1.
Please provide your feedback on the History and Level Set of Fast-Start Pricing provided in Working Group Session #6. Were there any specific topics that require further information/discussion in order to continue the development of a scope for analysis on Fast-Start Pricing for further discussion in subsequent phases of the Price Formation Enhancements initiative?
SCE appreciates the opportunity to comment on Working Group Session 6 regarding Fast-Start Pricing (FSP).
Note that when SCE requests additional data in the comments below, it does not just solely refer to empirical or observed facts. SCE also expects the CAISO to provide an analysis of these facts to justify any necessary action. In sum, SCE’s data requests are not just for raw data, but for CAISO’s detailed interpretation of this data that supports any proposed changes to the current market design. This analysis should include detailed explanations from CAISO’s on how the proposed changes will address the shortcomings (if any) of the existing market design.
Request for additional information
The information provided by the CAISO is a good introduction to FSP, but in order to fully assess the impact of the presented results, the CAISO should provide additional data. The data presented on slide 32 showed increases in prices due to the inclusion of minimum load costs and start-up costs in the energy bids, but the CAISO should also provide the total cost increase as well as the reduction in uplift costs. Additionally, the CAISO should provide the frequency of occurrences when units are at minimum load, but their marginal costs are not setting the price. The simple example provided in the presentation on slides 12-17 should seem to be a likely occurrence; however, in the actual, broad CAISO (or EIM) marketplace containing hundreds of on-line generators, FSP may not be as necessary. As such, SCE is concerned that there would be little if any benefit derived from the additional costs that FSP would present.
Separately, in these analyses, SCE would like to understand whether the bids of units are adjusted for minimum load and commitment costs at all times, or only when the units are not running, or scheduled only to minimum load? If a unit has self-scheduled to minimum load, are the minimum load and commitment costs still included in the bids?
What are the benefits of taking on the added cost of FSP?
CAISO has indicated a willingness to reconsider the concept of Fast Start Pricing (FSP), suggesting that it could “meet the needs of a broad regional market.” However, it remains unclear whether incorporating FSP addresses any specific need. For the sake of transparency and understanding, it would be beneficial for the CAISO to better describe the potential benefits of FSP. Given that any additional constraint would generally lead to higher market prices, the accompanying benefit must be identified. This explanation should also discuss what is gained through FSP if minimum load and commitment costs are already included in the least cost optimization. The identification and description of potential benefits (along with possible quantification) would enable stakeholders to better understand the rationale behind this initiative.
There should be no double payments from any incremental additions to the market design
The CAISO has identified two key features of FSP: the relaxation of minimum output and the integration of commitment costs into the marginal price. Given these two features, certain questions arise regarding the compatibility of FSP with the existing market structure and it is unclear whether the CAISO intends to revise the current operational framework to accommodate FSP. For example, currently commitment costs are captured through separate startup cost payments. Would integrating FSP change this existing payment, and would start-up cost payments be phased out? The CAISO would need to remove these payments to ensure that resources do not receive double payment for commitment costs.
Will FSP’s task overlap that of existing products?
Another complexity is the potential overlap in compensation for flexible ramping capabilities to meet the next incremental load. FSP incentivizes fast-start resources by allowing them to set prices for their marginal supply. However, the presence of the Flexible Ramping Product (FRP) in the real-time market and the Imbalance Reserve Product (IRP) in the day-ahead market warrants a detailed explanation of how FSP will coexist with these mechanisms and how to address the overlap in compensation for essentially the same market product.
The analysis that the CAISO provided was for 2021, well before recent changes to the FRP. The CAISO should consider rerunning the analysis for a period when the existing FRP structure was in effect, in order to provide data about whether FRP alters the potential need for FSP.
Will FSP have adverse impacts given that it may not be reflective of typical conditions during the majority of the time? Is FSP even capable of representing the reality of the CAISO market?
Lastly, the CAISO should provide examples of how FSP would function during oversupply conditions when renewables supply is abundant. The ability of Fast Start Generation to influence pricing, even when the resource is far from being utilized, can create wrong price signals.
Before proceeding with FSP, CAISO must provide comprehensive solutions to the challenges and questions mentioned above. This proactive approach will not only enhance stakeholders’ understanding but will also ensure that implementing FSP would be achievable.
