Comments on Track A1 draft final proposal

1. Please provide a summary of your organization’s comments on the Extended Day-Ahead Market (EDAM) ISO Balancing Authority Area (BAA) Participation Rules track A1 draft final proposal, and Aug 2, 2023 stakeholder call discussion:

The California Community Choice Association (CalCCA) appreciates the opportunity to comment on the EDAM ISO BAA Participation Rules Track A1 Draft Final Proposal (Draft Final Proposal) and August 2, 2023 stakeholder call.  In summary, CalCCA recommends:

• The ISO should adopt its proposals to always keep the net export transfer constraint on, distinguish between stressed and non-stressed hours for the confidence factor and reliability margin, and memorialize other details in the Business Practice Manual (BPM);
• Adopt the ISO’s proposal to initially use a confidence factor of zero during non-stressed and stressed system conditions;
• Transmission revenue recovery and Wheeling Access Charge (WAC) revenues should be a transitional mechanism only, accompanied by a sunset date such that the proposal does not introduce indefinite uplift payments and market inefficiencies;
• The ISO should adopt its proposal to allocate Resource Sufficiency Evaluation (RSE) failure surcharges and revenues on an hourly basis based on megawatt (MW) of metered demand for each Scheduling Coordinator (SC) as a portion of total ISO BAA metered demand; and
• A long-term solution for allocating RSE failure surcharges and revenues will need to deviate from the stakeholder-proposed two-tier allocation methodology in order to accurately capture cost causation.

2. Provide your organization’s comments on the proposed EDAM ISO BAA Participation Rules initiative tracks and schedule:

CalCCA supports the proposed EDAM ISO BAA Participation Rules tracks and schedule.  

3. Provide your organization’s comments on the Track A1 draft final proposal: Criteria to Set the ISO BAA’s Net EDAM Export Transfer Constraint:

The ISO should adopt its proposals to keep the constraint on at all times, distinguish between stressed and non-stressed hours for the confidence factor and reliability margin, and memorialize other details in the Business Practice Manual (BPM). Memorializing the details in the BPM will allow the ISO to adjust the confidence factor levels, reliability margin levels, and definitions of stressed and non-stressed conditions as the ISO and ISO BAA participants gain experience with EDAM. CalCCA supports the revised definition of stressed hours to include net peak hours. The ISO indicates net peak hours automatic triggering of stressed conditions will be applied on a seasonal basis with additional details to be determined in the BPM process. When determining which seasons to use net peak hours as stressed conditions, the ISO should present an analysis in the BPM process to support any findings that suggest net peak hours are not stressed during certain seasons.

While CalCCA originally supported the ISO basing the confidence factor during non-stressed conditions based on historical delivery of non-RSE eligible supply, CalCCA supports the ISO’s proposal to use a confidence factor of zero during non-stressed and stressed system conditions. This approach allows the ISO to start conservatively and revise the confidence factors in the BPM process as it gains experience in EDAM. It may be that as the ISO gains this experience, the ISO and ISO BAA participants can become more comfortable with raising the confidence factor during non-stressed system conditions to be more consistent with historical delivery of non-RSE eligible supply.

4. Provide your organization’s comments on the Track A1 draft final proposal: Transfer Resource Settlement and Transfer Revenue Distribution:

CalCCA has no comments at this time.  

5. Provide your organization’s comments on the Track A1 draft final proposal: Process for Recovering Historical Wheeling Access Charge Revenues:

The ISO proposes a process for determining the recoverable foregone historical WAC revenues, including revenues associated with reduction in WAC revenues at existing transfer locations; unrealized WAC revenues attributed to non-firm use of approved new transmission builds that increase transfer capability between EDAM BAAs; and revenues for wheeling-through transfer volumes for EDAM BAAs that exceed the total imports/export transfers from the EDAM BAA.

CalCCA continues to hold its position from the EDAM stakeholder process and previous comments. That is, while making transmission available to the EDAM on a hurdle-free basis may result in a reduction in transmission revenue and WAC revenues relative to historical revenues, transmission revenue recovery and WAC revenues should be a transitional mechanism only, accompanied by a sunset date such that the proposal does not introduce indefinite uplift payments and market inefficiencies.[1]

The ISO states in the Draft Final Proposal that “in the Extended Day Ahead market, the ISO committed to review this mechanism provision in a future initiative, as the ISO gains experience with EDAM.”[2] This review should result in a commitment to sunset the historical transmission revenue recovery mechanism on a reasonable timeframe after EDAM implementation.

[1]             CalCCA Comments on the Issue Paper and Track A Straw Proposal (May 17, 2023): https://stakeholdercenter.caiso.com/Comments/AllComments/f4f5607b-8a10-4fc7-b065-eca237f20800.

[2]             Extended Day-Ahead Market ISO Balancing Authority Area Participation Rules Track A1 Draft Final Proposal (July 25, 2023), at 19: http://www.caiso.com/InitiativeDocuments/TrackA1DraftFinalProposal-EDAMISOBAAParticipationRules.pdf.

6. Provide your organization’s comments on the Track A1 draft final proposal: Interim Solution for Allocating RSE Failure Surcharges and Revenues:

The ISO should adopt its proposal to allocate RSE failure surcharges and revenues on an hourly basis based on MW of metered demand for each SC as a portion of total ISO BAA metered demand. While CalCCA supports the allocation of costs on a cost-causation basis consistent with the principles put forth by the ISO,[1] it will take time to develop and implement an approach that accurately allocates costs to market participants that caused the RSE failure. The ISO should adopt its interim proposal for Track A1 and consider in the next track if and how to modify the approach for the long term.

[1]             CAISO Presentation: Extended Day-Ahead Market ISO Balancing Authority Area Participation Rules, Stakeholder Workshop on Track A1 (June 14, 2023), at Slide 21: http://www.caiso.com/InitiativeDocuments/Presentation-ExtendedDay-AheadMarketISOBAAParticipationRules-Jun14-2023.pdf.

7. Please also provide your organization’s ideas for a Long-Term Solution for Allocating RSE Failure Surcharges and Revenues (which will be developed in Track B). More specifically, please provide your organization’s comments on the stakeholder-proposed two-tier allocation methodology (see footnote 21 on page 31 of the draft final proposal) and/or please provide suggestions for the parameters that should be considered in a long-term solution:

The ISO indicates that it will use the two-tier approach proposed by Pacific Gas and Electric Company, San Diego Gas & Electric, Six Cities, and BAMx (Joint Parties) in their June 28, 2023 comments as the starting point for the long-term cost allocation solution. Under that approach, in the first tier, surcharges are allocated to Load-Serving Entities (LSEs) whose month-ahead supply portfolios (RA + Non-RA) are less than their daily peak LSE metered demand. In the second tier, surcharges are allocated pro-rata to LSE-metered demand. The Joint Parties put forth this proposal as an interim approach intended to be implemented in Track A1. A long-term solution, however, will need to deviate from this proposal in order to accurately capture cost causation.  

The ISO and stakeholders should consider the following factors when developing a long-term solution:

• The ISO and stakeholders should start by identifying the many factors that drive RSE failures or surpluses (including contracts for Resource Adequacy (RA) and non-RA supply, RA and non-RA generators on outage, the availability of substitute capacity not shown). Approaches that target just one of the many causes of RSE failure could worsen cost causation relative to a metered demand approach. Therefore, conducting cost allocation based upon only some of the possible drivers of an RSE failure just because those drivers are easier to identify than the others is not just and reasonable.

• It could be extremely difficult to tie a resource’s schedule to a particular LSE because there is not a one-for-one relationship between the schedule of a resource and the LSE for which it is serving. LSEs do not have to be the scheduling coordinator for their resources. Even where an LSE is the scheduling coordinator for a resource, there is no guarantee that the resource being scheduled is to serve that LSE’s load. The LSE may have sold the output associated with that resource to another LSE. Resources may provide partial capacity or capacity to multiple different LSEs, making it difficult to determine which portion of the capacity ties to which LSE. The only way to realistically allocate charges based on metered demand net of contracted supply may be to understand the contractual obligation between LSEs and resources. The schedule alone does not provide this information.  
• RA requirements and RSE requirements are not identical and serve different purposes. Any allocation methodology for RSE failure deficiencies should not be duplicative of RA penalties and should instead target the specific RSE requirements the charges would be based upon. LSEs enter into many different types of contracts with RSE-eligible resources beyond RA-only contracts, including contracts for substitute capacity and contracts for hedges (e.g., firm-energy contracts, call options, etc.).

• There are RA program compliance mechanisms in place to incentivize CPUC and non-CPUC jurisdictional LSEs to bring enough supply to the market. The RSE failure consequences should avoid duplicative charges on LSEs who have already paid for their deficiencies through CPUC and ISO RA compliance mechanisms. The RA program incents upfront compliance through a robust penalty structure at the CPUC. LSEs face tiered penalties increasing in price based upon the number of deficiencies the LSEs have. The penalties for RA deficiencies at the CPUC start at $8.88 in the summer months and go up to three times that amount for repeat deficiencies. LSEs also face reputational risk with being on the RA penalty list. Some LSEs also face limits on expansions if they do not meet their RA requirements.[1] If LSEs are short on their RA requirements, in addition to paying the CPUC penalties, the ISO can backstop through its CPM to fill the deficiency and allocate costs first to deficient LSEs. Therefore, LSEs will either (1) collectively meet their RA obligations, obviating the need for ISO backstop, or (2) receive costs of ISO backstop allocated to them if they are the cause of a deficiency. After ISO backstop for RA deficiencies occurs, LSEs’ obligations to bring supply to the day-ahead market are fulfilled, and it is up to the supplier to ensure the resource is available and offered into the day-ahead market consistent with its must-offer obligation to pass the RSE. In short, the mechanism for an RA compliance failure is for the ISO to backstop procure.  If it does, then the reason for an RSE failure is not the RA deficiency because the ISO backstopped it.  If the ISO does not backstop, then the ISO has determined that it has sufficient RA collectively and once again, the cause of the RSE failure cannot be said to have been caused by an RA deficiency since the ISO determined that collectively, no such deficiency existed.
• If it is not possible to determine cost causation, there is precedent for the ISO allocating costs to metered demand – significant event and exceptional dispatch CPM costs are allocated in this manner.

[1]            California Public Utilities Commission, Decision 23-06-029, Decision Adopting Local Capacity Obligations for 2024 - 2026, Flexible Capacity Obligations For 2024, and Program Refinements, Rulemaking 21-10-002 (July 5, 2023): https://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M513/K132/513132432.PDF.

8. Provide any additional comments on the EDAM ISO BAA Participation Rules track A1 draft final proposal, and Aug 2, 2023 stakeholder call discussion:

CalCCA has no additional comments at this time.  

1. Please provide a summary of your organization’s comments on the Extended Day-Ahead Market (EDAM) ISO Balancing Authority Area (BAA) Participation Rules track A1 draft final proposal, and Aug 2, 2023 stakeholder call discussion:

The text of DMM's complete set of comments is included in this response to question 1.  For a fully formatted version of DMM's comments, please see the PDF attached below the final question.

Comments on Extended Day-Ahead Market ISO Balancing Authority Area Participation Rules Track A1 Draft Final Proposal

Department of Market Monitoring

August 14, 2023

Introduction

The Department of Market Monitoring (DMM) appreciates the opportunity to comment on the Extended Day-Ahead Market ISO Balancing Authority Area Participation Rules Track A1 Draft Final Proposal (Proposal).[1]  DMM recognizes that this initiative focuses on market rules for only the CAISO balancing area’s participation in the extended day-ahead market (EDAM).  However, one of DMM’s core duties is to “review existing and proposed market rules, tariff provisions, and market design elements and recommend proposed rule and tariff changes to the CAISO, the CAISO Governing Board…” [2]  As the proposed market rules will be decided by the CAISO Governing Board, it is within the scope of DMM’s role to review and make recommendations on the policy.

While this initiative develops rules specific to the CAISO balancing area, we have attempted to make our recommendations apply generally to any potential EDAM balancing area.  We hope aspects of these comments may be useful to stakeholders in other balancing areas as they redesign their OATTs to facilitate EDAM participation.   

Setting the net export transfer constraint

DMM continues to support the EDAM proposal to allow each balancing authority area (BAA) to utilize a net export constraint to determine hourly limits on net exports of EDAM energy, imbalance reserve up (IRU) and reliability capacity up (RCU).  Under the proposed EDAM design, each balancing area needs a mechanism to help ensure EDAM transfers do not cause it to take responsibility for load curtailment caused by another balancing area with a capacity shortfall during tight system conditions.

The EDAM should continue to increase coordination and collaboration between Western balancing areas. However, the ISO did not ultimately propose that all EDAM balancing areas share load curtailment if there is a collective supply shortfall. Instead, if there is a collective supply deficiency in real-time, the real-time optimization will identify EDAM balancing areas that do not have sufficient supply to meet their real-time load, export and EDAM transfer obligations. 

As a result, if one or more balancing areas do not bring sufficient capacity to the EDAM in tight system conditions, EDAM transfers can shift responsibility for potential load curtailment from balancing areas that have insufficient capacity in the day-ahead time frame to balancing areas that had sufficient capacity in the day-ahead time frame.   One way this shift of responsibility can occur is when greater net load uncertainty materializes than the imbalance reserve up product is designed to procure.[3] In addition, if an EDAM area allows convergence bidding, virtual supply can also cause the balancing area to assume responsibility for real-time load curtailment even if the area provided sufficient capacity to cover its obligations in EDAM.[4]   

Therefore, under this market design each EDAM balancing area needs a mechanism to help ensure EDAM transfers do not cause that area to take responsibility for load curtailment caused by another balancing area with a capacity shortfall during tight system conditions.  The net export constraint is intended to provide this critical function in the EDAM design.

EDAM balancing areas that do not have day-ahead must offer obligations and that do not allow virtual bidding could potentially prevent this adverse outcome by withholding capacity in excess of their EDAM resource sufficiency evaluation (RSE) requirements. However, even for these balancing areas, utilizing a net export constraint would be more efficient because it would allow the balancing area to bid its excess capacity into EDAM. This would allow this additional capacity to be efficiently re-dispatched within its own balancing area through the EDAM optimization and to be shared with other balancing areas for the benefit of all.

For a balancing area that allows convergence bidding or has day-ahead must offer obligations in excess of its EDAM resource sufficiency evaluation requirements, the net export constraint could be critical for ensuring its reliability in situations when other EDAM balancing areas’ capacity shortfalls could cause the EDAM footprint to have insufficient supply in real-time.

The net export constraint will not be able to serve this critical function in the EDAM design if a balancing area has not obtained authority under its open access transmission tariff (OATT) to properly utilize the constraint in tight system conditions.  Therefore, it is important that each balancing area develop and test procedures for implementing its own net export constraint prior to EDAM participation. For the constraint to be effective in preventing shifting of responsibility for load curtailment from another balancing area, these procedures must allow sufficient flexibility to cover the dynamic nature of a balancing area’s load and resource uncertainty, which can fluctuate based on the specific mix of resources a balancing area is relying on for a particular day.

The formulation of the net export constraint contains two components that a balancing area’s operators can adjust to increase or decrease the amount of transfers that EDAM can schedule out of the balancing area in the day-ahead market.  The first is the confidence factor.  A lower confidence factor reduces the amount of transfers that EDAM could schedule out of the balancing area.  It is intended to represent uncertainty in the availability of resources that bid into the day-ahead market and which could support EDAM transfers out, but which have not been counted towards meeting the balancing area’s EDAM resource sufficiency requirement.  The ISO proposes to set the initial confidence factor at its lowest possible setting of 0%.  This setting in effect allows no supply that did not count towards meeting the EDAM RSE requirement to support EDAM transfers out of the area.  While this may be overly conservative in non-stressed system conditions, it simplifies the operators’ job in setting the net export constraint each hour to only determining an appropriate level for the reserve margin, discussed below.  Therefore, this seems to be a reasonable initial setting at the start of EDAM.

The second component of the net export constraint that operators can use to limit the quantity of EDAM transfers out of the balancing area is the reserve margin.  The reserve margin is intended to represent all other uncertainty in the demand and supply that determine the EDAM RSE requirement and the capacity that can meet that requirement.  Each balancing area’s operators ultimately have the responsibility for ensuring EDAM transfers out do not jeopardize their area’s reliability.  Therefore, DMM has recommended that each balancing area’s operators have final discretion each day and hour to set the reserve margin portion of the net export constraint using the operator’s judgment and good utility practice.

The ISO’s proposal lists three criteria for setting the reserve margin in stressed hours: (1) replacement reserves for the most severe single contingency, (2) protection for non-credible contingency from weather events, and (3) imbalance reserve up requirement. These items seem reasonable as guidelines to help the operator determine the reserve margin. However, DMM appreciates that the ISO has clarified that these criteria will only be guidelines for the operators.  DMM supports the proposal to allow CAISO BAA system operators to use their discretion to set the reliability margin above the maximum of these three criteria during stressed hours. 

In non-stressed system conditions, the likelihood of EDAM transfers out of a balancing area resulting in a load shed event should be low.  Placing less restrictions on EDAM transfers in these conditions should increase EDAM benefits for both the source and sink balancing areas of EDAM transfers.  Therefore, the proposal to not set a pre-determined minimum level for the reserve margin in non-stressed conditions seems reasonable.  DMM supports allowing the balancing area operators to use their discretion to determine the reserve margin. 

DMM recognizes that the use of a net export constraint can reduce the potential efficiency benefits of an extended day-ahead market relative to not using a net export constraint. However, other fundamental elements of the EDAM design have made this constraint the critical tool for balancing areas to ensure EDAM transfers do not shift responsibility for load curtailment from another balancing area when they have brought sufficient capacity to EDAM.

DMM continues to believe the ideal EDAM design would involve a stringent day-ahead resource requirement sufficient for meeting all participating EDAM balancing areas’ reliability thresholds.  This would then allow mutually agreed upon sharing of any supply shortfalls that ultimately materialize in real-time.[5]  DMM understands that it would have been extremely difficult for diverse balancing areas to agree upon a uniform set of day-ahead reliability standards for this initial phase of EDAM implementation.

DMM continues to recommend that the ISO and participating EDAM balancing areas work towards this goal in upcoming initiatives to enhance the EDAM design.  In the meantime, some loss of potential EDAM efficiency due to the use of the net export constraint in tight system conditions is an unfortunate, but necessary, cost for the implementation of this initial design.

Allocation of RSE failure costs

DMM does not oppose the ISO’s Track A1 interim RSE failure surcharge allocation proposal.  The ISO has explained that policy to better align the surcharge allocation with the entities causing an EDAM RSE failure could not be implemented by the start of EDAM.  Therefore, the proposal to allocate the surcharge costs and revenues each hour based on each scheduling coordinator’s share of the balancing area’s metered demand seems to be a reasonable interim approach to facilitate EDAM’s initial implementation.

To the extent possible, balancing areas should allocate EDAM RSE failure costs to those who can act to avoid or cause the costs. RSE failure costs should be allocated to resources contracted to provide EDAM RSE capacity that do not bid into the EDAM because they contribute to the failure by not making the capacity available to the EDAM. Similarly, if the amount of contracted capacity is less than needed to pass the EDAM RSE, the load serving entities responsible for contracting to provide EDAM RSE capacity should pay the failure costs.

It follows that EDAM RSE failure costs should be allocated to contracted resources not bidding into the EDAM first, with the remainder allocated to the load serving entities contracting capacity to meet RSE requirements. For example, if a balancing area is short by 100 MW, and 70 MW of contracted capacity did not bid into EDAM, then total procurement was 30 MW short. The load serving entities contracting to meet RSE requirements should be allocated costs based on their 30 MW of under procurement. The contracted resources that did not bid into the EDAM should be allocated costs based on their 70 MW of unavailable contracted capacity.

This cost allocation framework appears similar to the ISO’s Track B Option 2. DMM recommends that each EDAM balancing area work towards developing and implementing this form of two-tiered cost allocation policy that first assigns costs to unavailable contracted supply.  In Track B of this initiative, DMM looks forward to working with the ISO and stakeholders on developing the details of EDAM RSE failure surcharge allocation policy that better assigns the cost to entities causing those costs.

Tagging non-resource specific imports that count towards EDAM RSE

The final EDAM proposal stated that if prior to the start of the STUC run for an hour, an EDAM BAA does not e-tag non-resource specific imports that counted towards the EDAM RSE, “the proposal is to remove the BAA from the pooled WEIM RSE approach.”[6] The proposal also “allows the EDAM entity to cure these failures through resupply of the capacity by the STUC horizon, through additional real-time bids, to replace the supply previously not tagged.”[7]

DMM supports the clarification of EDAM policy on bids and schedules that can cure untagged non-resource specific import awards.

The extended day-ahead market updated revised draft tariff language states:

An EDAM Entity Scheduling Coordinator will have until 5 hours before the start of the Operating Hour to submit E-Tags and/or replace the capacity with other firm schedules or physical resources for schedules that lack a valid Day-Ahead E-Tag within the timeframe. If the EDAM Entity Scheduling Coordinator does not E-Tag the outstanding import schedules, including import EDAM Transfers, and fails to resupply by submitting additional incremental Energy Bids from internal supply EDAM Resources above the resource’s Day-Ahead Schedule not encumbered by Day-Ahead capacity awards to cover the E-Tag insufficiency prior to the deadline, the CAISO will remove the EDAM Entity Balancing Authority Area from the group of Balancing Authority Areas that comprise the EDAM Upward Pool.[8]

DMM supports the ISO clarifying that firm schedules, or bids from specific resources in excess of day-ahead energy, IRU, and RCU awards, can count towards curing untagged non-source specific imports.  DMM noted in prior comments on EDAM policy that ambiguity in the Final Proposal language seemed to leave open the problematic possibility of only counting real-time bids in excess of day-ahead market bids.[9]  Counting real-time bids in excess of day-ahead awards, as clarified in the tariff language, resolves this potential ambiguity.

Track B should develop incentives for imports to tag and policy for curing untagged imports.

In tight conditions, EDAM policy for tagging non-resource specific imports could potentially result in a small quantity of imports untagged by the STUC run causing the entire EDAM balancing area to be removed from the EDAM pool for the WEIM RSE.  Therefore, it may be important for each EDAM balancing area to develop rules in its tariff to properly incentivize imports that count towards the EDAM RSE to tag prior to the STUC run.  This may warrant additional analysis of the financial consequences to an EDAM BAA from being removed from the pooled WEIM RSE in order to adequately assign these costs to the importers who caused it.

Similarly, it will also be important for each EDAM balancing area to develop policy for how it may cure any non-resource specific imports that fail to tag before the STUC run.  This policy should include the conditions in which entities besides the scheduling coordinators for untagged imports should intervene to prevent EDAM RSE failure, and who should bear the costs of capacity required to cure the untagged imports.  DMM recommends that Track B’s development of mechanisms for avoiding RSE failures include policy for curing imports that have not tagged by 5 hours before the start of the operating hour. 

Clarifying implications of a non-resource specific import counted towards EDAM RSE but that ultimately tags its source as being from an EDAM BAA

The ISO’s proposal contemplates the possibility of a non-resource specific import counted towards an EDAM balancing authority area’s EDAM RSE.  The ISO would model the import as a distributed injection at the sink BAA’s Demand Aggregation Points.  The proposal then describes the policy for how the real-time market would treat such an import, if the import ultimately sourced from within the EDAM footprint:

In the real-time market, once the source of the supply is known, the scheduling coordinator would be expected to submit a bid at the resource if the source supporting the firm delivered energy is located within the EDAM footprint. The scheduling coordinator would be expected to cancel the DA schedule at the resource in the EDAM footprint through a base transfer deviation with the ISO at the applicable interface between EDAM areas. This base transfer associated with the resource in the footprint would contribute to the ISO WEIM RSE.[10]

DMM continues to ask the ISO to clarify this policy.  If a non-resource specific import tags as ultimately being sourced from within an EDAM BAA, it seems reasonable to automatically set the real-time tagged energy amount on the import resource that cleared the day-ahead market to 0 MWs, forcing the importer to buy back the day-ahead cleared quantity at the relevant real-time market price.  This could also expose the importer to each EDAM balancing area’s penalties for failing to tag an import.  It is not clear if this is the intended EDAM policy. 

The proposal’s description of how a scheduling coordinator is “expected” to cancel the day-ahead schedule of the source resource in the EDAM balancing area is also insufficiently vague.  The proposal states that DMM will monitor for non-resource specific imports ultimately tagging the supply as sourcing in an EDAM balancing area.  DMM requests that in order to facilitate that monitoring, the ISO clarify in the upcoming Final Proposal and tariff language what adjustments to import, generator, and base transfer schedules will be automated, and which actions specific entities will be required to perform in these scenarios.

[1] Extended Day-Ahead Market ISO Balancing Authority Area Participation Rules Track A1 Draft Final Proposal, California ISO, July 25, 2023: http://www.caiso.com/InitiativeDocuments/TrackA1DraftFinalProposal-EDAMISOBAAParticipationRules.pdf

[2] Appendix P to CAISO Tariff, CAISO, April 1, 2017, p. 3: https://www.caiso.com/Documents/AppendixP_CAISODepartmentOfMarketMonitoring_asof_Apr1_2017.pdf

[3] Comments on extended day-ahead market straw proposal, Department of Market Monitoring, June 17, 2022, pp. 4-6: http://www.caiso.com/Documents/DMM-Comments-Extended-Day-Ahead-Market-Straw-Proposal-June-17-2022.pdf   

[4] Comments on extended day-ahead market draft final proposal, Department of Market Monitoring, November 22, 2022, pp. 5-7: http://www.caiso.com/Documents/DMM-Comments-Extended-Day-Ahead-Market-Draft-Final-Proposal-2022-11-22docx.pdf

[5] DMM’s 6-17-2022 comments on EDAM Straw Proposal, pp. 1-3.

[6] Extended Day-Ahead Market – Final Proposal, CAISO, December 7, 2022, p. 67: http://www.caiso.com/InitiativeDocuments/FinalProposal-ExtendedDay-AheadMarket.pdf

[7] Ibid, pp. 67-68.

[8] Updated Revised Draft Tariff Language – Extended Day-Ahead Market – Section 33 Extended Day-Ahead Market, CAISO, July 25, 2023, pp. 70-71: https://stakeholdercenter.caiso.com/StakeholderInitiatives/Extended-day-ahead-market

[9] Memorandum to ISO Board of Governors and WEIM Governing Body, Department of Market Monitoring, January 25, 2023, p. 9: http://www.caiso.com/Documents/DepartmentofMarketMonitoringReport-Feb2023.pdf

[10] EDAM ISO BAA Participation Rules – Track A1 Draft Final Proposal, p. 33.

2. Provide your organization’s comments on the proposed EDAM ISO BAA Participation Rules initiative tracks and schedule:

Please see DMM's complete set of comments in response to question 1 above or in the PDF attached below the final question.

3. Provide your organization’s comments on the Track A1 draft final proposal: Criteria to Set the ISO BAA’s Net EDAM Export Transfer Constraint:

Please see DMM's complete set of comments in response to question 1 above or in the PDF attached below the final question.

4. Provide your organization’s comments on the Track A1 draft final proposal: Transfer Resource Settlement and Transfer Revenue Distribution:

Please see DMM's complete set of comments in response to question 1 above or in the PDF attached below the final question.

5. Provide your organization’s comments on the Track A1 draft final proposal: Process for Recovering Historical Wheeling Access Charge Revenues:

Please see DMM's complete set of comments in response to question 1 above or in the PDF attached below the final question.

6. Provide your organization’s comments on the Track A1 draft final proposal: Interim Solution for Allocating RSE Failure Surcharges and Revenues:

Please see DMM's complete set of comments in response to question 1 above or in the PDF attached below the final question.

7. Please also provide your organization’s ideas for a Long-Term Solution for Allocating RSE Failure Surcharges and Revenues (which will be developed in Track B). More specifically, please provide your organization’s comments on the stakeholder-proposed two-tier allocation methodology (see footnote 21 on page 31 of the draft final proposal) and/or please provide suggestions for the parameters that should be considered in a long-term solution:

Please see DMM's complete set of comments in response to question 1 above or in the PDF attached below the final question.

8. Provide any additional comments on the EDAM ISO BAA Participation Rules track A1 draft final proposal, and Aug 2, 2023 stakeholder call discussion:

Please see DMM's complete set of comments in response to question 1 above or in the PDF attached below the final question.

1. Please provide a summary of your organization’s comments on the Extended Day-Ahead Market (EDAM) ISO Balancing Authority Area (BAA) Participation Rules track A1 draft final proposal, and Aug 2, 2023 stakeholder call discussion:

The Public Advocates Office at the California Public Utilities Commission (Cal Advocates) provides the following comments on the July 25, 2023 EDAM ISO BAA Participation Rules Track A1 Draft Final Proposal (Draft Final Proposal) and the August 2, 2023 stakeholder discussion (Working Group).  Cal Advocates generally supports the Draft Final Proposal and looks forward to the development of procedures and tools to ensure that the California ISO BAA’s (CISO BAA) participation in EDAM provides benefits to and protections for ratepayers within the BAA.

Cal Advocates provides comments on aspects of the Draft Final Proposal below.  In summary, Cal Advocates observes that:

• The proposed design of the Net Export Transfer Criteria (NETC) is very conservative but will provide reliability assurances to the CISO BAA once EDAM launches;
• The Track A1 final proposal of this initiative should state that a Participating Transmission Owner’s (PTO) prior 3 years of Wheeling Access Charge (WAC) revenues before joining the EDAM will be considered in the WAC revenue recovery calculation; and
• An enduring solution for Resource Sufficiency Evaluation (RSE) penalty and revenue allocations should balance cost causation principles with feasibility of design, including to ensure that any RSE requirements assigned to load-serving entities do not conflict with or effectively replace existing RA programs.

2. Provide your organization’s comments on the proposed EDAM ISO BAA Participation Rules initiative tracks and schedule:

Cal Advocates has no comment on this topic at this time.

3. Provide your organization’s comments on the Track A1 draft final proposal: Criteria to Set the ISO BAA’s Net EDAM Export Transfer Constraint:

Under a conservative approach to the NETC, the CISO BAA would decrease its supply offerings to EDAM.  This approach would increase the CISO BAA’s ability to handle potential reliability emergencies within the BAA since fewer domestic resources would have daily obligations to serve EDAM-wide load and other transfers.  The trade-off to a conservative approach is a reduction in market offers of supply, potentially decreasing revenue earned from EDAM since less supply is being traded.  However, it is not clear that increasing supply offers at EDAM will always yield additional revenue.  Market simulations and actual market experience are necessary to fully understand how supply used to support exports and the interaction of energy bids with Imbalance Reserve bids may impact CISO BAA net revenues.

The CAISO proposes to apply the NETC for all hours of the year; however, the Confidence Factor and Reliability Margin will have categories of stressed versus non-stressed hours and seasonal variability.[1]  The CAISO proposes to set the confidence factor at 0% for stressed and non-stressed hours,[2] and apply the Reliability Margin to both stressed and non-stressed hours as well.[3]  The volume of the Reliability Margin will depend on inputs that vary hour to hour and month to month.[4]

The Draft Final Proposal’s NETC design is relatively more conservative than the approaches advocated for by each and every stakeholder that commented on the June 14, 2023 workshop.[5]  Cal Advocates proposed a Confidence Factor for non-stressed hours of roughly 20%, based on historical imports.^[6]  PG&E, SDG&E, Six Cities, and BAMx similarly recommended using 10% or 10%-20% for non-stressed hours.[7]  However, the CAISO proposes a more conservative approach using a 0% Confidence Factor for all hours of the year and a Reliability Margin as low as 1 GW or higher than 4 GW applied to all hours of the year.[8]  Additionally, the CAISO proposes to define “stressed hours” as all net-load peak hours (4pm-9pm) on top of the criteria proposed by SCE; using net load peak hours is much more broad than using the more granular criteria that account for each day’s supply and demand conditions.[9]

Setting overly conservative criteria for the NETC reduces supply offerings to EDAM and may decrease the financial benefits to EDAM for the CISO BAA.  However, given that a conservative NETC provides reliability benefits and that the exact impact of NETC on the EDAM market is not entirely clear, the CAISO’s proposed NETC design is acceptable as a starting point until additional development is completed.  Additional development should incorporate market simulations and, following EDAM implementation, operational experience.

[1] Draft Final Proposal at 11, and 13-14.

[2] Draft Final Proposal at 13-14.

[3] Draft Final Proposal at 13.

[4] Draft Final Proposal at 13.

[5] Those parties recommended a range of approaches which the Draft Final Proposal exceed, such as the use of less broad criteria for defining “stressed” conditions and setting a non-zero Confidence Factor for stressed hours.  See the June 28, 2023 comments on the June 14, 2023 workshop for the following parties: California Community Choice Association (CalCCA), Cal Advocates, Pacific Gas and Electric Company (PG&E), San Diego Gas & Electric Company (SDG&E), Six Cities, Southern California Edison Company (SCE), and the Bay Area Municipal Transmission group (BAMx).  Available at: https://stakeholdercenter.caiso.com/Comments/AllComments/b70bac10-da2a-4c8d-8e91-57ad7cf5c5e2#org-e5dadcd5-e3dc-43b2-bce4-c61ef7a1e471.

[6] Public Advocates Office Comments on the June 14, 2023 Stakeholder Workshop, June 28, 2023 at Section 3.  Available at: https://stakeholdercenter.caiso.com/Comments/AllComments/b70bac10-da2a-4c8d-8e91-57ad7cf5c5e2#org-9d9774ef-5060-4795-b5db-31da3ef3fdb3.

[7] See comments, in particular Section 3, of those parties’ comments on the June 14, 2023 Stakeholder Workshop.

[8] The Reliability Margin is proposed to be set at the maximum of (1) Replacement reserves for the Most Severe Single Contingency (MSSC), (2) protection for a non-credible contingency, or (3) the Imbalance Reserve Upward (IRU) requirement.  A commonly used MSSC is the loss of one of the units of Diablo Canyon (1.1 GW).  Non-credible contingencies are less defined, though a Joint Agency assessment estimated wildfires could cause the loss of access to 4,000 MW of resources.  The IRU itself has not been estimated in any publication.  (Draft Final Proposal at 13.)  See also CAISO, Final Flexible Capacity Needs Assessment for 2024, May 16, 2023 at 3, FN 3.  See also Joint Agency Reliability Planning Assessment, May 2023 at 10.

[9] SCE Comments on the June 14, 2023 Stakeholder Workshop, June 28, 2023 at Section 3.  Available at: https://stakeholdercenter.caiso.com/Comments/AllComments/b70bac10-da2a-4c8d-8e91-57ad7cf5c5e2#org-1aecc9fa-c812-4f76-8b23-76f0dc8d5b4f.

4. Provide your organization’s comments on the Track A1 draft final proposal: Transfer Resource Settlement and Transfer Revenue Distribution:

Cal Advocates has no comment on this topic at this time.

5. Provide your organization’s comments on the Track A1 draft final proposal: Process for Recovering Historical Wheeling Access Charge Revenues:

Cal Advocates supports the CAISO‘s proposal to compensate PTOs for possible reductions in WAC revenues due to participation in the EDAM.  The current proposal for calculating WAC revenue recovery considers the WAC revenues collected over the last 3 years and the current WAC rate.[1]  The CAISO should confirm that the proposed compensation approach would not phase-out possible WAC revenues over time.  The final proposal should state that a PTO’s prior 3 years of WAC revenues before joining the EDAM will be considered in the WAC revenue recovery calculation.

[1] Draft Final Proposal at 20.

6. Provide your organization’s comments on the Track A1 draft final proposal: Interim Solution for Allocating RSE Failure Surcharges and Revenues:

Cal Advocates has no comment on this topic at this time.

7. Please also provide your organization’s ideas for a Long-Term Solution for Allocating RSE Failure Surcharges and Revenues (which will be developed in Track B). More specifically, please provide your organization’s comments on the stakeholder-proposed two-tier allocation methodology (see footnote 21 on page 31 of the draft final proposal) and/or please provide suggestions for the parameters that should be considered in a long-term solution:

Cal Advocates understands that the stakeholder-proposed two-tier allocation methodology is intended only as an interim methodology.[1]  However, the CAISO has indicated that this methodology is not a workable proposal for near-term implementation.  Therefore, Cal Advocates does not have a position vis-à-vis the stakeholder proposal at this time.  However, Cal Advocates looks forward to participating in ongoing discussions to develop an enduring solution.  A long-term solution should appropriately balance cost causation principles with feasibility of design.  The solution should also ensure that any RSE requirements assigned to load-serving entities do not conflict with or effectively replace existing RA programs.

[1] Draft Final Proposal at 31. 

8. Provide any additional comments on the EDAM ISO BAA Participation Rules track A1 draft final proposal, and Aug 2, 2023 stakeholder call discussion:

Cal Advocates has no additional comments at this time.

1. Please provide a summary of your organization’s comments on the Extended Day-Ahead Market (EDAM) ISO Balancing Authority Area (BAA) Participation Rules track A1 draft final proposal, and Aug 2, 2023 stakeholder call discussion:

PG&E appreciates the effort that the CAISO staff has dedicated to developing Track A1 proposal.

2. Provide your organization’s comments on the proposed EDAM ISO BAA Participation Rules initiative tracks and schedule:

PG&E supports the separation of this initiative into separate tracks as outlined in the draft final proposal to provide sufficient opportunity for the stakeholder community to engage in the development process. We support immediately starting work on a long-term solution for the allocation of RSE surcharges and revenues. PG&E requests that the CAISO dedicate resources to ensure that the development of this solution is not delayed.

3. Provide your organization’s comments on the Track A1 draft final proposal: Criteria to Set the ISO BAA’s Net EDAM Export Transfer Constraint:

PG&E supports the net-export transfer constraint parameters as outlined in the draft final proposal:

• Stressed hours definition that includes net-load peak hours
• A zero (0) confidence factor for stressed and non-stressed hours
• A reliability margin floor based on key risk categories during stressed conditions.

PG&E requests that the non-stressed reliability margin and the criteria for defining stressed conditions be actively monitored and discussed within an appropriate balancing area forum with the intent of confirming that the constraint is functioning in the market as expected.

4. Provide your organization’s comments on the Track A1 draft final proposal: Transfer Resource Settlement and Transfer Revenue Distribution:

No comments

5. Provide your organization’s comments on the Track A1 draft final proposal: Process for Recovering Historical Wheeling Access Charge Revenues:

No comments

6. Provide your organization’s comments on the Track A1 draft final proposal: Interim Solution for Allocating RSE Failure Surcharges and Revenues:

PG&E supports immediately starting work on a long-term solution for the allocation of RSE surcharges and revenues. PG&E requests that the CAISO dedicate resources to ensure that the development of this solution is not delayed.

7. Please also provide your organization’s ideas for a Long-Term Solution for Allocating RSE Failure Surcharges and Revenues (which will be developed in Track B). More specifically, please provide your organization’s comments on the stakeholder-proposed two-tier allocation methodology (see footnote 21 on page 31 of the draft final proposal) and/or please provide suggestions for the parameters that should be considered in a long-term solution:

The proposal set forth in our previous round of comments was specifically an interim solution. While this proposal achieved many of the principles and goals that PG&E would want in a long-term solution, it also (admittedly) did not achieve them all.

PG&E would set for the following goals and principles:

1. Allocations should be based on actual bids that contribute towards meeting the RSE
2. Achieves appropriate cost-causation linkages in tier 1 allocation; including catching the following cases:
   1. Allocating surcharges to an LSE when it fails to meet its share of the RSE requirement due to under-procurement.
   2. Allocating surcharges to an LSE when it fails to meet its share of the RSE due to anomalous load (i.e., loads above planning standards).
   3. Allocating surcharges to a resource when it fails to meet its obligations to bid in
   4. Allocating revenues to LSEs that provide more than their share of the RSE and contribute towards exceeding the DA RSE requirement.
   5. Allocating revenues to non-contracted supply that contribute to exceed the RSE requirement.

8. Provide any additional comments on the EDAM ISO BAA Participation Rules track A1 draft final proposal, and Aug 2, 2023 stakeholder call discussion:

No additional comments.

1. Please provide a summary of your organization’s comments on the Extended Day-Ahead Market (EDAM) ISO Balancing Authority Area (BAA) Participation Rules track A1 draft final proposal, and Aug 2, 2023 stakeholder call discussion:

SDG&E appreciates this opportunity to comment on the EDAM ISO participation rules. It has been a difficult discussion at times and SDG&E thanks the CAISO for listening to stakeholders, especially with respect to the Net Export Transfer Constraint (NET-C).

NET-C

SDG&E supports many aspects of the draft final proposal’s parameters for setting the NET-C, but still has concerns over the definition of “stressed” system conditions.

Allocating Resource Sufficiency Evaluation (RSE) Failure Surcharges and Revenues

It is frustrating to revert back to CAISO’s original proposal of allocating surcharges and revenues to metered demand after stakeholders invested so much time and effort.

2. Provide your organization’s comments on the proposed EDAM ISO BAA Participation Rules initiative tracks and schedule:

No comments at this time.

3. Provide your organization’s comments on the Track A1 draft final proposal: Criteria to Set the ISO BAA’s Net EDAM Export Transfer Constraint:

SDG&E supports many aspects of the draft final proposal’s parameters for setting the NET-C, but still has concerns over the definition of “stressed” system conditions. SDG&E agrees that the Confidence Factor (CF) ought to be zero in both stressed and non-stressed system conditions. As was explained in its presentation, a zero CF appropriately protects the CAISO BAA from having to “firm up” economic imports to the level of EDAM transfers while not having adverse impacts on market efficiency.

As for the reliability margin, SDG&E agrees with the criteria laid out in the draft final proposal for setting the reliability margin during stressed system conditions. However, in light of recent events on July 25^th, SDG&E urges CAISO to consider also setting the same reliability margin even for non-stressed system conditions. Even though the CAISO system would not have been considered stressed, a heatwave in a neighboring Balancing Authority (BAA) created huge demand for exports from CAISO, to the point where CAISO was exporting roughly 10,000 MWs and then had to call an Energy Emergency Alert 1 (EEA 1).

Lastly, SDG&E is concerned over the definition of stressed hours. In particular, SDG&E objects to CAISO’s footnote 10 on p.11 stating that, “Net-load peak hours automatic triggering of stressed conditions will be applied on a seasonal basis.” During CAISO’s most recent EDAM ISO BAA Participation Rules call, it became clear that CAISO was planning to only implement this rule during the summer. Based on data that SDG&E has reviewed regarding CAISO’s RA capacity trend, it appears that the net-load peak hours run thin on excess capacity at least one day every month. This suggests that there should be a reliability margin during the net peak hours to protect CAISO in every month of the year, not just summer.

4. Provide your organization’s comments on the Track A1 draft final proposal: Transfer Resource Settlement and Transfer Revenue Distribution:

No comments at this time.

5. Provide your organization’s comments on the Track A1 draft final proposal: Process for Recovering Historical Wheeling Access Charge Revenues:

No comments at this time.

6. Provide your organization’s comments on the Track A1 draft final proposal: Interim Solution for Allocating RSE Failure Surcharges and Revenues:

SDG&E believes the proposal is acceptable for an interim basis.  However, SDG&E believes CAISO should continue to explore other proposal including the put together by various stakeholders which was the result of great effort and compromise.  SDG&E understands the need to have something in place for Day 1 but expects CAISO, along with the stakeholders, to work together on a lasting solution. 

7. Please also provide your organization’s ideas for a Long-Term Solution for Allocating RSE Failure Surcharges and Revenues (which will be developed in Track B). More specifically, please provide your organization’s comments on the stakeholder-proposed two-tier allocation methodology (see footnote 21 on page 31 of the draft final proposal) and/or please provide suggestions for the parameters that should be considered in a long-term solution:

SDG&E continues to support its proposal to net each Load Serving Entities’ (LSEs’) demand against their supply. The demand amount could either be a forecast or actual demand for each LSE. The supply should be based on each LSE’s supply plan, but as was discussed in SDG&E’s presentation, there may be additional resources beyond what is shown on the supply plan. For example, there may be additional resources under Resource Adequacy (RA) contracts that are withheld from the supply plan for substitution purposes in case a unit on the supply plan needs to take a forced outage. There may be import resources under contract that would be RA but for the LSE’s ability to obtain Maximum Import Capability (MIC) allocation. Some have also advocated for including Energy Only (EO) resources, and that could be worth exploring.

8. Provide any additional comments on the EDAM ISO BAA Participation Rules track A1 draft final proposal, and Aug 2, 2023 stakeholder call discussion:

No comments at this time.

1. Please provide a summary of your organization’s comments on the Extended Day-Ahead Market (EDAM) ISO Balancing Authority Area (BAA) Participation Rules track A1 draft final proposal, and Aug 2, 2023 stakeholder call discussion:

As discussed below, the Six Cities support or do not oppose the CAISO’s Track A1 draft final proposal. 

2. Provide your organization’s comments on the proposed EDAM ISO BAA Participation Rules initiative tracks and schedule:

The Six Cities do not have comments on the tracks or schedule for this initiative at this time.

3. Provide your organization’s comments on the Track A1 draft final proposal: Criteria to Set the ISO BAA’s Net EDAM Export Transfer Constraint:

The Six Cities support the CAISO’s proposal on this issue and appreciate the CAISO’s responsiveness to requests that the CAISO take a conservative approach to the Net EDAM Export Transfer Constraint upon initial implementation of the EDAM.  The Six Cities agree with differentiating between conditions that are stressed versus those that are not stressed and adjusting the variables in the constraint according to these conditions. 

With respect to the CAISO’s proposal to include in the identification of stressed conditions the hours of 4 through 9 pm during summer peak conditions, the Six Cities support this approach as a way to assure reliability within the CAISO at the outset of EDAM.  The Six Cities also note that the CAISO intends to develop the factors that will result in identification of stressed conditions through its Business Practice Manual process.  While this appears to be a reasonable approach, the Six Cities support inclusion in the tariff of principles that will define the identification of stressed versus non-stressed conditions that are appropriately tailored to ensure CAISO BAA reliability.

4. Provide your organization’s comments on the Track A1 draft final proposal: Transfer Resource Settlement and Transfer Revenue Distribution:

The Six Cities support the CAISO’s proposal on this issue. 

5. Provide your organization’s comments on the Track A1 draft final proposal: Process for Recovering Historical Wheeling Access Charge Revenues:

The Six Cities support the CAISO’s proposal on this issue, subject to review of the draft tariff language governing this element of the draft final proposal in particular. 

6. Provide your organization’s comments on the Track A1 draft final proposal: Interim Solution for Allocating RSE Failure Surcharges and Revenues:

The Six Cities do not oppose the CAISO’s interim approach as proposed in the draft final proposal and appreciate the CAISO’s coordination with affected stakeholders to identify both interim and long term solutions to this topic.

7. Please also provide your organization’s ideas for a Long-Term Solution for Allocating RSE Failure Surcharges and Revenues (which will be developed in Track B). More specifically, please provide your organization’s comments on the stakeholder-proposed two-tier allocation methodology (see footnote 21 on page 31 of the draft final proposal) and/or please provide suggestions for the parameters that should be considered in a long-term solution:

The Six Cities continue to support development of a long term, durable methodology for surcharge cost allocation and revenue distribution for use within the CAISO that is consistent with principles of cost causation.  The framework outlined by the Six Cities during the stakeholder discussion reflects these principles, but the Six Cities anticipate that continued refinement of this proposal will be necessary as part of the Track B initiative.  The Six Cities look forward to continuing to work with the CAISO and CAISO LSEs on development of a long term methodology. 

8. Provide any additional comments on the EDAM ISO BAA Participation Rules track A1 draft final proposal, and Aug 2, 2023 stakeholder call discussion:

The Six Cities have no further comments at this time.

1. Please provide a summary of your organization’s comments on the Extended Day-Ahead Market (EDAM) ISO Balancing Authority Area (BAA) Participation Rules track A1 draft final proposal, and Aug 2, 2023 stakeholder call discussion:

SCE appreciates the opportunity to comment on the Extended Day-Ahead Market ISO BAA participation Rules Workshop.  SCE generally supports CAISO’s final proposal in the following areas:

• Net EDAM Export Transfer Constraint  
• Avoiding RSE Failures using Existing ISO Tariff Authority

SCE requests additional clarifications regarding the following two topics:

• Transfer Resource Settlements and Transfer Revenue Distribution
• Process for Recovering Historical Wheeling Access Charge Revenues.

SCE does not support CAISO’s final proposal of how RSE failure surcharges and revenues are allocated for EDAM Day 1 but understands the complexities involved with obtaining a consensus from stakeholders.

2. Provide your organization’s comments on the proposed EDAM ISO BAA Participation Rules initiative tracks and schedule:

SCE supports the track and schedule for this initiative.

3. Provide your organization’s comments on the Track A1 draft final proposal: Criteria to Set the ISO BAA’s Net EDAM Export Transfer Constraint:

SCE is pleased that CAISO took a conservative approach with how to set the CAISO BAA’s Net EDAM Export Transfer Constraint.  SCE appreciates the following areas of the NETC proposal:

Enablement of the Net Export Transfer Constraint (NETC)

CAISO agreeing with stakeholders to always have the net EDAM export transfer constraint enabled. 

Definition of Stressed Hours

CAISO defining “stressed” and “non-stressed” conditions and making further improvements by including peak hours from hour-ending (HE) 17 to hour-ending 21 as “stressed”.  However, SCE is requesting clarification on page 10 (footnote) of the final proposal where CAISO states  “Net-load peak hours automatic triggering of stressed conditions will be applied on a seasonal basis” because it is unclear if CAISO is saying that net-load peak hours are considered stressed only during specific seasons such as summer only, or, if CAISO meant to say that the hours – for which net load peak hours are defined – will change based on different seasons.   SCE recommends that each season should have its own net-load peak hours defined, but strongly supports having peaks hours considered “stressed” during all seasons.  

EDAM Reliability Margin

CAISO making improvements by taking into consideration “stressed” and “non-stressed” hours when setting the reliability margin and allowing it to be set higher than originally proposed – recognizing that the 3 contingency criteria for setting the reliability margin amount are not mutually exclusive. 

Confidence Factor

SCE supports the CAISO starting off conservatively by setting the confidence factor at 0% for both “stressed” and “non-stressed” hours.   SCE believes this is the right decision given the recent events that occurred last month in July where the CAISO BAA declared an EEA1 without any signs of stressed conditions.  Allowing a higher confidence factor during non-stressed hours would put the CAISO at risk of having to firm-up exports during unexpected contingency events. SCE supports starting off at 0% and then re-evaluating that figure as CAISO gains experience following the launch of EDAM.

4. Provide your organization’s comments on the Track A1 draft final proposal: Transfer Resource Settlement and Transfer Revenue Distribution:

SCE agrees in principle with the description of the Transfer Resource Settlement and Transfer Revenue Distribution, including the distribution of most Transfer Revenues 50/50 between the EDAM entities, the direct allocation of some (Bucket 2, Pathway 2 Transfer Revenue) to the Transmission customer that held the transmission right, and the distribution of ISO Transfer Revenue within the ISO on the basis of Metered Demand.

However, SCE does not believe that Figure 3 “Transfer Revenue Distribution Example” correctly reflects the description of the Transfer Revenue Distribution.  Specifically:

• SCE agrees that there would be $3,000 of total Transfer Revenue (500 MW times $6 MEC Difference between the two EDAM entities).
• Transfer 1-2 (Self Scheduled ETC/TOR) of 325 MW yielding $1,950 of Transfer Revenue is distributed 50/50 between the ISO and the other EDAM BAA.  The table shows the Transfer Revenue split $975 to each EDAM entity.  In SCE’s view, the entire $1,950 Transfer Revenue should be directly paid to the ETC/TOR holder.  If the ISO intends to first split the total between the two EDAM entities, then there should be a requirement that the other EDAM uses its $975 to pay the ETC/TOR holder (who would then be compensated $975 * 2 = $1,950)
• Transfer 3-4 (Pathway 2 ETC/TOR, released to the market) of 75 MW, yielding $450 of Transfer Revenue should be directly settled with the transmission customer as stated at the bottom of page 16, not split 50/50 as shown in the first table ($225 each BAA).  The $6 MEC difference is due to the difference between the EDAM MECs, not due to an internal ISO constraint as the figure is drawn and described, so this revenue is Transfer Revenue and should be split 50/50.
• Transfer 5-6 (ATC) of 100 MW, yielding $600 of Transfer Revenue should be split 50/50 between the two EDAM entities (as the first table correctly shows).  However, the second table (ISO Transfer Revenue Sub-Allocation) should only include $300 of Transfer Revenue to be distributed to ISO Metered demand, since the other $300 was initially sent to the other EDAM Entity, leaving the ISO with only $300 to distribute internally.

5. Provide your organization’s comments on the Track A1 draft final proposal: Process for Recovering Historical Wheeling Access Charge Revenues:

SCE agrees with the principle that there should be compensation to PTOs for reduced transmission Wheeling revenues attributable to lower Wheeling volumes as a result of transmission capacity moving to EDAM from Wheeling Service.  SCE has reviewed the “Process for Recovering Historical Wheeling Access Charge Revenues” set forth in Section 5, and has several observations as follows. Additionally, SCE continues to believe that any EDAM Transfer Revenue produced from the transmission capacity that is moved to EDAM from Wheeling service should be used as a credit to the determination of the “Transmission Recoverable Amount.”

SCE’s observations:

1. The definition of “Revenue Recovery Bound” (bottom of page 20) is ambiguous, since the denominator “ISO Total Exports” is not defined.  SCE is not sure if this amount is intended to be the sum of Wheeling and the “ISO EDAM Transfer Use” (numerator) or some other measure of flows out of the ISO BAA, but the ISO should define the term precisely.  Additionally, SCE requests clarification regarding how often this amount is updated.
2. On the Table on Page 21, the columns are mislabeled; presumably the three years should be 2021, 2022, and 2023. The method of forecasting the “WAC Recoverable” amount in the table on page 21 is not stated. In the example, 25% of the XYZ capacity is moved to the EDAM market (200/800), but the “Forecasted” is not 25% of the Total WAC, so SCE presumes there is some other method than simply reducing by 25% (which SCE would suggest as a preferable method). If so, how is the forecast developed and agreed to? 
3. The Line labeled “Forecasted” is misleading, since this line actually represents the ISO’s ex-post evaluation of what may have occurred in those three historic years had the EDAM been in place then.  SCE would suggest the term “Reduced Wheeling MWh”, and provide a footnote explaining what the amount is and how it is determined.
4. The determination of the “New Transmission Project WAC Recoverable Amount” (pages 21-22) is highly dependent on the choice of the “similarly situated” intertie already in EDAM.  SCE believes a more precise method would be better and suggests considering a measure based on all interties moved into EDAM. The calculation of the “Excess Wheel-Through Recoverable Amount” is unclear due to the following ambiguities: 1) The description of the ISO Net Export Quantity can be interpreted in two ways, either as the maximum of 0 and the difference between the second two items, or as the maximum of 0 and the second item, all less the third term.  SCE requests clarification on this; and 2) The description of the Excess Wheel Through Quantity is also ambiguous for the same reason.  SCE requests clarification on this.
5. Additionally, SCE would suggest that a clear verbal definition of the terms “Excess Wheel Through Quantity” and “Excess Wheel Through Amount” be provided to help understand the objective of including the Excess Wheel Through Amount as part of the “ISO BAA total WAC Recoverable Amount”
6. Regarding the last paragraph of the “Calculation of Transmission Revenue Recovery Amount” (page 22), describing the “ISO BAA total WAC Recoverable Amount” and the “ISO BAA TRR Rate for each EDAM BAA”, SCE would like clarification that this describes the loss of Wheeling Revenues within the CAISO BAA (the “ISO BAA total WAC Recoverable Amount”) and the recovery of that amount from other EDAM BAAs, not including the ISO. Additionally, the distribution of the “Collected WAC Recoverable Amounts” (bottom of page 22) includes S-PTOs (Subscriber PTOs) as eligible for a part of the distribution.  SCE disagrees that S-PTOs should be eligible for any distribution of the WAC Recoverable Amounts, since an S-PTO already recovers all of its costs through subscriber fees.  Furthermore, no new capacity that an S-PTO brings to the ISO could be affected by historic Wheeling over its facilities, and so the S-PTO should not share in the distribution.
7. The description of the distribution of the “Transmission Revenue Recoverable Amount” on page 7 (based on a proxy TRR) does not seem to be consistent with the description on page 22 (distributed based on “PTO WAC Recoverable Amounts”).  SCE requests clarification on this issue.  
8. How does this process work if a line is impacted by two or more entities joining EDAM at different times and impacting the amount of CAISO transmission that is available for Transfers vs. Exports?
   1. For example, assume there is CAISO line that has 800MW of export capability.  On day 1, an entity joins EDAM and impacts the line so that there are now 200MW of Transfer capability and a residual 600MW of Export capability (consistent with the CAISO’s example).  It is clear how the 3-year historical wheeling/Exports are calculated per the CAISO’s example.
   2. Next, assume 3 years later, a second entity joins EDAM and brings 250MW of Transfer capability impacting the same line, reducing the remaining Export capability to 600MW-250MW = 350MW.   Is a new 3-year historical average of Exports calculated?  (Note that for the previous 3-years the Exports were impacted by 200MW due to the EDAM Transfers.)  If so, this could create a perverse outcome where if the two entities joined EDAM at the same time, the CAISO transmission holder would be entitled to the full impact of the conversion to transfers based on full historical Exports.  But if entities join sequentially and the calculation for historical Exports is refreshed each time someone new joins EDAM, the CAISO transmission holder will receive a smaller make-whole payment.    

SCE seeks clarification, with examples.  But in principle, SCE believes the CAISO transmission holder should receive the same make-whole independent of the sequence of other entities joining EDAM.

6. Provide your organization’s comments on the Track A1 draft final proposal: Interim Solution for Allocating RSE Failure Surcharges and Revenues:

SCE disagrees with CAISO's method of allocating RSE revenues and surcharges to scheduling coordinators pro-rata to total metered demand. However, SCE acknowledges that CAISO had to retain the original proposal due to the lack of consensus among stakeholders.

SCE suggests that, when developing the long-term approach, CAISO should avoid fixating on a "perfect solution" that satisfies all parties. Instead, the focus should be on devising a reasonable allocation methodology based on some form of cost-causation principles. SCE is concerned that striving for a perfect solution may prove unattainable, potentially resulting in the CAISO BAA continuing with a status quo of generalized cost allocation pro-rata to metered demand.

7. Please also provide your organization’s ideas for a Long-Term Solution for Allocating RSE Failure Surcharges and Revenues (which will be developed in Track B). More specifically, please provide your organization’s comments on the stakeholder-proposed two-tier allocation methodology (see footnote 21 on page 31 of the draft final proposal) and/or please provide suggestions for the parameters that should be considered in a long-term solution:

SCE has not taken a position on the use of the two-tiered approach proposed by PG&E, SDG&E, Six Cities, and BAMx as a long-term solution. SCE understood this proposal was intended solely for EDAM Day 1 and not for long-term use.

However, for SCE to consider the concept of utilizing RA and non-RA month ahead showings to identify RSE deficiencies, it is crucial that the proposal mandates that non-RA monthly supply be offered to the market, similar to the must-offer obligation (MOO) for RA supply. This ensures that the use of non-RA monthly showings for RSE test passage is not merely a means to evade surcharges, but rather indicates a genuine intent to schedule supply to the market.

In terms of long-term solutions, SCE envisions an optimal method for surcharge and revenue allocation would involve comparing a LSE's day-ahead supply offers with their RSE load obligation. SCE acknowledges the complexity of determining RSE obligations for each LSE and, therefore, does not currently offer further suggestions or comments on this matter.

8. Provide any additional comments on the EDAM ISO BAA Participation Rules track A1 draft final proposal, and Aug 2, 2023 stakeholder call discussion:

SCE does not have any additional comments.

1. Please provide a summary of your organization’s comments on the Extended Day-Ahead Market (EDAM) ISO Balancing Authority Area (BAA) Participation Rules track A1 draft final proposal, and Aug 2, 2023 stakeholder call discussion:

WPTF appreciates the opportunity to provide these comments on the CAISO’s EDAM ISO BAA participation rules draft final proposal as discussed during the Aug 2 stakeholder meeting. We are concerned that the proposal unnecessarily restricts CAISO’s participation in EDAM and in turn will reduce overall EDAM benefits among all participants. Our concern is most notably related to how the CAISO is setting and enforcing the ISO BAA’s Net EDAM Export Transfer Constraint. The current concept seems to extend beyond the original policy intention as discussed in EDAM. WPTF believes it’s imperative that the CAISO develop participation rules that help facilitate confidence and credibility among all BAAs as it endeavors to extend the day-ahead market.

As discussed in more detail in response to #3 below, WPTF believes that a few modifications to the proposal can achieve the intended objective of the constraint while striking the appropriate balance between increased confidence in ensuring CAISO BAA reliability while also contributing to the overall benefits of a wider market footprint. Additionally, there are some unintended market consequences of the current formulation that need to be further discussed with stakeholders.

2. Provide your organization’s comments on the proposed EDAM ISO BAA Participation Rules initiative tracks and schedule:

No comment at ths time. 

3. Provide your organization’s comments on the Track A1 draft final proposal: Criteria to Set the ISO BAA’s Net EDAM Export Transfer Constraint:

WPTF is extremely concerned with how the current proposal is considering setting and enforcing the constraint as it seems to unnecessarily restrict CAISO participation in EDAM. As commented at the onset of this effort, WPTF believes it’s imperative that the CAISO develop participation rules that help facilitate confidence and credibility among all BAAs. The current formulation and proposal for the net EDAM export transfer constraint does not seem to achieve that result. For the reasons discussed below, WPTF strongly encourages the CAISO to (1) further reduce hours classified as stressed hours and (2) not include the imbalance reserves up requirement in the reliability margin. WPTF also requests the CAISO commit to releasing a system operating message identifying hours that are being considered a “stressed hour” and to the timely publishing of the net EDAM Export Transfer Constraint MW and the underlying formulation components (RSE supply, RSE obligation, reliability margin, confidence factor, and non-eligible RSE supply) on OASIS.

First, the CAISO is proposing to have the constraint enforced 8,760 but during hours that meet the criteria for a “stressed” hour, the CAISO constraint will be formulated in such a way that further restricts EDAM transfers out to other EDAM BAAs. While we understand that during certain stressed system conditions, having an additional margin for reliability is desirable, the current criterion for identifying stressed hours is too broad. Specifically, the CAISO is proposing that net load peak hours are considered stressed hours. Based on stakeholder discussion it is unclear if the CAISO is proposing net load peak hours of every day to be considered a stressed hour (which the hours captured each season may vary), if 4pm -9pm will always be considered stressed hours, or if the CAISO will only identify net load peak hours during certain months/seasons as stressed hours. Regardless, WPTF believes that only the net load peak hours on days where the system is tight or facing stressed conditions is a more appropriate criteria to use. For example, the CAISO could consider that whenever one of the other criteria is met on a given day, then the net load peak hours for that day will be considered a stressed hour if even the other criteria were triggered during a non-net load peak hour. WPTF does not believe it’s appropriate to consider net load peak hours every day of the year, or every day during a certain season, as stressed hours.

Second, the current formulation for reliability margin double counts for capacity that is already included in the RSE obligation value. Since both components - reliability margin and RSE obligation – reduce the net EDAM export constraint value, the double counting of capacity unnecessarily restricts EDAM participation. Specifically, the imbalance reserve up requirement is used in setting both the RSE obligation (part of the RSE requirement) and reliability margin (which takes the higher of three values, one of which is the imbalance reserve requirement). Thus, when IRU sets the reliability margin, the export constraint formulation is accounting for the IRU requirement twice – once in the RSE obligation and then again in the reliability margin.

For example, assume the RSE obligation is 30,000 MW (20,000 MW for demand, 6,000 MW for ancillary services, and 4,000 MW for IRU), the reliability margin is set by the IRU of 4,000 MW, the confidence factor for non-RSE eligible supply is 0, and there is 35,000 MW of RSE eligible supply. During stressed hours, the net EDAM export transfer constraint is 1,000 MW (35,000 MW RSE supply – 20,000 MW demand – 6,000 MW ancillary services – 4,000 MW IRU RSE obligation component – 4,000 MW IRU Reliability margin. This constraint and underlying components/requirements are set prior to the market run. Even if the market run does not procure any IRU due to the proposed demand curve, the market will still hold back 8,000 MW of capacity from supporting EDAM export transfers due to the 4,000 MW IRU requirement. If WPTF’s understanding of how this formulation is being set is accurate, there is no reason why the constraint should hold back capacity that reflects 200% of the IRU requirement. Also recall that the IRU requirement is based on assuming 95% of upward uncertainty materializing; thus this formulation is ensuring sufficient capacity remains within the CAISO BAA to cover 190% of upward uncertainty materializing.

Based on the discussion during the stakeholder meeting, WPTF understands that the reason the CAISO includes the IRU requirement in the reliability margin, knowing it’s also in the RSE obligation, is because the day-ahead market may not actually procure the full requirement. However, WPTF respectfully disagrees with this reasoning. It’s important to keep in mind that the RSE obligation is calculated prior to the day-ahead market running and is based on the IRU requirement not market procurement. Thus, while the market may not fully procure the IRU requirement, the RSE obligation accounts for the full requirement. In other words partial procurement of IRU in the day-ahead market does not change the IRU requirement used in setting the RSE obligation.

Similarly, we would appreciate the CAISO providing additional discussion regarding the replacement reserve component of the reliability margin. Based on discussions to date it is unclear if the replacement reserve component is analogous to operating reserves or is some other type of ancillary service. If the former, then we have the same concern regarding double counting. The RSE obligation accounts for operating reserves already, thus not needed to be included in the reliability margin. 

WPTF also believes there are two unintended consequences due to overstating the net EDAM export transfer constraint that needs to be further discussed with stakeholders. First, the CAISO is essentially retaining capacity within its BAA without actually procuring and paying for that capacity through the market when that capacity could have been used to support a transfer to another EDAM BAA. As discussed above, the CAISO is essentially double counting the IRU requirement and ensuring it has sufficient supply to meet twice the IRU requirement. Recall that the EDAM benefits study showed the majority of EDAM benefits arising due to the imbalance reserves being procured over a larger footprint, yet this formulation will almost nullify the imbalance reserve benefits contributed by the CAISO BAA participating in EDAM.  Furthermore, the justification for including the IRU requirement in the reliability margin is unfounded and seems to be a backstop mechanism for the CAISO to hold the capacity needed for IRU without actually procuring, pricing, and paying for the capacity through the market.

For example, assume the IRU requirement is 2,000 MW. The net EDAM export transfer constraint will ensure there is 4,000 MW of capacity within the CAISO BAA that is not transferred to another BAA but not all of that capacity will actually be scheduled/awarded. Assume the day-ahead market procures 1,500 MW of IRU due to the demand curve (i.e., the cost of procuring more IRU was higher than $55/MW). Thus, the net EDAM export transfer constraint is essentially keeping an additional 2,500 MW of capacity within the CAISO BAA as a result of how the IRU requirement is reflected in the net EDAM export transfer constraint. However, the 2,500 MW is held back in the CAISO BAA but may not actually be procured/scheduled and paid for being held back; it’s just not awarded any schedule. In other words, the CAISO is retaining capacity but not actually paying for retaining that capacity through the market.

Lastly, the net EDAM export constraint may not actually achieve the outcome originally intended. It is WPTF’s understanding the constraint is only applied to EDAM transfers, and as such, does not include exports on CAISO interties. Thus, one potential outcome is that while the constraint restricts transfers (and benefits) to other EDAM BAAs, the capacity won’t actually be retained within the CAISO BAA – it may simply be exported out of the CAISO BAA through intertie locations. The constraint may simply shift exports from what may have been EDAM export transfers to intertie export schedules. The end result is reduced EDAM benefits, no improvement on CAISO reliability during stressed hours, and increased exports out of the CAISO at intertie locations.

4. Provide your organization’s comments on the Track A1 draft final proposal: Transfer Resource Settlement and Transfer Revenue Distribution:

As iterated during the EDAM discussions, WPTF is extremely concerned with the implementation of having multiple system marginal energy costs (SMECs) across the EDAM footprint with the difference between the SMECs being due to transfer congestion. Having different SMECs unravels what a locational marginal price means. An energy market that produces a “marginal” price for the very same undifferentiated product of marginal energy at different locations across the system undermines key economic principles, and through distorting the meaning of nodal marginal energy price signals, may disrupt market decisions. Financial Transmission Rights, Convergence Bidders, Load, and Suppliers all use nodal pricing to inform decisions. Changing what is reflected in the SMEC component of the nodal prices across the EDAM footprint will obfuscate what is the cost of marginal energy on the system, disrupting business decisions informed by nodal pricing. WPTF requests the CAISO change its implementation route to address transfer settlement challenges to separate out the marginal cost of transfers in the LMP by adding a new component rather than embedding it in the SMEC. This will allow transfer congestion to be separately priced and illuminated in its own component and EDAM to maintain integrity of core economic principles while still facilitating the proposed transfer resource settlement and transfer revenue distribution.

5. Provide your organization’s comments on the Track A1 draft final proposal: Process for Recovering Historical Wheeling Access Charge Revenues:

No comment at this time.

6. Provide your organization’s comments on the Track A1 draft final proposal: Interim Solution for Allocating RSE Failure Surcharges and Revenues:

No comment at this time. 

7. Please also provide your organization’s ideas for a Long-Term Solution for Allocating RSE Failure Surcharges and Revenues (which will be developed in Track B). More specifically, please provide your organization’s comments on the stakeholder-proposed two-tier allocation methodology (see footnote 21 on page 31 of the draft final proposal) and/or please provide suggestions for the parameters that should be considered in a long-term solution:

No comment at this time.

8. Provide any additional comments on the EDAM ISO BAA Participation Rules track A1 draft final proposal, and Aug 2, 2023 stakeholder call discussion:

No comment at this time.