to IFM is not sufficient to capture uncompetitive reliability capacity scenarios that won’t be determined until the RUC process. CAISO’s revised proposal would remove reliability capacity mitigation from the MPM pass prior to IFM and create a separate MPM pass prior to RUC to mitigate reliability capacity.
Until the transition period is over, PGP would like CAISO to consider using a fixed price cap (such as the $247/MW that was previously proposed) to limit capacity prices rather than develop an elaborate MPM process. Until then, resource adequacy (RA) resources will bid $0.00 for both reliability capacity and imbalance reserves, and CAISO has stated that “the marginal price should be zero in most cases” which indicates little need for MPM at this time. However, this should be monitored, and MPM can be implemented if a need for mitigation is identified.
5.
Please provide your organization's comments on the proposed RUC process changes:
PGP continues to support the utilization of co-optimization approach in the development a of the reliability capacity and imbalance reserves products. CAISO explained in the issue paper that “Due to technical challenges and stakeholder feedback, the CAISO no longer proposes a co-optimized integrated forward market and residual unit commitment process”. CAISO is now proposing to revert back to the sequential IFM-RUC approach and enhance the RUC process by procuring reliability capacity to meet the difference between cleared physical supply and net demand.
PGP supports the procuring of reliability capacity. Not only does this product improve market efficiency and reliability, but it will also provide a mechanism for flexible resources to be compensated for providing capacity to the market.
However, CAISO has not provided enough information on the technical challenges associated with the co-optimization approach for PGP to provide comment on this change. PGP continues to supports co-optimization of these new products with energy and ancillary services to schedule resources more efficiently. PGP would like CAISO to share results of their testing to more specifically demonstrate the nature of these technical challenges.
6.
Please provide your organization's comments on the proposed real-time market ramp deviation settlement:
PGP supports the intent of the ramp deviation settlement to eliminate double payments and to incent accurate day-ahead scheduling. However, it is not clear how this ramp deviation settlement will interact with the Flexible Ramping Product. The issue paper states that:
Imbalance reserves in the day-ahead market and flexible ramping product in the real-time market both provide additional capacity for ramping. Market payments for the provision of ramping services should net in each market. However, there are differences in the configuration, eligibility, and pricing of these products that make a direct deviation settlement infeasible.
PGP is concerned that this additional complexity of settlements may be difficult for market participants to unravel and wonders whether there may be unintended consequences. A better approach may be to explore whether there are ways to align configuration, eligibility and pricing of these products so that a direct deviation settlement would be possible.
7.
Please provide your organization's comments on the proposed method to account for energy offer cost in upward capacity procurement:
In the proposal, CAISO describes a scenario in which multiple resources have the same upward capacity bid and that the optimization cannot differentiate between the multiple resources when they are the marginal resource. CAISO proposes to use the day-ahead energy bid associated with these resources and make the award to the marginal resource with the lowest energy bid. As discussed at the stakeholder call, the challenge with this approach is that there is no guarantee that the awarded resource will retain the same energy bid in the real-time market, and there is a risk that the awarded resource could have low-balled the day-ahead energy bid and increased the energy bid in real-time. PGP agrees that this approach may not achieve the desired objective, but has no objection with CAISO moving forward with this proposed method.
CAISO also proposes to exclude resources from RCU and IRU awards whose energy bid exceeds the marginal price of meeting the P97.5 net load forecast. PGP believes that, during stressed conditions, this exclusion may result in cases in which CAISO has not procured sufficient RCU and IRU. PGP would like CAISO to consider lifting this exclusion for days when there is a Flex Alert in place, which will ensure that all resources are able to supply RCU and IRU when they are most needed for reliability.
8.
Please provide your organization's comments on the proposed default capacity bid, including feedback on the appropriate price based on historical spinning reserve prices::
CAISO proposes to use historical spinning reserve prices as a source for determining the appropriate “default capacity bid” and asks stakeholders to comment on the appropriate percentile that best approximates the real-time availability cost of their resources. PGP is not convinced that looking at historical prices is the best indicator of resource costs in real-time – especially during stressed conditions.
Rather than developing a method to estimate a default capacity price PGP would like CAISO to consider using a fixed price cap (such as the $247/MW that was previously proposed) to limit capacity prices until the transition period is over. Until then, resource adequacy (RA) resources will bid $0.00 for both reliability capacity and imbalance reserves, and CAISO has stated that “the marginal price should be zero in most cases” which indicates little need for MPM at this time. However, this should be monitored, and MPM can be implemented if a need for mitigation is identified.
9.
Please provide your organization's comments on the proposed variable energy resources eligibility to provide new products:
Seeking stakeholder input on setting a requirement to provide high sustainable limit for CAISO forecasted VERs.
CAISO’s previous proposal allowed variable energy resources (VERs) to provide downward imbalance reserves (IRD) and reliability capacity (RCD). In response to stakeholder feedback, CAISO is now proposing to allow VERs to provide upward imbalance reserves (IRU) and reliability capacity (RCU) when the VERs utilize CAISO’s forecast. PGP supports further exploration of this enhancement and recommends that CAISO evaluate how other organized markets treat VERs’ ability to provide upward capacity. PGP also believes that any provision of upward capacity by VERs should be at a very high level of confidence, such as at P95.
10.
Please provide your organization's comments on the proposed transition period for DAME enhancements:
CAISO is proposing a transition period that would require RA resources to bid $0.00 for both reliability capacity and imbalance reserves. In addition, non-RA resources designated to support a PT export will also be require to bid $0.00 for RCU up to the quantity being used to support the PT export. CAISO is proposing to end these requirements at the start of the calendar year in which EIM entities will onboard into EDAM, which is currently planned for 2024.
PGP agrees with the rationale of CAISO and DMM that:
The DAME independently provides benefits in terms of resource adequacy efficiency, which would still merit an eventual end to the transition period. The CAISO, with the support of the Market Surveillance Committee, has argued that compensating resources for making capacity available through market bids, rather than through resource adequacy contract payments, is a more efficient way to allocate reliability capacity and imbalance reserve capacity.
As a result, PGP does not see a need to connect the end of the transition period to the development of EDAM. A preferred approach would be to pick a specific date that would end the transition period independent of the status of EDAM.
11.
Please provide your organization's comments on the proposed treatment of metered subsystems, existing transmission contracts, and transmission owner rights:
This topic was not discussed at the workshop and it is not clear from the issue paper what is actually being proposed and what is different from the previous proposal. PGP would like to see CAISO provide more information on this topic.
12.
Please provide your organization's comments on the proposed EIM Governing Body advisory role classification:
PGP agrees that the EIM Governing Body classification should be advisory
13.
Please provide any additional comments on the DAME second revised straw proposal that have not previously been addressed:
Public Power Council
Submitted 08/18/2021, 04:16 pm
1.
Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) second revised straw proposal:
The Public Power Council[1] appreciates the opportunity to provide comments on the CAISO’s Day-Ahead Market Enhancements July 21 Second Revised Straw Proposal. PPC remains very supportive of CAISO’s efforts to enhance the day-ahead market. The challenges CAISO faces managing the increased number of variable resources with the existing day-ahead market design have been well documented throughout this stakeholder process and other CAISO reports. Operators now routinely rely on out-of-market actions such as load conformance and exceptional dispatch to set up the CAISO BAA with sufficient flexible capacity to reliably meet real-time operating conditions. The regular reliance on out-of-market actions creates inefficiencies and has undermined the economic signals provided by market prices.
PPC continues to assert that the original formulation of the day-ahead market enhancements which fully co-optimized energy, ancillary services, imbalance reserves and reliability capacity would result in more efficient market outcomes than the sequential approach included in the revised straw proposal. That market formulation would also have served as a better foundation for a potential expanded day-ahead market. Despite PPC’s preference for the original market formulation, PPC is supportive of the CAISO revised day-ahead market proposal to procure imbalance reserves and a new downward capacity product in the residual unit commitment. These new products should help the CAISO address the new and growing needs for additional capacity products and reduce reliance on operator out-of-market actions. PPC hopes CAISO is willing to review additional potential changes to the day-ahead market formulation should the extended day-ahead market initiative resume.
[1] PPC members are statutory preference customers of the Bonneville Power Administration (BPA) and represent over 90 percent of BPA’s Tier 1 sales. Overall, Northwest public power is the largest purchaser of BPA’s power products and services and is among the largest purchasers of BPA’s transmission products and services, funding nearly 70 percent of the agency’s total power and transmission costs.
2.
Please provide your organization’s comments on the proposed changes to the market power mitigation (MPM) pass for the integrated forward market (IFM):
PPC understands the CAISO proposes to calculate a “default capacity bid” and a “competitive capacity price”. The higher of these two values will be used to mitigate capacity bids. CAISO should take a cautious approach to mitigating capacity given the difficulty in accurately calculating a default capacity price. PPC acknowledges the challenges CAISO and stakeholders have found in determining a formulaic approach to a default capacity bid. However, PPC remains concerned that using a historic spinning reserve price may not an appropriate default capacity price. At a minimum, the CAISO should strive to find a methodology that can reflect conditions on the grid. The $30 historic spinning price may deter competitive offers of capacity because market participants’ actual opportunity costs exceed the default capacity price. PPC believes there is a realistic possibility of this occurring. Over the month of July 2021, generally in the evening peak CAISO spinning prices often exceeded the proposed $30. As an interim approach, CAISO could begin with a much higher default capacity bid price and use the transition period to analyze the competitiveness of capacity offers. PPC believes this may be a more prudent approach and would give the CAISO additional data to continue to develop a default capacity bid methodology. PPC believes this is a topic that will grow in importance as the grid continues to transition away from traditional dispatchable resources to meet capacity needs.
3.
Please provide your organization’s comments on the proposed changes to the IFM:
PPC is supportive of CAISO’s proposal to create a new imbalance reserve product. PPC is also supportive of CAISO acquiring 100% of the imbalance reserve requirement. The new imbalance reserve product should help address the significant amount of operator actions that currently take place.
4.
Please provide your organization’s comments on the proposal for an additional market pass to perform MPM for the residual unit commitment (RUC) process:
Please see response to question #2.
5.
Please provide your organization's comments on the proposed RUC process changes:
PPC is supportive of CAISO adding a reliability capacity down product.
6.
Please provide your organization's comments on the proposed real-time market ramp deviation settlement:
No comments at this time.
7.
Please provide your organization's comments on the proposed method to account for energy offer cost in upward capacity procurement:
PPC is supportive of CAISO developing a method to account for energy offer cost in upward capacity procurement. Given that this capacity is expected to be deployed frequently, incorporating the potential costs of that deployment should lead to a more efficient outcome. On the stakeholder initiative call, stakeholders raised the possibility that excluded bid range on resources above the p97.5 price level may limit CAISO’s ability to meet the full imbalance reserve product. Under the circumstance that limiting participation to bid range under the p97.5 price level results in procurement of less than the full imbalance reserve requirement, it may be appropriate to allow capacity awards on bid range above the p97.5 level. PPC looks forward to additional discussion on the tradeoffs between accounting for energy costs under the CAISO proposal and the potential of under procurement of capacity up.
8.
Please provide your organization's comments on the proposed default capacity bid, including feedback on the appropriate price based on historical spinning reserve prices::
Please see response to question #2.
9.
Please provide your organization's comments on the proposed variable energy resources eligibility to provide new products:
Seeking stakeholder input on setting a requirement to provide high sustainable limit for CAISO forecasted VERs.
PPC has concerns that the revised proposal will result in CAISO awarding capacity up to resources that may not actually be able to respond in real-time. For example, the uncertainty requirement used to calculate imbalance reserve requirements is based on the deviations between day-ahead and real-time net load. Awarding imbalance reserves to variable energy resources would effectively be carrying capacity to meet uncertainty on the resources creating the uncertainty. PPC believes, this is only prudent if capacity up awards are limited to an output that a resource high a very high confidence of meeting.
10.
Please provide your organization's comments on the proposed transition period for DAME enhancements:
No comments at this time.
11.
Please provide your organization's comments on the proposed treatment of metered subsystems, existing transmission contracts, and transmission owner rights:
No comments at this time.
12.
Please provide your organization's comments on the proposed EIM Governing Body advisory role classification:
PPC supports the proposed EIM Governing Body advisory role.
13.
Please provide any additional comments on the DAME second revised straw proposal that have not previously been addressed:
PPC appreciates the opportunity to comment on the DAME second revised straw proposal and looks forward to further discussions on the topic.
Salt River Project
Submitted 08/18/2021, 02:02 pm
1.
Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) second revised straw proposal:
Salt River Project Agricultural Improvement and Power District (SRP) appreciates the opportunity to submit the following comments on the DAME initiative second revised straw proposal.
SRP has similar concerns on the DAME second revised straw proposal as other EIM entities, specifically Bonneville Power Administration (BPA). SRP did not answer each question below but will continue to evaluate the DAME initiative as it evolves with the questions below in mind to determine if we have comments in the future.
SRP has the following comments on the DAME second revised straw proposal:
The straw proposal and technical description appendix fail to adequately describe the need for the enhancements outlined in the second revised straw proposal. SRP requests the CAISO clearly identify problems and concerns in the existing day-ahead market and map those issues and concerns to the proposed solutions in the straw proposal. We request this clear identification of the need for enhancements because we are concerned that the timing of this initiative may affect the time and attention CAISO staff and stakeholders can dedicate to other regionally significant initiatives that are currently moving forward.
The CAISO has several other initiatives in progress and on its roadmap that could lessen the need for the enhancements proposed by the DAME initiative.
Regardless of the timing for the DAME initiative, SRP encourages the CAISO to seek simple, implementable solutions that have minimal opportunity for unintended consequences.
SRP has the following concerns and questions regarding the DAME second revised straw proposal:
- The second revised straw proposal identifies an additional Market Power Mitigation (MPM) run for Residual Unit Commitment (RUC). SRP is concerned about adding another component to the market solution process of running the integrated forward market (IFM) and RUC sequentially, especially if the computation time is infeasible given the current timeline of running and publishing the day-ahead market results. SRP requests CAISO to provide written clarification on the need for a separate MPM pass in each instance of market offers and include it as a topic of discussion at an upcoming initiative meeting.
- With this proposal, new market products are being introduced in the form of Imbalance Reserves in the IFM and Reliability Capacity in RUC. It is unclear why these additional products are needed, what market issues these products are trying to address or if these new products would increase complexity. SRP requests that these questions be answered in the next version of the second revised straw proposal and discussed at an upcoming initiative meeting.
- SRP requests clarification on how divergence between real-time and day-ahead markets will be calculated and how this is beneficial to market participants.
- CAISO should provide full transparency on any load forecast differences between IFM and RUC prior to IFM run.
- Any limitations or adjustments that may occur between forecasts for the IFM and RUC need to be transparent and made public prior to the run of IFM.
- VER forecasting may not provide sufficient accuracy in the day-ahead market to account for Imbalance Reserves Up (IRU) and Reliability Capacity Up (RCU) awards. SRP requests that any changes being made to the VER forecast to increase its accuracy are clearly articulated.
2.
Please provide your organization’s comments on the proposed changes to the market power mitigation (MPM) pass for the integrated forward market (IFM):
It is unclear what problem the MPM attempts to address or solve relative to the IFM. SRP requests that the CAISO clarify why additional market power mitigation is needed. Please describe issues that are occurring or could occur that would necessitate this additional MPM process.
SRP is also concerned about increased study times when incorporating the proposed MPM pass to the IFM, therefore it is important for CAISO to demonstrate and confirm that this additional process will provide benefit to market participants.
3.
Please provide your organization’s comments on the proposed changes to the IFM:
CAISO should provide any and all information available that CAISO may leverage to determine what would affect the risk of curtailment in advance of the Integrated Forward Market (IFM) and in advance of the day-ahead bilateral trading period so that the market (both IFM and bilateral) can effectively work towards economic and reliable alternative solutions. If, for example, CAISO substitutes a high probability forecast with operator adjustments and bias just prior to the Residual Unit Commitment (RUC) run, that can be problematic for several reasons. However, as CAISO staff indicated verbally to SRP at a meeting on July 27, 2021, the DAME stakeholder process will contemplate a new methodology for “imbalance reserves” that will be used so operators do not have to manually adjust and bias forecasts on a regular basis. To increase transparency, SRP requests as a near-term enhancement that the CAISO provide weekly or monthly reports (through OASIS or other platform) showing all RUC award adjustments.
4.
Please provide your organization’s comments on the proposal for an additional market pass to perform MPM for the residual unit commitment (RUC) process:
It is unclear what problem the MPM proposal attempts to address or solve relative to the RUC. Why is additional market power mitigation needed? What issues are occurring or could occur that would necessitate this additional MPM process?
SRP is also concerned about increased study times when incorporating the proposed MPM pass to the RUC, therefore it is important to confirm that this additional process will provide benefit to market participants.
5.
Please provide your organization's comments on the proposed RUC process changes:
No comment at this time.
6.
Please provide your organization's comments on the proposed real-time market ramp deviation settlement:
No comment at this time.
7.
Please provide your organization's comments on the proposed method to account for energy offer cost in upward capacity procurement:
No comment at this time.
8.
Please provide your organization's comments on the proposed default capacity bid, including feedback on the appropriate price based on historical spinning reserve prices::
No comment at this time.
9.
Please provide your organization's comments on the proposed variable energy resources eligibility to provide new products:
Seeking stakeholder input on setting a requirement to provide high sustainable limit for CAISO forecasted VERs.
SRP is concerned with the accuracy of the CAISO VERS forecast that will be used to implement the proposed variable energy resources eligibility to provide new products in the DAME. Before this element gets implemented, SRP requests a discussion and write up on what improvements has CAISO made to its VERS forecast to reduce errors and improve accuracy.
10.
Please provide your organization's comments on the proposed transition period for DAME enhancements:
No comment at this time.
11.
Please provide your organization's comments on the proposed treatment of metered subsystems, existing transmission contracts, and transmission owner rights:
No comment at this time.
12.
Please provide your organization's comments on the proposed EIM Governing Body advisory role classification:
SRP supports the EIM Governing Body’s advisory role classification in the approval of this initiative.
13.
Please provide any additional comments on the DAME second revised straw proposal that have not previously been addressed:
No additional comments at this time.
San Diego Gas & Electric
Submitted 08/18/2021, 02:30 pm
1.
Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) second revised straw proposal:
- Reduce Redundancy
Other initiatives are under way to address similar problems. To name a few examples: the Flexible Ramping Product Phase 2 could reduce ramping uncertainty as well as undercut the need for Imbalance Reserve Up (IRU) and Imbalance Reserve Down (IRD); the Energy Storage Enhancements could enable batteries to solve these problems; and there are probably more such initiatives addressing similar problems. CAISO should review and explain to stakeholders which ones are likely to be the most valuable, implement those, and then study the results to see if further refinements are still needed.
- Feasibility
CAISO has run into problems in the past with its systems being unable to handle its own proposals in DAME. CAISO had to scrap the first revised straw proposal because its systems could not handle co-optimizing the new products with the existing Integrated Forward Market (IFM). To add further complications, CAISO is looking to significantly expand the DAM with the Extended Day Ahead Market (EDAM), which could add additional strain to CAISO’s systems. CAISO should make sure that its systems are capable of handling the current DAME proposal, and also have a plan moving forward to ensure that its systems will be able to handle the other fixes that CAISO is planning in other initiatives, as well as the anticipated EDAM expansion.
2.
Please provide your organization’s comments on the proposed changes to the market power mitigation (MPM) pass for the integrated forward market (IFM):
3.
Please provide your organization’s comments on the proposed changes to the IFM:
4.
Please provide your organization’s comments on the proposal for an additional market pass to perform MPM for the residual unit commitment (RUC) process:
5.
Please provide your organization's comments on the proposed RUC process changes:
6.
Please provide your organization's comments on the proposed real-time market ramp deviation settlement:
7.
Please provide your organization's comments on the proposed method to account for energy offer cost in upward capacity procurement:
8.
Please provide your organization's comments on the proposed default capacity bid, including feedback on the appropriate price based on historical spinning reserve prices::
Using the spin price may not be the best approximation for the appropriate default capacity bid price. It would probably be more useful to look at the potential opportunity cost.
9.
Please provide your organization's comments on the proposed variable energy resources eligibility to provide new products:
Seeking stakeholder input on setting a requirement to provide high sustainable limit for CAISO forecasted VERs.
10.
Please provide your organization's comments on the proposed transition period for DAME enhancements:
SDG&E shares CalCCA’s concerns on the transition period. First, SDG&E shares CalCCA’s concern that the transition period may end prematurely and force LSEs to double procure. Given the expected tightness in the capacity market for the next several years, it could be difficult to renegotiate such contracts. This means that if the transition period ends and RA contracts have not been renegotiated to reflect the new landscape, LSEs could be paying for this capacity twice: once in the RA market, and a second time in the CAISO’s DAM. CAISO should consider keeping the zero dollar bid requirement at least beyond 2024. Or it may be more appropriate to reconsider this item in the Extended Day Ahead Market initiative.
Second, SDG&E shares CalCCA’s concerns over the CAISO proposal to remove the Real Time (RT) Must Offer Obligation (MOO) for RA resources. This is capacity that LSEs have already procured and that capacity is expected to provide energy, if needed, up to and including RT. Releasing that capacity prematurely could cause reliability issues, or else force LSEs to pay a high premium just to retrieve resources that were already paid for.
11.
Please provide your organization's comments on the proposed treatment of metered subsystems, existing transmission contracts, and transmission owner rights:
12.
Please provide your organization's comments on the proposed EIM Governing Body advisory role classification:
13.
Please provide any additional comments on the DAME second revised straw proposal that have not previously been addressed:
Six Cities
Submitted 08/18/2021, 04:49 pm
Submitted on behalf of
Cities of Anaheim, Azusa, Banning, Colton, Pasadena, and Riverside, California
1.
Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) second revised straw proposal:
Although the elements of the DAME second revised straw proposal include some improvements as compared with previous versions of the DAME proposal, the Six Cities oppose implementation of the proposed Imbalance Reserves and Reliability Capacity products, primarily because payments for these products likely will result in duplicative payments to Resource Adequacy (“RA”) resources. The CAISO has not provided any empirical analysis to demonstrate that the benefits of implementing these new Day-Ahead capacity products will be sufficient to justify the additional costs and market complexity. The Six Cities support further evaluation of limited modification of the Residual Unit Commitment (“RUC”) process to include a market power mitigation pass, to enable downward adjustment of Day-Ahead capacity commitments, and to take into account gas availability conditions (as discussed in Items 4 and 5). The Six Cities also support the proposed modifications to Real-Time ramp deviation settlements (as discussed in Item 6).
2.
Please provide your organization’s comments on the proposed changes to the market power mitigation (MPM) pass for the integrated forward market (IFM):
As the Six Cities understand the DAME second revised straw proposal, modifications to the market power mitigation pass for the IFM will not be necessary if the CAISO does not proceed with implementation of the Imbalance Reserves and Reliability Capacity products. The additional complexities associated with market power mitigation for Imbalance Reserves and Reliability Capacity (e.g., identification of non-competitive constraints in Imbalance Reserves deployment scenarios and development of an appropriate default capacity price) provide additional reasons to introduce those new capacity products only if there is clear support for a conclusion that the benefits of implementing those products are likely to outweigh the costs and increases in complexity resulting from the market design changes. See the comments in Item 3 below.
3.
Please provide your organization’s comments on the proposed changes to the IFM:
In earlier stages of this initiative, the Six Cities and a number of other stakeholders have requested repeatedly that the CAISO conduct a data-based, quantitative analysis of the costs versus benefits of the DAME proposals, but the CAISO has not presented any such analysis. In the absence of such a cost/benefit comparison, the Six Cities cannot support implementation of most elements of the DAME second revised straw proposal, particularly the implementation of Imbalance Reserves and Reliability Capacity.
The CAISO describes the benefits of establishing these new products in purely theoretical terms. Before proceeding with implementation of the proposed new products, the CAISO should provide stakeholders with an assessment of how existing costs may be expected to change, which stakeholders are likely to incur additional costs based on the new products, and which stakeholders are expected to benefit from the CAISO’s proposals. For example, the CAISO theorizes that adoption of the new capacity products will enable CAISO operators to reduce out of market actions, but the CAISO has not identified any way to measure those changes or the expected impact on costs. In view of the fact that most of California’s energy requirements are met through transactions in the CAISO’s Day-Ahead Market, it is critical that any proposals for significant modifications to the current Day-Ahead Market design appear likely to provide benefits that exceed the costs and complexities of implementation and avoid creating unintended consequences or opportunities for extracting payments that exceed the value of services actually provided. The CAISO’s presentations to date have not convinced the Six Cities that the design in the second revised straw proposal would satisfy the test set forth in the preceding sentence.
The second revised straw proposal still fails to address the most fundamental question: whether the proposed payments for capacity in the Day-Ahead Market will provide value to customers in the CAISO’s Balancing Authority Area (“BAA”) commensurate with the costs to those customers of developing and implementing such a significantly different Day-Ahead Market design. Load-serving entities in California, including the Six Cities, procure RA capacity at substantial cost from diverse types of capacity resources under contracts with varying lengths. Under the current market design, most capacity under RA contracts is required to be available to serve load in the CAISO BAA without additional capacity payments. Moreover, modifications to the RA program currently under consideration in the RA Enhancements initiative generally would expand requirements for forward capacity procurement and availability obligations, all of which are likely to increase costs for RA capacity. If the objectives of the RA Enhancements initiative are achieved, there should be sufficient RA capacity participating in the CAISO’s Day-Ahead Markets to meet the needs that Imbalance Reserves and Reliability Capacity are intended to address.
The CAISO claims, at page 43 of the second revised straw proposal, that “compensating resources for making capacity available through market bids, rather than through resource adequacy contract payments, is a more efficient way to allocate reliability capacity and imbalance reserve capacity.” (Emphasis added). However, the CAISO fails to explain, even in theoretical terms, why compensating resources for making capacity available both through market bids and through resource adequacy contract payments results in a just and reasonable outcome for customers. The CAISO has not even attempted to provide empirical support for its assumption that the benefits of optimizing unit commitment under the proposed Day-Ahead design (primarily described in terms of reducing the need for out-of-market adjustments) justify the additional and largely duplicative payments for capacity that the CAISO proposes to make.
Although the second revised straw proposal provides that during a transition period to the DAME market design, RA resources would be required to bid $0 for Imbalance Reserves and Reliability Capacity, the CAISO proposes to pay RA resources the marginal price for both Imbalance Reserves and Reliability Capacity. Such payments clearly will overlap with capacity payments under RA contracts. Moreover, in addition to creating the likelihood of duplicative capacity payments, the proposed DAME structure could create a gaming opportunity if resources hold back from selling a portion of available capacity for RA purposes. A resource owner could submit a non-zero bid for the non-RA portion of the resource, knowing that the RA portion of its capacity would receive payment of the bid amount (if the bid cleared) or higher (if a higher capacity bid cleared).
The Six Cities support the objective of reducing the need for out-of-market interventions such as Exceptional Dispatch and load biasing. However, design modifications under consideration in the RA Enhancements initiative have the same objective. In addition, enhancements to the Flexible Ramping Product, such as extension of the look-ahead period as recommended by the Department of Market Monitoring, also may reduce the need for out-of-market interventions. The CAISO should evaluate the effects of other proposed modifications to the current market designs on the frequency of out-of-market interventions before going forward with more complex revisions that are likely to result in duplicative capacity payments.
4.
Please provide your organization’s comments on the proposal for an additional market pass to perform MPM for the residual unit commitment (RUC) process:
The Six Cities support further evaluation of potential modifications to the RUC process to incorporate a pass for market power mitigation. However, the Cities request further information concerning the costs for implementing market power mitigation for the RUC process. To the extent that RA capacity is sufficient to meet forecast requirements and is required to submit $0 bids in the RUC process, non-zero bids may clear in RUC so rarely that implementing market power mitigation in RUC may not be cost-justified. As emphasized above, the Six Cities request information concerning the costs versus benefits for all proposed design modifications.
5.
Please provide your organization's comments on the proposed RUC process changes:
For the reasons set forth in response to Item 3 above, the Six Cities oppose implementation of the new Reliability Capacity product as proposed by the CAISO.
The Six Cities support further consideration of more limited modifications to the RUC process to allow transitioning of multi-stage generating resources in the downward direction (while not turning them off completely), to consider other potential processes for downward adjustment of committed capacity, and to consider gas availability conditions, again subject to cost/benefit considerations.
6.
Please provide your organization's comments on the proposed real-time market ramp deviation settlement:
The proposals at page 38 of the second revised straw proposal to implement (a) settlement for FMM forecasted movement deviation for Energy Imbalance Market (“EIM”) participants based on EIM base schedules, and (b) settlement for forecasted movement deviation at the FMM Flexible Ramping Product price for virtual supply and demand appear to represent appropriate refinements of real-time market settlements that do not appear to be dependent upon introduction of the Imbalance Reserves and Reliability Capacity products. With that understanding and subject to their continuing opposition to adoption of the Imbalance Reserves and Reliability Capacity products as discussed above, the Six Cities support further consideration of these limited refinements to Real-Time Market ramp deviation settlement.
7.
Please provide your organization's comments on the proposed method to account for energy offer cost in upward capacity procurement:
The Six Cities take no position on this aspect of the DAME second revised straw proposal at this time.
8.
Please provide your organization's comments on the proposed default capacity bid, including feedback on the appropriate price based on historical spinning reserve prices::
The Six Cities take no position on this aspect of the DAME second revised straw proposal at this time.
9.
Please provide your organization's comments on the proposed variable energy resources eligibility to provide new products:
Seeking stakeholder input on setting a requirement to provide high sustainable limit for CAISO forecasted VERs.
The Six Cities take no position on this aspect of the DAME second revised straw proposal at this time.
10.
Please provide your organization's comments on the proposed transition period for DAME enhancements:
As described in response to Item 3 above, the Six Cities oppose implementation of the proposed Imbalance Reserves and Reliability Capacity products. If the Day-Ahead and Real-Time market revisions arising out of this initiative exclude those two new capacity products and are more limited, then a defined transition period may not be necessary.
If the Day-Ahead Market design resulting from this initiative does include the Imbalance Reserves and Reliability Capacity products, notwithstanding the opposition of the Six Cities and perhaps other stakeholders, then the transition period should end no sooner than the implementation of an Extended Day-Ahead Market (“EDAM”) design. If implementation of an EDAM design does not occur, then the requirements for RA capacity to submit $0 bids in RUC and to submit bids for energy in Real-Time should continue until such time as the owner of specific RA capacity demonstrates that its RA contract expressly permits submission of non-zero bids for Imbalance Reserves or Reliability Capacity and optional participation in the Real-Time market.
11.
Please provide your organization's comments on the proposed treatment of metered subsystems, existing transmission contracts, and transmission owner rights:
The Six Cities take no positions on these aspects of the second revised straw proposal at this time.
12.
Please provide your organization's comments on the proposed EIM Governing Body advisory role classification:
The Six Cities support the proposed EIM Governing Body advisory role classification.
13.
Please provide any additional comments on the DAME second revised straw proposal that have not previously been addressed:
In Section 5 of the DAME second revised straw proposal, entitled “Alignment between RA Enhancements, DAME, and EDAM,” the CAISO discusses its vision of the role of the proposed Imbalance Reserves and Reliability Capacity products in a presumed EDAM framework. There is only limited discussion of the relationship between the RA Enhancements currently under consideration and either the DAME or EDAM constructs, and no discussion at all of the potential for duplicative payments arising from payments for RA capacity through forward procurement plus payments for offering the same capacity into the Day-Ahead Market through Imbalance Reserves and Reliability Capacity. Furthermore, the EDAM construct presumed in Section 5 of the DAME second revised straw proposal is problematic from the perspective of the Six Cities, because it appears to contemplate that an EIM Entity could choose whether or not to participate in the Day-Ahead Market on a day-by-day basis. At this point the Six Cities are not prepared to accept an EDAM design that would allow external entities the option to hop in and out of the Day-Ahead Market on a daily basis.
The discussion in Section 5 at page 47 of the DAME second revised straw proposal points to the proposed Imbalance Reserves and Reliability Capacity products as providing the mechanisms to “allow resources in one balancing authority area to be compensated for providing flexibility to another balancing authority area” and to “allow the EDAM entity to purchase (at lower cost) imbalance reserves and reliability capacity from another entity.” The Six Cities fully support further efforts to expand efficiencies in the regional commitment and use of resources to meet flexibility and other reliability requirements, and they agree completely with the general proposition that there must be appropriate compensation for the use of resources procured by one BAA to meet the needs of other BAAs. It is not at all clear, however, that implementing the Imbalance Reserves and Reliability Capacity products is the only, much less the best, way to provide for such compensation, especially in the absence of a fully-developed EDAM proposal that has widespread support from stakeholders both within the CAISO and in external BAAs.
At this point, implementation of the Imbalance Reserves and Reliability Capacity products can only be justified based on a demonstration that they will produce better market outcomes (on an overall basis and considering the likelihood of duplicative capacity payments to RA resources) for current participants in the CAISO Day-Ahead Markets. As discussed in response to Item 3, that demonstration has not been made.
Southern California Edison
Submitted 08/18/2021, 09:48 am
1.
Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) second revised straw proposal:
2.
Please provide your organization’s comments on the proposed changes to the market power mitigation (MPM) pass for the integrated forward market (IFM):
3.
Please provide your organization’s comments on the proposed changes to the IFM:
4.
Please provide your organization’s comments on the proposal for an additional market pass to perform MPM for the residual unit commitment (RUC) process:
5.
Please provide your organization's comments on the proposed RUC process changes:
6.
Please provide your organization's comments on the proposed real-time market ramp deviation settlement:
7.
Please provide your organization's comments on the proposed method to account for energy offer cost in upward capacity procurement:
8.
Please provide your organization's comments on the proposed default capacity bid, including feedback on the appropriate price based on historical spinning reserve prices::
9.
Please provide your organization's comments on the proposed variable energy resources eligibility to provide new products:
Seeking stakeholder input on setting a requirement to provide high sustainable limit for CAISO forecasted VERs.
10.
Please provide your organization's comments on the proposed transition period for DAME enhancements:
11.
Please provide your organization's comments on the proposed treatment of metered subsystems, existing transmission contracts, and transmission owner rights:
12.
Please provide your organization's comments on the proposed EIM Governing Body advisory role classification:
13.
Please provide any additional comments on the DAME second revised straw proposal that have not previously been addressed:
WPTF
Submitted 08/18/2021, 04:06 pm
Submitted on behalf of
WPTF
1.
Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) second revised straw proposal:
WPTF appreciates the opportunity to comment on the CAISO’s Day-Ahead Market Enhancements Second revised straw proposal that was discussed during the July 28, 2021 stakeholder call. We are encouraged to see the CAISO take a more simplified approach at this time compared to the fully integrated IFM/RUC design that was initially discussed at the onset of this effort. Retaining the sequential IFM RUC process enables the CAISO and stakeholders to better evaluate the impact this set of changes will have on the market and then make determination if additional enhancements are warranted. That being said, WPTF is concerned that the proposal as currently written introduces unnecessary complexities that will come at significant market efficiency and reliability costs. Where possible, as identified throughout these comments, we strongly encourage the CAISO to consider modifications to the proposal that we believe will still achieve the intended outcome of this effort with regards to market efficiency and reliability improvements without introducing undue risk.
Additionally, WPTF is concerned that the proposal introduces real-time reliability risk, running counter to WPTF’s understanding of one of the CAISO’s main objectives for this initiative. As discussed in more detail in response to question #3, by design, this policy will create artificial scarcity in the day-ahead market and set the real-time market up with less certainty around having sufficient bid-in energy. Coming out of the day-ahead market with less than the targeted imbalance reserve product, despite sufficient capacity being made available, in conjunction with eliminating the RA real-time must offer obligation will likely lead to additional out-of-market actions between the day-ahead and real-time markets. It is extremely concerning to WPTF that a policy intended to “ensure the day-ahead market schedules sufficient real-time dispatch capability” may actually result in insufficient real-time dispatch capability, artificial scarcity in the day-ahead market, and higher out of market actions to address the reliability risk. The risk becomes clearer when one takes a step back and looks at how all the proposal elements, which are highly interrelated, will function together within the market and the overall impact that is created. As such, WPTF has offered potential modifications to the proposal that will alleviate what we believe is an unintended outcome of the proposal elements.
Lastly, WPTF respectfully requests that if the CAISO were to move forward with this proposal that there be additional transparency with regards to out of market actions. Given that the one objective of this proposal is to decrease out of market actions, it would be extremely useful to have the CAISO routinely track and report such actions on a more routine and granular basis than is done today.
2.
Please provide your organization’s comments on the proposed changes to the market power mitigation (MPM) pass for the integrated forward market (IFM):
First, WPTF would appreciate if the CAISO can clearly define the problem statement that this element of the proposal is intended to address such that the stakeholder community can better assess the reasonableness of the proposed mitigation process. At a high level, one could reasonably assume the CAISO believes there is the ability for participants to exercise market power via the newly proposed capacity products in the day-ahead market. And the proposed solution is then to mitigate capacity bids using an energy-based transmission flow mitigation process designed to identify local market power.
WPTF is concerned that this proposal element adds unnecessary complexity – mitigation test, defining and calculating “competitive capacity price”, defining and calculating a “default capacity bid”, and additional market runs adding to computational time. Rather, WPTF believes implementing a bid cap structure is a more straightforward and simplified approach.
WPTF is struggling to understand why/how using a mitigation test that is designed to test for the ability to exercise local market power in energy is the appropriate approach for determining if/when a resource can exercise market power for what appears to be a system capacity product. If the CAISO is concerned that market participants will bid IRU/IRD sufficiently high knowing the output of that resource is needed to manage local congestion, shouldn’t the market award the IRU/IRD to another deliverable resource located somewhere else on the system because the requirement/need for IRU/IRD is not constrained to that local area? WPTF struggles to understand the need for the mitigation proposal - how exactly could a system resource exert market power? The natural forces of a competitive market for a system wide capacity product will protect the market from generating artificially high prices; market participants do not simply price themselves out of the market in a competitive environment. This is a foundational concept of running a market. Thus, WPTF believes additional discussion on this element of the proposal, if the CAISO opts to move forward with mitigation, is essential.
We do understand that the CAISO is running deployment scenarios to test to see where capacity, if needed to convert to energy in real-time, would be transmission constrained. WPTF would like to better understand how testing for deliverability when awarding resources IRU/IRD translates into the ability to exercise market power on a system wide capacity product. This is an area of the proposal where we believe additional discussion is warranted. WPTF would like to better evaluate and discuss if it makes sense to use a local market power mitigation test based on transmission congestion to identify the ability to exercise market power in a capacity product.
If in fact the problem statement the CAISO is trying to address via IRU/IRD mitigation is the concern that market participants may be able to exercise system wide market power in the IRU/IRD market and artificially increase prices, then WPTF believes there is a more effective and less complex approach that the CAISO should strongly consider. Similar to all the other capacity products procured in the day-ahead market, i.e., ancillary services, the CAISO does not apply a mitigation mechanism based on transmission flows. Rather, to prevent potential market power in the ancillary service markets, the CAISO has a circuit breaker bid cap and then allows the natural forces of a competitive market to drive the offers towards marginal cost.
WPTF believes applying a bid cap equal to that of spinning reserves rather than applying mitigation using the local market power mitigation mechanism will provide the following benefits:
- Simplifies implementation
- Aligns with market power mitigation treatment with all the other existing capacity products procured in the day-ahead market
- Reduces additional runs needed in the MPM process, thus reduces computational time
- Eliminates the need to determine what is a “competitive capacity price” and how to calculate the value
- Eliminates the need to determine what is “default capacity bid” for IRU/IRD and how to calculate the value
3.
Please provide your organization’s comments on the proposed changes to the IFM:
As summarized by the CAISO at the beginning of this effort, one of the objectives of this market design change is to come out of the day-ahead market better situated going into real-time in a way that it has sufficient energy to meet uncertainty and granularity differences. This is turn will reduce out of market actions currently taken to address uncertainty and real-time reliability risk.
WPTF is concerned that this proposal, as currently structured, will introduce additional real-time reliability risk, running counter to a main objective of this effort. Specifically, the proposal element to not award IRU/IRD to resources with an underlying energy bid price higher than a predetermined amount in conjunction with the CAISO’s proposal to eliminate the RA real-time must offer obligation. We recognize that the CAISO is proposing the RA real-time must-offer obligation change in another initiative, but it is imperative to discuss herein as these two proposal elements are significantly interrelated and when taken together introduce additional reliability risk.
First, it is WPTF’s understanding that the problem statement this element of the proposal is trying to address is ensuring the day-ahead market awards IRU/IRD capacity to resources with the lower energy costs. Thus, if/when the IRU/IRD capacity is used as energy in real-time it will be the lower cost resources providing that energy, e.g., least cost dispatch. While we understand the CAISO’s perspective, WPTF is concerned that this concept of minimizing the deployment cost of the IRU/IRD in real-time by restricting which resources can be awarded the IRU/IRD capacity is somewhat misguided. If the market awards a resource IRU with a low underlying day-ahead energy bid, the resource can still rebid that energy into the real-time market at potentially higher prices; the end result may be a higher deployment cost of the energy in real time than what may have been if another higher priced resource in the day-ahead market was awarded the IRU capacity. WPTF believes that if the CAISO allows the day-ahead market to co-optimize all the products, it will come to a least cost solution. All the resources awarded IRU/IRD in the day-ahead market will then rebid in real-time at potentially different prices and the real-time market will determine the least cost dispatch of real-time energy based on bids. We have to keep in mind that the real-time market will also mitigate any bids from resources with the potential to exercise market power. Additionally, if the CAISO were to retain the RA real-time must-offer obligation (as discussed in more detail below) then there would be additional supply made available in real-time, increasing the competitive conditions and driving bids towards marginal cost.
Regarding the reliability risk introduced by this proposal element; if the day-ahead market does not fully procure its IRU/IRD requirement because the underlying energy bids are “too high”, the day-ahead market will by design result in insufficient energy being made available in real-time. Under this scenario, the IFM market will hit the penalty parameter associated with the IRU/IRD products, signaling to the market that there was insufficient supply even though there was enough supply just priced at a point that seemed “too high”. In other words, this proposal element will result in the market not only coming into the real-time market knowingly with not enough capacity but will also trigger artificial scarcity in the IFM market even though there was sufficient capacity offered into the market.
Taking it one step further, not only will the CAISO come out of the day-ahead market with insufficient capacity, but the CAISO is also proposing to eliminate the RA real-time must-offer obligation. So, the CAISO can no longer rely on RA resources that were not awarded in the day-ahead market showing up in real-time to help resolve undersupply conditions; its 100% relying on the day-ahead market process to procure sufficient capacity while simultaneously setting up the day-ahead market to have an “out’ for procuring 100% of its forecasted need if it will cost too much.
Regarding the proposal to eliminate RT RA MOO, WPTF would greatly appreciate the CAISO clearly defining the problem statement that this market design change is intended to address. To our knowledge, suppliers and LSEs alike are not pushing for this change, which makes us wonder what the underlying issue is that is the impetus for eliminating the RA RT MOO. If the CAISO is concerned that there will not be sufficient capacity made available in real-time, thus has spent significant resources considering changes to the day-ahead market, then why is the CAISO proposing to eliminate the RA RT MOO?
Eliminating the RA RT MOO in conjunction with the potential for coming out of the day-ahead market with less than 100% of IRU/IRD procured will only likely result in additional out of market actions.
Here again, WPTF believes that if the CAISO simply procures 100% of the IRU/IRD requirement (similar to how it procures ancillary services) and not ignore IRU/IRD capacity with high underlying energy bids, this will result in a more reliable, efficient, and less complex market design change. To this, WPTF strongly encourages the CAISO to retain the RA RT MOO as it does not seem to be addressing any concern that has been raised to our knowledge but yet introduces additional reliability risk in the real-time market.
Lastly, the deployment scenarios introduce significant complexity not only from a market perspective but also implementation perspective. While we understand the desire to test for deliverability, as was discussed and proposed for the Flexible Ramping Product, there is an opportunity here to first assess if the added complexity of deployment scenarios result in the intended and efficient outcomes. The FRP Enhancements initiative also introduces deployment scenarios. Thus, WPTF believes it would be beneficial for the CAISO to consider delaying the DAME deployment scenarios until after there has been an opportunity to test and evaluate the effectiveness of the FRP deployment scenarios. In other words, make sure the deployment scenarios first work with FRP before introducing it into the day-ahead market with another product.
4.
Please provide your organization’s comments on the proposal for an additional market pass to perform MPM for the residual unit commitment (RUC) process:
WPTF continues to question how market power on a system wide capacity product can be accurately mitigated by using a mitigation mechanism designed to identify local market power for energy. We strongly encourage the CAISO to consider implementing a bid cap set at the spinning reserve bid cap price as an alternative solution.
5.
Please provide your organization's comments on the proposed RUC process changes:
As highlighted by the CAISO in the proposal paper, there is already concern that the additional market runs in both the IFM and RUC processes may create issues with the CAISO’s ability to solve the markets within the necessary timeline. The proposed solution is to only run the RUC MPM run for a 24-hr period and then use the mitigation results in the 72-hr RUC run. As discussed in more detail in response to question #13, WPTF is generally concerned about the processing time needed to complete not only the additional RUC market runs but also the IFM market runs that this proposal introduces. At the onset of this initiative, we spent a significant amount of time on a market design that in the end was not technological feasible due to computational time. Thus, we strongly encourage the CAISO to ensure that whatever market design is being proposed, that there is ample testing done up front to ensure it can be solved within the necessary timelines.
Here again, by making some of the modifications proposed by WPTF in these comments, the CAISO could not only reduce the implementation complexity but also processing time needed, mitigating the concern already raised by the CAISO in the proposal paper.
6.
Please provide your organization's comments on the proposed real-time market ramp deviation settlement:
7.
Please provide your organization's comments on the proposed method to account for energy offer cost in upward capacity procurement:
Please see response to question #3.
8.
Please provide your organization's comments on the proposed default capacity bid, including feedback on the appropriate price based on historical spinning reserve prices::
The concept of a default capacity bid price, while in casual conversation seems as though there should be a reasonable and widely accepted method, is much more complex. If the CAISO opts to adopt a bid cap approach instead of the proposed approach, this is a detail that would no longer be needed to be worked out.
9.
Please provide your organization's comments on the proposed variable energy resources eligibility to provide new products:
Seeking stakeholder input on setting a requirement to provide high sustainable limit for CAISO forecasted VERs.
10.
Please provide your organization's comments on the proposed transition period for DAME enhancements:
11.
Please provide your organization's comments on the proposed treatment of metered subsystems, existing transmission contracts, and transmission owner rights:
12.
Please provide your organization's comments on the proposed EIM Governing Body advisory role classification:
13.
Please provide any additional comments on the DAME second revised straw proposal that have not previously been addressed:
WPTF believes given the complexity of this proposal, concerns raised herein, and the need for additional engagement with CAISO staff, additional time is warranted on this initiative. The CAISO and stakeholders have been working on DAME for over two years now and each iteration of the policy has been drastically different than the prior. Thus, it is imperative that prior to taking any policy to the Board for decision, stakeholders are given ample time to digest, understand, and engage with the CAISO staff as well as time for CAISO staff and stakeholders to vet and address any concerns/issues raised. The current proposed schedule does not provide ample opportunity. Thus, we ask that the CAISO schedule another stakeholder call or working group to discuss the technical appendix and address any concerns/issues raised by stakeholders before issuing the next iteration of the proposal.
We do recognize that the latest stakeholder call was scheduled to take place over two days, but the CAISO cancelled the second day because it was able to present its proposal over the course of 4 hours on day one. However, WPTF is concerned that one of the main reasons the CAISO was able to present the entire proposal was because stakeholders were still trying to digest the proposal itself; most questions were clarifying questions to understand the proposal. Additionally, there were several details that the CAISO was still working through at the time of the call. While we appreciate and understand some of those details have been included in the technical appendix posted last week, there remain some details to be worked out and yet the schedule does not provide for another robust opportunity to engage with the CAISO before taking the policy to the Board for decision.
WPTF requests that the CAISO provide more analysis with regards to the impact this proposal has on processing time. The CAISO and stakeholders spent nearly a year discussing the integrated IFM/RUC to then be informed that the CAISO technology is unable to implement the changes and still produce market results in the necessary timeframe. Before we spend additional time on this proposal, we ask that the CAISO evaluate the processing time needed and if it is even feasible to begin with as it would be unfortunate for the CAISO and stakeholders to continue spending time and effort on a potential market design that in the end cannot be implemented. While we appreciate that the CAISO has identified a potential back up plan in the event the processing time is infeasible, we have concerns with the market implications of that back up plan. Here again, a benefit of reducing the complexity introduced in this proposal will be reducing the processing time and addressing this concern as well.
Lastly, WPTF believes that the CAISO could make the following modifications to the proposal resulting in reduced implementation complexity, processing time, and improved market efficiency and reliability concerns:
- Applying mitigation to the imbalance reserve and reliability capacity products through bid caps set at the spinning reserve bid cap price
- Procure 100% of the IRU/IRD requirement in the day-ahead market regardless of the underlying energy bid price
- Retain the RA real-time must offer obligations
