Comments on straw proposal

1. Please provide a summary of your organization’s comments on the Capacity Procurement Mechanism (CPM) Enhancements Track 2 stakeholder meeting.

The California Community Choice Association (CalCCA) appreciates the opportunity to comment on the California Independent System Operator’s (ISO) CPM Enhancements Track 2 Straw Proposal. CalCCA supports the ISO’s proposal to increase the CPM soft offer cap from $6.31 per kilowatt (kW) -month to $7.34 per kW-month. The ISO’s proposal to use updated California Energy Commission-provided combined cycle going-forward fixed costs is consistent with the existing ISO tariff and reflects the fact that most of the recent CPM capacity comes from gas resources.

The ISO’s presentation notes that it will consider additional CPM enhancements in a future initiative following a Resource Adequacy (RA) working group that will begin in late 2023. Within this initiative, the ISO should develop how it will perform backstop in the event ISO load-serving entities, collectively or individually, do not procure sufficient capacity to satisfy RA needs in all hours of the day once the California Public Utilities Commission RA program transitions to its slice-of-day framework.[1]

[1]             CalCCA made the same recommendation in its June 20, 2023 Comments on the June 6, 2023 CAISO RA Workshop: Current Processes and Interoperability with the CPUC’s Slice of Day Reform: http://www.caiso.com/Documents/CalCCA-Comments-Resource-Adequacy-Enhancements-Slice-of-Day-Workshop-Jun062023.pdf.  

2. Please provide your organization’s comments on the CPM Enhancements Track 2 straw proposal.

See response to (1) above.  

3. Please provide your organization’s comments on the proposed alternate schedule for the CPM Enhancements Track 2 initiative.The alternate schedule would accelerate the timeline by moving directly to a final proposal following the straw proposal. The alternate schedule would accelerate the timeline by moving directly to a final proposal following the straw proposal.

Because the ISO should adopt the CPM Enhancements Track 2 straw proposal as is, CalCCA supports the proposed alternate schedule, which would move the straw proposal straight to a final proposal rather than draft final proposal.

1. Please provide a summary of your organization’s comments on the Capacity Procurement Mechanism (CPM) Enhancements Track 2 stakeholder meeting.

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 this question #1, but there may be some formatting errors.

Capacity Procurement Mechanism Enhancements Track 2 – Straw Proposal

Comments by Department of Market Monitoring

July 24, 2023

Summary

DMM appreciates this opportunity to comment on the ISO’s Capacity Procurement Mechanism (CPM) Enhancements Track 2 Straw Proposal and meeting.[1] Since establishing the CPM soft offer cap in 2014, the ISO’s policy has been to set the CPM soft offer cap equal to the going forward fixed costs of a typical new gas-fired unit plus 20%.[2] The ISO set the current soft offer cap using estimates of going forward fixed costs derived from reports by the California Energy Commission (CEC). Units receiving these CPM payments also keep all net revenues earned from operating in the market. 

In the previous soft offer cap initiative, DMM requested that the ISO review the accuracy of the cost estimates derived from CEC reports and provided extensive analysis showing that the current soft offer cap may be based on cost estimates that are significantly greater than the actual going forward fixed costs of most gas-fired resources.[3] Additionally, DMM suggests the ISO reconsider the appropriateness of including the 20% cost adder given a recent United States Court of Appeals case.[4]

The current straw proposal and workshop presentation details a more recent CEC estimate, but does not include any new analysis beyond updates to labor cost inputs and inflation. Based on analysis previously submitted by DMM, the current workshop material will set the soft offer cap substantially above the going forward fixed costs of gas-fired resources, and will therefore allow resources with market power in local areas to exercise that market power in capacity contract negotiations. Furthermore, as DMM has noted in prior comments, the proposal to offer soft offer cap compensation to resources under CPM, and to offer cost-of-service compensation to resources under RMR, will allow resources with market power to self-select between the two forms of compensation: the CPM soft offer cap or full cost-of-service compensation under Reliability Must Run (RMR) contracts.  

To be consistent with the ISO’s long-standing policy for determining the soft offer cap, DMM continues to recommend that the ISO reassess the accuracy of cost estimates based on CEC reports and set the soft offer cap based on a more reliable and accurate estimate of going-forward fixed costs. DMM continues to recommend that in the next track of this initiative, the ISO give further consideration to the framework described in the ISO’s prior CPM stakeholder initiative to test for and mitigate market power in CPM solicitations.[5] 

Additional changes to the soft offer cap to include the cost of newly built resources have been suggested in previous initiatives, as well as by stakeholders. DMM supports the ISO not considering such a policy change in this track of the initiative.  This would be a substantial change to the theory used to determine the soft offer cap and would warrant substantial stakeholder and Market Surveillance Committee discussion. 

The rest of these comments provide additional details or explanation.

The CPM soft offer cap is substantially higher than the value prescribed by ISO’s established soft offer cap policy.

Since establishing the CPM soft offer cap in 2014, the ISO’s policy has been to set the CPM soft offer cap equal to the going forward fixed costs of a typical new gas-fired unit plus 20%. Units receiving CPM payments also keep all net revenues earned from operating in the market. 

The ISO set the current soft offer cap using “the CEC’s updated estimate for the levelized going-forward fixed costs of a mid-cost 550 MW combined cycle.”[6] The CAISO’s estimate of going forward fixed costs include three components from the CEC report: (1) fixed annual O&M, (2) insurance and (3) ad valorum (taxes). 

In previous stakeholder processes, DMM has repeatedly expressed concerns that fixed O&M estimates based on the CEC report, which the ISO uses for setting the soft offer cap, significantly overstate the going forward costs of a typical combined cycle resource. DMM’s August 2019 comments on the ISO’s straw proposal explained why DMM believed a closer review of the cost estimates used in the CEC reports was needed, and recommended that the ISO perform additional review of the cost estimates developed from the CEC reports.[7] As explained in DMM’s August 2019 comments:

DMM has numerous concerns about the cost data in the CEC reports, and recommends that the CAISO perform additional verification and/or an independent assessment of GFFC. The CEC report was not designed to provide an estimate of GFFC and was not intended to be used for the kind of rate-making that occurs when these data are being used for setting the soft cap. DMM understands that the data on costs of generation in the CEC report were initially developed prior to 2014 based on self-reported data collected through a survey. No details of this survey or the components/assumptions underlying the data used to estimate GFFC are provided in the report.

In addition, based on the limited information provided in the CEC report, the report appears to categorize almost all maintenance as being a fixed annual cost, rather than maintenance costs that actually depend on the usage of the unit (e.g. start-ups, run hours, and MWh produced). In the ISO market, a significant portion of these maintenance costs are incorporated in maintenance adders applied to startup, minimum load, and energy bids used to dispatch units and provide revenue recovery.[8]

DMM’s analysis provided further evidence that the CEC report data used by the ISO significantly overestimates the actual going forward costs of gas-fired generating units. As shown in Attachment A of DMM’s 2020 comments on the CPM Soft Offer Cap Draft Final Proposal,[9] the CEC’s recent fixed O&M estimates are about three times higher than the higher end of the various estimates found by DMM. In the ISO’s current straw proposal materials, the ISO does not address this concern, and simply seeks to continue to use the CEC’s cost estimates updated for 2023 with increased labor input costs and inflation. DMM recommends that the ISO evaluate the appropriateness of using the CEC’s O&M cost estimates, and set the soft offer cap based on a levelized going-forward fixed cost estimate that is more accurate and appropriate for the ISO’s purposes.

Moreover, the continued use of the 20% adder used by the ISO does not reflect a case brought before the United States Court of Appeals (hereafter the Court) on the justification of the 20% adder.[10] The Court found a lack of substantial evidence for the 20% adder as a means of cost justification. The Federal Energy Regulatory Commission’s approval of the 2020 tariff for the CPM relied on the 2015 CPM Order, and as the Court stated, “[s]tripped of its citation to the 2015 CPM Order, the Commission’s order has little else, if anything, to support it [the cost adder].” DMM recommends the ISO reconsider the appropriateness of the 20% adder in light of the Court’s recent ruling.

DMM supports the ISO proposal to not consider incorporating the cost of new builds into the CPM soft offer cap during this track of the initiative.

In its prior CPM initiative, the ISO cites “significant changes to the grid’s resource fleet to meet state goals… [and] as early as 2022 the numbers begin to reflect the cost of building solar and storage as the marginal capacity resources on the system” [emphasis added].[11] Similarly, stakeholders in the 2023 CPM Enhancements Track 2 workshop requested the ISO consider such changes to reflect the cost of building new resources.

Such changes suggests the ISO would be significantly deviating from its established policy for determining the value of the soft offer cap. If the ISO believes the soft offer cap should be based on the cost of building new clean resources that are required “to meet state goals to significantly reduce greenhouse gas emissions,”[12] the logic behind this major policy change should be vetted with stakeholders, the Market Surveillance Committee, and the Board in a lengthier and more appropriate stakeholder process than the current CPM Enhancements Track 2.

When the ISO developed the Capacity Procurement Mechanism in 2010, the ISO ran a lengthy stakeholder process in which it carefully vetted with stakeholders over numerous straw proposals whether to base the CPM compensation on (1) going forward fixed costs or (2) the cost of building new resources. In its 2010 CPM draft final proposal, the ISO concluded:

The ISO’s proposal to compensate suppliers for CPM designations on the basis of going-forward fixed costs is essentially the same rule that was adopted for the ICPM and approved by FERC… Going forward costs are generally understood as the minimum fixed costs needed to keep a generator available for operation.[13]

Furthermore, the ISO argued “that maintaining the going forward fixed cost pricing approach is also consistent with the criteria to minimize procurement through the backstop mechanism.”[14]  In other words, “to provide sufficient cost recovery under the voluntary CPM paradigm and not create incentives for load serving entities to forego bilateral RA contracts and instead rely on CPM backstop procurement,” CPM compensation based on going forward fixed costs is sufficient.[15]

At the end of its extensive 2010 stakeholder process on this issue, the ISO also explained clearly why it had concluded to not base CPM compensation on the cost of building new capacity:

In the absence of a well-designed investment mechanism, a CPM based on cost of new entry could in some locations simply raise capacity prices to buyers without encouraging new entry, and be judged not just and reasonable unless other protective mechanisms were established in the presence of barriers to investment.[16]

Other than the CPM soft offer cap, measures to protect against the exercise of market power in the bilateral capacity markets that support CAISO’s spot markets have not been established. A proposal to set the soft offer cap substantially above the going forward fixed costs of resources no longer under contract would allow resources with market power in local areas to exercise that market power and “simply raise capacity prices to buyers without encouraging new entry.”   

Given the short timeline of the CPM Enhancements Track 2, DMM recommends that the ISO only potentially consider these substantial changes to the CPM in a future stakeholder process in which the ISO and stakeholders can more thoroughly vet any purported justification.

[1] Capacity Procurement Mechanism Enhancements – Track 2 Straw Proposal, CAISO, June 30, 2023: http://www.caiso.com/InitiativeDocuments/StrawProposal-CapacityProcurementMechanismEnhancements-Track2.pdf

[2] Capacity Procurement Mechanism Replacement Draft Final Settlement Document for ISO Board of Governors, CAISO, December 15, 2014, p. 15: http://www.caiso.com/Documents/DraftFinalSettlementProposal-CapacityProcurementMechanismReplacement.pdf

[3] Supplemental Comments on Capacity Procurement Mechanism Soft Offer Cap Straw Proposal, Department of Market Monitoring, September 10, 2019: http://www.caiso.com/InitiativeDocuments/DMMSupplementalComments-CapacityProcurementMechanismSoftOfferCap-StrawProposal.pdf

[4] California Public Utilities Commission v. Federal Energy Regulatory Commission and California Independent System Operator. United States Court of Appeals for the District of Columbia Circuit. No. 20-1388: https://www.cadc.uscourts.gov/internet/opinions.nsf/A7E4F1659200B2B4852587AE0054513A/$file/20-1388-1927124.pdf

[5] Capacity Procurement Mechanism Soft Offer Cap Straw Proposal, CAISO, July 24, 2019, pp. 11-12: http://www.caiso.com/InitiativeDocuments/StrawProposal-CapacityProcurementMechanismSoftOfferCap.pdf

[6] 2014 CPM Draft Final Settlement Document, p. 15. 

[7] Comments on Capacity Procurement Mechanism Soft Offer Cap Straw Proposal, Department of Market Monitoring, August 20, 2019, pp. 3-5: http://www.caiso.com/Documents/DMMComments-CapacityProcurementMechanismSoftOfferCap-StrawProposal.pdf

[8] Ibid, p. 4.

[9] Comments on Capacity Procurement Mechanism Soft Offer Cap Draft Final Proposal, Department of Market Monitoring, January 24, 2020: DMMComments-CapacityProcurementMechanismSoftOfferCap-DraftFinalProposal.pdf (caiso.com)

[10] California Public Utilities Commission v. Federal Energy Regulatory Commission and California Independent System Operator. United States Court of Appeals for the District of Columbia Circuit. No. 20-1388: https://www.cadc.uscourts.gov/internet/opinions.nsf/A7E4F1659200B2B4852587AE0054513A/$file/20-1388-1927124.pdf

[11] 2020 Draft Final Proposal, p. 7.

[12] 2020 Draft Final Proposal, p. 7.

[13] Capacity Procurement Mechanism, and Compensation and Bid Mitigation for Exceptional Dispatch Revised Draft Final Proposal, CAISO, September 15, 2010, p. 35: http://www.caiso.com/Documents/RevisedDraftFinalProposal15-Sep-2010.pdf

[14] 2010 Draft Final Proposal, p. 34.

[15] 2020 Draft Final Proposal, p. 7.

[16] 2010 Draft Final Proposal, p. 34.

2. Please provide your organization’s comments on the CPM Enhancements Track 2 straw proposal.

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 this question #1, but there may be some formatting errors.

3. Please provide your organization’s comments on the proposed alternate schedule for the CPM Enhancements Track 2 initiative.The alternate schedule would accelerate the timeline by moving directly to a final proposal following the straw proposal. The alternate schedule would accelerate the timeline by moving directly to a final proposal following the straw proposal.

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 this question #1, but there may be some formatting errors.

1. Please provide a summary of your organization’s comments on the Capacity Procurement Mechanism (CPM) Enhancements Track 2 stakeholder meeting.

MRP supports the CAISO’s proposal to update the Soft Offer Cap (SOC), but notes the level of the proposed SOC price is inconsistent with cost of other resources California has secured to maintain reliability.   

MRP also offers two topics for the CAISO’s successor initiative to consider CPM topics: making CPM designation to cure deficiencies mandatory and shaping the CPM SOC price on  monthly basis.  

Finally, MRP supports the alternate proposed schedule in this initiative, especially if that schedule would facilitate an earlier engagement on the issues in the successor initiative. 

2. Please provide your organization’s comments on the CPM Enhancements Track 2 straw proposal.

With regards to the CPM SOC, MRP understands the basis for the CAISO’s proposal to update the CPM SOC price to $88.09/kW-year by retaining a Combined Cycle Gas Turbine (CCGT) unit as the reference resource and using the updated CCGT going forward cost estimates provided by the California Energy Commission (CEC) in May 2023.  In MRP’s view, this proposed SOC fits with the current Tariff requirement that the CPM SOC should reflect the going forward costs of an existing unit, not a new unit, given that the CPM’s purpose is to secure existing capacity needed to meet Resource Adequacy (RA) requirements that LSEs did not secure. 

That said, MRP notes that the $/kw-year cost associated with California’s Strategic Reliability Reserve units is (1) well above $88.09/kW-year value and (2) shaped to provide a higher price across the peak summer months:[1]

MRP understands that the California Strategic Reliability Reserve prices are payments not only for capacity but also energy as well.  These resources, however, are to be used only “as necessary to respond to extreme events”[2] and therefore the energy value is likely to be relatively low, given that, while prices may be higher during extreme events, the duration of such events is likely to be very limited.  Given that expectation, these contract prices likely provide a relevant benchmark for the capacity prices of large CCGT resources that have been deemed needed to maintain reliability.

In addition, MRP respectfully urges the CAISO to take up the following CPM topics in a successor initiative:[3]

• Making CPM designating mandatory instead of discretionary.   Various parts of Tariff Section 43A provide that the CAISO “shall have the authority’ to designate or “may designate” CPM capacity under various conditions.[4]   MRP submits that the CAISO should have the obligation to provide a CPM designation to capacity to meet reliability requirements, including RA requirements, when sufficient RA capacity has not been secured, regardless of the month of the shortfall.  If Load Serving Entities (LSEs) do not have sufficient RA capacity in place in each month, then the RA portfolio cannot meet the annual 0.1 Loss of Load Expectation target established for the RA program.  Further, it makes little sense to require LSEs to secure a certain amount of capacity to maintain reliability but then excuse the entity ultimately charged with maintaining reliability – the CAISO - from securing capacity that is required to maintain reliability when the LSEs have not secured that capacity.  To be sure, the CAISO should not be required to secure capacity that does not exist, but if the capacity needed to address the reliability need does exist, and is not under RA contract, the CAISO should be required to secure that capacity through the CPM.

• Shaping the monthly CPM price.  As the Reliability Reserve Fund Plan pricing indicates, capacity is scarcer during peak demand periods, and, therefore, more valuable during those periods.  In contrast, the CPM SOC price is the same across all months.  Given the summer-weighted shape of RA prices, if a non-RA resource receives a CPM designation in a summer month, that resource – which, depending on the conditions giving rise to its designation, should have already been under an RA contract – incurs a greater opportunity cost, and therefore should be entitled to a higher CPM price.   This is especially true because of the very limited duration of CPM designations and the need to recover a significant portion of the resource’s fixed cost across the designation period.  

[1] See June 2023 California Department of Water Resources Investment Plan [for the] Electric Supply Reliability Reserve Fund, California Energy Commission TN 250477 (“Reliability Reserve Fund Plan”), at pages 5-7.  This document is available at https://efiling.energy.ca.gov/GetDocument.aspx?tn=250477&DocumentContentId=85254. 

[2] Reliability Reserve Fund Plan at page 5.

[3] The Gantt Chart on slide 13 of the presentation for the CAISO’s July 10, 2023 CPM Enhancements Phase 2 Straw Proposal meeting indicates the CAISO intends to launch a “Resource Adequacy/CPM Enhancements” initiative in Q4 2023. 

[4] For example, section 43A.2 provides that the CAISO shall have the authority to designate CPM capacity to address a number of circumstances, including Insufficient Local Capacity Area or RA Resources shown in an annual or monthly RA plan; a Cumulative Deficiency or Collective Deficiency; a Significant Event; or via Exceptional Dispatch.  However, the only conditions that require the CAISO to issue a CPM designation is if the CAISO Exceptionally Dispatched non-RA capacity pursuant to Tariff Section 34.11.1, subsections (6), (9) and (10) of Tariff Section 34.11.2, or Section 34.11.3, unless the Exceptional Dispatch directs the curtailment or decommitment of the resource. 

3. Please provide your organization’s comments on the proposed alternate schedule for the CPM Enhancements Track 2 initiative.The alternate schedule would accelerate the timeline by moving directly to a final proposal following the straw proposal. The alternate schedule would accelerate the timeline by moving directly to a final proposal following the straw proposal.

MRP believes the alterative schedule, which would present the proposed new SOC to the Board for its approval in September 2023, is feasible, if the scope of this initiative remains at only updating the costs associated with the current reference resource.   MRP encourages the CAISO to take up other CPM issues – including the two listed above – as soon as possible in the successor initiative. 

1. Please provide a summary of your organization’s comments on the Capacity Procurement Mechanism (CPM) Enhancements Track 2 stakeholder meeting.

Please see NCPA’s response to question 2.

2. Please provide your organization’s comments on the CPM Enhancements Track 2 straw proposal.

The Northern California Power Agency (NCPA) supports CAISO’s Capacity Procurement Mechanism (CPM) Enhancements Track 2 Straw Proposal to update the CPM soft offer cap using the CEC’s 2023 calculation of the levelized going-forward fixed costs of a 550 MW combined cycle with duct firing.  More specifically, NCPA supports CAISO’s proposal to increase the CPM soft offer cap to $7.34/kW-month.

At this time NCPA does not support use of other technologies (e.g., energy storage resources, geothermal resources, gas peakers or imports) to derive the soft offer cap.  Based on historical procurement, a majority of the resources procured using the CPM mechanism have been natural gas resources, and natural gas resources continue to represent a majority of the generation capacity that supports grid reliability during strained system conditions.

3. Please provide your organization’s comments on the proposed alternate schedule for the CPM Enhancements Track 2 initiative.The alternate schedule would accelerate the timeline by moving directly to a final proposal following the straw proposal. The alternate schedule would accelerate the timeline by moving directly to a final proposal following the straw proposal.

No comment at this time.

1. Please provide a summary of your organization’s comments on the Capacity Procurement Mechanism (CPM) Enhancements Track 2 stakeholder meeting.

PG&E appreciates the CAISO’s stakeholder meeting and the presentation explaining the additional information from the California Energy Commission (CEC) and, at this time, PG&E considers the proposed changes to be reasonable and consistent with the tariff.

PG&E agrees with the CAISO’s statement during the call that the ongoing and upcoming resource adequacy (RA) changes will impact the capacity procurement mechanism (CPM), competitive solicitation process (CSP), and the soft offer cap (SOC). In that sense, PG&E requests that the CAISO open an initiative to provide a wholistic review of these processes.

2. Please provide your organization’s comments on the CPM Enhancements Track 2 straw proposal.

PG&E appreciates the CAISO’s updated Straw Proposal incorporating additional information from the CEC on the combined cycles gas turbines (CCGT) going-forward fixed costs. PG&E considers the changes proposed by the CEC to be reasonable and consistent with the tariff. PG&E supports this update. Currently, PG&E supports the soft offer cap’s adherence to the tariff and its methods.

PG&E agrees that there have been many changes to the landscape surrounding the CPM and CSP, e.g., the creation of the central procurement entities, Western Energy Imbalance Market (WEIM) energy assistance program, and California strategic reserves. These changes along with the expected change of the Extended Day-Ahead Market merit re-evaluating the effectiveness and potential improvements to the CSP, CPM, and soft offer cap within this new environment.

3. Please provide your organization’s comments on the proposed alternate schedule for the CPM Enhancements Track 2 initiative.The alternate schedule would accelerate the timeline by moving directly to a final proposal following the straw proposal. The alternate schedule would accelerate the timeline by moving directly to a final proposal following the straw proposal.

PG&E supports this track 2 scope and the alternative proposed accelerated schedule. PG&E understands that to implement the proposed soft offer cap by the end of this year 2023, the Decision by the CAISO’s Board of Governors needs to be expedited.

1. Please provide a summary of your organization’s comments on the Capacity Procurement Mechanism (CPM) Enhancements Track 2 stakeholder meeting.

SDG&E appreciates the opportunity to comment on the Capacity Procurement Mechanism (CPM) Enhancements Track 2 initiative. Please see our comments below.

2. Please provide your organization’s comments on the CPM Enhancements Track 2 straw proposal.

SDG&E finds that the proposed increase to the soft offer cap as part of the Capacity Procurement Mechanism (CPM) enhancement initiative track 2 to be reasonable. The proposed increase to the CPM soft offer cap from $6.31/kw-month to $7.34/kw-month represents approximately a 16% increase. This increase is justified given that the price of Resource Adequacy (RA) resources continues to rise. The boost also aligns with the recent rise in inflation. For these reasons SDG&E finds the increase to the Soft Offer Cap be appropriate.

3. Please provide your organization’s comments on the proposed alternate schedule for the CPM Enhancements Track 2 initiative.The alternate schedule would accelerate the timeline by moving directly to a final proposal following the straw proposal. The alternate schedule would accelerate the timeline by moving directly to a final proposal following the straw proposal.

Moving directly to a final proposal directly following the straw proposal is suitable if all appropriate comments are considered.

1. Please provide a summary of your organization’s comments on the Capacity Procurement Mechanism (CPM) Enhancements Track 2 stakeholder meeting.

Shell Energy North America (US), L.P. ("Shell Energy") appreciates the opportunity to comment on the CPM enhancements Track Two straw proposal.  Shell Energy has two observations:

1. The CAISO staff made a compelling case as to why gas-fired resources are applicable for CPM base costs; however, there are varying cost profiles of gas-fired resources.  Shell Energy requests the CAISO clarify why a hypothetical 550MW combined cycle combustion turbine generator is selected as the resource type from which to derive the CPM soft offer cap ("SOC") over another gas-fired configuration such as a combined-heat and power project, or simple-cycle gas generator.  Are most of the recent CPM designations supplied from comparable combined-cycle resources?  This clarification would be appreciated.  
2. As it relates to future CPM Enhancements, such as a dynamic SOC or monthly/seasonal SOC, Shell Energy respectfully requests the CAISO dedicate time and resources for this topic in the RA Enhancements stakeholder process. 

2. Please provide your organization’s comments on the CPM Enhancements Track 2 straw proposal.

3. Please provide your organization’s comments on the proposed alternate schedule for the CPM Enhancements Track 2 initiative.The alternate schedule would accelerate the timeline by moving directly to a final proposal following the straw proposal. The alternate schedule would accelerate the timeline by moving directly to a final proposal following the straw proposal.

Shell Energy is amenable to the timetable presented in option 2 with the understanding and expectation that the RA Enhancements stakeholder process will examine possible future enhancements to CPM.  

1. Please provide a summary of your organization’s comments on the Capacity Procurement Mechanism (CPM) Enhancements Track 2 stakeholder meeting.

As discussed below, the Six Cities generally do not oppose the proposal discussed in the Track 2 Straw Proposal and stakeholder meeting. 

2. Please provide your organization’s comments on the CPM Enhancements Track 2 straw proposal.

The Six Cities do not oppose the CAISO’s proposal to adjust the soft-offer cap based on the data provided by the CEC and discussed during the stakeholder meetings in this initiative. 

3. Please provide your organization’s comments on the proposed alternate schedule for the CPM Enhancements Track 2 initiative.The alternate schedule would accelerate the timeline by moving directly to a final proposal following the straw proposal. The alternate schedule would accelerate the timeline by moving directly to a final proposal following the straw proposal.

The Six Cities do not oppose this proposed process. 

1. Please provide a summary of your organization’s comments on the Capacity Procurement Mechanism (CPM) Enhancements Track 2 stakeholder meeting.

Southern California Edison (SCE) appreciates the opportunity to comment on the CAISO’s CPM Enhancements Track 2 stakeholder meeting. SCE appreciates that the CAISO has established a narrow scope for this track. SCE supports the CAISO’s proposed change to the CPM soft offer cap, and believes it moves the soft offer cap in the right direction. SCE also supports the alternative schedule discussed in the workshop. 

2. Please provide your organization’s comments on the CPM Enhancements Track 2 straw proposal.

Experience in the RA markets has shown that the costs of RA have increased in recent years. The CAISO’s proposed revision of the CPM soft offer cap from $6.31 to $7.34 kW-month is consistent with that. While SCE notes that the CEC cost study could have been more thorough, the direction of the changes does seem to correlate with changes in the RA market and SCE supports the proposed changes.

3. Please provide your organization’s comments on the proposed alternate schedule for the CPM Enhancements Track 2 initiative.The alternate schedule would accelerate the timeline by moving directly to a final proposal following the straw proposal. The alternate schedule would accelerate the timeline by moving directly to a final proposal following the straw proposal.

SCE supports the alternative schedule described in the workshop presentation. The lack of comments during the workshop indicates that another round of comments is not necessary and there is no need to delay this needed change. SCE notes that the alternate schedule will result in the update being presented to the Board of Governors before the annual RA filings for 2024 are due, which ensures that the information is known to the market in advance of those filings.  

1. Please provide a summary of your organization’s comments on the Capacity Procurement Mechanism (CPM) Enhancements Track 2 stakeholder meeting.

Vistra appreciates the CAISO acknowledging several stakeholders raising the need for CAISO to explore changes to the derivation and/or structure of the soft offer cap. Vistra is one of those stakeholders. We appreciate your commitment to working with stakeholders on broader reforms to the CAISO's CPM, including potential changes to the soft offer cap. We request the CAISO clarify in the next iteration that its commitment extends to exploring broader reforms that also include changes to the FERC formula rate for a cost recovery filing above the soft offer cap. Vistra's requested changes in prior comments include both exploring improvements to the soft offer cap as well as the FERC filing rights. We are committed to working with CAISO as it explores these broader reforms at the earliest opportunity.

We would like to clarify our previous comments as we noted two areas of potential confusion in CAISO's summary.

• Our request is for CAISO to explore changes to the derivation and/or structure of the soft offer cap and the filing right of a FERC formula rate for cost recovery above the soft offer cap. In your summary of stakeholder comments you state, "stakeholders asked the ISO to consider incorporating opportunity costs into the soft offer cap, which would likely result in a dynamic soft offer cap." Vistra wants to clarify that we understand the challenges with incorporating an opportunity cost into the soft offer cap, but that the ability to submit a FERC formula rate filing that can include opportunity cost would be appropriate and feasible. We would like to request the CAISO refine its summary of stakeholder comments in the next iteration to include our request to explore resource-specific FERC filing rules.
• Vistra generally agrees with the CAISO's characterization of our other scope requests to consider a new reference unit other than combined cycle and to have different annual and monthly CSP offer caps. However, CAISO summarized comments including ours as "stakeholders request it consider using going-forward fixed costs from resources other than combined cycles". Vistra requested considering moving to a net cost of new entry based on the marginal new resource as the needed change, rather than the CAISO description of using going forward fixed costs from another reference unit as stated. We would like to request the CAISO refine its summary of stakeholder comments in the next iteration to include that stakeholders requested the CAISO explore whether the reference resource should be a marginal new resource or marginal existing resource.

2. Please provide your organization’s comments on the CPM Enhancements Track 2 straw proposal.

3. Please provide your organization’s comments on the proposed alternate schedule for the CPM Enhancements Track 2 initiative.The alternate schedule would accelerate the timeline by moving directly to a final proposal following the straw proposal. The alternate schedule would accelerate the timeline by moving directly to a final proposal following the straw proposal.