Comments on Mar 2, 2022 workshop presentation and discussion

1. Please provide your organization's comments on the imbalance reserve demand curve topic:

The Bonneville Power Administration (Bonneville)^[1] recognizes CAISO’s concern that the penalty price for imbalance reserve up (IRU) could result in inaccurate prices and overscheduling of IRU. Having stepped penalty prices and procurement appears to address the concern, but we request additional information regarding how both of these values will be calculated in practice. 

CAISO’s example noted illustrative levels for both penalty prices and procurement (%), but it is unclear when these values will be determined, and how relevant factors will be taken into account.

[1] Bonneville is a federal power marketing administration within the U.S. Department of Energy that markets electric power from 31 federal hydroelectric projects and some non-federal projects in the Pacific Northwest with a nameplate capacity of 22,500 MW. Bonneville currently supplies around 30 percent of the power consumed in the Northwest. Bonneville also operates 15,000 miles of high voltage transmission that interconnects most of the other transmission systems in the Northwest with Canada and California. Bonneville is obligated by statute to serve Northwest municipalities, public utility districts, cooperatives and then other regional entities prior to selling power out of the region.

2. Please provide your organization's comments on the market power mitigation topic:

Bonneville strongly opposes CAISO’s proposal to mitigate reliability capacity bids.

CAISO appears to be proposing market power mitigation of reliability capacity bids.  Bonneville noted significant opposition to capacity mitigation in previous stakeholder comments and reiterates those concerns. 

First, CAISO has not demonstrated a need for mitigation in the RUC process via either demonstrating exercise of market power or even the potential presence of market power.  We do not believe that the mere presence of capacity bids necessitates market power mitigation. 

Second, CAISO’s proposal to use the 90^th percentile historical non-RA RUC bid as a “default availability bid” is arbitrary, particularly because it would be applied to every resource in every interval.  This appears to be a transparent attempt to reduce bid prices for up to 10% of resources which, again, lacks justification. 

            Third, the issue of local market power mitigation for RUC availability bids was already addressed by the FERC Commission in its September 21, 2006 Order[1]:

• …the CAISO states that the concept of local market power mitigation of RUC availability bids was rejected by the Commission as “complicated and intrusive” in the July 2005 Order. For this reason, the CAISO explains, the MRTU Tariff does not include market power mitigation of RUC availability bids.”
• …we [the Commission] find that a $250/MWh bid cap on RUC availability bids provide sufficient mitigation of any potential for market power. Furthermore, we note that we would not ordinarily expect the CAISO to exhaust the resource adequacy capacity available for commitment in RUC, except in periods of extreme shortage. If such an extreme shortage were to occur, a RUC availability price near the bid cap could be an appropriate reflection of supply and demand fundamentals.”

Regarding mitigation of imbalance reserves, Bonneville agrees with CAISO’s assessment that imbalance reserve availability bids should not be mitigated in either the base scenario or in any of the deployment scenarios.   

[1] Paragraph 137 of FERC Order Conditionally Accepting the CAISO’s Electric Tariff Filing to Reflect Market Redesign and Technology Upgrade Issued September 21, 2006.

3. Please provide your organization's comments on the accounting for energy offer price in upward capacity procurement topic:

Bonneville does not support CAISO’s proposal to limit energy bids from high-energy-cost resources.

CAISO’s suite of alternatives to prevent high-energy-cost resources from being awarded capacity payments while rarely being dispatched in real-time appears discriminatory toward certain types of resources. 

We understand that capacity and energy bids are not co-optimized, but administratively limiting energy bids is an inappropriate method for discouraging supply participation.  There are certainly scenarios where high-priced energy bids are uncompetitive, and we would expect those bids to be mitigated in the real-time market in such scenarios.  We disagree, however, with all alternatives that artificially lower or disqualify energy bids that are otherwise considered valid and competitive. 

4. Please provide your organization's comments on the resource adequacy real-time must offer obligation topic:

Bonneville supports CAISO’s proposal to make real-time must-offer obligations optional by Local Regulatory Authority.

Bonneville reiterates its support for replacing the RA real-time must-offer obligation with imbalance reserves.  CAISO has sufficiently demonstrated the need for this change in previous workshops, and Bonneville maintains that this is one of the most critical components of the DAME. 

Removal of the RA real-time must-offer obligation accomplishes multiple goals, aligning both the imbalance reserve product and the RA product more closely with their intended uses and encouraging appropriate price formation for both products. 

Removing the real-time must-offer obligation increases the amount of RA supply (type of resources) and likely decreases the prices that resources bid, simply because more flexibility retained by supply decreases their opportunity cost.  We encourage entities opposed to this change to recognize the positive effects on RA from removal of the real-time must-offer obligation.

Bonneville believes current RA pricing inappropriately incorporates imbalance between day-ahead and real-time. The imbalance reserve product is targeted to more accurately address relevant uncertainty. 

5. Please let us know if you have additional comments (optional):

Bonneville has no further comments. 

1. Please provide your organization's comments on the imbalance reserve demand curve topic:

The California Community Choice Association (CalCCA) appreciates the opportunity to comment on the Day-Ahead Market Enhancements (DAME) Workshop held on March 2, 2022. CalCCA’s comments focus on the proposals’ impact on the Resource Adequacy (RA) must-offer obligations.

2. Please provide your organization's comments on the market power mitigation topic:

 CalCCA has no comments at this time.

3. Please provide your organization's comments on the accounting for energy offer price in upward capacity procurement topic:

 CalCCA has no comments at this time.

4. Please provide your organization's comments on the resource adequacy real-time must offer obligation topic:

CalCCA appreciates the CAISO reconsidering its proposal to remove the resource adequacy real-time must offer obligation. The CAISO’s proposal to have the Local Regulatory Authority (LRA) elect to require the real-time must offer obligation, however, creates challenges around enforceability. Because the CAISO is the entity that accepts the bids offered into the market, there is no way to ensure RA resources with an offer obligation imposed by the LRA is offering in real-time until after the fact. If the LRA determines there is a reliability benefit to maintaining the real-time must offer obligation, the CAISO should enforce the must offer obligation and insert bids for resources with a must offer obligation so that bids are in fact available in real-time.

CalCCA supported the transition period in the previous proposal that would require RA resources to bid zero dollars into the Residual Unit Commitment (RUC) until the Extended Day-Ahead Market (EDAM) is implemented to allow time for parties to consider alternatives. Now that EDAM and DAME’s planned implementation dates are on the same timeline and there is no time for a transition period, CalCCA requests the CAISO consider this issue in a coordinated manner between EDAM and DAME. CalCCA agrees with the CAISO that California resources should not effectively provide capacity to other balancing authorities at zero cost; a potential result of maintaining the zero dollar bidding requirement. The CAISO and stakeholders should consider alternatives within the EDAM initiative so capacity paid to be available through real-time are not paid for twice; once through bi-lateral RA transactions and again through imbalance reserve payments. It is not clear the benefits of the DAME proposal outweigh the costs resulting from these impacts to RA. Additional discussion is needed to ensure imbalance reserves paid for by California LSEs will be available to serve California load under the context of EDAM.

5. Please let us know if you have additional comments (optional):

  CalCCA has no additional comments at this time. 

1. Please provide your organization's comments on the imbalance reserve demand curve topic:

CAISO proposes to procure Imbalance Reserves (IR) using a stepped penalty price methodology instead of a demand curve as originally proposed.  This new method should provide sufficient IRs while at the same time relaxing the imbalance reserve up (IRU) procurement as energy prices rise.  CDWR requests that the CAISO provide a deeper analysis comparing the cost and effectiveness of the stepped penalty price methodology versus the demand curve method.  This information will allow stakeholders to weigh the costs and benefits of each option. 

2. Please provide your organization's comments on the market power mitigation topic:

CDWR supports CAISO’s scenarios on IRs deployment, especially to co-optimize IRs deployment with the base scenario and to assure IRs awards are delivered through transmission constraints.  CDWR also supports CAISO’s proposed bid ceiling and floor bids for IRs ($0, $247) and Reliability Capacity (RC) ($0, $250). We believe such bid mitigations would avoid higher costs of IRs and RCs.

3. Please provide your organization's comments on the accounting for energy offer price in upward capacity procurement topic:

CDWR supports CAISO’s effort in accounting for energy offer price in upward capacity procurement to limit high-cost energy resources from being awarded capacity payments.

4. Please provide your organization's comments on the resource adequacy real-time must offer obligation topic:

CAISO is proposing not to require RTM must offer obligation (RTM MOO) and no bid insertion applies in RTM. CAISO is proposing the RTM must offer be voluntary and based on a Local Regulatory Authority (LRA) criterion. Please clarify whether this change applies to all RA capacity or just apply to the RA capacity providing Imbalance Reserve (IR) products. There are resources that provide generic RA and not eligible to provide imbalance reserve products or Reliability Capacity (RC) products. Resources under these categories are still able to provide generic RA. Therefore, the proposal should identify and list resources that are obligated to provide IR and RC products from their RA capacity in the DAM and the type of resources that are not required to.  Will a generic RA resource capacity not eligible to offer IR (or not required to offer IR) be exempt from RTM must offer? There may be cases where a generating unit that is eligible to provide IR but cannot offer IR even though it is a designated generic RA resource capacity (for example, meeting generic RA obligation by self-scheduling due to operational constraints). Such type of RA resource exists today, and IR should not be required from such resource offering generic RA.

It would be helpful to understand DAM and RTM requirements if the proposal includes DAM and RTM MOO for each type of resource (such as use limited, non-use limited, DR, Participating load etc.).

CDWR also seeks clarification that current exemption under tariff section 40.6.4.2 including pumping load from RUC must offer requirement will continue under DAME by exemption from RC requirements. The current participating load scheduling uses a specific model (extended non-participating load model) that allows to offer non-spin with contingency flag in the DAM and offer energy bid in RTM for the DAM AS non-spin award to meet RA obligation. This specific model will not allow offering IR or RC products, as it only allows non-spin with contingency flag in the IFM. Therefore, a participating load cannot offer IR and RC product from its RA capacity and should be exempt from IR and RC requirements. If IR and RC are required from participating load RA capacity, it will be unable to offer these products and become ineligible to be a RA resource. Please clarify that how a participating load meets RA obligation today will not change under DAME design considerations.

5. Please let us know if you have additional comments (optional):

CDWR requests that the CAISO provide an updated cost allocation spreadsheet that shows how the imbalance reserve and reliability capacity product costs will be allocated.

1. Please provide your organization's comments on the imbalance reserve demand curve topic:

MRP understands that the example shown on slide 7 of the presentation for the March 2 workshop is illustrative.  That said, MRP supports the CAISO procuring all its imbalance reserve requirements (up to the P97.5 probability level) at prices up to the price cap for the imbalance reserve product. 

While the CAISO’s proposal to relax imbalance reserve procurement as prices increase – effectively, an imbalance reserve demand curve – would allow bid-in demand to clear at high prices and would avoid the problem of procuring imbalance resources instead of clearing demand if there was a large difference between the imbalance reserve scheduling run price and the imbalance reserve pricing run price (as shown in slide 6) – reducing the amount of imbalance reserve procurement based solely on price does not seem to comport with the reliability purpose of imbalance reserves, namely, to provide a market-based “envelope” of operating flexibility for the operators to cover uncertainty instead of relying on the operators securing that uncertainty capacity envelope through out-of-market actions.   It is unclear whether there is correlation between high prices and a reduced need for imbalance reserves.  While not procuring sufficient imbalance reserve products may reduce overall cost it may not provide the operating flexibility to address uncertainty that CAISO operators need under all conditions, but especially under stressed conditions.

The reasonableness of this proposal largely hinges on the relationship between the relaxation amounts and the imbalance reserve prices.  If the CAISO intends to pursue this approach, it should, in the next iteration, provide a proposal for the relaxation prices and thresholds, something more than illustrative numbers. 

2. Please provide your organization's comments on the market power mitigation topic:

MRP agrees with WPTF representative Kallie Wells’ comments on this topic during the March 2 workshop: MRP understands and accepts the need for energy market power mitigation (because of the potential for the available of uncompetitive supply of energy counterflow to resolve transmission constraints, which bind in the market solution because of energy flow).

As MRP understands, the CAISO will procure imbalance reserves through deployment scenarios, which will ensure that energy from the imbalance reserve capacity can be delivered to load.  If energy from imbalance reserve capacity cannot be delivered to load because of a binding transmission constraint, that constraint binds because the energy from the imbalance reserve capacity contributes to binding the constraint instead of providing counterflow.  In that case, MRP expects that the CAISO would not procure imbalance reserves in what amounts to a generation pocket, and it would not be necessary to mitigate either the resource’s energy price (except, perhaps, to subject it to a floor) or its capacity price (again, except to impose a floor). 

If the energy that would be delivered from the procured imbalance reserves is part of a non-competitive pool that provides counterflow to a binding constraint, the energy bid should be mitigated.  MRP does not object to that aspect of the CAISO’s proposal.  

However, the need to mitigate the imbalance reserve capacity bid remains unclear.  MRP’s objection is based on this concept: the CAISO can access the resource’s counterflow energy without having to procure imbalance reserves from that resource. 

 If the resource is an RA resource, the resource is compelled to offer energy from its RA capacity, and the CAISO already has existing market power mitigation for that energy.  If the resource is not or not fully an RA resource, the CAISO can still access the counterflow energy needed through exceptional dispatch – the bids for which the CAISO already has the authority to mitigate - if the resource does not bid that energy. Again, the CAISO does not need to procure imbalance reserves from that resource to access the counterflow energy.  Given that imbalance reserves are a system product and the CAISO deployment scenarios to prevent the energy from those imbalance reserves from being “bottled up” behind (not providing counterflow to) a binding constraint, the CAISO need not procure imbalance reserves from a resource to have access to that resource’s counterflow energy at mitigated prices. Further, given that the full pool of RA resources will have a day-ahead must-offer obligation, the CAISO will have a robust pool of capacity from which to select a relatively small amount of imbalance reserves, meaning that if the CAISO believes a resource is bidding a non-competitive price for imbalance reserves, the CAISO can procure those reserves from other sources. 

If the CAISO was required to procure imbalance reserves to access counterflow energy, MRP would be more receptive to a conversation about the need to mitigate that resource’s imbalance reserve capacity bid.  But because the CAISO does not need to procure imbalance reserves to access a resource’s counterflow energy, MRP remains opposed to, or at least puzzled by, the CAISO proposal to mitigate the imbalance reserve capacity bid.  

3. Please provide your organization's comments on the accounting for energy offer price in upward capacity procurement topic:

The CAISO has offered three alternatives to the address the purported problem of awarding imbalance reserves or reliability capacity but then having the resources that provide those reserves submit high energy bids associated with those reserves so that the energy is not dispatched in real-time.

The first alternative is to estimate the “P97.5” price of real-time energy – that is, the energy price that would result if the real-time energy market was dispatched to a level that is the 97.5 probability level of what it could be dispatched to – and cap RT energy bids associated with these capacity products to that P97.5 price.  A proposed variation of this first option is for the CAISO to “No Pay” capacity awards if they have energy bids above the P97.5 price. 

The second alternative is to disqualify a resource from providing these capacity products if the resource bids energy associated with the capacity product above the P97.5 price.

The third alternative is to neither limit energy bids nor disqualify resources from providing these capacity products based on their energy bids, but instead monitor bidding behavior and market performance and assess the need for further action.

Without fully understanding the extent to which the dispatch of high-priced energy bids from these capacity products is a problem, MRP prefers the third option.  The CAISO notes that the objective of this proposal is to “prevent opportunities for high-energy-cost resource from routinely being awarded capacity payments and rarely dispatched for energy in the real-time.” (March 2 Presentation at slide 15, MRP’s emphasis.)   While the CAISO uses the adverbs “routinely” and “rarely”, those adverbs are very subjective, the CAISO does not offer any way to quantify when those conditions would be satisfied, and the extent to which this is or will be a problem is not known.   Another unknown is how the calculation of the P97.5 price will turn out.  Without any sense of how often this will be a problem, or what the P97.5 prices will be, MRP is reticent to support any proposal to limit energy bid prices. 

Stakeholders would benefit from some information as to (1) what extent this is a problem with the current ancillary services products; and (2) some projection of how often, and to what extent, the CAISO expects energy to be dispatched from imbalance reserves. 

4. Please provide your organization's comments on the resource adequacy real-time must offer obligation topic:

The CAISO’s proposal to limit the RA Real-Time must-offer obligation to the amount of Day-Ahead energy, ancillary service, reliability capacity and imbalance reserve awards was novel, but its ability to maintain reliability hinged on the accuracy of the CAISO’s “high-confidence” demand forecast.  Further, the CAISO’s proposal to leave up to Local Regulatory Authorities whether their RA resources have a RT MOO seems destined to ensure that their jurisdictional RA resources will have a RT MOO; it’s hard to imagine an LRA not adopting a RT MOO, given the choice. 

MRP supports all RA resources having a real-time MOO that is conditioned only by their operating characteristics (i.e., a resource with a 12-hour start-up time that is not synchronized would not have a RT MOO.)  MRP would not support a paradigm in which some, but not all, RA resources have a RT MOO, or in which the application of the MOO is conditioned by something other than physical operating characteristics (such as having to offer only a certain number of hours a month even if they were physically capable of operating more than that.) 

5. Please let us know if you have additional comments (optional):

MRP has no other comments.

1. Please provide your organization's comments on the imbalance reserve demand curve topic:

NV Energy appreciates the opportunity to comment on the CAISO’s Day Ahead Market Enhancement initiative and recognizes the importance of the proposed market enhancements not only as an enhancement to the CAISO’s current market, but also as a potential foundational element for the Extended Day Ahead Market (EDAM).  

CAISO has proposed to procure the full Imbalance Reserve requirement rather than utilize a demand curve which would procure Imbalance Reserves based on the probability that the capacity is needed in real-time. This proposed change could have a significant impact on the Day-Ahead prices of this product and may result in over-procurement in capacity for a large portion of the year. Therefore, NV Energy requests that CAISO explain the rationale for procuring up to the 97.5 percentile of uncertainty.  Is this consistent with other Day Ahead Markets? Additionally, it is our understanding that this product is designed to procure capacity to reduce instances of operator load conformance and to establish a price for capacity that might otherwise be procured outside the market.  However, it is unclear whether this product would procure too much capacity. In other words, is it necessary to procure capacity in the Day Ahead Market to cure almost 100% of the uncertainty.  

The potential application of the Imbalance Reserve Product to EDAM raises a number of important issues. First, it is NV Energy’s understanding that the product has been primarily developed to address issues associated with CAISO’s practice of permitting customers to bid demand, below the CAISO’s forecast and to rely on RUC and load conformance to protect system reliability.  If, however, an EDAM Entity is bidding to a forecast, should that EDAM Entity be required to have a similar quantity of Imbalance reserve or should there be a reduction in the requirement?  Without a diversity credit, does the procurement of this additional capacity have the potential to diminish potential EDAM benefits? 

Second, NV Energy understands that the proposed Imbalance Reserve Product would procure capacity to meet the uncertainty that occurs from Day Ahead to Real-Time for each Balancing Authority Area that joins the Extended Day Ahead Market. For potential EIM Entities with significant third-party OATT customers, the Imbalance Reserve requirement would need to be proportionally sub-allocated.  In effect, the CAISO would be creating a new product that would be an addition to the existing ancillary service reserve requirements.  It is important to note that typically FERC has provided OATT customers the option to either purchase transmission services directly from the Transmission Provider or to allow the customer to self-supply these services. Therefore, it is important to consider how the costs of this product would be allocated and how a Transmission Provider could provide the optionality for a Transmission Customer to self-supply this service.   

2. Please provide your organization's comments on the market power mitigation topic:

3. Please provide your organization's comments on the accounting for energy offer price in upward capacity procurement topic:

4. Please provide your organization's comments on the resource adequacy real-time must offer obligation topic:

5. Please let us know if you have additional comments (optional):

1. Please provide your organization's comments on the imbalance reserve demand curve topic:

PG&E appreciates the CAISO’s effort of responding to stakeholders’ concerns and looks forward to more details in the upcoming proposal.

• PG&E understands that procuring Imbalance Reserves (IR) on a demand curve would allow for more energy procurement during tight supply conditions in the IFM and could alleviate high prices, which will be the result of procuring IR based on a fixed target.

PG&E believes that the successful implementation of the DAME proposal, including procuring IR based on demand curves, without considering reliability issues in other markets depends on a few other assumptions. PG&E requests that the CAISO clarify those assumptions and factor the potential risks in future market designs.

• Impact on RUC procurement. PG&E requests that the CAISO clarify whether the RUC procurement target will be adjusted by the IR procurement amount in the IFM. Is the RUC procurement target defined by (a) the difference between CAISO’s net load forecast and physical cleared supply, (b) the aforementioned difference less the IR procurement target, or (c) the difference less the IR actual procured amount based on the demand curve?
• Impact on real-time reliability. PG&E requests the CAISO to further discuss the impact of the proposed item on real-time RSE test. During the March 2^nd workshop, the CAISO stated that CAISO was considering counting IR awards in the EIM RSE tests. Will the demand curve make the CAISO procure less than the target and more likely to fail the EIM RSE, specifically, the capacity and flex-ramp tests?  

2. Please provide your organization's comments on the market power mitigation topic:

PG&E appreciates the CAISO’s efforts of addressing the stakeholders’ concerns but requests that the CAISO provide more details on the regulatory compatibility of the proposal’s implication.

• RA bid above $0. During the March 2^nd DAME workshop, the CAISO confirmed that the proposal of mitigating Reliability Capacity (RC) bids in the RUC implies that RA would be allowed to bid above $0. The CAISO further acknowledge that relaxing the RA bid requirements was due to the consideration of other BAs’ leaning on CAISO’s RA resources. PG&E has been sharing the same concern (i.e., leaning on CA RA resources under the current bidding requirements) and appreciates the CAISO’s effort of addressing the issue.
• Cost impact and FERC compatibility.  However, CAISO should realize that allowing RA bidding above $0 also presents duplicative costs to California ratepayers. PG&E also requests the CAISO to provide more details going forward of working with CPUC to ensure that the proposed RA bidding requirement is regulatorily compatible.

PG&E requests the CAISO to clarify the following questions, which are important to evaluate the proposed Market Power Mitigation (MPM).

1. Is the MPM a complete part of DAME for California alone, or is it for E-DAM? PG&E believes MPM is not applicable to RUC within the CAISO BAA, since it is a residual capacity market and has not demonstrated any market power.

During the March 2^nd DAME workshop, the CAISO indicated that MPM is needed due to RA would bid above $0 in extended RUC, where market power may exist in E-DAM. In that case, PG&E believes that it is important to clearly define the structure of RUC first and develop its MPM under the initiative of E-DAM.

2. Is the MPM going to be local, system, or both? PG&E requests the CAISO to clarify whether MPM in the RUC will be applied on local as well as system MPM and how the CAISO determine those needs. Will those MPM be computationally feasible under the current market timeframe?
3. Will the MPM replace the existing bid cap mechanism in the RUC? Or will both be kept? The current bid caps for RC products so far has been effectively preventing high prices and is much more straightforward to implement. What additional value will the MPM bring? And why the CAISO believes the MPM is better than the existing bid caps?
4. How will the Default Capacity Bid (DCB) be defined? The DCB will need to incorporate the opportunity cost of resources providing Reliability Capacity other than energy.
5. Will the proposed MPM be compatible with CPUC Resolution E-3955?
6. Will it be compatible with FERC ruling ER02-1656-026 (July 1, 2005)?

3. Please provide your organization's comments on the accounting for energy offer price in upward capacity procurement topic:

PG&E believes that the CAISO’s proposed alternative 2 and 3 have flaws. 

• ALT 2 (Disqualify resources if accompanied by DA energy bid with segment above P97.5 cap): PG&E finds this alternative could allow for resources to violate the real-time must offer obligation by bidding strategically at a higher price. With those resources disqualified, it could lead to high price spikes or serious reliability issues due to RSE failures.

• ALT 3 (Do no limit energy bids): is the status quo for RT markets.

Alternative 1 seems to be the most effective, out of the three options, in restricting real-time bidding behavior. PG&E requests more details to better understand Alternative 1.

• ALT 1 (Limit RT energy bid price to P97.5 price) PG&E understands this alternative intends to motivate market participants to incorporate their real-time bid costs into day-ahead bids.  PG&E requests more details on how the P97.5 price is calculated, i.e., the forecast methodology and dataset to be used.

4. Please provide your organization's comments on the resource adequacy real-time must offer obligation topic:

PG&E appreciates the CAISO’s effort of addressing stakeholders’ concerns and emphasizes that retaining RA RT MOO is critical to maintaining California’s real-time reliability.

• Impacts of asymmetrical adoption. PG&E requests the CAISO to further discuss in the upcoming proposal the impacts of allowing for Local Regulatory Authorities’ (LRA) options of RT MOO, in particular, in the scenarios (1) when DAME is implemented within California, what are the potential consequences if non-CAISO jurisdictive districts chose not to impose RT MOO, and (2) when extended in E-DAM, what is the impact on real-time RSE and market prices if E-DAM entities choose not to impose RT MOO. PG&E encourages the CAISO to propose backstop mechanisms once any negative consequences are identified.    

5. Please let us know if you have additional comments (optional):

PG&E continues to request the CAISO to include discussions of how storage, hydro, and VERs will be incorporated in the DAME framework, specifically in the areas of

• What are their bidding eligibilities for the proposed products (i.e., imbalance reserves and reliability capacity)?
• How to count for their intermittency and responsiveness to market conditions in the estimation of the procurement targets of the proposed products?
• Given their energy limits, what model should be used in the market dispatch process?
• What are settlement processes to address unfulfilled awards of those resources?   

1. Please provide your organization's comments on the imbalance reserve demand curve topic:

Please see Powerex’s comments available at: CAISO March 2 DAME Workshop Comments

2. Please provide your organization's comments on the market power mitigation topic:

Please see Powerex’s comments available at: CAISO March 2 DAME Workshop Comments

3. Please provide your organization's comments on the accounting for energy offer price in upward capacity procurement topic:

Please see Powerex’s comments available at: CAISO March 2 DAME Workshop Comments

4. Please provide your organization's comments on the resource adequacy real-time must offer obligation topic:

Please see Powerex’s comments available at: CAISO March 2 DAME Workshop Comments

5. Please let us know if you have additional comments (optional):

Please see Powerex’s comments available at: CAISO March 2 DAME Workshop Comments

1. Please provide your organization's comments on the imbalance reserve demand curve topic:

PPC supports continuing to explore the use of a demand curve for the imbalance reserve products.  PPC agrees with previously raised concerns around the potential interaction of the scheduling and pricing run penalty prices leading to export and load schedules not clearing, despite submitting bids above the market clearing prices.  PPC looks forward to additional detail on how implementing a demand curve may impact the broader EDAM footprint’s ability to acquire the necessary amount of reserves for uncertainty. 

In various forums, CAISO and stakeholders have discussed the use of a quantile regression or similar method to set the quantity of imbalance reserves.  Providing analysis on the quantity of imbalance reserves needed under different grid conditions would provide useful information on the impact of the demand curve as well as many of the subsequent policy considerations.  For example, if the need for imbalance reserve up quantities was materially less during periods in which the grid was considerably stressed, that may be informative on the consequences of relaxing the reserve requirement, the importance of accounting for energy costs, and the potential for and consequences of market power mitigation.

2. Please provide your organization's comments on the market power mitigation topic:

PPC understands that energy bids will be mitigated in the base scenario, imbalance reserve up scenario, and imbalance reserve down scenario if an uncompetitive transmission constraint is found in any scenario.  PPC would like to better understand why all scenarios would be mitigated if market power is found in only one scenario.  For example, if market power is found in the imbalance reserve up scenario, why should that require the mitigation of the base scenario bids.  If the imbalance reserve target is calculated correctly, there is a small probably of that scenario occurring and it seems more appropriate to only mitigate the contribution to marginal congestion from the uncompetitive scenario.  

PPC supports not mitigating imbalance reserve bids but has concerns over the proposal to mitigate RUC.  Given the RUC price cap and the difficulty of accurately calculating a default availability bid mitigating RUC may not be appropriate at this time.

3. Please provide your organization's comments on the accounting for energy offer price in upward capacity procurement topic:

PPC supports finding a methodology to account for energy offer costs in upward capacity procurement. Given the relatively high likelihood the  imbalance reserves will be called upon, a market solution that jointly considers capacity costs and the expected value of the associated real-time energy would be an improvement over the status-quo.  Limiting the price cap to the amount of day-ahead capacity is an improvement over the previous iteration of the proposal, however PPC still would like to better understand how the P97.5 price would be calculated prior to day-ahead bids being submitted.

4. Please provide your organization's comments on the resource adequacy real-time must offer obligation topic:

PPC has no comment at this time and looks forward to additional discussion and detail on this topic. 

5. Please let us know if you have additional comments (optional):

PPC appreciates the opportunity to comment on the March 2 Day-Ahead Market Enhancements stakeholder workshop.

1. Please provide your organization's comments on the imbalance reserve demand curve topic:

At this point, the Six Cities do not have comments on the workshop discussion relating to the imbalance reserve demand curve topic in the absence of a comprehensive proposal by the CAISO detailing all DAME elements.  Please refer to the comments in response to question no. 5 below.

2. Please provide your organization's comments on the market power mitigation topic:

The Six Cities do not have comments on this element of the workshop discussion at this time.  Please refer to the comments in response to question no. 5 below. 

3. Please provide your organization's comments on the accounting for energy offer price in upward capacity procurement topic:

The Six Cities do not have comments on this element of the workshop discussion at this time.  Please refer to the comments submitted in response to question no. 5 below. 

4. Please provide your organization's comments on the resource adequacy real-time must offer obligation topic:

With respect to resource adequacy and the rules for RA resource participation in the day ahead market, the Six Cities remain concerned with the need to ensure that RA resources procured by CAISO load serving entities for the purpose of meeting their RA obligations – whether local, system, or flexible – are available to meet the needs of the CAISO balancing authority area, particularly during tight system conditions.  It is essential that the DAME market elements not create inappropriate risks for the CAISO region of experiencing capacity shortages by establishing or maintaining market rules that will facilitate the transfer of CAISO RA resources out of California to other balancing areas at artificially low prices, as might occur if RA resources are subject to bidding obligations at $0 or by enabling RA resources to inappropriately opt out of participation in markets.  It is likewise critical that the CAISO’s DAME structure not expose CAISO LSEs to increased energy costs by enabling RA resources that are already being paid for adhering to the CAISO’s existing bidding and offer rules to extract supplemental revenues from CAISO LSEs by permitting these resources to submit bids at non-zero rates.  And, finally, the CAISO should not place LSEs and resources within its footprint at any reliability or competitive disadvantages relative to external entities, whether they participate in the EDAM or not, as might occur if external entities are able to “hold back” some of their resources from market participation, while CAISO entities do not have the same ability. 

Simply put, DAME must ensure that CAISO RA is available to meet the needs of the CAISO footprint without imposing additional costs on the CAISO footprint.  The Six Cities request that the CAISO work with CAISO LSEs on development of solutions to address these considerations. 

5. Please let us know if you have additional comments (optional):

The Six Cities have previously articulated concerns with the DAME proposals, including the proposal to establish new products that may not fully remove the need for out of market actions and that may not be necessary except in relation to achieving objectives that are central to the Extended Day-Ahead Market.  As the Six Cities have emphasized repeatedly, the DAME proposals should stand on their own and provide benefits to the CAISO balancing authority area apart from any market revisions resulting from the EDAM. 

The Six Cities have also previously commented on the need to ensure that any proposals under consideration in DAME be considered in conjunction with proposals in the RA Enhancements initiative, and the Six Cities reiterate their prior comments here.  Please refer to the Six Cities’ Oct. 27, 2021 comments in the Resource Adequacy Enhancements initiative, at question no. 2. 

1. Please provide your organization's comments on the imbalance reserve demand curve topic:

2. Please provide your organization's comments on the market power mitigation topic:

3. Please provide your organization's comments on the accounting for energy offer price in upward capacity procurement topic:

4. Please provide your organization's comments on the resource adequacy real-time must offer obligation topic:

5. Please let us know if you have additional comments (optional):

1. Please provide your organization's comments on the imbalance reserve demand curve topic:

Salt River Project Agricultural Improvement and Power District (SRP) appreciates the opportunity to submit the following comments on the DAME initiative workshop. While SRP appreciates the CAISO hosting the workshop to discuss the incorporation of the imbalance reserve product into the DAME, SRP has concerns with respect to the impact the imbalance reserve product may have on intertie self-schedules or economic bids in the Integrated Forward Market (IFM) due to the proposed priorities. SRP recommends that the CAISO provide additional rationale with respect to the change from a demand curve towards a stepped penalty price in both its scheduling and pricing runs. SRP encourages the CAISO to provide additional information explaining why imbalance reserve products are scheduled ahead of the lower price taker (LPT) exports.

2. Please provide your organization's comments on the market power mitigation topic:

SRP appreciates the CAISO’s efforts to ensure competitive pricing through Market Power Mitigation (MPM) measures. SRP would like clarification on how MPM will impact imbalance reserve products, or why MPM should not be applicable to these products, especially in the event they are converted to energy.

3. Please provide your organization's comments on the accounting for energy offer price in upward capacity procurement topic:

No comment at this time.

4. Please provide your organization's comments on the resource adequacy real-time must offer obligation topic:

No comment at this time.

5. Please let us know if you have additional comments (optional):

SRP encourages continued discussions of DAME, including on the relationship between DAME and the Extended Day Ahead Market (EDAM) initiative. SRP recognizes the interdependency between DAME and EDAM and that the CAISO may need to incorporate enhancements into the existing day-ahead market to support EDAM. To further ensure the DAME and EDAM initiatives are aligned, SRP recommends the CAISO facilitate regular meetings to discuss and identify the relationships between these two initiatives.

1. Please provide your organization's comments on the imbalance reserve demand curve topic:

Voltus appreciates this opportunity to comment on the Day Ahead Market Enhancements.  As currently proposed, the imbalance reserve products will favor traditional generation.  Those resources can be offered into the market more often and at a lower cost than many distributed resources, which clear less often and at a higher cost.  Voltus would encourage the CAISO to be mindful of the unique benefits that distributed resources provide.

2. Please provide your organization's comments on the market power mitigation topic:

Voltus does not have comments to provide on this topic.

3. Please provide your organization's comments on the accounting for energy offer price in upward capacity procurement topic:

Voltus favors the third alternative that does not limit energy bids.  It is the most friendly towards Distributed Resources that cannot be dispatched as often as traditional generation resources.  Supporting Distributed Resources will help increase the grid’s resiliency and diversity. 

If the CAISO does proceed with the first or second alternative, Voltus requests that DERs be exempt from those penalties and restrictions. If the CAISO is not amenable to that, then it should at the very least maintain the CAISO’s ability to turn off the RT energy price bid cap in emergency situations. 

4. Please provide your organization's comments on the resource adequacy real-time must offer obligation topic:

Voltus opposes replacing the RA real-time must offer obligation with imbalance reserves.  Resource adequacy should ensure there are sufficient resources in an emergency.  Higher cost resources should be able to qualify for RA and still offer at their marginal cost.  There is a risk of eliminating them from the market by requiring that they offer at a lower market cap that is more aligned with the marginal cost of thermal generators.  This would negatively impact grid reliability.        

5. Please let us know if you have additional comments (optional):

To incentivize economical resources to enter the ancillary services market, Voltus recommends that the Day Ahead Market Enhancements initiative include collapsing the spinning and non-spinning reserves into one single contingency reserve.  Currently, CAISO is the only FERC-jurisdictional ISO that requires spinning reserves to be frequency responsive.  This severely limits the resources able to provide cheap, clean, and easily dispatchable spinning reserves.  Collapsing spinning and non-spinning reserves would expand the market for contingency reserves, while improving market simplicity when CAISO adds the imbalance reserve products.  

Thank you for the opportunity to comment. We can be reached at (415) 463-4236 or at Voltus.co.

1. Please provide your organization's comments on the imbalance reserve demand curve topic:

WPTF is generally supportive of moving to the demand curve methodology and looks forward to evaluating the technical formulation in the next straw proposal.

2. Please provide your organization's comments on the market power mitigation topic:

There is no evidence that the energy products will not be competitive and thus similar to co-optimized ancillary service products, an offer cap should be sufficient to prevent any potential substantive exertion of market power. WPTF supports the CAISO monitoring the product and if uncompetitive conditions exist, then to design and implement additional market power mitigation mechanisms. WPTF also struggles with the concept of mitigating a capacity product based on energy flows (i.e., the power flow of energy during the deployment scenario to determine competitive vs uncompetitive constraints).

3. Please provide your organization's comments on the accounting for energy offer price in upward capacity procurement topic:

As noted during the call, WPTF supports the “monitor and asses” approach rather than imposing a real-time energy bid cap on resources awarded IRU/RCU in the IFM. In order for a resource to profit from economic withholding they would have to be able to predict the energy price and IRU/RCU prices predictably and persistently. This seems unlikely at this time but is worth monitoring after implementation.  

4. Please provide your organization's comments on the resource adequacy real-time must offer obligation topic:

 The logic of removing the RA real-time must-offer entirely hinges on EDAM. This initiative should enhance the day ahead market regardless of whether EDAM moves forward and so should not go to FERC with this element. Without the RT must off obligation on RA resources, the CAISO may find itself in a situation where it is unable to meet load in real-time, risking the reliable operation of the grid. It could be the case that the CAISO either (1) procures the incorrect amount of IRU/IRD and RUC products at the wrong time in the day-ahead market, (2) procures IRU/IRD but due to changes in congestion patterns between the day-ahead and real-time, its not deliverable, or (3) a combination thereof. Under either of those scenarios, the CAISO would release the obligation of RA resources from being available in real-time when they are needed. While we understand the CAISO has indicated it would expect those resources to still participate in real-time, in light of the August 2020 events, we should be cautious about implementing market design elements that in the tight supply conditions may result in reliability concerns. It could be the case that those resources not procured in day-ahead will not be available in real-time simply due to gas prices being too expensive to procure on the spot market. We understand this is an extreme case, but we need to test those extreme cases for robustness.

Within the EDAM initiative, if warranted, the CAISO could propose to remove the real-time must-offer on RA resources. Ideally this would occur after the CAISO has validated the imbalance product and RUC changes are working as planned.

5. Please let us know if you have additional comments (optional):

WPTF supports the CAISO’s DAME proposal and again request that the CAISO make a commitment to publish on its website the following forecasts:

1. CAISO forecast of CAISO demand
2. The “rough” high confidence forecast that guides operator bias as described in the presentation
3. The actual requirement used in RUC

Without these forecasts, despite the CAISO’s excellent analysis, there will continue to be lingering questions on the benefits of this proposal. The CAISO clearly has this data as it was used to develop the summary statistics and WPTF believes transparency is required in advance of this proposal moving forward.