Comments on 1/29 DAME Configurable Parameters Implementation Working Group Meeting

1. Please provide a summary of your organization's comments on the January 29, 2025 DAME Configurable parameters implementation working group discussion.

Comments on Day-Ahead Market Enhancements Configurable Parameters

Working Group Presentation on January 29, 2026

Department of Market Monitoring

February 19, 2026

Summary

The Department of Market Monitoring (DMM) appreciates the opportunity to comment on the Day-Ahead Market Enhancements - Configurable Parameters Implementation Working Group presentation on January 29, 2026.[1]

DMM supports the ISO testing the sensitivity of the configurable parameters on the market results prior to go-live. Consistent with ISO data team’s explanations of the data, DMM has recommended caution when interpreting results based on potentially unrealistic input data in the test environment. However, the ISO’s preliminary analysis has demonstrated that some of the configurable parameter values can significantly increase imbalance reserve (IR) prices, with limited evidence that these higher prices would improve real-time energy availability and deliverability of IR schedules. Further, there appears to be little evidence that the resulting prices are consistent with the actual costs of providing the product.

DMM supports the ISO’s proposal made in the Market Surveillance Committee meeting on February 6 to utilize lower default values for the envelope multiplier, deployment imbalance reserve (DIR) factor, and imbalance reserve requirement at go-live, as this could help protect against inefficiently high IR prices. DMM recommends the ISO conduct analysis after go-live to evaluate whether resource availability and transmission deliverability of IR needs improvement, whether adjusting these parameters could appropriately address these concerns, and whether the value of any increased availability or deliverability justifies the potential increase in IR costs that may result from higher parameter values.

DMM also supports the ISO considering changes to the remaining configurable parameters after go-live when actual market data are available.

Comments

DMM agrees with the ISO’s summary of the results from the first stage of analysis, particularly regarding the impact of the battery envelope multiplier and the deployment imbalance reserve factor on IR prices.[2] DMM supports the ISO’s proposal to lower the default value for these two configurable parameters at go-live to reduce risk of inefficiently high IR prices, as discussed in the Market Surveillance Committee meeting on February 6, 2026.[3]

Higher envelope multipliers increase costs and may not ensure real-time availability

DMM continues to recommend that the benefit of a higher envelope multiplier be weighed against the cost.[4] The ISO’s preliminary analysis indicates that higher envelope multipliers significantly increase IR prices. It is unclear to DMM whether this envelope multiplier will substantially increase the availability of storage resources to provide IR in real-time for two reasons:

• First, there is no real-time constraint that ensures storage resources with IR awards will establish the needed state-of-charge earlier in the day to be available to provide charging or discharging energy in later hours with IR awards.[5]
• Second, the current bid cost recovery (BCR) structure removes storage resources’ exposure to the real-time price of day-ahead schedule buybacks, which further reduces the likelihood that real-time and day-ahead schedules will align to establish the state-of-charge needed to provide imbalance reserve capacity later in the day.[6]

DMM supports the ISO’s proposal to use a lower envelope multiplier value at go-live to reduce the risk of inefficiently high IR prices with potentially little to no benefit in return. DMM recommends the lower envelope multiplier remain in place until further analysis determines (1) whether it is necessary to improve the available charge of storage resources in real-time; (2) whether the envelope multiplier can effectively address storage availability in real-time; and (3) whether the value of that improved availability justifies the resulting higher IR prices.

High deployment imbalance reserve factors increase costs and may not increase actual IR deliverability

DMM continues to recommend the ISO consider starting the deployment imbalance reserve (DIR) factor at a value less than 100 percent and then evaluate after go-live whether an increase is necessary.[7] The ISO’s analysis shows that higher DIR factors may lead to higher IR prices, and could lead to more demand curve procurement which implies fewer IR awards to resources (less capacity procured). The DIR factor creates a trade-off between the probability of real-time deliverability and the cost of IR. However, because even a 100 percent DIR factor does not guarantee deliverability in real-time, or potentially not even more deliverability than a lower factor, DMM recommends the ISO start with a lower value at go-live and then analyze actual market data to determine whether deliverability problems warrant potentially increasing the DIR factor.

DMM agrees with the ISO’s choice of parameters to adjust for go-live

DMM supports the ISO’s choice of parameters to reduce IR impacts at go-live (including the envelope multiplier, DIR factor, and reserve requirement levels) rather than changing the other parameters—such as the $55/MWh bid cap and default availability bid. The $55/MWh bid cap and default availability bid are defined in the tariff and may be harder to adjust prior to go-live. As such, these parameters are not appropriate to adjust based on potentially unrealistic market data. DMM also notes that there is limited analysis on how the $55/MWh default availability bid affects market outcomes. DMM recommends the ISO analyze actual market data after go-live to determine whether updates to these parameters are warranted, as this will provide better insight into their impact on market performance.

[1]  Day-Ahead Market Enhancements: Configurable Parameters Implementation Working Group presentation, California ISO, January 29, 2026: https://stakeholdercenter.caiso.com/InitiativeDocuments/Presentation-Day-Ahead-Market-Enhancements-Configurable-Parameters-Implementation-Working-Group-Jan-29-2026.pdf

[2] Ibid, p 52.

[3] Day-Ahead Market Enhancements: Update on the configurable parameters working group progress, California ISO, Market Surveillance Committee Meeting February 6, 2026: https://www.caiso.com/documents/presentation-extended-day-ahead-market-edam-configurable-parameters-feb-06-2026.pdf

[4] Comments on Day-Ahead Market Enhancements Configurable Parameters Working Group Presentation on November 20, 2025, Department of Market Monitoring, December 10, 2025: https://www.caiso.com/documents/dmm-comments-on-day-ahead-market-enhancements-configurable-parameters-implementation-nov-20-2025-working-group-dec-10-2025.pdf

[5] A battery would need to charge before being able to discharge energy during hours of imbalance reserve up awards. Similarly, a battery may need to ensure sufficient charging capability during hours of IRd awards by discharging or forgoing charging in hours before the imbalance reserve down awards. There is no real-time constraint on state-of-charge (SOC) that will ensure such outcomes, even if they exist in the day-ahead market.

[6] Comments on Storage Design and Modeling Working Group Presentation on November 12, 2025, Department of Market Monitoring, November 26, 2025: https://www.caiso.com/documents/dmm-comments-on-storage-design-and-modeling-nov-12-2025-working-group-presentation-nov-26-2025.pdf

[7] Comments on Day-Ahead Market Enhancements Configurable Parameters Working Group Presentation on December 18, 2025, Department of Market Monitoring, January 8, 2026: https://www.caiso.com/documents/dmm-comments-on-day-ahead-market-enhancements-configurable-parameters-implementation-dec-18-2025-working-group-jan-08-2026.pdf

2. Please provide a summary of your organization's comments regarding the discussion on Sensitivity analysis #5 results – Default availability bids for IR and RC.

Please see the PDF attached below the final question for DMM's fully formatted complete set of comments. For the reader's convenience, the complete text of the comments is pasted in response to #1, but there may be some formatting errors.

3. Please provide a summary of your organization's comments regarding the Parallel Operations Plan discussion.

Please see the PDF attached below the final question for DMM's fully formatted complete set of comments. For the reader's convenience, the complete text of the comments is pasted in response to #1, but there may be some formatting errors.

4. Please provide any additional comments.

Please see the PDF attached below the final question for DMM's fully formatted complete set of comments. For the reader's convenience, the complete text of the comments is pasted in response to #1, but there may be some formatting errors.

1. Please provide a summary of your organization's comments on the January 29, 2025 DAME Configurable parameters implementation working group discussion.

Energy Division staff (ED staff or staff) of the California Public Utilities Commission (CPUC) develops and administers energy policy and programs to serve the public interest, advises the CPUC, and ensures compliance with CPUC decisions and statutory mandates. ED staff provides objective and expert analyses that promote reliable, safe, and environmentally sound energy services at just and reasonable rates for the people of California.?? 

?ED staff appreciates the opportunity to submit comments on the Day-Ahead Market Enhancements (DAME) configurable parameters implementation working group. ED staff also appreciates the considerable amount of material analyzed and released for discussion as the working group has progressed over the last several months.  

ED staff is concerned that the imbalance reserve requirements may be set too high and will result in CAISO customers paying twice for reliability capacity, given the preliminary results provided during Market Simulation and early results from parallel operations. ED staff understand CAISO does not agree with our preliminary cost analysis, based off Market Sim data. Nevertheless, now that we have data emerging from parallel operations; ED staff will continue to conduct cost analysis once the data emerging from parallel operations appears reasonable. ED staff looks forward to discussing with CAISO and the working group more broadly once this cost analysis is conducted. Does CAISO have a plan if these new costs emerging in parallel operations are significant? Is there any mechanism being considered to protect ratepayers from potentially large non-forecasted costs?

ED staff notes that CAISO committed to address parties’ concerns about the costs of the imbalance reserve product in market testing process.[1]  ED staff recommends that CAISO proactively consider steps it could take should the preliminary results from market simulation and parallel operations materialize in the market (e.g., high costs, etc.) when CAISO implements the EDAM and DAME changes on May 1, 2026.

ED staff is concerned that the Imbalance Reserve product, as designed, will cause CAISO customers to double-pay for resources that must bid into CAISO markets: once through contracts for resource adequacy (RA) resources that have day-ahead and real-time must offer obligations, and a second time for those same resources when they are selected as Imbalance Reserves. Ultimately, the Imbalance Reserve design must ensure that CAISO customers do not double-pay for reliability capacity.

[1] CAISO noted in its tariff filing that it was “committed to implementing a range of configurable market parameters in the software design to permit the CAISO to make refinements readily based on experience during the market simulation period and during the initial stages of implementation. … to provide off-ramps and the ability to pivot quickly should the CAISO identify unintended adverse consequences.”  Id[1].   (Emphasis added.)

2. Please provide a summary of your organization's comments regarding the discussion on Sensitivity analysis #5 results – Default availability bids for IR and RC.

ED staff does not support any consideration of a higher default availability bid (DAB) for imbalance reserves and reliability capacity and is encouraged by CAISO’s response in the recent comment matrix in which CAISO stated that it “agrees that the $55 bid cap will not be raised for go-live and this was purely done to test whether there are any adverse impacts of using bids above $55.”[1]

While ED staff appreciates the presentation and analysis on market power mitigation, ED staff broadly continues to be concerned about the prices that emerged in the Market Simulation testing (Market Sim) and now in Parallel Operations. Market Surveillance Committee member Dr. Scott Harvey voiced these concerns during his presentation on February 6, as shown in the slide below, noting that “the overall level of imbalance reserve up prices and costs in the simulation models appears to be materially higher than they should be in an efficient market.”

[2]

ED staff would be less concerned about the overall size of the imbalance reserve requirement, if the imbalance reserve product was clearing at prices closer to ancillary services, but the Market Sim data thus far (as well as early Parallel Operations data) does not indicate that to be the case.

[1] Pg.10, Comment-Responses-Day-Ahead-Market-Enhancements-Configurable-Parameters-Working-Group-Jan-29-2026 (3).pdf

[2] Slide 3, Dr. Scott Harvey, Market Surveillance Committee Opinion on EDAM Imbalance Reserve Costs: Market Design and Parameter Choices, see - Title

3. Please provide a summary of your organization's comments regarding the Parallel Operations Plan discussion.

CAISO’s approach to Parallel Operations is as follows: 100% Deployed Imbalance Reserve (DIR), 85% Envelope Charging Multiplier, enforcement of all constraints, and the default availability price and bid cap of $55. The first two elements are subject to business practice manual (BPM) processes, the third by computational considerations, and the final two by CAISO tariff. If CAISO chooses to implement the aforementioned combination of configurable parameters noted above, ED staff recommends CAISO be prepared to adjust these parameters should adverse outcomes materialize, which would be expected based on results from Market Simulation and Parallel Operations to date.

In the last round of comments, stakeholders, including ED staff, recommended a nimbler approach to the DIR factor, but CAISO has proposed and will implement in Parallel Operations a 100% DIR factor. The usage of a 100% DIR factor seems to conflict with CAISO’s own stated goals of ensuring reliability -- in fact, analysis from the December Working Group (slide 68) shows a higher DIR factor actually leads to less imbalance reserve procurement. Although ED staff largely does not find a need for an imbalance reserve product at the levels CAISO has proposed to procure, we recommend CAISO continue to fine tune this DIR factor. A 100% DIR factor will create unnecessary congestion, while pushing up LMPs across the grid, and potentially distorting the dispatch of resources because of an over modeling of congestion. The impact of the DIR factor is compounded if CAISO is successful in their plan to enforce all constraints. Notably, with a 97.5% level of uncertainty used, the market will be overly constrained and overly congested for conditions that will only materialize 2.5% of the time.  

ED staff recommends CAISO reconsider the 85% attenuation factor being used in the envelope constraint multiplier (ECM) and are encouraged that CAISO will assess this parameter during Parallel Operations. ED staff previously requested that CAISO consider changing the configurable parameters based on system conditions (e.g., with load less than 43,000 MW, using 0% for the envelope constraint and no deployment). MSC Member Dr. Scott Harvey also made this point on slide 7-8 of his presentation, since a high ECM raises the price of storage providing imbalance reserves. In addition, the final parameters cannot lead to excessive thermal resources being dispatched for imbalance reserves as that could generate large uplift charges.[1]

In past comments, ED staff requested that CAISO release the data underlying many of its charts, so that stakeholders could understand the effect of imbalance reserves on energy prices, for example. CAISO responded that they would not provide the data, but encouraged ED staff and others to review data from Parallel Operations. ED staff notes, as discussed further below, that the data from Parallel Operations is not yet stable (i.e., the energy costs are far above what is seen in the market today) and many of the imbalance reserves and reliability capacity products are at prices that are higher than one would expect from an efficient market.  Thus, it is difficult at this point to assess the potential increased costs associated with the imbalance reserve products (and the reliability capacity products) and encourages CAISO to inform parties when more stable data is available. Moreover, ED staff notes that these high prices are seen during low load and non-stressed system conditions and, thus, ED staff is concerned that the costs for these products could further increase and adversely affect energy prices as well, as load increases during the summer months.

[1] Slide 7-9, , Dr. Scott Harvey, Market Surveillance Committee Opinion on EDAM Imbalance Reserve Costs: Market Design and Parameter Choices, see - Title

4. Please provide any additional comments.

Imbalance Reserve Requirements are too high

ED staff has consistently argued the 97.5% percentile of uncertainty being used for imbalance reserve procurement is too high. Analysis from DMM has shown that the 97.5% percentile of uncertainty has not been used in recent years, for a variety of reasons, and notably, there have been many days/hours with no adjustment at all.[1] CAISO’s slide from its presentation (below) illustrates the point that ED staff and others have been highlighting -- that the 97.5% level of uncertainty is too high.

[2]

ED staff understands CAISO has committed to a tariff change as needed: “Values defined in the BPM can be changed expeditiously; for values defined in the tariff the ISO committed to pursue a tariff change as needed.”[3] ED staff understands CAISO does not want to make any tariff changes at this point, as it would delay EDAM go-live. ED staff appreciate CAISO laying out a process during the February 6^th MSC call to reduce the threshold of uncertainty used. A lower percentile of uncertainty will reduce ED staff’s concerns about over procurement of a duplicative product.

In addition to the graph above from CAISO, DMM has published the chart below illustrating RUC adjustments in 2024 (below). [4]

When these values are converted to hourly figures the results are shown below. In 2024, CAISO used a 97.5% percentile uncertainty adjustment in only 3% of the hours.

Imbalance Reserve Requirements are too expensive for an efficient market

ED staff understands that CAISO does not agree with the preliminary calculation of imbalance reserves costing the CAISO BAA $300 million annually. The data being presented thus far is limited. ED staff has estimated this cost to the CAISO BAA based on the available data. Rather than CAISO conducting a cost/benefit analysis in response, or providing more data, CAISO has provided a menu of reasons this number could possibly be wrong. The prices seen in Market Simulation and the early weeks of Parallel Operations do not appear to reflect an efficient market, and as a result will produce overall market clearing costs much higher than the current production environment.

Imbalance Reserves will cause higher prices in downstream costs

In addition to the direct costs related to the over procurement of imbalance reserves, there will be indirect costs tied to the distortion in the ancillary services and energy market clearing prices. Relatedly, the DIR and constraint enforcement plan for imbalance reserves will likely produce added congestion that would not have materialized without procurement of this new reliability product. This added congestion will have impacts beyond imbalance reserve and energy market clearing prices by increasing the congestion share of each LMP.

Additional Questions and Comments:

• In addition, ED staff would appreciate more clarity on the chart below: in this scenario, what was actually procured?  Could CAISO provide this chart at a minimum with associated MW amounts and the price?

[5]

• ED staff requests that CAISO explain what is actually procured in the scenario where all bids are placed at $55/MWh and the demand curve reduces the price. It would be helpful to explain whether no imbalance reserves are procured under this scenario. That is, if all bids are $55/MWh, and the price is set at $30/MWh by the demand curve, it would seem that no imbalance reserves would be procured. Can you confirm that if all bids are at $55/MWh and the demand curve sets the price at $35/MWh, then no imbalance reserves is procured?
  • If this is the case, is there any penalty to not meeting the IR requirements or are bids forced to clear at $30/MWH, and if so, can these generators, then receive BCR for the difference between $30 and $55?
  • ED staff understands imbalance reserves to be eligible for BCR per 11.8.2.1 IFM Bid Cost Calculation “For each Settlement Interval, the CAISO shall calculate IFM Bid Cost for each Bid Cost Recovery Eligible Resource as the algebraic sum of the IFM Start-Up Cost, IFM Transition Cost, IFM Minimum Load Cost, IFM Pump Shut-Down Cost, IFM Energy Bid Cost, IFM Pumping Cost, IFM AS Bid Cost, IFM GHG Bid Cost, and IFM Imbalance Reserves Bid Cost.” If this is not the case, can CAISO please clarify?
  • CAISO in their answer stated “In the scenario where all Imbalance Reserve bids are $55, it is important to remember that the last segment of the demand curve is also $55. So, the optimization could clear some Imbalance Reserve bids at $55 and also would use the last segment of the demand curve to set the price to $55. The Imbalance Reserve price cannot be $30 set by the demand curve because either the optimization would procure the $55 bids or the majority of the Imbalance Reserve Requirement would not be procured and the $55 demand curve segment would set the price.”[6]
    • Therefore, it is a correct conclusion that while the EDAM tariff does allow for imbalance reserves to be eligible for BCR there is no scenario identified thus far where they would qualify?
• ED staff requests further analysis of the competitiveness of the imbalance reserve product during Parallel Operations.
• ED staff supports some of the additional metrics proposed by SCE in their comments in December, specifically – considering price formation and market distortion, constraint shadow price volatility, congestion overlap analysis, market liquidity and award diversity.
• ED staff will be closely following the prices resulting from parallel operations to conduct cost analysis, as this is critical to ensuring that the benefits of EDAM are realized and do not result in large, unanticipated costs for CAISO customers.
• ED staff believe that the promise of EDAM is that it is a more efficient market with lower production costs, but based on the current data emerging from market sim and parallel operations this data does not indicate the market will be more efficient or lower cost, due to large and high new costs stemming from the new day-ahead market enhancement products. ED staff looks forward to continuing to engage with CAISO over the next couple of months to establish a more reasonable and less conservative set of configurable parameters in advance of EDAM go-live.
• Finally, if the initial data emerging from the first week of parallel operations is indictive of what to anticipate in EDAM go-live, then ED staff has more serious concerns than simply excess costs. ED staff will continue to monitor parallel operations, and if results continue to be unstable, ED staff will raise these issues. ED staff hope that the initial week of parallel operations data simply reflects implementation bugs at the start, rather than more serious implementation considerations.

[1] Pg. 121, Department of Market Monitoring Quarter 2 Report on Market Issues and Performance, 2025-second-quarter-report-on-market-issues-and-performance.pdf

[2] Slide 38, Market Performance and Planning Forum, MarketPerformance-PlanningForum-Jan-27-2026

[3] Slide 14, January 29^th DAME Configurable Parameters Working Group - Presentation-Day-Ahead-Market-Enhancements-Configurable-Parameters-Implementation-Working-Group-Jan-29-2026 (3).pdf

[4] Pg. 259, 2024 Department of Market Monitoring Annual Report, 2024-annual-report-on-market-issues-and-performance-aug-07-2025.pdf

[5] Slide 86, November Configurable Parameters Working Group, Presentation-Day-Ahead-Market-Enhancements-Configurable-Parameters-Implementation-Working-Group-Nov-20-2025 (4).pdf

[6] Pg. 9, Comment-Responses-Day-Ahead-Market-Enhancements-Configurable-Parameters-Working-Group-Jan-29-2026 (3).pdf

1. Please provide a summary of your organization's comments on the January 29, 2025 DAME Configurable parameters implementation working group discussion.

San Diego Gas and Electric (SDG&E) appreciates the opportunity to comment on the DAME configurable parameters working group presentation and discussion. SDG&E supports CAISO’s addition of an additional working group meeting in April and appreciates the inclusion of the flexible parameter matrix for the DAME parameters in the January 29 meeting materials. The matrix outlines, among other items, the pre- and post-launch evaluation process and decision criteria. SDG&E supports the decision criteria broadly, but notes that it lacks both quantifiable metrics for determining efficiency and consideration for the overall price and costs for imbalance reserves. The latter is critical to the efficiency of the market and must be included in the decision criteria for setting the parameter values. The impact of parameter values on imbalance reserve prices and costs was discussed at length during the February 6 Market Surveillance Committee (MSC) meeting, illustrating the importance of these factors to the overall assessment.

Should CAISO opt out of including consideration of the costs and prices for imbalance reserves in their decision-making criteria, stakeholder input in the parallel operations plan becomes that much more critical. CAISO’s proposed testing approach for the configurable parameters during parallel operations allows for limited iteration and evaluation, as to be expected considering the constrained timeline during which this tuning will take place. However, SDG&E is concerned that CAISO’s decision to adjust values may not align with the date of the working group sessions. We strongly urge CAISO to allow for market participant review in the tuning process during parallel operations, as stakeholder feedback should inform the decision-making process for changing the values during this critical period. The CAISO should commit to engaging with stakeholders in this process and informing them of the results of the assessments as they become available, rather than updating stakeholders after-the-fact when adjustments have already been made and there is no opportunity for stakeholders to weigh in on the modified test values.

Finally, SDG&E strongly agrees that ongoing monitoring and evaluation following go-live and after market participants gain operational experience is a critical aspect of the plan for the configurable parameters. Information on how the monitoring and evaluation would take place, what specific criteria would be used, and how that information would be communicated to market participants is requested.

We thank CAISO for their continued work on the configurable parameters, as collaboration and engagement on this topic will lead to a successful DAME and EDAM go-live. 

2. Please provide a summary of your organization's comments regarding the discussion on Sensitivity analysis #5 results – Default availability bids for IR and RC.

No comment.

3. Please provide a summary of your organization's comments regarding the Parallel Operations Plan discussion.

No comment.

4. Please provide any additional comments.

No comment.

1. Please provide a summary of your organization's comments on the January 29, 2025 DAME Configurable parameters implementation working group discussion.

Six Cities’ Summary:  Subject to ongoing review of Parallel Operations outcomes, the Six Cities generally support the planned approach to Parallel Operations summarized at Slide 68 of the presentation for the 1/29/26 working group meeting.  The Six Cities remain concerned with the continuing absence of data that would provide a basis for confidence that the parameter values to be used for procurement of Imbalance Reserves (“IR”) can reasonably be expected to result in an appropriate cost/benefit relationship for those products.  The Six Cities urge the CAISO to make prompt analysis of the cost effectiveness of the IR products a key priority.

2. Please provide a summary of your organization's comments regarding the discussion on Sensitivity analysis #5 results – Default availability bids for IR and RC.

Six Cities’ Response:  The Six Cities have no comments on this topic.

3. Please provide a summary of your organization's comments regarding the Parallel Operations Plan discussion.

Six Cities’ Comments:  At this time and subject to ongoing review of Parallel Operations outcomes, the Six Cities generally support the planned approach to Parallel Operations summarized at Slide 68 of the presentation for the 1/29/26 working group meeting.  While the Six Cities recognize that the CAISO does not believe the outcomes from Parallel Operations will provide sufficient data to support a comprehensive estimate of the costs of the IR products going forward, the analysis of Parallel Operations outcomes should include at least a preliminary review and assessment of information on potential cost impacts or trends reflected in the Parallel Operations data.  Where Parallel Operations data indicate potential for either high cost impacts or adverse operational impacts, the Six Cities support consideration of modifying the initial settings of one or more of the parameters not fixed in the tariff.

4. Please provide any additional comments.

Six Cities’ Comments:  The Six Cities remain concerned with the absence, thus far, of data that would provide a basis for confidence that the parameter values to be used for procurement of IR can reasonably be expected to result in an appropriate cost/benefit relationship for those products.  The CAISO’s most recent responses to prior stakeholder comments stated (in response to a comment by the CPUC Staff), “. . . the Parallel Operations effort unfortunately is not equipped nor designed to estimate projected costs.  The configurable parameters effort is focused on calibrating products for effective market operations.”  The implication of the language quoted that “effective market operations” excludes consideration of costs is invalid. 

In the February 6, 2026 Market Surveillance Committee web meeting on the configurable parameters, member Harvey observed that market simulation outcomes indicated higher costs for IR than an efficient market would produce and recommended analyses to try to identify the drivers for the high IR cost outcomes.  During that meeting, a stakeholder representative asked the MSC members how they would define success in analyzing the configurable parameters.  All three MSC members framed their responses in terms of reasonableness of market outputs, and members Harvey and Bushnell focused explicitly on reasonableness of costs.  Professor Bushnell identified as the key metric whether the cost of IR compares favorably with the costs resulting from out-of-market solutions previously relied upon for ensuring availability of necessary reserves.  Reasonableness of cost is a necessary and critical metric for assessing “effective market operations,” and performing a prompt analysis of the cost effectiveness of the IR products should be a key priority.

1. Please provide a summary of your organization's comments on the January 29, 2025 DAME Configurable parameters implementation working group discussion.

SCE requests that CAISO’s parallel operations plan explicitly include some form of stressed system testing. The version conducted during market simulation focused on increasing demand; however, given the potential impacts on congestion, these sensitivity cases should also include higher levels of generation bidding than would typically be expected on an early spring day, which is the period proposed for parallel operations. In addition to potential congestion issues under stressed conditions, the impacts of the storage envelope constraint multipliers are likely to be more pronounced. Specifically, there may be an increased risk of shortages in energy, imbalance reserves, reliability capacity, and ancillary services, resulting from faster depletion of the state of charge of storage resources due to higher envelope constraint multipliers.

2. Please provide a summary of your organization's comments regarding the discussion on Sensitivity analysis #5 results – Default availability bids for IR and RC.

The sensitivity results demonstrate that CAISO’s current methodology can result in very large imbalance reserve procurement quantities during certain hours, especially during ramping periods. When these quantities are combined with default bid assumptions and full deployment modeling, the resulting price and congestion impacts may be driven more by modeled congestion relief in hypothetical deployment scenarios than by expected operational use. SCE is concerned that this interaction could distort market signals and resource selection in ways that are not aligned with reliability objectives. 

A central concern for SCE is that the imbalance reserve design relies on assumed deployment scenarios that are not forecasts of actual dispatch, but rather a method used to test feasibility and pricing. As a result, parameter settings that assume full or near-full deployment risk overstating the operational role of imbalance reserves and may skew optimization outcomes. SCE emphasizes that configurable parameters should be evaluated not only for feasibility, but also for whether they align optimization incentives with how imbalance reserves are expected to be used in practice. SCE is concerned that assuming 100 percent deployment of imbalance reserves in optimization and pricing is inconsistent with expected operational use outside of limited ramping or emergency conditions. Such assumptions risk biasing the optimization toward resources that appear to relieve congestion in hypothetical deployment scenarios, even when those reserves are unlikely to be deployed. SCE recommends that CAISO perform additional testing with a lower deployed reserve percentage, and consider using a value significantly lower than 100% at go-live, and adjust this parameter incrementally as operational experience is gained.  

Finally, SCE notes that imbalance reserve deployment scenarios should be simplified and should initially not include all sets of enforced constraints. Applying full constraint enforcement and full deployment assumptions to these scenarios risks producing misleading results. SCE encourages CAISO to maintain flexibility in initial parameter settings and to provide analysis based on information derived from parallel operations, along with opportunities for stakeholders to voice their opinions on what the initial parameter settings should be for production. CAISO should clearly document both its proposed initial settings and the rationale for those settings and commit to continued stakeholder engagement. Analysis of market results should continue into production with opportunities for stakeholders or the CAISO to suggest potential changes to parameter settings based on the initial production results. 

SCE therefore recommends deployment-related parameters should be set conservatively and revisited based on observed outcomes during Parallel Operations, rather than relying on aggressive initial assumptions that may be difficult to unwind once the market is operational.  This is especially true if CAISO is unable to simulate production-like data due to limited participation in parallel operations testing. 

3. Please provide a summary of your organization's comments regarding the Parallel Operations Plan discussion.

An additional layer of configurable parameters that need further discussions during Parallel Operations is the quantity of imbalance reserve requirements, including the percentile used in the procurement methodology. Although it is currently not framed as a configurable parameter, during the recent MSC meeting on configurable parameters CAISO indicated that they were considering reducing the quantity of imbalance reserve required for the start of go-live. SCE encourages continued discussion of this possibility, as this is one of the most prominent aspects of the design and should be explicitly recognized as a key policy lever and a configurable parameter.  The imbalance reserves procurement quantity materially affects prices, congestion outcomes, and resource selection. SCE strongly recommends that CAISO include procurement quantity as part of ongoing stakeholder discussions, particularly during early market operations. 

SCE requests that CAISO’s parallel operations plan explicitly include some form of stressed system testing. The version conducted during market simulation focused on increasing demand; however, given the potential impacts on congestion, these sensitivity cases should also include higher levels of generation bidding than would typically be expected on an early spring day, which is the period proposed for parallel operations. In addition to potential congestion issues under stressed conditions, the impacts of the storage envelope constraint multipliers are likely to be more pronounced. Specifically, there may be an increased risk of shortages in energy, imbalance reserves, reliability capacity, and ancillary services, resulting from faster depletion of the state of charge of storage resources due to higher envelope constraint multipliers. 

4. Please provide any additional comments.

SCE does not have any further comments.