Please provide your organization’s comments on the EDAM Transitional Ramp-In Model Proposal
The Six Cities do not oppose the EDAM Transitional Ramp-In Model, but do have concerns about whether it provides just and reasonable rates and reflects an appropriate rate design for CAISO entities. Under the proposed approach, the CAISO will limit the application of increased costs associated with its Grid Management Charges to new EDAM participants during an initial, four-year transition period ending in 2028. Under the Transitional Ramp-In, EDAM administrative fees (including the Market Services Charges and the new System Operations Real Time Dispatch Charges) applicable to load volumes are limited to increases over currently-applicable EIM administrative charges of 5% in 2025, 25% in 2026, 50% in 2027, and 75% in 2028, with fully-applicable charges applying in 2029 and no discounting of supply volumes during the transition period. Underpinning this proposal is a desire by the CAISO to remove a perceived disincentive to membership in the EDAM resulting from exposure to increased administrative charges; the CAISO explains that increases in administrative fees may materially impact the costs/benefits of EDAM for particular entities and serve as a barrier to participation. (See generally 2023 Cost of Service Study and 2024 GMC Update Draft at 73.) To make early participation commitments in EDAM more attractive, the CAISO states that it does not currently intend to extend this transition period beyond the end of 2028. (Id. at 73-74.)
While the Six Cities understand and support the CAISO’s objective of encouraging early EDAM participation commitments, the Six Cities have reservations about whether it is reasonable for the CAISO footprint to effectively subsidize a transition period for EDAM participants by agreeing to relinquish a share of the reduction in Grid Management Charges that CAISO entities would otherwise have received if EDAM participants pay their full share of administrative charges. Presumably a rational cost/benefit analysis of EDAM membership would consider the potential for increased Grid Management Charges resulting from broader market participation. If the calculation of such costs/benefits is indeed sensitive to what are relatively modest impacts in administrative charges, then that would seem to reveal potentially significant issues with the costs and benefits of the overall market design, rather than a need for a temporary defrayal in these administrative costs. Moreover, with respect to PacifiCorp specifically, the Six Cities note that PacifiCorp has already recouped significant benefits from its participation in the EIM, with the CAISO reporting a cumulative total of more than $620 million in benefits to PacifiCorp since 2014. On a load-weighted basis, EIM benefits to PacifiCorp have substantially exceeded load-weighted benefits to the CAISO BAA, which has a much greater load and experienced $758 million in benefits over the same period. (See Western EIM Benefits, available at Benefits - Western Energy Imbalance Market (westerneim.com).) There is little reason to think that PacifiCorp’s relatively high benefits from regional market participation would diminish in a material way if it joined EDAM and did not receive a CAISO-funded Grid Management Charge subsidy for its participation. Given this, the EDAM Transitional Ramp-In Model strikes the Cities as a somewhat gratuitous benefit for potential EDAM participants that is unlikely to (and really should not) drive participation decisions or materially reduce the benefits of market participation.
While the Cities question the justifications for the policy choice being proposed, the Six Cities reluctantly do not oppose the proposed Transitional Ramp-In Model. However, their lack of opposition is contingent on the CAISO’s commitment not to later extend this discounting to other entities for future years, and, at this time, the Six Cities do not anticipate supporting any future extensions of the transition period. Given the CAISO’s explanation that this Ramp-In is necessary to attract early EDAM participation commitments, it would not be reasonable or appropriate to later extend or revise this treatment to attract new participants in future years.