Comments on EDAM: Congestion Revenue Allocation Phase 2 - Working Group (12/11)

1. Please provide your organization's overall feedback regarding the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation - Phase 2 working group presentation held on December 11, 2025.

Appian Way wholeheartedly supports the promise of a broader regional market through EDAM, which, if implemented properly, will bring greater reliability, market efficiency and cost savings for consumers throughout the west.

The presentation by CAISO was extremely helpful, particularly in identifying the ways that transactions in EDAM areas impact CAISO congestion. A more detailed set of comments is provided below.

2. Please provide your organization's overall feedback regarding the associated initial principles for guiding Phase 2 design.

Appian Way concurs with the phase 2 design principles. However, under the recently approved tariff, there is inherent incompatibility among the various design principles regarding effective administration of CRRs in the CAISO and OATT transmission rights in the non-CAISO EDAM areas. To be very clear, the current allocation rules are both discriminatory and harm CAISO ratepayers and transmission customers. As such, the tariff as currently approved violates the design principles. Below we provide two specific examples of how this is so.

Equitable Allocation of Congestion Revenues Under Outage Scenarios

              CAISO has long identified “loop flow” as a contributing factor to congestion and congestion allocation issues within the CAISO, so it is no surprise that CAISO identified transactions between EDAM areas as impacting important constraints in CAISO:

• “Transactions between PAC areas have a directional impact on CAISO constraints” p.24
• “PAC transactions have significant impact on a subset of CAISO constraints” p.24
• “About 21 percent of all constraints located in the CAISO area are affected by parallel flows generated by transactions between PacifiCorp east and west areas” p.25
• “A few constraints, such as Path26, can experience up to 40 percent flow impacts from transactions between PacifiCorp east and west” p.25

Important constraints identified include the California-Oregon Interface (COI) and many important internal constraints limiting flow from southern CAISO to the North on the CAISO 500 kV backbone network (Midway-Vincent, Losbanos, Gates-Midway, Path26, and others). Importantly, these constraints are most likely to bind with large price differences from South to North under circumstances when there are outages and/or significant transmission derates. When there are transmission derates and resulting congestion, there is simply not enough transfer capability to accommodate all firm rights holders. Indeed, the equitable and commonly accepted approach in such circumstances is to pro-rate down equivalent firm rights holders to ensure firm transactions do not exceed the capacity of the transmission grid. Indeed, this is the approach applied to OATT physical rights holders in the existing non-LMP bilateral markets when transmission is restricted due to outages or other system conditions (i.e OATT physical rights holders are accustomed to experiencing firm rights proportionately derated when transmission conditions so dictate – indeed they would likely expect this approach).

However, the current EDAM rules provide OATT rights holders with preferential access to transmission at the expense of CAISO firm rights holders when there are outages. In the case of the EDAM Tariff, OATT rights will be honored 100% with no reduction in capacity when there is a reduction in transfer capability on CAISO’s system such that not all rights holders can be made whole. CAISO rights will absorb the financial impact both of their own pro-rata share of the reduction as well as subsidize external, firm OATT rights flowing on the same constraint. The impact of this discriminatory treatment is an inequitable cost shift, primarily at the expense of CAISO transmission customers who pay for the embedded cost of their transmission network. CAISO ratepayers and customers pay for the cost shift through reduced auction revenues and CRR values, and though impaired financial integrity of the CRR products that are relied on to hedge delivery of power to load from contracted resources. Indeed, CAISO staff have identified loop flow a major culprit in underfunding many of the constraints identified in CAISO’s analysis. For instance, Gates-Midway, a constraint identified in the CAISO December presentation, was one of the most congested constraints in CAISO in 2024 and was underfunded to the tune of 44% ($27 MM) in that year.

As yet, to our understanding, CAISO staff has not acknowledged outages as an aspect of the asymmetric treatment between CRRs and /OATT rights that this Phase 2 process is intended to address.

Equitable Incentives for Contracting New Renewable Resources That Avoid Cost Shifts

Over the past number of years, electricity customers throughout CAISO and the Western markets have wanted to develop, contract for and access the significant wind and solar resources located in the southwest US. The development of these resources has helped states throughout the region reduce greenhouse gas emissions, but transmission to deliver power from the southwest has become constrained with the growth of renewable generation in this region.

As new resources are developed in the area, it is essential that market participants have comparable treatment as they seek to contract for zero-carbon energy, regardless of whether they are CAISO or non-CAISO EDAM entities. Consider a utility-scale solar plant at the southern border of PACE or in Arizona. If such a plant was contracted for as a network or point-to-point resource for Pacificorp, under the current EDAM tariff, this new resource would not pay for the congestion it causes in CAISO, even though 40%(ish) of its output will flow over the CAISO transmission network from south to north. This new resource would represent incremental new loop flow that would crowd out CAISO transmission ratepayer access to usage of their own network that they pay for. Now consider the same resource contracted for by a Northern California CCA or utility. In this case, no cost shifting would occur because the CAISO CRR allocation process would not result in the contracting load obtaining a greater share of transmission rights merely by contracting for generation. It is apparent that this system eventually collapses on itself, with CAISO ratepayers over time having their access to their own transmission network eroded, transaction by transaction.

The ultimate solution here must be a scenario where CAISO entities’ access to their own transmission network is fair and equitable and not subject to being worn away by new physical OATT rights that do not incrementally invest in the expansion of the grid. Certainly, it is reasonable to reserve an amount of CAISO transmission for EDAM entities based on historical usage. However, this phase 2 process will need to result in a business solution that allocates congestion rights transparently and fairly and does not create incentives for cost shifting where incremental new transactions do not pay for the congestion they cause. The current EDAM tariff is most definitely deficient in this respect.

Efficient Market Outcomes and Effective Congestion Management

              A desired outcome of the EDAM reforms is increased and more efficient economic usage of the transmission network. However as economic transactions increase, it is quite likely that congestion will increase and new patterns of congestion may emerge. In addition, BAA operators in bi-lateral markets may have heuristics or self-scheduling rules of thumb that are used under system conditions when transmission congestion may otherwise occur that would be an alternative more economical solution. Indeed, some instances may occur when these heuristics or rules of thumb are structured so as to make deliverable the BAA’s resources that may otherwise face economic curtailment in a market system.

              The goal of the phase 2 design to “reduce or eliminate self-schedule incentives” and “support economic bidding and efficient market outcomes” is of great importance and will be a significant challenge. The concern, strongly expressed by the MSC and the WEM Governing Body Market Expert, is that the “use or lose” nature of physical rights in the OATT system creates incentives for uneconomic self-scheduling or uneconomic bidding. Every market in North America that has successfully implemented an LMP system to achieve least-cost dispatch and efficient transmission usage has had to adapt the OATT physical rights system to some form of allocated financial rights in order to avoid significant implementation challenges, inefficiencies or market design flaws.

While these issues were raised over the summer in the context of parallel flows where one BAA’s transactions flow power over a neighboring BAA’s transmission network, this problem is universal and more general. Self-scheduling incentives will also exist in any “OATT physical rights” paradigm both within BAAs and between them.

Financial Rights and Firm Flow Entitlements

              Ultimately, it is simply not efficient or equitable to maintain the existing OATT system of physical rights unmodified in the context of an efficient LMP system such as EDAM. Other ISOs have solved this problem by converting physical rights into financial rights such as ARRs and/or CRRs. An alternative that has been proposed by the MSC is to establish firm flow entitlement rights (FFEs) associated with firm rights over each constrained facility. Each of these solutions would create rights to flow over scarce transmission with the goal of establishing an equitable initial allocation of rights. Moreover, a clear and equitable allocation of rights would avoid undue cost shifts and incentives for new OATT transactions that cause congestion but are able to bypass paying for the congestion they caused.

A key difference between Financial Rights and FFEs is that financial rights are point to point and have a specific source and sink. As such, they are very practical from the standpoint of congestion hedging and are workable regardless of what constraints bind, whereas FFEs must be specified for each constraint and there are potentially hundreds, or thousands, of constraints which change over time as system conditions and transmission topology changes over time. 

3. Please provide any additional feedback.

              FERC issued a while paper on “SEAMS Coordination in the Western Interconnection” on November 21, 2025. Addressing this coordination should be a very high priority for CAISO, not only with respect to the successful implementation of EDAM, but also with respect to coordination with non-EDAM BAAs that border the CAISO system.

              A likely direction of this Phase 2 process will be establishing a common understanding of a system for the allocation of rights to flow power. We believe CAISO staff should better understand the loop flows from non-CAISO entities that are impacting the CAISO grid. As long as external entities are allowed to unrestricted flow on CAISO's transmission facilities, they will have no incentive for market to market coordination, and cost shifting will continue to occur where non-EDAM and non-CAISO entities are given unrestricted access to flow on CAISO transmission whilst CAISO participants face restricted transmission access and unhedged congestion due to the erosion of the congestion rights. The first step in the process is for CAISO to understand what is going on on their system, particularly with respect to flows from the southwest to the north. Ultimately, it will be essential to negotiate a shared understanding of the level to which transactions in neighboring BAAs are allowed to flow on CAISO's network without paying for the congestion they cause, and the level above which transactions from neighboring regions must pay for the congestion they cause through a market to market coordination agreement, as referenced in the FERC SEAMS white paper, and as occurs in other markets. 

1. Please provide your organization's overall feedback regarding the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation - Phase 2 working group presentation held on December 11, 2025.

CDWR-SWP would like to thank CAISO for presenting this EDAM Congestion Revenue Allocation Stakeholder meeting and allowing stakeholders to participate in this commenting process.

CDWR-SWP agrees that although CAISO does indeed affect constraints within the PacifiCorp Areas, the impact of parallel flows on these constraints is less than 0.5% contribution, meaning that the impact from CAISO, is considered, de minimis. The same is also true for transactions between the PacifiCorp east and west areas affecting the constraints in CAISO, maintaining de minimis impact.

Based on the analysis done by CAISO, CDWR-SWP believes that maintaining transparency is key to helping customers manage and hedge congestion risk. Therefore, CDWR-SWP proposes that CAISO publishes either monthly or quarterly reports detailing parallel flow impacts on constraints within the CAISO BAA. This will help customers make informed decisions by providing historical data on key constraints within a customer’s hedging portfolio, thereby reducing the amount of risk to their hedge.

Furthermore, CDWR-SWP seeks clarification whether the proposed limitation/removal of self-scheduling will apply to the CAISO BAA or the greater EDAM footprint.

2. Please provide your organization's overall feedback regarding the associated initial principles for guiding Phase 2 design.

Although CAISO clearly points out that the congestion in PACE tends to marginally increase prices in CAISO or have negligible impact on prices based on congestion from PACW, these parallel flows provide a considerable impact to the Congestion Revenue Rights (CRR) auction efficiency which still creates considerable shortfalls where the total revenue collected from the Day-Ahead congestion charges is less than the payouts owed to CRR holders, creating an underfunding effect which impacts Load Serving Entities(LSE). As a result, these impacted constraints caused by parallel flows increase the risk to LSE’s by not providing a perfect Day-Ahead market hedge, thus incurring higher charges to their customers.

Therefore, CDWR-SWP suggests that CAISO performs a more in-depth analysis on how these parallel flows can be reduced to prevent further underfunding on key CAISO constraints due to transactions between PACW and PACE.

3. Please provide any additional feedback.

CAISO should run a study showing bigger impacts on certain nodes such as San Luis Pumping Plant to assess if the unusual MCC spikes (during solar hours) are the outcome of parallel flows (CAISO slide #19). Allocation of CRR revenue associated with EDAM transfer should be such that it would mitigate the costs associated with the unusual spike of MCC in such nodes.

1. Please provide your organization's overall feedback regarding the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation - Phase 2 working group presentation held on December 11, 2025.

Energy Division staff (ED staff or staff) of the California Public Utilities Commission (CPUC) develops and administers energy policy and programs to serve the public interest, advises the CPUC, and ensures compliance with CPUC decisions and statutory mandates. ED staff provides objective and expert analyses that promote reliable, safe, and environmentally sound energy services at just and reasonable rates for the people of California.  

ED staff appreciates the opportunity to submit comments on the recent EDAM Congestion Revenue Allocation (CRA) Phase 2 – Working Group meeting and associated analysis. ED staff thanks CAISO for performing this initial analysis. The expansion of the day-ahead market (DAM) model to other balancing authority areas (BAAs) will allow CAISO and stakeholders to assess the extent to which there are parallel flows across CAISO caused by other BAAs and vice versa. The congestion revenue tied to these parallel flows has not previously been modeled and is suspected to be one of the causes of the persistent underfunding of congestion revenue rights (CRRs) within the CAISO balancing authority area (BAA) because congestion caused by external flows reduces the amount of transmission grid capacity available for native load. Increased congestion increases the marginal congestion component (MCCs) of locational marginal prices (LMPs), which is how CRRs are paid out. With the launch of EDAM, this analysis should provide stakeholders greater visibility into these parallel flows due to the expansion of the DAM model. Rather than develop a CRA methodology that keeps these parallel flow congestion revenues internal to the BAA that they occur in, the revised methodology opens the door to allocating these congestion revenues entirely to the area that causes the congestion which is inappropriate because native load owns and maintains the CAISO BAA transmission grid, but then is not able to use all of native load’s own transmission capacity due to the impact of external BAAs’ flows on native load’s grid.

The original Congestion Revenue Allocation methodology that was approved by FERC in 2023, would have allocated congestion revenue to the BAA in which the constraint occurred. For example, if there was congestion revenue tied to a constraint in the CAISO BAA, but originating from flows in another BAA, that associated congestion revenue would have been allocated to the CAISO BAA.

Therefore, under the original proposal approved by FERC, the CAISO BAA would have begun collecting the congestion revenue tied to the parallel flows, which as explained above, has been a suspected cause of CRR underfunding within the CAISO system.

However, the expedited tariff revision that was approved by FERC in August of 2025 revised the allocation of congestion revenue for a specific class of bids (i.e.,when an EDAM BAA self-schedules their generation) and the congestion revenue associated with the parallel flow on the CAISO system will now be allocated to them.  CAISO will still collect the congestion revenue tied to these CAISO constraints, but how they allocate it will change. Rather than allocating this congestion revenue to the BAA in which the constraint occurred, CAISO will allocate this congestion revenue to the BAA that caused the congestion. Therefore, the revised methodology will maintain this suspected underfunding problem for the immediate future if other BAAs decide to self-schedule their bids in order to receive this congestion revenue.

2. Please provide your organization's overall feedback regarding the associated initial principles for guiding Phase 2 design.

Overall, ED staff support the principles presented and discussed at the December 11^th working group meeting. ED staff strongly supports Principle #1 and #6 (related), and Principle #5.

Principle #1

• Congestion revenues should be allocated in an equitable manner so as to avoid undue cost shifts.
  • Seeks to recognize that a design for allocation should provide for fair and equitable allocation of congestion revenues

Principle #6

• Provides a comparable allocation method for the CAISO balancing area with a CRR construct and for EDAM balancing areas which sell firm OATT transmission.
  • Seeks to recognize that the design should enable symmetry in allocation between CAISO and EDAM balancing areas

The parallel flows have long been suspected to be one of the causes of CRR underfunding. The expansion of the DAM should not come at the expense of California ratepayers, who have invested millions, if not billions of dollars, into a building a reliable grid. Therefore, rather than allocating away congestion revenue tied to parallel flows to the BAA causing the parallel flow, any long-term CRA methodology should return that congestion revenue to the BAA in which the constraint occurred. ED staff recognizes that this is further complicated by the CAISO’s BAA CRR construct, but it should be the job of EDAM CRA to develop a design that keeps this congestion revenue internal to the CAISO BAA. How to allocate this congestion revenue within the CAISO BAA is another issue that is being discussed in the CRR Enhancements Initiative.    

Stakeholders understood that while the revised CRA methodology had shortcomings, revisions were necessary as a stopgap measure for EDAM go-live to occur on time. As adopted, CAISO will first collect congestion revenue tied to CAISO BAA constraints, and then transfer congestion revenue from parallel flows when tied to balanced self-scheduled bids from non-CAISO BAAs. Self-scheduled bids, or price taker bids, ensure the resources of entities with OATT Rights in non-CAISO BAAs will flow from Point A to Point B without experiencing any pricing differences due to congestion. Price-taker bids ensure resources are dispatched, but also reduce the economic dispatch efficacy of electricity markets.

By contrast, the CAISO BAA will collect the congestion revenue tied to those self-scheduled bids to the extent the CAISO BAA causes parallel flows in other BAAs, but have no mechanism to allocate this congestion revenue. This is because the CAISO BAA converted their OATT Rights system into a financial transmission right system, known as CRRs when the DAM was established. As designed, the revised methodology creates an asymmetry for the CAISO BAA. If congestion revenues collected in one BAA can be transferred to another BAA, load serving entities in CAISO BAA should receive these revenues as well to the extent they materialize.

Principle #5

• Establishes proper incentives for economic market participation supporting efficient market outcomes.
  • Seeks to recognize that the design should reduce or eliminate self-schedule incentives and should support economic bidding and efficient market outcomes

The Market Surveillance Committee and WEM Expert Susan Pope both raised concerns about pervasive self-scheduling incentives when the revised CRA methodology entered the approval process. ED staff appreciates the MSC and Susan Pope for identifying these concerns for all parties, but also notes that the discussion regarding the shortcomings  with the revised CRA process has identified the ability to game the market for all market participants.

ED staff recognizes fairly allocating congestion revenues is an extremely complex topic but urges CAISO staff to consider a near term enhancement(s) to create a “stop the brakes” mechanism, such as a pause in settlements, should rampant pervasive behavior materialize. If extreme, CAISO should consider reverting to the prior methodology, that this revised methodology replaced as an interim/emergency measure. ED staff does not support consideration of allocating parallel flow congestion revenue tied to economic bids, as proposed in Spring 2025. The MSC and WEM Expert Susan Pope have noted this proposal could significantly worsen pervasive incentives.[1]

“We understand that the nature of these changes would be to extend the rebate of congestion charges on constraints located in other balancing areas to generation that is dispatched in accord with its firm transmission service, rather than self-scheduled. We believe that this is a bad design and a bad use of CAISO resources.”[2]

[1] initial-brief-wem-governing-body-market-expert-opinon-on-extended-day-ahead-market-congestion-revenue-allocation-jun-18-2025.pdf

[2] Pg. 30, market-surveillance-committee-final-opinion-extended-day-ahead-market-congestion-revenue-allocation-jun-16-2025.pdf

3. Please provide any additional feedback.

ED staff have a couple of questions and concerns that we will address here.

Timeline

ED staff is concerned about the timeline being proposed by CAISO in the December 11^th meeting.

“Q4 2026 - Targeted decision timeline on policy design based on progression through stakeholder process.”

The EDAM footprint in 2026 is relatively small – the footprint will include PACE/PACW, and will expand to include Portland General Electric (PGE) in fall of 2026. ED staff is concerned that the data that will emerge at go-live will be relatively straightforward, but more useful market data will not emerge until EDAM expands in 2027 and 2028 to LADWP, BANC, NVE, etc. ED staff is not advocating for delaying this initiative into 2027 or 2028, but encourages CAISO staff to conduct more extensive analysis for this initiative in Stage 2 and 3, covering a wider and more meaningful EDAM footprint. Analysis using WEIM data from a larger footprint will be arguably more helpful for designing a long-term CRA design than the initial data from the narrow EDAM footprint at go-live.

Questions

• ED staff requests that CAISO confirm if their settlements system will be able to break out the congestion revenue tied to a parallel flow that cross multiple BAAs? At go-live this will not be a concern, but as the market expands to PGE and other entities in early 2027 the ability to break apart the congestion revenue will be more important, depending on what long-term solution is adopted and how soon it can be implemented. For example, if there are flows and transmission capacity, could CAISO’s DAM model identify what aspects of a flow from CAISO through PACW to PGE are tied to which constraints? Or even more complicated, if there are flows in the above scenario that have to transfer through BPA because of no other available transmission capacity, can CAISO identify what portion of the congestion revenue is tied to constraints in BPA?  
• ED staff requests that CAISO identify which intervals are impacted on slide 25, especially regarding Path 26? 
• ED staff requests clarification on how CAISO is treating congestion revenue tied to parallel flows caused by flows from another market, such as Markets+? Is this congestion revenue assigned to the BAA in which the constraint occurs, or is this congestion revenue returned to the market participant in the other market? If the latter, has CAISO initiated these conversations with Markets+? Or does EDAM simply keep these congestion revenues?
• In addition, to the extent resource adequacy (RA) imports from a non-EDAM BAA generate congestion revenue, who receives this revenue? It is ED staff’s understanding that the non-EDAM BAA with those types of import RA contracts would not receive the connected congested revenue for those bids, since RA imports economically bid. The adopted CRA methodology only allocates parallel flow revenue tied to self-schedules, not economic or negative bids. For example, if an LSE within the CAISO BAA has an import RA contract with BPA, and this flow causes congestion, who is assigned this congestion revenue? It is ED staff’s understanding that the CAISO BAA would retain this congestion revenue under EDAM, but would appreciate if CAISO could confirm.
• ED staff requests analysis on whether market participants could increase the market clearing price by using virtual convergence bidding to increase the price at which their self-schedule bids will clear? If they self-schedule, they would be able to receive the market clearing price AND any associated congestion revenues tied to parallel flows caused by those self-scheduled bids. Does CAISO have a mechanism to address this arbitrage opportunity, and if not, do they plan on developing a mechanism before go-live?
• Finally, ED staff would like to voice our support for the cost impact analysis as discussed between PG&E and CAISO, around the 1 hour 20-minute mark.

1. Please provide your organization's overall feedback regarding the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation - Phase 2 working group presentation held on December 11, 2025.

DC Energy thanks the CAISO for providing and presenting  insightful analysis regarding unscheduled parallel flows based on historical data in the Western Energy Imbalance Market (WEIM).  This analysis, together with the forthcoming analysis based on EDAM market simulation data, should inform future policy and system modeling decisions as EDAM evolves.  This analysis should also inform decisions regarding congestion revenue inadequacy allocation and CRR underfunding in the CAISO.  To that end, the CAISO should provide more information regarding the dollar values of congestion caused by unscheduled parallel flows, in order to better understand their contribution to congestion revenue inadequacy.

The CAISO also should provide the flow contribution of unscheduled parallel flows on each constraint or the data necessary to evaluate such flow contributions. The raw historical data the CAISO used in its analysis would help market participants do their own assessments regarding flow contributions on individual constraints and otherwise better understand how unscheduled parallel flows affect congestion in the CAISO and the wider-EDAM market.  An improved understanding would in turn allow market participants to transact with more confidence and accuracy, ultimately improving market efficiency. 

In addition, once simulation data is available, the CAISO should publish shift factors for all EDAM binding constraints in all EDAM BAAs, without limitation by the shift factor cut-off threshold.  This data should continue to be published after EDAM go-live, because it would greatly enhance market transparency for all participants. 

2. Please provide your organization's overall feedback regarding the associated initial principles for guiding Phase 2 design.

The draft principles premised on the “continued sale of OATT transmission rights” conflict with the other stated draft principles, due to the use-it-or-lose-it nature of physical transmission rights.  As Dr. Susan Pope has explained:

[An] incentive to self-schedule arises because OATT transmission customers will be eligible to receive a congestion revenue payment to offset EDAM congestion charges for parallel flow on constrained transmission facilities in neighboring BAAs only if they submit balanced self-schedules to use their monthly or yearly firm OATT transmission rights. If their balanced schedules are expected to cause material parallel flows on congested transmission, OATT customers often will be able to serve their load less expensively by self-scheduling, because if they do not self-schedule they will not be eligible to receive a rebate of their EDAM parallel flow congestion charges through receipt of an allocation of EDAM congestion revenues. The incentive is strongest when the OATT schedule would cause material flows across a congested constraint in a neighboring EDAM BAA (in the direction of congestion).[1]

Thus, for example, the continuation of physical transmission rights conflicts with the draft principle to “[e]stablish[] proper incentives for economic market participation supporting efficient market outcomes.”

Rather than enshrining the continued sale of physical transmission rights in the guiding principles for congestion allocation in EDAM, the CAISO should develop a plan to transition physical transmission rights to financial transmission rights.   

The continuation of physical transmission rights conflicts with the draft principle to “manage and hedge congestion risk exposure considering grid conditions and feasibility of flow.”  OATT based physical transmission rights do not adjust to changing grid conditions or consider the feasibility of flows. In contrast, centrally clearing auctions for Congestion Revenue Rights (“CRRs”) in the CAISO, as well as equivalent financial transmission rights in every other day-ahead electricity market in the US, are based on a simultaneous feasibility test that ensures the maximum feasible utilization of the transmission network based on the best available data regarding expected grid conditions during the settlement period.  CRRs and their equivalents then settle on actual day-ahead congestion as determined by grid conditions over the settlement period.  Simultaneous feasibility should be a fundamental principle guiding the long-term congestion allocation process and market design of EDAM.

The continuation of physical transmission rights also conflicts with the equitable allocation of congestion revenues and the equal treatment of transmission customers in each EDAM BAA.  Static OATT-based firm physical transmission rights demand priority in the allocation of congestion revenue, even when their exercise is infeasible in their native BAA and can only be accomplished by additional unscheduled parallel flows that increase congestion in neighboring BAAs. Congestion should be paid by the market participant that causes it, including congestion in BAAs outside of the BAA(s) where it was scheduled; otherwise, there is an undue cost shift.[2]  The preservation of physical transmission rights compromises the other draft principles. 

[1] Susan L. Pope, Western Energy Market Governing Body Market Expert, Opinion on California ISO Final Proposal for EDAM Congestion Revenue Allocation (June 16, 2025) available at https://www.westernenergymarkets.com/documents/wem-governing-body-market-expert-opinon-on-extended-day-ahead-market-congestion-revenue-allocation-jun-18-2025.pdf; see also, EDAM Congestion Revenue Allocation, presentation by Scott Harvey, slide 12 (Mar. 28, 2025) (“Tying allocation of congestion rents to use of firm transmission, or to the dispatch of generation to meet balancing area load, will generally create inefficient use-it-or-lose-it self-scheduling incentives in EDAM”) available at: https://www.caiso.com/documents/extended-day-ahead-market-congestion-revenue-allocation-harvey-presentation-mar-28-2025.pdf

[2] Conversely, a hedge should be available for congestion on each constraint within the market that may be affected by a power flow, regardless of BAA.

3. Please provide any additional feedback.

DC Energy appreciates the CAISO’s focus on the principles that should guide the development of durable, long-term congestion allocation market design in EDAM.  It was DC Energy’s understanding, however, that the CAISO would seek to implement certain near-term enhancements to the current EDAM congestion revenue allocation.  The CAISO indicated to stakeholders,[1] the ISO Board of Governors and the Western Energy Market Governing Body,[2] as well as the Federal Energy Regulatory Commission[3] that it would begin to pursue certain near-term enhancements to the current EDAM market design prior to the initial implementation of EDAM in 2026.

Specifically, CAISO Management identified two key, near-term enhancements to be discussed prior to EDAM implementation: “expand[ing] the allocation of congestion revenues from parallel flows for the exercise of eligible firm transmission rights beyond those self-scheduled, in a manner that better incentivizes economic bids and more efficient market behavior;” and (2) “establish[ing] reciprocal treatment for the CAISO balancing area by allocating parallel flow congestion revenue arising from a transmission constraint in a neighboring EDAM balancing area to support affected congestion revenue rights on the CAISO system.”[4]  The CAISO should honor this commitment and work quickly to finalize and file these previously discussed near-term enhancements. 

Long-term, EDAM should transition from physical transmission rights in certain BAAs to financial transmission rights across all EDAM BAAs, where congestion revenue allocation and the ability to hedge congestion costs are not tied to physical bids and schedules, consistent with the other draft principles outlined by the CAISO in its December 2025 presentation.  A combination of firm flow entitlements on seams with non-EDAM BAAs and auctioned, centrally clearing, EDAM-wide CRRs with source and sink locations across and among all EDAM BAAs, similar to interstate RTOs, is the best way to address the self-scheduling and congestion allocation issues now facing EDAM. 

It may take some time to implement this change to the EDAM market design, so in the interim, the CAISO should make the near-term enhancements promised to stakeholders, its Board and WEM Governing Body, as well as FERC.

[1] See, e.g., Enhanced Day Ahead Market Congestion Revenue Allocation Initiative Presentation, at slide 25 (May 27, 2025).

[2] Memorandum to ISO Board of Governors and Western Energy Market Governing Body Regarding Decision on EDAM Congestion Revenue Allocation, at (June 12, 2025) (“Joint Memo”) available at: https://www.caiso.com/documents/decision-on-edam-congestion-revenue-allocation-memo-june-2025.pdf

[3] See California Independent System Operator Corp., Tariff Amendments to Enhance Congestion Revenue Allocation for EDAM­, Docket No. ER25-2637-000 (filed June 26, 2025) (“FERC Filing”).

[4] Joint Memo at 5; see also, FERC Filing at 9 (committing to consider a near-term enhancement to develop “a treatment for congestion revenue allocation within the CAISO balancing area that is comparable to the treatment afforded to OATT transmission service rights in other EDAM balancing areas.”)

1. Please provide your organization's overall feedback regarding the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation - Phase 2 working group presentation held on December 11, 2025.

PG&E appreciates CAISO providing the Stage 1 analysis of the problem and beginning discussions on EDAM CRA Phase 2. The principles CAISO articulated principles are a great starting point.

PG&E is requesting CAISO to conduct an additional workshop to focus on the thinking and intent behind the principles. We would appreciate a discussion where CAISO can more explicitly describe its thinking and also for stakeholders to discuss interpretations. The principles are vague in places and leave room for different interpretations. For example, Principle 3 says, “Supports continued administration of CRRs in the CAISO balancing area and continued sale of OATT transmission rights.” What is the intent?

• Does this mean that the CRR/OATT framework should continue for now,

- OR -

• Does CAISO mean that the ideal solution is one in which the CRR/OATT framework continues unaltered into the foreseeable future?

The additional understanding and discussion of intent would help move PG&E to a place where we could provide edits and concise comments to the principles, as well as, provide a way to consider if prioritization is necessary.

2. Please provide your organization's overall feedback regarding the associated initial principles for guiding Phase 2 design.

No comment

3. Please provide any additional feedback.

No comment

1. Please provide your organization's overall feedback regarding the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation - Phase 2 working group presentation held on December 11, 2025.

PacifiCorp appreciates the CAISO’s efforts to develop and present analysis to support Phase 2 discussions on congestion revenue allocation (CRA). PacifiCorp found the presentation a helpful starting point for considering how the current Phase I design will impact congestion revenue outcomes following the launch of EDAM, and to inform a long-term CRA design.

PacifiCorp recognizes that the data presented reflects Stage I of CAISO’s analysis and relies on historical WEIM data as a proxy for EDAM congestion and parallel flow patterns. Given EDAM’s launch is still several months away, PacifiCorp understands CAISO’s approach of using the best available data to inform CRA discussions. In that context, PacifiCorp agrees that leveraging WEIM data to explore potential outcomes is appropriate and can provide valuable insight during ongoing long-term CRA design discussions.

While PacifiCorp appreciates the transparency and breadth of the data presented, additional clarity on the implications of certain analyses would further support stakeholder understanding. Based on the information presented during the stakeholder meeting, it was not clear what conclusions stakeholders should draw from the results or how specific analyses were intended to inform Phase 2 design discussions. PacifiCorp requests that CAISO clearly explain the key takeaways and relevant implications of its analysis in future meetings to ensure stakeholders can most effectively engage in the design discussions.

As EDAM launches in May 2026, any available operational data, while not fully representative of the eventual overall EDAM footprint, could still be informative in ongoing design discussions when appropriately contextualized. PacifiCorp would therefore support the CAISO’s continued analysis and the use of EDAM congestion and parallel flow data to inform the Phase 2 congestion revenue allocation design.

2. Please provide your organization's overall feedback regarding the associated initial principles for guiding Phase 2 design.

PacifiCorp supports the initial principles proposed to guide the Phase 2 design. PacifiCorp believes the principles provide an appropriate foundation for continued evaluation of congestion revenue allocation and is comfortable with the direction outlined.

3. Please provide any additional feedback.

No comment.

1. Please provide your organization's overall feedback regarding the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation - Phase 2 working group presentation held on December 11, 2025.

San Diego Gas and Electric (SDG&E) appreciates the chance to provide comments on the EDAM CRA Phase 2 presentation and discussion. SDG&E thanks CAISO for the Congestion Revenue Allocation Methodology Stage 1 Analysis showing the proposed enhancements, the congestion patterns and constraints, and their effects on flow across the EDAM footprint. This analysis will aid in improving known concerns with the approved interim design. SDG&E also supports the CAISO’s proposal to draft design principles for the Stage 2 effort, which will result in enhancements to improve congestion hedging in EDAM without sacrificing equitable allocation of costs.

2. Please provide your organization's overall feedback regarding the associated initial principles for guiding Phase 2 design.

SDG&E supports the principle that congestion revenues should be allocated in an equitable manner and agrees that the design principles outlined in the presentation are intended to increase confidence that the market is not prejudiced against any transmission hedging framework or result in undue cost shifts between participants. Moreover, the durable design must be able to accommodate changes to the composition of EDAM and principally should not create disincentives for participation from additional BAA membership. SDG&E also agrees with the inclusion of a principle that focuses on establishing proper incentives for economic participation in the market. However, efficiently and effectively layering an OATT rights framework alongside a market framework remains a complex undertaking that will require significant discussion and analysis prior to the adoption of any near-term or long-term design.

3. Please provide any additional feedback.

SDG&E thanks CAISO for the information provided regarding the initial historical congestion analysis and considers it a good starting point for discussion of the allocation outcomes. While SDG&E recognizes CAISO’s stated position to analyze the potential impacts and address the drawbacks of the framework before EDAM goes live, SDG&E requests that CAISO provide stakeholders with at least a high level overview of the following for any near-term enhancements: 1) would any of the systems currently used need to be updated or enhanced, and 2) what would the plan be for any re-design, testing and implementation. This information is critical for stakeholders to assess the technical viability of implementation as well as the estimation of potential impacts of any near-term proposal, especially if it is to be adopted in an expedited timeframe. SDG&E recognizes that any enhanced design option is likely to undergo iterative changes during phase 2 of the initiative. Still, SDG&E strongly urges the CAISO to assess options for providing these overviews as part of the upcoming working group meetings, so stakeholders can understand the system and process impacts of any proposed enhancements.

Further, as discussed by CAISO during the December working group meeting, there are limits to using both historical data and data from parallel operations to estimate the realized physical transmission dynamics of the EDAM footprint. This is especially true when considering the participation of additional BAAs in the market. To that end, SDG&E notes that any longer-term Phase 2 & Phase 3 proposals will have to be re-evaluated over time as the economic impact of congestion on transmission rights holders becomes clearer. Nevertheless, SDG&E supports starting these discussions expeditiously and the three-stage analytical framework for changes to the CRA methodology as outlined, with the added request that CAISO clearly state what adjustments (if any) are made to the WEIM and EDAM data simulation used for the second stage analysis.

1. Please provide your organization's overall feedback regarding the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation - Phase 2 working group presentation held on December 11, 2025.

The Six Cities appreciate the CAISO’s efforts to analyze and present data that seek to describe the potential impacts of the CAISO’s 2025 revisions to its originally-approved policy for allocation of congestion revenues in the EDAM.  The data are helpful in contextualizing the possible effects of the 2025 changes.  The Six Cities support the three-stage approach as discussed in the CAISO’s December 11, 2025 report entitled “Stage 1 of Analysis.”  (See Report at 4.)

The Six Cities request that the CAISO clarify whether its future stages of reporting and analysis will include a more robust description of the expected financial impacts of the CAISO’s 2025 congestion revenue allocation policy.  Based on the data provided thus far, it appears that the PacifiCorp balancing authority area (“BAA”) (and the transmission rights holders in the PacifiCorp BAA) are likely to be the beneficiaries of the 2025 policy changes, given the data showing that there are constraints impacted by transactions between PacifiCorp East and PacifiCorp West located in the CAISO (and that CAISO transactions impact the PacifiCorp areas in a way that would generate parallel flows infrequently).  However, the Six Cities acknowledge that transaction patterns and congestion flows may change once EDAM is implemented.  For this reason, data from the CAISO’s second and third analytical stages are likely to be important.  The Six Cities request that the CAISO assess, as part of the analyses presented in this initiative, the cost impacts to the CAISO BAA arising from the application of the 2025 policy revisions, especially as part of Stage 2 and Stage 3.  It will also be critical to understand the extent to which expansion of EDAM to BAAs other than PacifiCorp may expand the impacts to the CAISO of the 2025 policy changes. 

Second, the Six Cities request that the CAISO’s analysis include an assessment of impacts on the funding and revenue adequacy of Congestion Revenue Rights (“CRRs”) in the CAISO BAA.  As highlighted by certain parties in comments on the policy development phase of the 2025 policy changes, the revenues that are transferred from the CAISO to EDAM BAAs in order to enable the EDAM BAA to provide a larger congestion hedge to certain transmission rights holders might exceed the congestion revenue collected and may consequently be funded from CRR funding  (See Pac. Gas and Elec. Co. Comments on May 27 Hybrid Call, 6.2.2025.)  The CAISO Market Surveillance Committee also discussed the interaction of the revised congestion revenue allocation policy with CRR funding in its June 16, 2025 Opinion. 

Finally, the Six Cities request that the CAISO consider the extent to which parallel flows in the CAISO arising from EDAM transactions may adversely impact prices within the CAISO.  Again, the extent of any impacts may be best assessed during the market simulation phase or following go live. 

2. Please provide your organization's overall feedback regarding the associated initial principles for guiding Phase 2 design.

The Six Cities generally agree with the design principles that the CAISO outlined during the December 11^th meeting, subject to the additional comments below. 

The first design principle, setting forth that “[c]ongestion revenues should be allocated in an equitable manner so as to avoid undue cost shifts” (see Stakeholder Working Group presentation, 12.11.2025, at slide 31) sounds constructive and reasonable, but requires further clarification.  Upon initial review, this principle appears to work in tandem with the principle of ensuring comparability as between the CAISO BAA and external EDAM BAAs stated on slide 32 of the December 11^th presentation.  However, the Six Cities request confirmation that the principle of equitable allocation is in fact intended to encompass equity and the potential for cost shifts between BAAs in the EDAM (including the CAISO BAA) that are consistent with cost causation.  If the CAISO intends that equity principles and avoidance of cost shifts should be construed to mean something else, then the Six Cities request the CAISO clarify this principle.  For example, the Six Cities do not agree that the 2025 policy changes for EDAM congestion revenue allocation are necessitated by either equity or to mitigate the impacts of an undue cost shift to open access transmission tariff (“OATT”) customers in EDAM BAAs. 

Second, the Six Cities request that the design principles be revised to specifically acknowledge the interim and limited nature of the 2025 policy changes.  The Six Cities did not support indefinite implementation of the 2025 policy changes, and they did not support application of the 2025 policy changes to new OATT rights obtained after the start of EDAM.  (See Six Cities Comments on May 27 Hybrid Call, 6.2.2025.)  While the Six Cities understand that the CAISO intends to develop and adopt more durable policy changes through this initiative, if implementation of such changes appears to be infeasible in the near term, whether due to software limitations, a lack of stakeholder consensus, or other reasons, then the Six Cities reiterate their request to sunset the 2025 policy changes and/or limit their applicability to exclude from eligibility for a congestion rebate (due to parallel flows) new OATT services that are contracted after a date certain. 

3. Please provide any additional feedback.

The Six Cities have no additional feedback at this time. 

1. Please provide your organization's overall feedback regarding the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation - Phase 2 working group presentation held on December 11, 2025.

SCE appreciates the work that theCAISO has conducted. SCE is encouraged that the results generally show only small and/or infrequent instances of loop flow congestion across the initial configuration of EDAM. SCE also generally agrees with the schedule for the initiative that CAISO has provided, especially targeting a potential decision in Q4 2026. As many comments have previously enunciated, the currently approved policy is only an interim mechanism that has known limits and criticisms and should be replaced as soon as possible with a more durable policy.

Given the impending implementation of EDAM and associated market changes, the analysis following go-live will be critical for two reasons. First, it will essentially be the only opportunity to evaluate and ensure that the policy is working as expected. Second, the analysis of actual market data will be vital to the development of policy improvements and a durable policy solution. In advance, CAISO should provide stakeholders with a detailed schedule of when it expects reports will be available. CAISO should target releasing these reports as soon as possible after implementation, on a weekly basis initially, to allow stakeholders and the CAISO to assess whether the market is working as expected.  Further, expedient evaluation of market outcomes will allow for quick identification of issues and necessary adjustments. The schedule for this initiative calls for the publication of issues papers and proposals during Q2-Q4 2026; if there is any delay in the publication of initial data and analysis this time frame will likely need to be pushed back.

SCE appreciates the need for the CAISO to focus this initial analysis on potential impacts to PacifiCorp during the initial implementation of EDAM. However, as SCE and others have pointed out in previous comments, the parallel path congestion impacts will likely be much larger when other entities begin joining EDAM. Although it is hard to discern from the data provided, there does seem to be some indication in the data that parallel flow congestion impacts will be greater with the further expansion of EDAM. The next phase of the analysis should expand the more detailed studies to include the next set of entities expected to join EDAM, specifically Portland General Electric, LADWP, BANC and Nevada Power. Using WEIM data for this is appropriate because even after EDAM go-live the day-ahead market data won’t include these entities. Given the importance of the analysis for the determination of the best improvements and permanent policy, this analysis must be started now.

2. Please provide your organization's overall feedback regarding the associated initial principles for guiding Phase 2 design.

SCE generally agrees with the initial principles with the exception of the third principle, “[s]upports continued administration of CRRs in the CAISO Balancing Area and continued sale of OATT transmission rights.” While it may turn out that the continued use of both CRRs and OATT rights, in the CAISO BAA and non-CAISO EDAM BAAs, respectively, is the ultimate decision on the long-term solution to EDAM Congestion Revenue Allocation issues, this should not be decided before the stakeholder initiative gets underway and should not be a design principle. As was discussed in comments on the interim solution, a possible long-term solution may involve all EDAM BAAs converting to CRRs. There is a mismatch between CRRs and OATT transmission rights and the market and market participants might be better served by a permanent solution that eliminates this mis-match and puts all EDAM BAAs and market participants on an equal footing. At a minimum, such a solution should not be excluded from consideration by a “design principle.” A better design principle would be: “The solution encourages an efficient market solution and treats all EDAM BAAs and market participants fairly.”

3. Please provide any additional feedback.

1. Please provide your organization's overall feedback regarding the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation - Phase 2 working group presentation held on December 11, 2025.

As always, The Energy Authority (TEA) appreciates the staff time and effort that went into the presentation and background work. We also want to express appreciation for CAISO management’s prioritization of this initiative and commitment to enhancing and evolving the EDAM design.

It will come as no surprise that TEA views this effort as mission-critical for EDAM’s near- and long-term success. We have expressed deep concern going back to early 2024 regarding the EDAM Congestion Revenue Accrual and Allocation (CRAA)[1] design, both at the CAISO Tariff level and as enacted by the EDAM BAAs through their Tariffs and Business Practices (BP). The current EDAM CRAA design undermines the core economic and reliability benefits proposition of EDAM. It creates an incentive for most resources to self-schedule their output, which reduces the opportunity for the market to find the true least-cost solution, respond to supply and demand uncertainty, or manage around transmission outages. It also presents a major financial risk to the non-CAISO EDAM Load Serving Entities (LSEs) as these entities will be unable at times to adequately hedge their congestion exposure for both on-system and off-system purchases under the existing design.

TEA is deeply involved in EDAM go-live planning and implementation as a Scheduling Coordinator (SC) for both generation and load[2] in the first phase of market operation beginning May 1, 2026. Like other market participants across the West and in CAISO’s BAA, we will be heavily impacted by the immediate and second-order impacts of CAISO’s CRAA policy.

Based on this experience, we are concerned the timeline outlined in the December meeting is not nearly aggressive enough to deal with the known issues facing entities on day one of market operations – issues which have been being discussed at length over the last six-months but which have not seen full resolution to date and likely will not be addressed before go-live given the limited time available to make conforming Tariff and BP changes and system updates.

TEA therefore requests that CAISO prioritize addressing known CRAA design flaws as soon as practicable following go-live, including:

• Transitioning to a Scheduling Point-Tie (SP-Tie) model for the non-CAISO EDAM BAAs  parallels the model CAISO recently determined it would use at go-live for the CAISO EDAM BAA.
• Enabling Firm Point-to-Point (PTP) customers of non-CAISO EDAM Transmission Service Providers (TSP) to bid or schedule imports at the border of the EDAM BAA in which their generation sinks (i.e., receiving SP-Tie treatment), regardless of whether that bid is associated with a Resource Adequacy (RA) contract.
• Expanding Tier One congestion reversal eligibility to cover instances where non-CAISO EDAM LSEs have no choice but to rely on Non-Firm Network Transmission (NT) rights to serve their demand in an EDAM BAA and meet EDAM Resource Sufficiency Evaluation (RSE) requirements from on- and off-system resources.

TEA believes each of these changes will provide broad benefits to the EDAM community and does not see them as requiring a heavy lift from a Tariff, BP, or systems perspective.

Rather than providing an in-depth explanation and defense of the need to immediately address each of these elements here, TEA requests the opportunity to present its rationale at an upcoming stakeholder meeting and looks forward to discussing each with CAISO and stakeholders at that point.

Assuming those items can and will be addressed near-term, TEA believes CAISO’s timeline for making broader changes through the CRAA initiative is reasonable and provides feedback below on the individual design principles.

[1] TEA suggests adding the second “A” to the description to acknowledge there is both an element of where does the congestion revenue come from and where does the congestion revenue go to in this effort.

[2] TEA will begin providing generation and load SC services to Utah Area Municipal Power Systems (UAMPS) and generation SC services to Clark Public Utilities at initial EDAM go-live, will continue to manage wheel-through transmission rights on Portland General’s (PGE) share of the BPA-operated California-Oregon Intertie at PGE’s EDAM go-live, and will continue to provide generation and load SC services to its multiple partners in the CAISO BAA, all while remaining an active participant in western bilateral markets and providing similar services to entities in both SPP’s RTO-Expansion footprint in 2026 forward and its Markets+ footprint beginning in 2027.

2. Please provide your organization's overall feedback regarding the associated initial principles for guiding Phase 2 design.

Principle 1 (P1): Congestion revenues should be allocated in an equitable manner so as to avoid undue cost shifts.

TEA agrees with this principle but notes that care will need to be taken to ensure that the principle plays out in practice as intended, given potential differences across the EDAM BAAs in how customer rights are acquired and accounted for today.

P2: Supports the ability of transmission customers with firm transmission rights or CRRs to manage and hedge congestion risk exposure considering grid conditions and feasibility of flow.

TEA agrees with this principle at a high level but as noted above believes there are certain instances where the spirit of the “firm transmission rights” qualifier needs to be expanded in practice to include “non-firm network rights”.

P3: Supports continued administration of CRRs in the CAISO balancing area and continued sale of OATT transmission rights.

TEA agrees with this principle.

P4: Does not impede effective congestion management.

TEA agrees with this principle at a high level but notes that any CRAA design for EDAM will by default come with some congestion management trade-offs, so it may be better to state the principle with a qualifier “..to the greatest extent possible without undermining other important market design elements and outcomes.”.

P5: Establishes proper incentives for economic market participation supporting efficient market outcomes.

TEA agrees with this principle and notes that the existing design fails to deliver on it.

P6: Provides a comparable allocation method for the CAISO balancing area with a CRR construct and for EDAM balancing areas which sell firm OATT transmission.

TEA agrees with this principle but believes it should be expanded to target “direct” allocation of congestion revenues and deficits to all market participants, rather than the BAA-mediated settlements included in the current design.

TEA is hopeful that CAISO and stakeholders will consider the merits of the SPP Markets+ congestion revenue accrual and allocation design, which can be seen as a “rights based” vs. “use based” way of looking at congestion revenue accrual and allocation. TEA believes this model could be adapted for EDAM to provide a model for fairly compensating PTP and NT users commensurate with the extent to which they are funding their TSP’s transmission revenue requirement, not dissimilar to how CAISO’s CRR market is intended to do the same for its various users. TEA would be interested in presenting its views in this area and its experience from participating in the Markets+ design process at a future stakeholder meeting.

P7: Provides transparency into footprint congestion to support the ability of market participants to make decision[s] on how to manage their congestion cost exposure risk effectively.

TEA agrees with this principle and notes that the existing design fails to deliver on it, particularly when combined with the GAP-Tie model currently planned to be used for managing interchange between bilateral and WEIM areas and the non-CAISO EDAM areas. TEA looks forward to explaining its concerns here in greater detail at a future stakeholder meeting.

3. Please provide any additional feedback.

TEA requests CAISO discuss how it plans to manage any touchpoints between this initiative and its ongoing Congestion Revenue Rights Enhancements initiative. TEA does not believe at this point that the two efforts should be combined into a single initiative; however, there are obvious areas where decisions and timelines in one may affect the others’, so it seems logical that CAISO and stakeholders would want to keep both groups aware of the other’s progress and outcomes.

TEA appreciates the effort that went into the analysis provided in the presentation and given to the WEM Governing Body (WEM GB) at an earlier meeting. We are concerned, however, that the data was aggregated and presented in a way that downplayed the potential impact on individual entities when combined with the existing CRAA policy, and therefore could have led the WEM GB to assume there are only de minimis impacts to consider and little difference in the impacts of policy decisions currently being discussed.

TEA would like an opportunity to engage with CAISO staff and other stakeholders on the data available as this initiative moves forward. We have had only limited time to review the report given the timing of its publication and the holiday period and would like to come back with some scenarios to test or get directional feedback around. For example, we are curious (1) how the treatment and modeling in EDAM of the Mona intertie and the parallel paths it includes may or may not have a bearing on how congestion patterns shift relative to what was presented here, (2) whether this data could be used to give some guidance around the potential impact of DGAP/DLAP modeling as it relates to interchange transactions at non-CAISO EDAM BAA borders and the modeling of potential future sub-LAP load-aggregations within non-CAISO EDAM BAAs, and (3) what points of intersection there may be between this modeling effort and what is being done around deployment factors and aggregations in the Configurable Parameters effort.

1. Please provide your organization's overall feedback regarding the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation - Phase 2 working group presentation held on December 11, 2025.

The Utah Municipal Power Agency (“UMPA”) and Deseret Generation & Transmission Co-operative, Inc. d/b/a Deseret Power (“Deseret”) appreciate the opportunity to comment on the EDAM Congestion Revenue Allocation Phase 2 Working Group. CAISO correctly identifies that the transitional congestion revenue allocation suffers from two design flaws that will undermine market efficiency and EDAM benefits: (1) “use-it-or-lose” incentive to self-schedule, and (2) asymmetry in congestion allocation between balancing authority areas. There are no near-term enhancements to the transitional congestion revenue allocation approach that can address these flaws. The transitional congestion revenue allocation for EDAM go-live must be replaced expeditiously with a long-term durable design that decouples energy scheduling from congestion revenue allocation and includes direct settlement between CAISO, as the market operator, and firm transmission customers. 

CAISO as the market operator must develop an EDAM footprint-wide process to allocate financial rights to long-term, firm transmission customers. All operating day-ahead energy markets using locational marginal prices include some form of financial congestion right. CAISO should begin by leveraging the CAISO’s monthly congestion revenue right (CRR) allocation process to load serving entities as a common market design across the EDAM footprint. Additional features of the CAISO CRR market such as the annual allocation and monthly/annual auction may not be necessary unless long-term, firm OATT transmission customers express the need for these features.

UMPA/Deseret have long advocated for transmission customers to have a direct settlement relationship with the CAISO. Having no sub-allocation by EDAM entities would make the determination of which balancing authority area should receive congestion revenue mute. An additional concern is that congestion revenue rights generally result in a payment to CAISO scheduling coordinators. This revenue offsets charges associated with day-ahead load schedules which reduces the credit requirements of load serving entities. In addition, transfer revenue is always a payment to the transmission customer that made the transfer capability available. Thus, absent direct settlement with the CAISO, load serving entities and other transmission customers will incur higher credit requirements. Again, this is because these payments are first allocated to the EDAM entity scheduling coordinator and then sub-allocated outside of CAISO settlement system. The CAISO should address this inequity and have a direct allocation of both congestion revenue and transfer revenue.

2. Please provide your organization's overall feedback regarding the associated initial principles for guiding Phase 2 design.

The current EDAM congestion revenue paradigm continues to overstate the importance of distributing congestion revenue to balancing authority areas (BAA) and minimizes the needs of transmission customers with firm transmission rights to hedge locational price differences. The EDAM paradigm also ignores the key role that transmission service providers (TSP) play in determining the firm rights made available and sold on each TSP’s system. In developing the long-term durable solution, CAISO should consider how TSP business practices affect their transmission customers’ ability to hedge locational price differences on the TSP’s system within the EDAM footprint.

UMPA/Deseret recommends CAISO adopt the market design goals/principles[1] presented by Dr. Scott Harvey at the May 2, 2025, Market Surveillance Committee meeting. Specifically, an ideal congestion allocation design would balance achieving the following goals:

• Be consistent with resource participation in the day-ahead and real-time dispatch, rather than incenting self-scheduling, and without distorting bidding incentives. This applies to resources that could be dispatched either up or down to manage transmission congestion.
• Enable the provision of congestion hedges that are reasonably consistent with the transfer capability of the transmission grid or are supported by the out-of-merit dispatch of the transmission seller’s generation.
• Enable balancing areas to preserve the rough overall benefit of the bargain for the parties to existing transmission contracts.
• Avoid undue cost shifts among market participants.

In the same presentation, Dr. Harvey highlights that there are three alternatives that avoid the self-scheduling incentives: (1) CRR obligations, (2) CRR options, and (3) financial flow entitlements. A combination of CRR obligations and financial flow entitlements would allow CAISO to leverage the existing CRR market across the EDAM footprint. The CAISO’s current CRR market utilizes CRR obligations. This is appropriate because CAISO load serving entities (transmission customers) chose to nominate or not nominate eligible source/sink combinations in the load serving entity allocation process. Transmission customers in the EDAM footprint outside of the CAISO should be allowed to make similar nomination decisions. Financial flow entitlements may be necessary to address concerns that some TSPs have more liberally awarded long-term firm point-to-point, conditional firm point-to-point, and network integration transmission services that cause excess flows that impact congestion on other TSP systems.  

UMPA/Deseret provided comments[2] to PacifiCorp on October 18, 2024, that highlighted the need for a regional approach to congestion revenue allocation within the EDAM footprint. UMPA/Deseret also provided a high-level congestion revenue allocation process that would distribute congestion revenues to transmission customers: The monthly allocation process (1) determines the eligible quantities transmission customers are allowed to nominate, (2) a voluntary, multi-tiered nomination process followed by a simultaneous feasibility test, (3) the award of monthly source/sink congestion hedges, (4) a methodology to address under-collection due to transmission outages within the month, and (5) direct settlement with the market operator for awarded source/sink congestion hedges and allocation of residual congestion revenue to measured demand of the TSP.

UMPA/Deseret looks forward to expeditiously developing a long-term, durable congestion revenue allocation process leveraging the existing CRR market. This initiative should plan to present a market design to Western Energy Market Governing Body in Q4 2026 to support implementation as soon as possible in 2027.

[1] https://www.caiso.com/documents/presentation-congestion-rent-allocation-harvey-may-02-2025.pdf

[2] https://www.oasis.oati.com/woa/docs/PPW/PPWdocs/18_Oct_2024_Deseret.UAMPS.UMPA_Comments.pdf

3. Please provide any additional feedback.

No additional comments.

1. Please provide your organization's overall feedback regarding the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation - Phase 2 working group presentation held on December 11, 2025.

The Utah Municipal Power Agency (“UMPA”) and Deseret Generation & Transmission Co-operative, Inc. d/b/a Deseret Power (“Deseret”) appreciate the opportunity to comment on the EDAM Congestion Revenue Allocation Phase 2 Working Group. CAISO correctly identifies that the transitional congestion revenue allocation suffers from two design flaws that will undermine market efficiency and EDAM benefits: (1) “use-it-or-lose” incentive to self-schedule, and (2) asymmetry in congestion allocation between balancing authority areas. There are no near-term enhancements to the transitional congestion revenue allocation approach that can address these flaws. The transitional congestion revenue allocation for EDAM go-live must be replaced expeditiously with a long-term durable design that decouples energy scheduling from congestion revenue allocation and includes direct settlement between CAISO, as the market operator, and firm transmission customers. Absent this decoupling, EDAM will continue to suppress efficient price formation, reduce liquidity in the day-ahead market, and limit the very production-cost savings the EDAM is intended to achieve.

First and foremost, any long-term EDAM congestion revenue allocation mechanism must be fully decoupled from energy scheduling decisions. Transmission customers must be able to hedge locational price differences without altering bids or self-schedules in the energy market. Any design that conditions congestion revenue on scheduling behavior will continue to distort dispatch outcomes and undermine EDAM’s efficiency objectives.

CAISO as the market operator must develop an EDAM footprint-wide process to allocate financial rights to long-term, firm transmission customers. All operating day-ahead energy markets using locational marginal prices include some form of financial congestion right. CAISO should start with leveraging the CAISO’s monthly congestion revenue right (CRR) allocation process to load serving entities as a common market design across the EDAM footprint. Additional features of the CAISO CRR market such as the annual allocation and monthly/annual auction may not be necessary unless long-term, firm OATT transmission customers express the need for these features.

UMPA/Deseret have long advocated for transmission customers to have a direct settlement relationship with the CAISO. Having no sub-allocation by EDAM entities would make the determination of which balancing authority area should receive congestion revenue moot. An additional concern is that congestion revenue rights generally result in a payment to CAISO scheduling coordinators. This revenue offsets charges associated with day-ahead load schedules which reduces the credit requirements of load serving entities. In addition, transfer revenue is always a payment to the transmission customer that made the transfer capability available. Thus, absent direct settlement with the CAISO, load serving entities and other transmission customers will incur higher credit requirements. Again, this is because these payments are first allocated to the EDAM entity scheduling coordinator and then sub-allocated outside of CAISO settlement system. The CAISO should address this inequity and have a direct allocation of both congestion revenue and transfer revenue. Absent direct settlement between CAISO and firm transmission customers, EDAM will systematically increase collateral requirements, weaken hedge effectiveness, and impose financing costs that offset any claimed market efficiencies. Direct settlement is therefore not a discretionary enhancement; it is a prerequisite for a workable long-term congestion revenue design.

2. Please provide your organization's overall feedback regarding the associated initial principles for guiding Phase 2 design.

Congestion revenue is not an attribute of a balancing authority area; it is the economic byproduct of scarce transmission capacity and exists to hedge price differences for firm transmission customers. The current EDAM congestion revenue paradigm continues to overstate the importance of distributing congestion revenue to balancing authority areas (BAA) and minimizes the needs of transmission customers with firm transmission rights to hedge locational price differences. The EDAM paradigm also ignores the key role that transmission service providers (TSP) play in determining the firm rights made available and sold on each TSP’s system. In developing the long-term durable solution, CAISO should consider how TSP business practices affect their transmission customers’ ability to hedge locational price differences on the TSP’s system within the EDAM footprint.

FERC has consistently recognized that congestion revenues in LMP markets exist to support firm transmission rights and to preserve the benefit of the bargain for firm transmission rightsholders, not to provide generalized revenue streams to balancing authorities. UMPA/Deseret recommends CAISO adopt the market design goals/principles[1] presented by Dr. Scott Harvey at the May 2, 2025, Market Surveillance Committee meeting. Specifically, an ideal congestion allocation design would balance achieving the following goals:

• Be consistent with resource participation in the day-ahead and real-time dispatch, rather than incenting self-scheduling, and without distorting bidding incentives. This applies to resources that could be dispatched either up or down to manage transmission congestion.
• Enable the provision of congestion hedges that are reasonably consistent with the transfer capability of the transmission grid or are supported by the out-of-merit dispatch of the transmission seller’s generation.
• Enable balancing areas to preserve the rough overall benefit of the bargain for the parties to existing transmission contracts.
• Avoid undue cost shifts among market participants.

In the same presentation, Dr. Harvey highlights that there are three alternatives that avoid the self-scheduling incentives: (1) CRR obligations, (2) CRR options, and (3) financial flow entitlements. A combination of CRR obligations and financial flow entitlements would allow CAISO to leverage the existing CRR market across the EDAM footprint. The CAISO’s current CRR market utilizes CRR obligations. This is appropriate because CAISO load serving entities (transmission customers) chose to nominate or not nominate eligible source/sink combinations in the load serving entity allocation process. Transmission customers in the EDAM footprint outside of the CAISO should be allowed to make similar nomination decisions. Financial flow entitlements may be necessary to address concerns that some TSPs have more liberally awarded long-term firm point-to-point, conditional firm point-to-point, and network integration transmission services that cause excess flows that impact congestion on other TSP systems.  

UMPA/Deseret provided comments[2] to PacifiCorp on October 18, 2024, that highlighted the need for a regional approach to congestion revenue allocation within the EDAM footprint. UMPA/Deseret also provided a high-level congestion revenue allocation process that would distribute congestion revenues to transmission customers: The monthly allocation process (1) determines the eligible quantities transmission customers are allowed to nominate, (2) a voluntary, multi-tiered nomination process followed by a simultaneous feasibility test, (3) the award of monthly source/sink congestion hedges, (4) a methodology to address under-collection due to transmission outages within the month, and (5) direct settlement with the market operator for awarded source/sink congestion hedges and allocation of residual congestion revenue to measured demand of the TSP.

Phase 2 process should not become an open-ended transitional regime. UMPA/Deseret looks forward to expeditiously developing a long-term, durable congestion revenue allocation process leveraging the existing CRR market. The CAISO should commit to present a market design to Western Energy Market Governing Body in Q4 2026 to support implementation as soon as possible in 2027. Continued reliance on transitional approaches beyond that timeframe will perpetuate inefficiencies and undermine stakeholder confidence in the EDAM market design and further erode benefits available to market participants.

[1] https://www.caiso.com/documents/presentation-congestion-rent-allocation-harvey-may-02-2025.pdf

[2] https://www.oasis.oati.com/woa/docs/PPW/PPWdocs/18_Oct_2024_Deseret.UAMPS.UMPA_Comments.pdf

3. Please provide any additional feedback.

No additional comments.

1. Please provide your organization's overall feedback regarding the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation - Phase 2 working group presentation held on December 11, 2025.

We appreciate CAISO for initiating an expedited stakeholder process to evaluate potential transitional mechanisms for allocating congestion revenues resulting from parallel flows, as well as for their responsiveness to stakeholder feedback throughout the evolution of the congestion revenue allocation design. Following FERC’s approval of the Phase 1 design, we also appreciate CAISO for initiating the Phase 2 working group to assess potential near-term enhancements and a longer term market design.  As the initiative progresses, we would appreciate additional quantitative analysis, particularly regarding financial impacts, to support the ongoing efforts and help stakeholders weigh tradeoffs across various designs and revenue allocation approaches. WRA also recommends in 2026, as EDAM is about to go-live, that there be a Regional Issues Forum workshop to review the divergent cost allocation approaches. 

2. Please provide your organization's overall feedback regarding the associated initial principles for guiding Phase 2 design.

We appreciate CAISO for developing principles to guide both the near-term enhancements and the longer term market design. We particularly value principles that promote efficient market outcomes by reducing self-scheduling incentives and promoting robust economic bidding. We recognize that achieving all these wide-ranging principles will require some compromises. As the initiative progresses and proposals are developed, CAISO should be transparent about which principles each proposal best achieves and which ones it may compromise on.

3. Please provide any additional feedback.

While it may be part of a future phase or different initiative, we would appreciate CAISO's serious consideration of direct settlement of congestion revenues from CAISO to transmission customers. This would help reduce the potential discrepancies between EDAM Entities, lower the risk of settlement errors, and improve overall confidence in congestion settlements to individual market participants.