1.
GENERAL COMMENTS: Please provide a summary of your organization’s comments on the Extended Day-Ahead Market revised straw proposal:
Executive Summary
Vistra Corp. and Dynegy Marketing and Trade, LLC (together, “Vistra”) appreciate the opportunity to comment on the California Independent System Operator Corporation’s (“CAISO”) Extended Day Ahead Market (“EDAM”) Revised Straw Proposal (“Revised Straw Proposal”). Vistra is committed to working with CAISO and other stakeholders to foster well-functioning competitive markets in California and the West. Vistra has a vested interest in the development of a workable EDAM proposal. While Balancing Authority Areas (“BAA”) considering EDAM participation will have a choice between the status quo, EDAM, and SPP Markets+, Vistra will necessarily be subject to the rules that govern EDAM because it operates assets located within the CAISO BAA that guarantee it will be an EDAM participant without any choice.
As a result, Vistra has endeavored to be a constructive participant in CAISO’s EDAM stakeholder process, sharing feedback both formally and informally throughout all stages of the EDAM Proposal development. Despite Vistra’s active stakeholder engagement, Vistra continues to have core concerns regarding central features of the EDAM proposal, including CAISO’s proposed frameworks for transmission commitment, resource sufficiency evaluation (“RSE”), the role of residual unit commitment (“RUC”), and greenhouse gas (“GHG”) accounting and reporting.
Vistra’s overarching concern is that the EDAM market design as currently proposed will result in discriminatory outcomes, and, for that reason, will fail to support continued investment in resource adequacy in the West. State and federal policymakers are rightly focused on the challenge of procuring enough clean, reliable, and deliverable power on a forward basis to meet evolving resource needs. Vistra is concerned that the EDAM could frustrate rather than advance that goal.
The EDAM cannot achieve its stated purposes—which include delivering economic, environmental, and reliability benefits across the West—without significant design changes. Such changes should ensure that the market design:
- Complements rather than conflicts with the open access principles and the Open Access Transmission Tariff (“OATT”) framework that are central to bilateral market functioning in the West, to ensure continued availability of and investment in firm transmission service under the OATT framework;
- Does not erode resource adequacy frameworks in the West by weakening commitment to engage in forward resource procurement, with a recognition that the diversity benefits created by the EDAM will not and cannot supplant the need to secure forward supply commitments that carry explicit must-offer requirements;
- Ensures that carbon compliance costs accurately flow through the market design, such that market prices reflect actual compliance costs based on dispatched resources; and
- Supports an even playing field for competitive generation resources that are not affiliated with load-serving entities.
Vistra supports steadfast progress to flesh out the EDAM market design so that stakeholders can develop informed decisions about the best paths forward in the West. However, Vistra opposes the rote extension of elements of CAISO’s current day-ahead market and/or the Western Energy Imbalance Market (“WEIM”) into the EDAM without consideration of EDAM-specific solutions. That shortcut approach fails. In particular, the Straw Revised Proposal’s extension of the WEIM’s GHG accounting framework into the EDAM amplifies its market-distorting flaws. And the Revised Straw Proposal’s transmission commitment framework, which echoes CAISO transmission commitment shortcomings by disregarding OATT-derived rights, fails to incentivize deliverable forward capacity.
In these comments, Vistra seeks to identify the areas of the EDAM market design proposal that must be updated or overhauled to deliver a carefully designed day-ahead construct that remains laser-focused on delivering what organized markets are designed to achieve—greater diversity benefits through an optimal security constrained unit commitment and economic dispatch. And CAISO must do so without muddying investment signals or harming forward progress toward market expansion in the West. Vistra urges CAISO to heed the warnings of past transitional market proposals that ultimately failed because they stymied rather than advanced the broader goal of supporting regional organized markets.[1]
A. Transmission Commitment
The Federal Energy Regulatory Commission (“FERC”) fundamentally changed the landscape when it established open access in 1996 through Order No. 888, which required transmission providers to offer service to third-party transmission customers on a comparable basis to what they provide themselves—and required them to do so under the rubric of the OATT, a non-discriminatory tariff with minimum terms of service. This simple idea was a seismic shift with enormous implementation challenges. Over the years, including through Order No. 890 and its progeny, FERC’s open access policies and OATT requirements have evolved. But at their core they require transmission providers to strike a careful balance between preserving their ability to meet native load obligations, on the one hand, and affording third-party, non-Load Serving Entity (“LSE”) transmission customers the ability to access firm transmission rights with equivalent access and curtailment priority, on the other hand. Maintaining this balance—which the OATT framework achieves by, among other things, defining available transmission services, establishing procedures for reserving and scheduling such services, and establishing prioritization and curtailment rules associated with them—has been central to the development of the competitive bilateral markets across the WECC. The EDAM market design as currently proposed will disturb this balance by subverting OATT rules, threatening the health of competition and resource adequacy in the West.
Fidelity to open access principles and OATT rules is not an academic issue. Concerns about open access have the very real potential to derail or delay approval of the EDAM proposal at FERC. For instance, FERC deadlocked on a far less ambitious effort to expand regional markets in part due to concerns about open access. FERC Commissioner Allison Clements observed, in her statement explaining why she did not support the proposal, that Order No. 888 “establishe[d] a firm requirement of open-access, not a demonstration that economic incentives might create conditions where utilities choose of their own accord to permit open competition.”[2] It is unacceptable to side-step the requirements of open access by hand-wringing about complexity or dismissing open access as technically infeasible, especially where—as here—the proponents of the new market design have not designed it “in a manner that facilitates a workable solution, and have not invested in the software or other analytical capabilities necessary to facilitate access under their chosen design. Permitting transmission providers to evade open access requirements via their own market design choices and investment decisions would fundamentally undermine open access.”[3]
This is the central problem presented by the EDAM Revised Straw Proposal—the potential evasion and erosion of open access in the West. Despite robust stakeholder discussion, in which Vistra has been a central voice, Vistra has deep concerns that the proposed market design does not adequately support resource scheduling and curtailment priority for market participants that have secured firm transmission service in advance. EDAM transfers supported by high-quality transmission reservations (i.e., priority 7 transmission rights, which include primary network service or firm point-to-point, and conditional firm point-to-point) should be afforded the same scheduling and curtailment priority in EDAM as they are afforded under the current OATT framework. The Revised Straw Proposal continues to provide inadequate clarity and assurance that this will occur, as required under longstanding open-access principles. Rather, the proposed EDAM market design appears to seize and transform third-party transmission holders’ rights, such that they can no longer reliably provide curtailment priority for off-EDAM system sales or for external sales into the EDAM. Further, the EDAM proposal appears to propose to inappropriately afford priority 6 secondary network service an equivalent priority to firm or conditional firm transmission service. Vistra is concerned that the EDAM proposal will be unable to survive review by FERC and the courts without significant revisions to ensure that transmission commitments under EDAM rules will complement—not transplant—the OATT transmission scheduling and prioritization framework.
- The Value of Third-Party Transmission Rights is Eroded Under EDAM.
The Revised Straw Proposal is designed to respect the transmission rights of LSEs. Specifically, transmission rights held by LSEs to serve their native load obligations—i.e., Bucket One transmission rights[4]—will, under the EDAM, be afforded priority equivalent to primary network service under the OATT. The Revised Straw Proposal, however, does not similarly protect the value of high-quality transmission rights held by third-party, non-LSE transmission rights holders. Indeed, the Revised Straw Proposal sharply compromises the value associated with Bucket Two transmission rights (i.e., firm and conditional firm point-to-point transmission rights held by third-party transmission customers). Under the proposal, the only way a third-party transmission customer can access an assured scheduling and curtailment priority to meet its commitments is to choose pathway one by using its rights to self-schedule a resource by 10:00 a.m. in the day-ahead timeframe.[5] Where a third-party holder of transmission rights does not choose pathway one but wants to retain the option to use its rights later in time, it is stuck on pathway three—a pathway of limbo.
Specifically, under the Revised Straw Proposal, unless firm rights holders self-schedule a specific resource and corresponding transfer path using their rights through the EDAM framework (under pathway one) or relinquish their transfer rights (under pathway two), then the EDAM rules use pathway three to transform those rights into non-firm available transmission capacity that is used to support the EDAM. The Revised Straw Proposal sends unclear and sometimes conflicting messages regarding what, if any, curtailment prioritization pathway three retains for third-party transmission rights holders. The Revised Straw Proposal openly acknowledges that pathway three represents a departure from how unscheduled firm transmission is treated under the OATT framework.[6] The Revised Straw Proposal states that where a holder of firm transmission rights is on pathway three and seeks to exercise its rights (through a resource self-schedule) after the day-ahead window, that participant “would have a priority lower than a day-ahead schedule that rolls into real-time, but a priority higher than new real-time self-schedules not exercising existing transmission rights.”[7] The proposal also explains that any such attempted exercise of transmission rights would be subject to “market infeasibility” and that all Bucket Two transmission will be dedicated to supporting market optimization and made “available to the market to maximize transfers."[8]
Pathway three thus raises myriad concerns. As an initial matter, on its face, the proposal conflicts with the pro forma OATT, which requires transmission providers to accommodate schedules submitted after 10:00 a.m., “if practicable.”[9] More fundamentally, the Revised Straw Proposal turns the OATT framework on its head. The relative priority of transmission rights secured under an OATT should not be eroded by EDAM market design choices. Firm transmission rights holders should not be forced to self-schedule their energy or transfer paths in the day-ahead to retain the curtailment priority for which they have paid. In real-time, self-schedules associated with firm rights holders should hold higher curtailment priority than schedules supported by non-firm transfer capability facilitated by EDAM. Vistra acknowledges that this poses a challenge with regards to differentiating the curtailment priority of day-ahead awards. However, as Commissioner Clements emphasized, it is unacceptable to side-step the requirements of open access simply because a market design problem is complex.
If the Revised Straw Proposal moves forward, transmission providers seeking to implement EDAM would be required to revise their OATTs to (1) remove the ability for firm rights holders to schedule on those rights if practicable after 10:00 a.m., effectively relinquishing their rights, and (2) require the release, for use by EDAM, of unscheduled firm rights to be scheduled under EDAM rules. These are not modest OATT changes; they would reduce the scheduling and curtailment priority of firm point-to-point transmission holders. As such, they would have a difficult time surviving FERC and appellate scrutiny because they are not standard deviations that are “consistent with or superior to” the pro forma OATT.[10] And recent FERC precedent affirms that the Commission’s open access requirements as reflected in the pro forma OATT do not support a market structure that automatically funnels all unused transmission rights—i.e., rights that are neither reserved nor voluntarily contributed—to the market to support least cost dispatch.[11] Beyond these legal durability issues, significant West-wide market-management challenges would arise, because the EDAM will not function like other areas of the West, in which schedules are afforded priority based on their relative quality of firmness.
To cure these infirmities, CAISO must propose market design changes that (1) enable third-party holders of transmission rights to submit day-ahead e-tags prior to the day-ahead market close, reflecting and reserving their high-quality transmission rights, and enabling resources utilizing such e-tags to be afforded commensurate curtailment priority in the operational timeframe; and (2) reflect that resources without associated transmission reservations would be afforded the lowest scheduling priority through EDAM and curtailment priority in the operational timeframe. EDAM rules also could be revised to permit firm rights holders to exercise their transmission scheduling rights under the OATT directly with the transmission provider (i.e., not through EDAM where the entitlement would not be included in EDAM transfer capability) and make clear that they do not wish to schedule in EDAM and will engage in energy scheduling closer to real time. This would retain the flexibility that is in-place today. In Vistra’s view, this is an implementation pathway that has not been provided sufficient consideration in the stakeholder process.
- EDAM Does Not Prevent Inappropriate Use of Network Service to Support Designated Network Resources’ Off-System Sales.
CAISO in the stakeholder process has been reluctant to provide clarity about which specific types of transmission rights fall into which of the three “buckets” of transmission rights. Based on stakeholder discussions, it is reasonably clear that Bucket One transmission rights—i.e., those held by LSEs to serve their native load obligations—include primary network service and firm or conditional firm point-to-point service; it is less clear whether Bucket One will include secondary network service (typically defined as network service from sources not designated as network resources). To the extent Bucket One includes secondary network service transmission rights, Vistra strongly opposes treating such rights on par with firm or conditional firm point-to-point transmission rights, as secondary network service is a form of non-firm service[12] and thus should receive a lower scheduling and curtailment priority.
And troublingly, the Revised Straw Proposal fails to address or acknowledge OATT limitations on the use of network service to make off-system sales by Designated Network Resources. Specifically, the Revised Straw Proposal appears to assume that OATT transmission providers will be able to amend their tariffs to allow for an exception to the requirement to un-designate a Designated Network Resource to support off-system (i.e., market) sales prior to engaging in the transaction, similar to entities in the WEIM.[13] For purposes of participation in the WEIM, the Commission approved such OATT revisions in light of the residual, just-in-time nature of the imbalance energy market (in which the freed-up transmission rights have limited value).[14] That is not the case in a day-ahead market timeframe, where freed-up transmission has considerable value. CAISO must address how the EDAM market design and market optimization will respect OATT limitations in the use of network service for off-system sales.
Again, Vistra’s concerns regarding whether transmission commitment in the EDAM will respect OATT-derived transmission rights are not merely academic. Investment in generation and transmission to support forward supply arrangements lies at the heart of resource adequacy and system reliability. Eroding the value of open-access transmission service investments, including by subverting the scheduling and curtailment priority that those investments afford, directly undercuts resource adequacy and thwarts investments in the grid. CAISO must squarely address these fundamental infirmities.
B. Resource Sufficiency Evaluation
The Revised Straw Proposal states that the RSE is designed to support the EDAM’s ability to facilitate beneficial economic displacement, i.e., by allowing BAAs to access more economic energy than they otherwise could absent the EDAM.[15] Vistra agrees that any “resource sufficiency” test in the day-ahead market context should be designed around a market-focused goal. Vistra questions, however, what the EDAM RSE is designed to do, and whether the proposal is consistent with CAISO’s stated market-focused objectives.
The RSE proposal on its face is a complex, difficult-to-unpack layer of regulatory rules that does not appear well-tailored for testing and assuring resource sufficiency. A well-tailored RSE would be a market-focused assessment to ensure that day-ahead supply bids—taking into consideration supply bids internal to the BAA, supply bids from external resources with firm commitments to the BAA, and exports from the BAA—can support the market’s ability to feasibly solve economic scheduling and transfers of internal and external resources. Yet, as CAISO acknowledges, the RSE does not model internal transmission constraints or external transmission capability and thus will not identify when resources dispatch would be limited by internal transmission or transfer capability to the BAA border.[16]
At bottom, it is unclear to Vistra whether and how the RSE mechanism, as proposed, advances the functioning of the EDAM market. Vistra specifically questions what value the mechanism brings to market functioning, given the facts that: (1) each BAA already is subject to forward-looking resource adequacy requirements, which could be subject to checks under the EDAM framework; (2) the WEIM RSE construct addresses resource sufficiency issues as they arise in the market operational timeframe. Vistra is also concerned that several elements of the proposed RSE will undermine its effectiveness, including concerns that: (1) bid-range trading dilutes the incentives for BAA to secure forward-looking resource adequacy requirements; and (2) the option to use utility owned resources to meet the test but then physically withhold them from the day-ahead market undermines the purpose of the test.
Of specific concern is whether and how the RSE framework is designed to complement—rather than undermine or partially displace—existing resource adequacy constructs or the nascent Western Resource Adequacy Program (“WRAP”) construct.[17] For example, the RSE design provides for a bid-range trading platform to enable EDAM BAAs to trade RSE requirements and “to work together to cure deficiencies,” with the “capacity offsets” at prices agreed-to by both parties. Though details regarding this proposal are scant, it appears to be an ill-formed capacity substitution framework to meet expected energy shortfalls. Vistra is concerned that this element, along with other elements of the RSE that are intended to “cure” supply deficiencies in the day-ahead timeframe, could be used to offset or undercut forward procurement in the EDAM footprint to the detriment of reliability, or alternatively conflict with procurement decisions under existing California Resource Adequacy (“RA”) program or the WRAP, if implemented.
Additionally, Vistra is extremely concerned with the CAISO proposal that LSEs could offer resources into the RSE but opt-out of the day-ahead market. The purpose of the RSE is to identify if there are sufficient resources to solve the energy and uncertainty needs for the BAA to mitigate risks of “leaning” on other areas in the day-ahead market. Excluding resources would fly in the face of the purpose of the RSE test. It would also formalize a process to physically withhold resources out of the day-ahead market, which would have price formation concerns that FERC would struggle to accept as just and reasonable.
Vistra acknowledges there is significant room for resource adequacy improvement across the West and believes it is an appropriate focus for CAISO and other stakeholders. Vistra supports efforts like the voluntary WRAP, which provides for the first non-RTO planning and compliance framework to maximize resource diversity across a multi-state footprint in support of reliability. Indeed, the WRAP provides a novel approach for entities across the West to plan and arrange in the pre-scheduling windows for the option to sell or buy emergency energy in real-time. This strikes Vistra as a positive step forward in regional coordination. It also strikes Vistra that the Revised Straw Proposal is proposing mechanisms to perform eerily similar functionality through the centralized market. Serious questions regarding the proposal’s impact on, and relationship to, resource adequacy suggest that CAISO should proceed with caution, and should consider significant revisions before implementing the RSE as proposed.
Beyond the fundamental structural concerns described above, Vistra is also concerned that there appears to be confusion regarding how the RSE test is designed, as reflected at the September 8, 2022 stakeholder meeting. Specifically, CAISO confirmed to Vistra on the August 29, 2022 EDAM stakeholder call that the RSE test would include all offers—both internal and external—regardless of the Scheduling Coordinator, meaning that generation resources scheduled by third parties would be included. However, at the September 8, 2022 stakeholder meeting, some BAAs expressed their understanding that resource offers would only be included if they are under contract to the LSE that is internal to the BAA. Depending on how this question is resolved, the nature of any gaps identified by the RSE could be vastly different.[18]
Vistra urges the CAISO to take a hard look at the RSE construct in light of these comments.
C. Residual Unit Commitment
The Revised Straw Proposal’s proposed use of the residual unit commitment (“RUC”) process—which procures backstop California RA today—to identify backstop capacity needs across the EDAM footprint further muddies the distinction between resource adequacy and resource sufficiency.[19] Today, RUC addresses two primary concerns. First, the RUC addresses instances where virtual supply displaces physical RA resources in the Integrated Forward Market run or where there is lower bid-in demand relative to physical supply, such that a backstop capacity run is needed to award and compensate incremental must-offer obligations to non-RA resources internal to CAISO. Second, the RUC addresses instances where virtual supply displaces long-start resources that are needed to meet forecast demand (whether from RA or non-RA resources), such that a binding start-up instruction needs to be sent in the day-ahead timeframe. Under EDAM, the RUC run would enable transfers to step in and meet CAISO’s backstop needs. This exacerbates “leaning concerns,” and runs counter to the goal of ensuring that there are sufficient resources internal to the CAISO BAA, or external RA, to meet CAISO reliability requirements.[20] If WRAP is implemented, the EDAM proposal for RUC will not only interfere with California’s RA program but is likely to interfere with the WRAP program as well.
These leaning concerns would be exacerbated in any timeframe in which only the CAISO BAA has virtual bidding. This raises a broader concern: Is the EDAM market design being advanced to “cure” CAISO virtual bidding or to otherwise address CAISO concerns about having insufficient internal resources or import offers to meet its RUC requirements? EDAM is an inappropriate mechanism by which to achieve these CAISO market objectives.
D. GHG Accounting
Vistra opposes the Revised Straw Proposal’s adoption of the WEIM’s resource-specific GHG accounting and compliance framework. As Powerex and other stakeholders have detailed, the WEIM framework has created extraordinary market distortions that frustrate rather than advance carbon-reduction goals.[21] Even with the CAISO’s proposed WEIM enhancements, the GHG accounting framework falls far short of being sufficiently accurate to support well-functioning market.
Vistra echoes and supports the wide array of concerns stakeholders have expressed about the WEIM resource-specific GHG accounting framework. Vistra urges CAISO to review the detailed report prepared by Powerex regarding the systematic pricing and dispatch failures caused by the current GHG framework and its false “deemed deliveries.”[22] Vistra urges CAISO to commit to a new stakeholder process in which it would address these issues rather than dismissing them as unfixable. In the meantime, Vistra submits that it is a non-starter to simply extend that flawed framework into the EDAM—even as just a “placeholder” framework that may eventually be replaced.[23]
As an owner and operator of diverse assets in California, Vistra brings a unique perspective on how flaws in the GHG accounting framework can distort market outcomes and skew supply incentives. Vistra currently owns and operates 400 MW (1,600 MWh) of battery storage resources, with an additional 350 MW (1,400 MWh) on track to achieve commercial operation prior to the EDAM’s target implementation date of late 2023.[24] In addition, Vistra is developing up to an additional 1,460 MW (5,860 MWh) of battery storage resources that will contribute to addressing CAISO’s supply challenges in the mid- to long-term. Vistra also owns and operates an efficient natural gas fired generation fleet with competitive carbon compliance costs that provides important reliability value when supply and demand are tight.[25] In sum, Vistra is an active supplier in CAISO and WEIM, seeking to bring new in-state capacity online as quickly as possible. But where price signals are skewed due to GHG accounting flaws and the fleet is not operating economically, it is a much more difficult path.
As stakeholders have explained, the proposed GHG accounting framework based on “deemed deliveries” cannot accurately identify GHG compliance costs. It must be overhauled because it: (1) overcounts the availability of surplus clean energy outside of California that is actually available to serve California load; (2) undervalues the true cost of compliance, resulting in uneconomic resource displacement (for example, the displacement of efficient in-state natural gas by out-of-state coal or more inefficient out-of-state gas), and suppressed market prices; and (3) overcompensates external resources that clear the market and are dispatched to provide clean energy to California, but do not actually do so. As a result, the framework undermines the price signals that are needed to drive emissions reductions to meet public policy goals. The significant risk that the “deemed deliveries” approach could undermine rather than advance California’s carbon-reduction objectives should prompt CAISO to re-evaluate its use in the WEIM rather than extend its use into the EDAM.
To be clear, Vistra does not believe that a GHG accounting structure embedded in a FERC-approved market design should be a vehicle for imposing compliance requirements or achieving carbon reductions. FERC is not an environmental regulator and has declined to place itself in the position of defining or establishing GHG reduction mechanisms. For example, FERC has steadfastly refused to shape or influence renewable energy credit (“REC”) compliance mechanisms, instead focusing only on ensuring that FERC policies allow for proper accounting of state-established REC policies.[26] Similarly, FERC has recently rejected a natural gas pipeline’s attempt to incorporate responsibly sourced gas (“RSG”) standards into its FERC-regulated tariff.[27] In so doing, FERC underscored its role as an economic regulator and deferred to the market to allow “market-driven initiatives” to establish basic RSG standards instead of FERC attempting to doing so itself.[28]
Considering FERC’s role as an economic regulator, Vistra urges CAISO to pursue an EDAM GHG accounting framework that accurately and transparently reflects the costs of compliance (as imposed by environmental regulators, such as state agencies) with the goal that market optimization, and the resulting sharing of diversity benefits, works as intended. Rules focused on compliance-cost accuracy within the market will enable an enforcement-based regime, with market participants’ accurately reflecting in their offers the costs of their compliance activities and obligations. Such a focus also would provide policymakers with clearer signals regarding the efficacy of their carbon-reduction regimes.
Vistra believes that with this shared focus, stakeholders could coalesce around a path forward from a purely technical perspective. However, despite statements in the Revised Straw Proposal that CAISO will “continue to vet and evaluate the alternate approaches,” to date CAISO has not facilitated meaningful discussion or evaluation of alternatives within the EDAM stakeholder process. Should CAISO open the floor to a different path forward, as an alternative, Vistra directionally and conceptually could support a zonal approach to achieve the twin aims of accuracy and transparency.
The resource-specific approach is fundamentally flawed because it does not restrict “deeming” to identifiable sources—e.g., surplus energy from a resource with excess output not needed to supply internal load or surplus energy from a BAA with excess internal supply not needed to serve its own load. This false “deeming” runs directly counter to the goals of state carbon-reduction regimes that are based on tracking and pricing the compliance costs of the energy that is serving load in the GHG regulation area. The zonal approach—while imperfect—acknowledges this disconnect and offers a rational way of differentiating instances where compliance costs can be accurately identified and reflected in the market price (i.e., resource-specific sales or transfers supported by a BAA surplus where the asset-controlling suppliers have expressed an intent to serve the GHG regulation area or by a resource under contract to serve the GHG area’s load) on the one hand, from instances where compliance costs cannot be accurately identified (i.e., excess unspecified supply in the EDAM footprint that is available to back a transfer into the GHG regulation area), on the other hand. Vistra could also conceptually support a hybrid of the resource-specific and zonal approaches, if any such hybrid approach addresses the “false deeming” problem (as Powerex has forcefully and persuasively explained).[29]
Closing
Vistra appreciates the opportunity to comment and supports continued progress toward developing a concrete EDAM market design proposal—shaped and improved by stakeholder feedback—so that stakeholders can develop informed decisions about the best paths forward in the West. Vistra offers these comments in the spirit of collaboration and open dialogue, to help identify the areas of the EDAM market design proposal that CAISO can improve to deliver economic, environmental, and reliability benefits across the West. We urge CAISO to use the coming months of stakeholder engagement to hone-in on market-design improvements geared toward respecting OATT frameworks, ensuring accurate price signals considering GHG compliance costs, complementing resource adequacy frameworks, and fostering an even playing field for competitive supply sources.
[1] See generally, e.g., Midwest Indep. Transmission Sys. Operator, Inc., 126 FERC ¶ 61,139, at PP 59-75 (2009) (rejecting a market proposal that “could cause adverse impacts on the efficiency of whole markets,” raising concerns that it could undercut the ability of an ISO to “address operational and reliability issues and to eliminate any residual discrimination in transmission services”).
[2] Fair Rates Act Statement of Commissioner Allison Clements, Docket No ER22-1111-002 (Oct. 21, 2021), https://www.ferc.gov/news-events/news/commissioner-clements-fair-rates-act-statement-southeast-eem-seem.
[3] Id.
[4] CAISO has described Bucket One transmission as priority 7 and priority 6; however, as explained below, priority 6 secondary network service should not be eligible to support “firm” EDAM transfers.
[5] Vistra is concerned about the lack of clarity that third-party resource schedulers would be able to submit transfer self-schedules under pathway one. In other words, Vistra is concerned that pathway one may only be available for transfers if the EDAM entity separately agrees to self-schedule the transfer path. We urge CAISO to clarify that third-party resource schedulers utilizing pathway one can submit transfer self-schedules on the paths associated with its rights. Moreover, in stakeholder discussions, CAISO has suggested that third-party transmission holders will be required to register a resource’s associated transmission rights in the Master File. Vistra is concerned that doing so would be clunky and burdensome and further erode the value of procuring transmission rights in advance. For example, this requirement may limit the ability to register short-term firm (e.g., firm weekly) transmission reservations and thus become a disincentive for doing so.
[6] Revised Straw Proposal at 31 & n.28. Confusingly, the proposal elsewhere concludes that pathway three does not “imping[e]” on the ability of firm-rights holders to exercise them. Id. at 31.
[7] Id.
[8] Id.
[9] Pro Forma OATT at Section 13.8, available at https://www.ferc.gov/media/pro-forma-oatt-effective-march-14-2022.
[10] See generally Preventing Undue Discrimination and Preference in Transmission Service, Order No. 890, 118 FERC ¶ 61,119, order on reh’g, Order No. 890-A, 121 FERC ¶ 61,297 (2007), order on reh’g, Order No. 890-B, 123 FERC ¶ 61,299 (2008), order on reh’g, Order No. 890-C, 126 FERC ¶ 61,228, order on clarification, Order No. 890-D, 129 FERC ¶ 61,126 (2009).
[11] Sw. Power Pool, Inc., 172 FERC ¶ 61,115, at P 40 (2020).
[12] Order 890-A at P 556 (“Secondary network service, also called priority non-firm service, is a non-firm transmission right.”).
[13] See, e.g., PacifiCorp, 147 FERC ¶ 61,227, at P 148 (2014) (“The Commission does not agree that network resources should be required to undesignate to participate in the EIM. . . . [H]ere, the EIM will dispatch EIM resources based on a real-time model of the transmission system and will utilize any unused transmission, whether firm or non-firm, to allow EIM resources to provide imbalance energy. Therefore, there would not be a need for network resources to undesignate for the EIM to function properly.”).
[14] Id.
[15] Revised Straw Proposal at 42.
[16] Id. at 43-44.
[17] Northwest Power Pool, Docket No. ER22-2762-000, Submission of Tariff to Establish Western Resource Adequacy Program (filed Aug. 31, 2022).
[18] Further, as part of this discussion, CAISO appeared to suggest that third-party transmission rights held by merchant generators outside the BAA would be turned over to the Load Serving Entity such that they would be reflected as Bucket One transmission rights. This is inconsistent with Vistra’s understanding of EDAM market functioning. Specifically, Vistra understood that where a third-party would like to schedule a resource into the BAA through the EDAM, it would self-schedule a transfer path and resource (pathway one) to flow using its transmission rights to that BAA. However, the CAISO appears to be requiring the transmission information to be registered, but it is unclear whether the third party is incentivized to do so if it is not able to submit a transfer self-schedule. This highlights the excessive confusion over how the EDAM Market will function in practice, and the inputs to (and thus the purpose of) the RSE test.
[19] See generally Cal. Indep. Sys. Oper. Corp., 116 FERC ¶ 61,274, at P 129 (2006) (explaining that the RUC is “a reliability mechanism designed to procure capacity in advance of real time, making the energy from that capacity available to meet load in real time”).
[20] Further, under EDAM, it is unclear whether long-start resources will be committed by RUC across the footprint to meet CAISO BAA needs.
[21] Powerex Corp., Executive Summary: The Western EIM’s Approach to Applying California’s Cap and Trade Program to Imports Is Undermining the Program’s Core Objectives 2 (2022) (“By understating the GHG emissions of electricity imports, wholesale electricity market prices in California are suppressed—distorting the price signals necessary to drive GHG reductions, while reducing the compensation to both in-state and external clean resources that actually do produce clean electricity and deliver to California.”), https://powerex.com/sites/default/files/2022-07/Examining%20the%20Western%20EIM’s%20Deeming%20Approach%20to%20GHG%20Pricing%20Programs%20%28Executive%20Summary%29.pdf
[22] Id. Powerex’s full report details the price distortions caused by the WEIM framework. Powerex, The Western EIM’s Approach to Applying California’s Cap and Trade Program to Imports Is Undermining the Program’s Core Objectives 7 (2022) (“It has long been understood by the California Air Resources Board (CARB), the [CAISO], and many of the stakeholders participating in western wholesale electricity market discussions that the Western EIM’s GHG deeming algorithm (for determining which external resources are the specified sources ‘deemed delivered’ to California) is imperfect.”), https://powerex.com/sites/default/files/2022-07/Examining%20the%20Western%20EIM’s%20Deeming%20Approach%20to%20GHG%20Pricing%20Programs%20%28Full%20Paper%29.pdf (“Powerex WEIM Report”).
[23] See Revised Straw Proposal at 70 (claiming that the WEIM framework “can evolve into a different approach (e.g., zonal or LADWP) if state regulatory programs change”).
[24] See id. at 106 (providing an EDAM implementation date of Q4 2023 and a go-live date of 2024).
[25] Vistra owns a Reliability Must Run jet fuel unit that is not a market participating resource.
[26] “The Commission has recognized that RECs are state-created and -issued.” Accounting and Reporting Treatment of Certain Renewable Energy Assets, 180 FERC ¶ 61,050, at P 54 (2022) (citing WSPP Inc., 139 FERC ¶ 61,0161, at P 21 (2012)).
[27] Tenn. Gas Pipeline Co., L.L.C., 179 FERC ¶ 61,076, at PP 1-2 (2022).
[28] See id. P 19.
[29] Powerex WEIM Report at 7.
