Comments on 3/4 Call

1. Please provide your organization’s feedback to the MURA discussion.

American Clean Power – California (ACP-California) appreciates the opportunity to provide feedback to CAISO on the March 4, 2025 Resource Adequacy Modeling and Program Design (RAMPD) discussion on the intersection of performance incentives and parallel efforts to manage outage risk through the Unforced Capacity (UCAP) effort. ACP-California appreciates the CAISO's efforts to review the effectiveness and need for the Resource Adequacy Availability Incentive Mechanism (RAAIM) as CAISO and the California Public Utilities Commission (CPUC) move forward with implementation of the UCAP proposal, itself intended to provide a direct incentive for performance (and penalty for non-performance) through feedback into Resource Adequacy (RA) resource valuation.

ACP-California expects that UCAP will provide a strong operational signal and a strong financial feedback mechanism to asset owners and load-serving entities moving forward. With the advent of UCAP, and ongoing efforts to align economic incentives during periods of scarcity in the Price Formation initiative, it is unclear that a new, expanded, and more punitive iteration of RAAIM is necessary to incentivize generator performance.

ACP-California reiterates its March 5 comments questioning the need for Measuring Unavailable RA (MURA). This echoes similar written comments from San Diego Gas and Electric, the Northern California Power Agency, and Six Cities, as well as verbal comments in the meeting from the Western Power Trading Forum, California Energy Storage Alliance, Terra-Gen, Middle River Power, and others questioning the necessity of a RAAIM successor as well as noting the significant complexities of seeking to implement a performance incentive overlay above and beyond UCAP, and perhaps using a very different measurement framework, from the forthcoming UCAP framework.

UCAP will provide incentives based on historical performance impacting Net Qualifying Capacity, while reforms being undertaken in the CAISO Price Formation Enhancements (PFE) initiative regarding scarcity pricing should provide generators with additional incentives to assure capacity is available during tight supply conditions. PFE stakeholder workshops have been ongoing since 2022 to develop structures to assure generator availability during tight supply conditions. It is unclear why there’s a need for a brand new approach to ensure generator availability through MURA outside of the ongoing PFE process.

There is significant overlap between scarcity pricing investigations being undertaken in the PFE initiative and what is being proposed via MURA. The February 6, 2025 PFE scarcity pricing workshop stated a key objective is “motivating the right actions from market participants to maintain balance when supply is tight,” which is the same objective MURA would attempt to accomplish, albeit through penalties and not pricing signals. The MURA proposal in the RAMPD initiative has not addressed how changes proposed in the PFE initiative cannot meet the same goals, why scarcity
pricing reform is not sufficient, or how MURA will lead to more generation being available in real time. Until these issues are addressed, ACP-California will not support MURA because it is a duplicative and unnecessary policy in light of UCAP and PFE implementation.

2. Please provide your organization’s feedback on the MURA design options leaning which includes: defining availability as meeting the must offer, using Tx/RMO/EEA hours as the assessment period, determining the penalty administratively based on RA bilateral trades, and allocating the penalty collected to load.

Development and implementation of MURA will require significant effort from CAISO staff and stakeholders. ACP-California reiterates that before CAISO undertakes a new major incentive design effort such as MURA, the CAISO should evaluate and identify why there are shortfalls in UCAP and scarcity pricing reform in the PFE initiative to achieve the same goals.

To the extent CAISO does move forward with MURA, ACP-California notes that establishing a new mechanism for assessing availability has significant complexities for clean energy resources and storage, which are increasingly measured and participate in the RA program through composite analyses of their availability and performance, such as an Effective Load Carrying Capability (ELCC) analysis. We also note that there is an outstanding need for a durable QC method for solar and wind resources for CPUC-jurisdictional showings (please see ACP-California’s Track 3 Proposal in CPUC proceeding R.23-10-011).

These accreditation methods are not intended to precisely align with expected performance during risk hours, but rather increasingly reflect their contributions toward a portfolio of complementary resources as modeled holistically in the CPUC's Integrated Resource Plan and RA programs. To the extent the QC methodology moves toward an ELCC-based methodology, this method poses two issues. First, it assesses the resource's contribution in expected reliability hours - which may risk divergence from hours assessed under a RAAIM successor. Second, it accounts for already integrated reductions for expected unavailability, including forced hours, as modeled in the study. Finally, ACP-California supports the continuation of the RAAIM precedent excluding variable energy resources (40.9.2(b)(1)) from any successor incentive and further encourages careful consideration of parallel complexities with energy storage resources.

3. Please provide your organization’s feedback to Walter Graf’s overview of PJM’s Capacity Performance mechanism.

ACP-California appreciates Dr. Graf’s time and engagement in support of CAISO’s policy development.

1. Please provide your organization’s feedback to the MURA discussion.

The California Community Choice Association (CalCCA) appreciates the opportunity to provide comments on the California Independent System Operator’s (CAISO’s) March 4, 2025, Working Group call on the Measuring Unavailable Resource Adequacy (MURA) concept. If designed correctly, MURA could provide a two-stage penalty that addresses two different needs depending upon the severity of system conditions during the outage. First, unforced capacity (UCAP) counting would provide an incentive for resources to conduct planned maintenance to be available as much as possible. This is because supply cushion hours span across a broad set of hours and suppliers cannot always predict when supply cushion hours will occur. The UCAP incentives will apply prospectively to suppliers’ future ability to provide RA value. Second, MURA would provide an incentive to be available specifically during the most extreme grid conditions if possible and provide an immediate financial incentive during those times. Forced outages during most critical periods have greater negative impacts on the grid, so the CAISO should explore targeted availability incentives during those periods.

2. Please provide your organization’s feedback on the MURA design options leaning which includes: defining availability as meeting the must offer, using Tx/RMO/EEA hours as the assessment period, determining the penalty administratively based on RA bilateral trades, and allocating the penalty collected to load.

Basing the assessment periods on Tx/RMO/EEA hours seems directionally like the right approach. As noted in PJM’s presentation, basing the assessment periods on rare occurrences, such as reserve shortages, would likely result in an availability incentive that is not strong enough because it is so rarely triggered. On the other hand, the availability assessment hours are likely too broad to create an availability incentive that is specifically targeted to times of significant system stress. Finding a middle ground will ensure an incentive that is both strong enough and targeted enough to incentivize availability during times of significant system stress.  

CalCCA does not yet have a recommendation on how to set the administrative penalty price but cautions against setting it too high as to risk future availability of resources that receive a penalty. Experience with similar availability incentives in other markets has revealed that penalty prices that are too high could adversely impact future supply availability by bankrupting entities that were unavailable during the assessment hours. As the CAISO examines this issue, it should be aware of other market values that could inform the administrative penalty price. It is important that the chosen value not be lower than other market incentives as this may negate the impact of the availability incentive. It is also important that the value remains current with changes in the market to ensure it is not too high or low.

The CAISO should allocate collected MURA penalty dollars to load. Load pays for RA resources to be available and for potential load shedding that could be exacerbated by resources’ unavailability during times of system stress. The CAISO should consider whether there are other ways to create additional positive incentives (in addition to penalties) for suppliers to be available during the MURA assessment periods.

3. Please provide your organization’s feedback to Walter Graf’s overview of PJM’s Capacity Performance mechanism.

CalCCA appreciates the presentation of PJM’s capacity performance mechanism. The information provided by PJM informed CalCCA’s responses in sections 1 and 2 above.

1. Please provide your organization’s feedback to the MURA discussion.

CAISO’s proposal to reassess the effectiveness of the Resource Adequacy Availability Mechanism (RAAIM) aligns with the defined problem statement. If forced outages have increased, that could be due to the unavailability of appropriate substitution capacity in addition to the lower RAAIM price.

2. Please provide your organization’s feedback on the MURA design options leaning which includes: defining availability as meeting the must offer, using Tx/RMO/EEA hours as the assessment period, determining the penalty administratively based on RA bilateral trades, and allocating the penalty collected to load.

Availability: It is appropriate for RA resources to have a must offer obligation (MOO) to bid (as well as self-schedule) into the CAISO market the amount of net qualifying capacity (NQC) the resource has shown in their supply plan.

Assessment period: The CAISO recommends starting with Tx/RMO/EEAs as the assessment period. If an analysis indicates that the resources being unavailable outside of these periods has no significant impact to the grid reliability, then this could be a simple way to track the availability of RA resources.

Price of Penalty: The CAISO recommends starting with RA benchmarking. It would be good to have an analysis on the impact of the three penalty price options (Value of Loss of Load-VOLL, RA benchmarking, & real time price). The magnitude of the impact could provide some clue as to whether a particular option is feasible or not in terms of cost to market participants. PJM’s Non-Performance Charge Rate (Penalty), in conjunction with the PJM stop loss limit, could also be compared to these options.

Cost allocation: The CAISO recommends allocating the penalty collected to load in line with cost causation; unavailable RA deteriorates the level of service load procured from RA available. CAISO should also consider options to incentivize (including payments) non-RA resources (including load drop) that performed by generating beyond RA or dropping load beyond RA capacity during the proposed assessment period. If non-RA resources help mitigate reliability concerns during assessment period, they deserve credit. Under PJM, it appears they are termed as “uncommitted resources”, such resources can receive incentive funds.

3. Please provide your organization’s feedback to Walter Graf’s overview of PJM’s Capacity Performance mechanism.

Electricity resources that participate in PJM’s capacity market must perform when called upon to do so during a system emergency. A few questions arise: a) Does CAISO system emergency criteria  align with the PJM system emergency? b) Does CAISO see availability of resources during system emergency only as sufficient for reliability of the grid? c) PJM may not have flexible RA; should the flexible RA be assessed only during system emergency (which may or may not align with the system emergency due to different MOO hours flexible RA relative to a generic RA resource)?

1. Please provide your organization’s feedback to the MURA discussion.

Comments on Resource Adequacy Modeling and Program Design

Working Group

Department of Market Monitoring

March 13, 2025

Overview

The Department of Market Monitoring (DMM) appreciates the opportunity to comment on the Resource Adequacy Modeling and Program Design Working Group dated February 10 and 11, and March 4, 2025.[1]^,[2] In these comments, DMM adds to our previous comments from the ISO’s Resource Adequacy Modeling and Program Design (RAMPD) Revised Discussion Paper and Final Recommendation Plan and Issue Paper.[3]^,[4] DMM includes additional comments on the following five issues:

• Unforced capacity (UCAP). DMM continues to support creating a resource-level UCAP policy with a supply cushion approach, and recommends incorporating energy limitations for storage resources.
• Accounting for ambient derates. Ambient derates should be self-reported by the resource, for conditions specified by the ISO. As tight system conditions typically arise during the availability assessment hours (AAHs), DMM recommends the ambient conditions for the ambient derate (and thus the net qualifying capacity, or NQC value) be set during this time period of the day. DMM also notes the need to address interdependencies of ambient derate accounting during the availability assessment hours, and the must offer obligation with UCAP.
• Resource availability and performance mechanisms. DMM recommends the ISO consider implementing both a resource availability and performance mechanism, and set the price using a resource adequacy (RA) price benchmark. DMM agrees that RA penalty revenues should be allocated to load to defray RA costs to ratepayers.
• Outage substitution. DMM suggests that the ISO relax outage substitution requirements, and establish an outage substitution pool that operates as an auction. This approach could reduce search and coordination problems with finding substitute RA for planned outages. These comments provide data on the upper bound of the volume of the market for potential outage substitution capacity. These data indicate sufficient capacity would likely be available to offer into the auction during non-summer periods, when most planned maintenance occurs.
• Resource visibility. DMM supports increased resource reporting, but notes it may be obviated when incentives are improved for the capacity procurement mechanism (CPM).

Comments

Unforced capacity (UCAP)

DMM continues to support creating a resource-level UCAP policy with a supply cushion approach.[5] A UCAP mechanism levelizes the capacity valuation process across resource types to ensure a more fungible market, and reduces concerns for “like-for-like” substitution RA capacity. The increased transparency from UCAP will promote procurement of better performing resources, and allow buyers of RA more information in the bilateral RA market.

The UCAP design should incorporate all forced (and urgent) outages that are under the control of the scheduling coordinator (SC) for the particular unit. This would include most forced and urgent outages, but would exclude outages that are beyond the control of the SC, such as transmission induced, market software limitations, or environmental restriction outages.

DMM further recommends particular attention be given to storage resources and their state-of-charge (SOC) limitations.[6]^,[7],[8] Limitations that prevent a storage resource from accessing its full SOC range may lead the resource to not have the four-hours of deliverability required to provide their shown resource adequacy. This could prevent a resource from being able to deliver its full resource adequacy value for a full four hours, or only allow the resource to maintain a value less than its resource adequacy capacity for a four-hour period.

DMM highlights this in Figure 1 below, which shows the average derated energy of storage resources, presented as a capacity measure. The calculation takes the minimum and maximum SOC limits of resources submitted through scheduling infrastructure and business rules (SIBR) or the outage management system (OMS), quantifies it against the energy limits registered in Masterfile, and divides the difference by four hours to calculate a measure of average hourly missing capacity from the submitted energy limits. This is the effective reduction in capacity if a four-hour deliverability is maintained. Average missing capacity for July through September 2024 was around 620 MW.

Figure 1 – Effective average hourly missing capacity from submitted energy limits

Another consideration for storage resources and UCAP accounting is that physical limitations of the resource may prevent full deliverability of resource adequacy capacity. For example, foldback or cell voltage imbalances create temporary physical limitations on a storage resource that can be rectified and allow for access to the phantom energy. In the Storage Design and Modeling initiative, there has been work to address these concerns.[9]^,[10] DMM recommends the interdependency between these two policy initiatives be considered in the development of the UCAP mechanism.

Accounting for ambient derates

The ISO is also contemplating a UCAP-like framework to account for ambient derates. DMM supports an ambient derate accounting framework, and suggests that the ISO require resources to self-report their available capacity after accounting for ambient derates from their known thermodynamic limits.[11] If the ISO were to seek to verify that a resource was accurately reflecting their seasonal ambient availability, then CAISO Tariff Section 40.4.4 may apply, allowing the ISO to test the resource and readjust the resource’s true maximum ambient operating limit. In this situation, DMM suggests the ISO could also include a penalty for misrepresentation of the resource’s availability.

Ambient derates are predominantly a function of temperature and humidity, and thus an ambient derate can vary throughout the day. To implement a self-reporting scheme with a monthly static value, the ISO will need to select the appropriate ambient conditions for resources to self-report an ambient derate. As tight system conditions typically arise during the availability assessment hours (AAHs), DMM recommends the ambient conditions for the ambient derate (and thus the NQC value) be set during this time period of the day. This may overstate potential production availability of resources during some warmer mid-afternoon hours, but the peak (and net peak) hours are when resources with ambient derates are most needed.

Currently, the CAISO Tariff includes  a must-offer obligation (MOO) for resources up to their shown RA values. The interdependencies of ambient derate accounting during the AAHs, and the MOO with UCAP will need to be addressed. DMM understands the resulting NQC of a resource after ambient derate accounting and UCAP will be the result of taking deliverable qualifying capacity, adjusting to reflect ambient derates, and then the UCAP percentage adjustment will be made. If ambient derate accounting does not reflect real-time conditions, and a resource must take an ambient derate above the derated capacity accounted for in this policy, the ISO should make explicit the interaction with the UCAP mechanism and the additional derate. In these conditions, the resource will be unable to meet their MOO, and thus there could be a potential UCAP impact of the additional derate.

As a part of the interdependencies in RAMPD, if the resource has misrepresented their maximum operating limit, and cannot reach their true maximum output, the resource would owe availability or performance payments. Sufficiently strong availability or performance penalties would dissuade resources from misrepresenting their available capacity. Self-reporting with the possibility of testing would reduce the administrative burden to the ISO, and the interdependent outage policies from a well-designed UCAP mechanism and performance incentives would discipline the SCs in their self-reporting.

Availability and performance incentives

As formulated in the Issue Paper, availability and performance incentive mechanisms are assessed on different metrics.[12] An availability incentive uses bids to determine availability, while a performance incentive uses schedules and delivered supply. The distinction between these two mechanisms is important because it leads to two separate behavioral incentives, and thus potentially two different outcomes.

Currently, the ISO’s RA availability incentive mechanism (RAAIM) is calculated from a resource’s submitted economic bids or self-schedules, and compared to their shown RA capacity. Availability penalties are calculated as a resource’s monthly average availability during the availability assessment hours (AAHs), and multiplied by an administrative penalty price set at 60 percent of the capacity procurement mechanism soft offer cap. The ISO’s MURA (Measuring Unavailable RA) proposal uses the same definition of availability, but assesses availability only during stressed grid conditions, and recommends a higher penalty price. DMM believes the proposed MURA mechanism will improve resource availability incentives and system reliability.

Availability incentives provide financial motivation for resources to bid into the market, but do not provide a financial motivation to perform, i.e., meet the resource’s schedule. As a result, DMM recommends the ISO additionally consider a performance incentive mechanism that would be a measure of a resource’s schedule against their metered contribution to the system. A performance mechanism and an availability incentive are complementary, and could be considered as a package to meet the operational needs of the system.

DMM publishes RA availability and performance measures during hours with restricted maintenance operations, or higher level of system emergency. The most recent report found there was an average availability of 89 percent of capacity bid or self-scheduled, indicating 11 percent of capacity was unavailable. As for performance, an average of about 67 percent of RA capacity received schedules and only 62 percent of RA capacity responded, indicating 7.5 percent of the 67 percent of scheduled RA capacity did not meet their schedules.[13] This amounts to an average of approximately 2,500 MW that did not perform during stressed conditions. With the current and proposed availability incentives, this non-performing RA capacity would not be assessed penalties.

As an alternative to an availability incentive mechanism, the ISO could continue to maintain the must-offer obligation (MOO) with bid insertion, but extend bid insertion to all resources. Requiring all resources to bid into the market, either explicitly or tacitly through bid insertion, would overcome the need for an availability incentive mechanism. Bid insertion for all resources could ensure capacity is bid in and available for each resource’s contractual and physical capability as represented by their shown RA capacity and/or OMS availability. Bid insertion is a forceful method to ensure availability, while an availability incentive mechanism provides the financial motivation and flexibility for scheduling coordinators to bid resources into the market. Further, for some resource types (e.g., storage), determining an appropriate bid to insert in a given hour may be challenging. Market incentives such as an availability incentive mechanism may be preferable to bid insertion taking the place of the availability incentive mechanism.

Incentive prices

Availability and performance mechanisms should function as penalties against RA capacity that cannot meet their obligation. As a result, DMM believes the penalty should be priced to claw-back RA capacity payments that are associated with the difference between the obligation and their availability and performance. Because the penalty is a claw-back, the penalty price should be designed as a function of RA market prices.

The goal of the penalties should be to create an incentive for resources to only provide RA capacity up to their expected operational capabilities. Any RA shown to the market that is unavailable or cannot perform should be financially clawed-back to ensure an efficient market.

Because load serving entities bear the cost of RA, DMM agrees that is would be reasonable that penalties should returned to load. Determining a price for an availability and/or performance incentive mechanism should be set such that it does not incentivize resources to sell RA in the bilateral markets unless there is an expectation of availability and performance. A few price estimates were suggested in the recent March 4 meeting, including (1) the value of lost load (VOLL), (2) scaled real-time prices, and (3) RA price benchmarks.[14] Among these, DMM recommends RA price benchmarks.

DMM recommends using the RA price benchmark penalties because the price is comparable to the RA prices transacted in the bilateral RA markets. The VOLL and scaled real-time prices are estimates derived from an energy price, and are not fundamentally a capacity concept. The VOLL is an estimate used to approximate load’s willingness to pay for energy to avoid curtailment. DMM does not support the empirical foundation of the VOLL, and further does recommend the application of it in an RA framework.[15] Real-time prices are derived from energy supply and demand conditions, and are not an estimate of a capacity cost. DMM does not recommend the use of the VOLL or real-time energy prices to approximate the value of capacity.

To ensure a financial incentive that is directly comparable to RA availability and performance in the bilateral RA markets, the ISO should use an RA price benchmark for their penalties. Importantly for setting the penalty price, the incentive mechanism(s) should unwind capacity payments, plus a penalty, from the resources that under-perform on their capacity obligation. DMM understands there will be a delay in the timing of the benchmark data, and this should be discussed with stakeholders. The incentives of using the RA price benchmark are efficient and simple, and prices should be derived from the market the policy will impact.

Innovation

Lastly, competitive market signals will incentivize market participants to innovate within the framework of the market they are competing in. A policy, such as availability and performance mechanisms, incents innovative behavior aligned with the policy goals, and thus system reliability. Such innovations could include installing dual fuel, adjusting gas scheduling practices, and making adjustments to improve performance and penalty risk. There are other short- and long-term adaptive changes that could be made, such as resource redundancies, changes in bidding behavior, optimization, fuel-types, and many we are unaware of that require the correct market incentives to be realized. DMM believes the current incentives are not providing appropriate market signals for the desired outcomes, and encourages the ISO to be attentive to potential innovations in the development of new incentives. 

Outage substitution

The ISO proposes to allow for conditional approval of planned outages without substitution, or if there would be a reliability impact, to procure from an outage substitution pool. DMM continues to support these policy developments.[16]

DMM suggests if the ISO elects to design an outage substitution pool, that it be designed as a reverse second price auction.[17]^,[18] In the February 11 RAMPD working group meeting, DMM detailed a theoretical structure for the auction.[19] A reverse second price auction would be economically efficient, incents the showing of resources, and is a reliable process for buyers, sellers, and the ISO. The theoretical structure of the auction will reduce search and coordination frictions, reduce market power concerns, and be designed to disincentivize strategic interactions between market participants. A reverse second price auction elicits true reservation prices by market participants, and results in an economically efficient outcome known as a Nash equilibrium, where no participant could be better off by choosing a different strategy.[20]

As described in DMM’s presentation at the February 11 working group meeting, reverse second price auction functions similar to an eBay auction, but with multiple buyers and sellers.[21] In the auction, the buyers are the market participants planning an outage, and the seller is the provider of the substitution capacity. It is termed a reverse auction because the roles of the buyers and sellers are reversed, i.e., the buyers need the good, and the sellers are the ones bidding to provide the good. In a reverse second price auction, the price is determined not by the winning (lowest) bid price of the auction, but by the next highest price, i.e., the lowest losing bid price. The second price aspect leads to buyers and sellers bidding their true values for the good, and not bidding strategically in the auction. This provides for efficient price formation properties, as the auction is seeking to reveal true reservations prices of the outage capacity, and not marginal prices.

With multiple buyers and sellers, the auction would be run sequentially. The auction begins with the highest priced bidder, and the auction clears that buyer’s capacity. The auction then repeats with the next highest priced bidder until prices or quantities on the buy or sell side can no longer support any further transactions. The final clearing price is the auction clearing price at the second price of the final transaction.

During the February 11 meeting, several questions arose surrounding the details of the auction design. DMM sought to provide a theoretical framework founded in economic principles, and appreciates the need to consider additional design details for the auction. Such concerns included the timing of the auction, the timeframes of capacity offered in the auction, what product is transacted (e.g., NQC values, ELCC, etc.), to continue to allow for bilateral contracting (or self-provision), who is the procurement entity (e.g., the scheduling coordinator), and whether offerings into the auction are voluntary.

DMM suggests the auction could run daily after the month-ahead RA showings. Capacity could be offered for a selected number of different timeframes, which could include daily, weekly, and potentially others. The auction would use the NQC values since the auction is transacting RA capacity. Lastly, DMM suggests the auction is voluntary, transactions are between scheduling coordinators, and the auction could allow for scheduling coordinators to self-provide substitution capacity.

The auction will function most efficiently in an environment with a relatively thick market, with sufficient buyers and sellers. To assess the potential thickness of this market, DMM computed the monthly average of maximum daily outages during peak hours from 2023 through 2024. The data is then supplemented by potential available substitution capacity, measured as the difference between capacity shown on the CAISO NQC lists and CAISO RA obligations. These data are presented in Figure 2.^{[22],[23],[24]}  

The analysis in Figure 2 suggests during the non-summer months, when the majority of resources take planned maintenance outages, there is likely to be sufficient additional capacity to offer into the auction to meet substitution outage needs. It should be noted the measured outages may be non-RA resources that are presented as potential substitution capacity. Figure 2 is a measure to help facilitate a deeper understanding of potential market thickness, though the measure is more of an upper bound of potential capacity offerings into the auction.

Figure 2 includes all planned outages, and forced outages that are for plant maintenance or trouble. DMM has raised the concern previously that resources are being denied their planned outages due to a lack of substitution capacity, and the planned outages are transferred into the forced timeframe.^[25],[26]

Figure 2 – CAISO outages and potential substitution capacity

Resource visibility

DMM agrees it would be valuable for system reliability for the ISO to have visibility into resource capacity that is above the RA showings, to allow a more effective and efficient capacity procurement. The ISO has highlighted the lack of capacity that is bidding into the capacity procurement mechanism (CPM) competitive solicitation process, and near-term visibility may be necessary if the system reaches tight conditions. DMM notes improvements to the CPM bid cap may obviate the need for the added visibility.

[1] Resource Adequacy Modeling and Program Design Working Group, California ISO, February 10-11, 2025: https://stakeholdercenter.caiso.com/InitiativeDocuments/Presentation-Resource-Adequacy-Modeling-and-Program-Design-Feb-10-2025.pdf

[2] Resource Adequacy Modeling and Program Design: Straw Proposal Options: Track 2 Availability and Incentive Mechanisms, California ISO, March 4, 2025: https://stakeholdercenter.caiso.com/InitiativeDocuments/Presentation-Resource-Adequacy-Modeling-and-Program-Design-Mar-03-2025.pdf

[3] Comments on Resource Adequacy Modeling and Program Design, Department of Market Monitoring, August 12, 2024: https://www.caiso.com/documents/dmm-comments-on-resource-adequacy-modeling-and-program-design-revised-discussion-paper-and-final-recommendation-plan-aug-12-2024.pdf

[4] Comments on Resource Adequacy Modeling and Program Design Issue Paper, Department of Market Monitoring, December 6, 2024: https://www.caiso.com/documents/dmm-comments-on-resource-adequacy-modeling-and-program-design-issue-paper-dec-06-2024.pdf

[5] Ibid.

[6] Comments on Resource Adequacy Enhancements Sixth Revised Straw Proposal – Phase 2A, Department of Market Monitoring, February 1, 2021: https://www.caiso.com/Documents/DMMCommentsonResourceAdequacyEnhancements-SixthRevisedStrawProposal-Feb12021.pdf

[7] Comments on Resource Adequacy Modeling and Program Design, Department of Market Monitoring, January 30, 2024: https://www.caiso.com/Documents/DMM-Comments-on-the-Resource-Adequacy-Modeling-and-Program-Design-Jan-16-2024-Working-Group-Jan-30-2024.pdf

[8] 2022 Annual Report on Market Issues and Performance, Department of Market Monitoring, July 11, 2023, p 253: https://www.caiso.com/Documents/2022-Annual-Report-on-Market-Issues-and-Performance-Jul-11-2023.pdf

[9] Storage Design and Modeling Workshop, California ISO, December 11, 2024:     https://stakeholdercenter.caiso.com/InitiativeDocuments/Presentation-Storage-Design-and-Modeling-Dec-11-2024.pdf

[10] Storage Design and Modeling Workshop, California ISO, January 23, 2025:     https://stakeholdercenter.caiso.com/InitiativeDocuments/Presentation-Storage-design-and-modeling-Jan-23-2025.pdf

[11] Comments on Resource Adequacy Modeling and Program Design Issue Paper, Department of Market Monitoring, December 6, 2024: https://www.caiso.com/documents/dmm-comments-on-resource-adequacy-modeling-and-program-design-issue-paper-dec-06-2024.pdf

[12] Resource Adequacy Modeling and Program Design Issue Paper, California ISO, November 7, 2024, p 51: https://stakeholdercenter.caiso.com/InitiativeDocuments/Issue-Paper-Resource-Adequacy-Modeling-and-Program-Design-Nov-07-2024.pdf

[13] 2023 Annual Report on Market Issues and Performance, Department of Market Monitoring, July 29, 2024, p 271, table 8.3: https://www.caiso.com/documents/2023-annual-report-on-market-issues-and-performance.pdf

[14] Resource Adequacy Modeling and Program Design: Straw Proposal Options: Track 2 Availability and Incentive Mechanisms, California ISO, March 4, 2025: https://stakeholdercenter.caiso.com/InitiativeDocuments/Presentation-Resource-Adequacy-Modeling-and-Program-Design-Mar-03-2025.pdf

[15] Comments on Price Formation Enhancements: Scarcity Pricing Working Group Sessions, Department of Market Monitoring, February 27, 2025, pp. 5: https://www.caiso.com/documents/dmm-comments-on-price-formation-enhancements-scarcity-pricing-working-group-sessions-feb-27-2025.pdf

[16] Resource Adequacy Modeling and Program Design Issue Paper, California ISO, November 7, 2024: https://stakeholdercenter.caiso.com/InitiativeDocuments/Issue-Paper-Resource-Adequacy-Modeling-and-Program-Design-Nov-07-2024.pdf

[17] Ibid.

[18] Outage substitution capacity pool auction: A theoretical framework, Department of Market Monitoring, February 11, 2025: https://www.caiso.com/documents/presentation-outage-substitution-dmm-feb-11-2025.pdf

[19] Ibid.

[20] Vickrey, William. “Counterspeculation, Auctions, and Competitive Sealed Tenders.” Journal of Finance, col. 16, no. 1, pp 8-37.

[21] Outage substitution capacity pool auction: A theoretical framework, Department of Market Monitoring, February 11, 2025: https://www.caiso.com/documents/presentation-outage-substitution-dmm-feb-11-2025.pdf

[22] Final Net Qualifying Capacity Report for Compliance Year 2023, California ISO, November 16, 2023: https://www.caiso.com/library/net-qualifying-capacity-nqc-and-effective-flexible-capacity-efc

[23] Final Net Qualifying Capacity Report for Compliance Year 2024, California ISO, December 13, 2024: https://www.caiso.com/library/net-qualifying-capacity-nqc-and-effective-flexible-capacity-efc

[24] There are values where the difference goes to zero, and the difference between the NQC list and the RA        obligation is met with RA imports.

[25] Planned-to-forced outages: Issue overview and discussion, Department of Market Monitoring, March 13, 2024, pp 35-41: https://stakeholdercenter.caiso.com/InitiativeDocuments/Presentation-Resource-Adequacy-Modeling-and-Program-Design-Working-Group-March13-2024.pdf

[26] Comments on Resource Adequacy Modeling and Program Design, Department of Market Monitoring, January 30, 2024: https://www.caiso.com/documents/dmm-comments-on-the-resource-adequacy-modeling-and-program-design-jan-16-2024-working-group-jan-30-2024.pdf

2. Please provide your organization’s feedback on the MURA design options leaning which includes: defining availability as meeting the must offer, using Tx/RMO/EEA hours as the assessment period, determining the penalty administratively based on RA bilateral trades, and allocating the penalty collected to load.

Please see the PDF attached below the final question for DMM's fully formatted complete set of comments. For the reader's convenience, the complete text of the comments is pasted in response to #1, but there may be some formatting errors.

3. Please provide your organization’s feedback to Walter Graf’s overview of PJM’s Capacity Performance mechanism.

Please see the PDF attached below the final question for DMM's fully formatted complete set of comments. For the reader's convenience, the complete text of the comments is pasted in response to #1, but there may be some formatting errors.

1. Please provide your organization’s feedback to the MURA discussion.

Calpine generally supports the MURA design--in particular the focus on availability during system stress hours combined with meaningful penalties that encourage performance.

2. Please provide your organization’s feedback on the MURA design options leaning which includes: defining availability as meeting the must offer, using Tx/RMO/EEA hours as the assessment period, determining the penalty administratively based on RA bilateral trades, and allocating the penalty collected to load.

It may be acceptiable to define availability as meeting the must offer, but It is unclear how CAISO is conceptualizing the MOO in combination with UCAP and other counting rules.  Would the obligation to be to offer at the UCAP/NQC or at the associated ICAP?  (In PJM, it is the latter.). Relatedly, how would renewables meet the must offer?  For example, presumably a solar resource could not satisfy the must-offer associated with its NQC, which is tied to its peak hour exceedance, in most other hours.  The formulation of the MOO may implicate how penalty receipts are allocated.  For example, Calpine generally favors allocating penalty receipts to overperforming resources, but it is unclear what would consitute overperformance under MURA.  It may be impossible for a thermal unit, for example, to overperform if the must offer is for the full ICAP coresponding to resource's UCAP.

Given the opacity of the RA market, it may be difficult to tie penalties to observed bilateral prices.  In particular, Calpine is concerned that some of the sources cited by CAISO, such as EQR data and the CPUC's RA report, do not accurately identify prices for delivery in specific months, e.g., multi-month fixed price transactions may be considered inappropriately in the calculation of average prices for each of the underlying months.  (On the other hand, the CPUC is trying to establish more accurate and granular estimates of RA prices in its new PCIA proceeding.  The CAISO may be able to leverage that effort.). Instead, the CAISO may want to consider tying penalties to an administrative number, such as a multiple of net CONE as in ISO-NE and PJM.  The CAISO could use the net CONE values that the CPUC will be using to assess penalties for failures to meet MTR procurement requirements.  (If the CAISO uses the same value in all months, e.g., 1/12 of annual net CONE in each month, this value might be too low to encourage performance/outage replacement in the highest priced months.)

3. Please provide your organization’s feedback to Walter Graf’s overview of PJM’s Capacity Performance mechanism.

N/A

1. Please provide your organization’s feedback to the MURA discussion.

Leap has no comments on the discussion at this time.

2. Please provide your organization’s feedback on the MURA design options leaning which includes: defining availability as meeting the must offer, using Tx/RMO/EEA hours as the assessment period, determining the penalty administratively based on RA bilateral trades, and allocating the penalty collected to load.

Leap supports continuing to define “availability” as meeting the must offer obligation (MOO), but it is concerned about the requirement that demand response (DR) be available during Tx and RMO events. To align with the CPUC’s Resource Adequacy program, DR should only be required to be available during events that are issued prior to the day-ahead market deadline. CPUC Decision 23-06-029 spelled out the availability requirements for DR in Resource Adequacy, stating that, “The resource must be available for the duration of an Alert, Warning, or Notice that is issued prior and up to the 10 a.m. day-ahead market bid deadline” (OP 30 on p. 145).” 

Requiring that DR be available during all emergency events regardless of when they are issued would circumvent this decision by the CPUC and would create misalignment between CAISO and CPUC DR availability requirements. Furthermore, availability during Tx and RMO events is not a component of the incentive-based QC methodology that the CPUC and CEC are jointly developing, so this requirement would ultimately be removed for DR resources once that methodology is finalized. To the extent that CAISO’s proposed MURA mechanism is implemented before the CPUC establishes an alternate QC counting methodology for DR, Leap proposes that DR be exempted from showing availability on Tx and RMO events that are called after the day-ahead market closes.  

Leap does not have any specific recommendations at this time as to how the MURA penalty levels should be set. From Leap’s past experience, benchmarking penalty levels to RA prices, while well-intentioned, is challenging and may be infeasible. As mentioned on the 3/4 call, this was also discusssed in CPUC working groups about the forthcoming DR QC methodology, Leap recommends that CAISO connect with the CPUC Demand Response team to coordinate on if/how RA prices can be used as a benchmark in both MURA and this new DR QC methodology. Finally, regardless of which approach CAISO chooses, Leap emphasizes that the penalty levels must be appropriately calibrated to ensure that smaller market participants are not hit with excessive penalties that may force them to exit the market and/or create lasting financial damage to the company.

3. Please provide your organization’s feedback to Walter Graf’s overview of PJM’s Capacity Performance mechanism.

Leap has no comments at this time.

1. Please provide your organization’s feedback to the MURA discussion.

Please see MRP's comments on the February 10-11 workshop, attached below.

2. Please provide your organization’s feedback on the MURA design options leaning which includes: defining availability as meeting the must offer, using Tx/RMO/EEA hours as the assessment period, determining the penalty administratively based on RA bilateral trades, and allocating the penalty collected to load.

Please see MRP's comments on the February 10-11 workshop, attached below.

With regards to using transmission emergency hours as an assessment period, while MRP does not dispute that generator availability may be more important (in some areas) under those circumstances, MRP is concerned about the equity of transmission unavailability triggering an assessment of generator unavailability.  If the purpose of a performance mechanism is to create a strong inventive for owners and operators of bulk power system components to make their facitilities available under stressed system conditions, rather than only assessing and penalizing generator non-availability, should the CAISO not also assess and penalize transmission unavailability, especially if transmission unavailability leads to the CAISO declaring a transmission emergency?   And if the loss of a transmission line could trigger an assessment of generator unavailability, should the CAISO also assess transmission availability when the need for that transmission becomes more critical due to the loss of a generator?   

MRP agrees that linking the penalty price to the prevailing RA price is the best of the three options presented, but that determining the "right" current RA price benchmark will be a subjective task that will depend on data that is typically not publicy available.  

3. Please provide your organization’s feedback to Walter Graf’s overview of PJM’s Capacity Performance mechanism.

While MRP appreciates both Dr. Graf's presentation on the PJM Capacity Performance Mechanism (CPM) and the CAISO's investigation into performance mechanism designs in other ISOs, MRP respectfully urges the CAISO to exercise caution in placing too much emphasis on PJM's CPM experience.

First, MRP notes that PJM's CPM created huge amounts of potentially ruinous penalty liability during the events of Winter Storm Eliott - amounts that were ultimately reduced through a negotiated settlement at FERC.  In some case, huge non-performance penalties were allocated to generators that PJM did not timely commit, which then could not secure fuel to operate.  While PJM modifed its CPM penalties in response to this event, including linking the penalty cap to auction revenues instead of the cost of new entry,  MRP urges the CAISO to consider the possibility of a similar event occuring under a MURA constuct and take steps to prevent a similar catastophic application of non-performance penalties.

Second, any CAISO performance mechanism cannot be designed and considered in isolation but must be designed and considered in the context of the overall market design.  While PJM's overall market design includes CPM, it also includes a mutli-year forward centralized capacity market with capacity commitment terms longer than a single month.   Consequently, lifting all or even parts of the PJM's CPM design and simply inserting them into the monthly bilateral California Resource Adequacy market would be inapt.  

1. Please provide your organization’s feedback to the MURA discussion.

MURA doesn’t appear to be that much of a departure from or improvement to RAAIM, and NCPA is skeptical that it will resolve the availability issues CAISO is trying to address. As such, NCPA currently supports retention of RAAIM at this time, but NCPA is also open to further discussing certain enhancements to RAAIM to account for current market conditions (as further discussed below). Under MURA, CAISO proposes to adjust assessment hours from routine business day intervals to only hours during grid emergency events. To support existing contractual commitments, and to support ongoing reliable operations of the grid, NCPA believes that the current Availability Assessment Hours provide certainty, reflect the expectation that RA resources be generally available, and help generators stay focused on critical hours to support reliability.

Regarding possible enhancements to RAAIM, NCPA can support expanding the RAAIM availability assessment hours to capture additional morning and weekend/holiday hours. NCPA would also be supportive of increasing the applicable RAAIM rate to be equal to 100% of the CPM price, which reflects the actual cost of operational capacity in the market. NCPA does not support and will strongly oppose basing any RAAIM or MURA incentives / penalties rates on VOLL; VOLL is far too subjective and does not reflect the actual cost of operational capacity in the market.

CAISO also proposes to allocate MURA proceeds to load rather than generators. NCPA believes that incentives historically work better than penalties and that the RAAIM mechanism to allocate penalty proceeds to generators is reasonable.

At this point, NCPA believes that CAISO’s focus should be on UCAP development over a RAAIM replacement. If stakeholders agree to implement UCAP then NCPA feels that RAAIM, MURA, or any other type of availability assessment would be not the primary mechanism to incentive performance, but rather would be complimentary. UCAP will incentivize generators to be available during stressed conditions or else they will not have as much capacity to sell in following years. Worse still, MURA in combination with UCAP risks a “double risk,” where resources are penalized once through a MURA penalty and then again in the form of a reduction in UCAP for the same outage.

CAISO states that one of the issues with RAAIM is too many generators are exempt. While it may be appropriate to further evaluate the current exemption rules that are in place, in some cases the current exemptions are appropriate and were originally put in place due to other considerations.  For example, NCPA operates in the CAISO as a Load-Following Metered Subsystem (LF-MSS).  As such, it already has strong performance incentives built into its contract with CAISO that are very well aligned with CAISO operational goals. An LF-MSS is required to balance its portfolio of load and supply within a tight compliance deviation band during every 5-minute dispatch interval, or be subject to significant financial penalties. These penalties provide a strong incentive for an LF-MSS to ensure it has adequate capacity available at all times to meet its real-time load serving obligations, and to take appropriate measures to ensure that capacity performs in real-time. NCPA strongly believes that the operating characteristics and incentives of the LF-MSS model already align well with the goals that CAISO has identified for this initiative.

2. Please provide your organization’s feedback on the MURA design options leaning which includes: defining availability as meeting the must offer, using Tx/RMO/EEA hours as the assessment period, determining the penalty administratively based on RA bilateral trades, and allocating the penalty collected to load.

Please refer to item 1.  

3. Please provide your organization’s feedback to Walter Graf’s overview of PJM’s Capacity Performance mechanism.

NCPA believes that attempting to transfer PJM’s Capacity Performance mechanism to CAISO without careful consideration and analysis of the significant differences between the two programs

Is ill-advised. Recent events highlight that PJM’s approach is a work in progress and not without problems (not to mention the significant differences between PJM and the CAISO). NCPA understands that there was an event, Winter Storm Elliot, which resulted in $1.8 billion in penalties that were assessed under this program. Moreover, PJM’s application of its Capacity Performance mechanism led to more than a dozen complaints and significant litigation that ultimately led to a reduction in penalties by about a third through a FERC-approved settlement (at least some complaint issues are still being litigated). NCPA understands that much of the unavailability may not have even been the fault of the generators, but rather faults in the fuel distribution system, which were probably outside of the generators’ control. The money spent on these penalties (not to mention the litigation spurred by these penalties) could have been used for upgrades to generators and fuel distribution systems.

Similar to the concerns noted in response to item one about MURA, an approach like PJM’s Capacity Performance mechanisms risks imposing severe penalties that may often be the result of chance or factors outside of a generator’s control. And in that circumstance, the approach is not likely to create the incentives CAISO and stakeholders have identified. Indeed, Dr. Graf recognized that while severe penalties for rare emergency events may make sense at a theoretical level, this approach may not actually induce actions that improve availability and reliability in practice.

Regardless if generators are unavailable during stressed conditions, proper price formation based on the marginal cost of generation should incentivize performance. That is being reviewed in the Price Formation Enhancements initiative. Also, if generators are not performing in stressed conditions then the balancing authority should investigate and refer the resource to the DMM and/or FERC for penalties if tariff violations occurred.

1. Please provide your organization’s feedback to the MURA discussion.

• The must-offer-obligation is a key design element of every market that procures forward capacity.  Including incentives to comply (or penalties for non-compliance) comes together with the must-offer-obligation.  Whether we call it RAAIM or MURA, long-term and short-term incentives that enforce the must-offer-obligation are necessary.
• Forward-contracted resources have an obligation to support the grid during the most extreme events. It is reasonable that these forward-contracted resources should have a financial incentive to be available during the most extreme grid conditions since forced outages during critical periods have greater reliability impacts on the grid.
• PG&E supports exploring potential reforms to RAAIM regardless of whether UCAP is implemented. CAISO analysis shows that RAAIM does not work as intended, it does not provide incentives to be available and does not provide substitution for forced outages.

2. Please provide your organization’s feedback on the MURA design options leaning which includes: defining availability as meeting the must offer, using Tx/RMO/EEA hours as the assessment period, determining the penalty administratively based on RA bilateral trades, and allocating the penalty collected to load.

PG&E notes there is a need for a wholistic design UCAP and RAAIM revision. RAAIM reforms largely depends on the RA design changes that are being considered in the RA MPD such as UCAP. Many UCAP design elements still need to be addressed for developing a complete methodology (e.g., the nature of works to calculate resources’ UCAP values; defining the assessment hours and the supply cushion; clarifying the forced outage substitution requirements and how extended forced outage can be cured).

Additional comments on MURA: 

• Must-Offer Obligation (MOO): the MOO requires that SCs make the RA capacity listed in the Scheduling Coordinator’s monthly Supply Plans available to the CAISO each hour of each day of the reporting month. If UCAP is implemented, the LSEs RA requirements will be set in terms of UCAP values. There is a need to clarify if the MOO will be in terms of UCAP values or ICAP values.  This is an important clarification prior to additional discussion on incentives and penalties. 
• Assessment period: PG&E supports exploring the CAISO’s proposal to assess RA availability based on TX/RMOs/EEA as it aligns with CAISO stressed grid conditions.
• Price of penalty options: PG&E supports exploring options that either 1) could approximate the cost of RA replacement (RA benchmarking price); or 2) represent the real time impact that unavailability could contribute towards (CAISO RTD).  
  • PG&E agrees with the pros and cons the CAISO identified for both options.
  • The Administrative Price Based on RA Bilateral Prices (RA benchmarking price; slide 22 of CAISO presentation) could approximate the cost of RA replacement; however as discussed at the March 4th meeting there is complexity in determining such a price. Can CAISO provide example of FERC EQR data that would be used?
  • The real-time prices reflect the real-time impact that unavailability has, the price is marked-based and transparent, however unavailable RA may not be the sole driver for high marginal real time prices.

3. Please provide your organization’s feedback to Walter Graf’s overview of PJM’s Capacity Performance mechanism.

Not at this time.

1. Please provide your organization’s feedback to the MURA discussion.

REV Renewables (REV) appreciates CAISO having this discussion on Measuring Unavailable Resource Adequacy (MURA). While REV strongly agrees with the need for RA resources to meet their must offer obligation and desire to incentivize capacity to be available, REV does not support moving forward with MURA as outlined.

REV agrees with stakeholder comments during the March 4 meeting on the need for CAISO to more clearly define its problem statement, including identifying which types of outages and situations are the primary concern. CAISO should then lay out the other proposals identified in this initiative and related initiatives such as Price Formation Enhancements (e.g. scarcity pricing), and see how those proposals map to the outages and situations of concern. This problem-proposal mapping could ensure CAISO does not over penalize for the same issue of concern. CAISO’s Unforced Capacity (UCAP) proposal, for example, would reduce the qualified RA value of resources based on their historical forced outage rates. If MURA is also aimed at reducing forced outage rates by penalizing resources on forced outage during emergency conditions, this would be a double penalty on these resources (once during the emergency condition and then in future years via UCAP). REV also agrees with CESA’s comments that CAISO and stakeholders need to clearly define what is a forced outage and what outage types are included in that definition. This would help CAISO further define what outages are the ones of concern and targets for penalty via MURA. The outage data on slide 12 should be broken out by outage type to better understand the RA outage rate, since CAISO stated this data currently includes ambient derates (which would be included in the proposed UCAP) and planned outages (which could be accounted for in other proposals such as the planned outage pool).

Any program that includes the risk of penalties means that resources will then incorporate that risk into the cost of the resource. This is well documented in the PJM market, including most recently in PJM’s docket ER25-785 where FERC allowed sellers to include the capacity performance quantifiable risk (CPQR) in the capacity offer price. Additionally, PJM’s most recent capacity performance event during Winter Storm Elliott in 2022 highlights the magnitude of the impact this could have on the industry. PJM generators were assessed a total of $1.8 billion in non-performance charges, which resulted in a FERC complaint and settlement that lowered it to $1.2 billion in performance payments.[1] While there is debate over who operational decisions by PJM and generators during this event, it is clear that this event had a significant financial impact on the industry. Given California’s electricity bill affordability concerns, CAISO should proceed with caution on any mechanism that could impact RA prices.

[1] https://insidelines.pjm.com/ferc-approves-winter-storm-elliott-settlement-agreement/

2. Please provide your organization’s feedback on the MURA design options leaning which includes: defining availability as meeting the must offer, using Tx/RMO/EEA hours as the assessment period, determining the penalty administratively based on RA bilateral trades, and allocating the penalty collected to load.

As stated above, REV does not support the MURA potential proposal, though offers these comments for consideration.

REV agrees that availability could be defined as meeting the must offer obligation. REV also notes that CAISO uses some operations tools that PJM does not, such as Exceptional Dispatch, to ensure resources are available and ready during stressed grid conditions. CAISO should consider resources as available during these times as well.

REV suggests that assessment periods should be more closely tied to true emergency conditions. This can also help not overly penalize RA resources and drive up RA costs unnecessarily. PJM, following Winter Storm Elliott in 2022, adjusted their criteria for calling a Performance Assessment Interval that makes it be a more closely aligned to true emergency conditions. In contrast, CAISO’s proposed assessment periods include Restricted Maintenance Operations and Transmission Emergency, which REV considers too early of an “emergency” condition, as shown by the number of incidents in slide 17. EEA Watch or EEA 1 are likely a better trigger for potential penalty situations.

A penalty price should be predictable in order for resources to understand the potential magnitude of performance risk. REV agrees that RA benchmark price, published the month in advance, could be a reasonable penalty price that represents the replacement value of missed capacity. REV cautions against including real time prices in the penalty as these are not predictable at the time of resource contracting, and potentially not even the day before an event. In a true forced outage situation, a resource that is unable to come back online that day could be exposed to exorbitant penalty prices if real time prices are included in the penalty. Further, if scarcity pricing is in place, then resources should already have the incentive to be available in the real time.

REV suggests further conversation on the penalty allocation. Allocating the penalty collected to load could compensate the LSEs for resources that they procured that were not actually available. However, more discussion should also be given to PJM’s approach to allocate a portion of penalties to resources that were available as bonuses. This provides a performance incentive to RA resources to be available, and can counterbalance the risk of penalties in RA pricing.

3. Please provide your organization’s feedback to Walter Graf’s overview of PJM’s Capacity Performance mechanism.

REV included some PJM comments and comparisons above and has no further comment at this time.

1. Please provide your organization’s feedback to the MURA discussion.

SDG&E shares CAISO's objective of enhancing resource adequacy and ensuring grid reliability. This is a concern for all Load Serving Entities. However, SDG&E urges CAISO to exercise caution with the proposed MURA framework. At the outset, SDG&E challenges the assumption that organizations deliberately choose to incur penalties instead of securing replacement RA capacity. Accepting this premise would mean accepting that LSEs operate based on nefarious intentions. This behavior would contradict LSE obligations and without evidence, such motivations should not be attributed to LSEs. Furthermore, such significant policy changes should not be based on unsubstantiated assumptions.

SDG&E is also concerned about MURA's potential impact on ratepayer costs. Any mechanism that introduces penalties or increases RA procurement costs demands thorough scrutiny. It is crucial that any MURA framework harmonizes with existing resource adequacy programs at both the CPUC and CAISO, particularly UCAP, to avoid duplication, conflicting requirements, and the risk of double penalties for the same deficiency.

While SDG&E supports improving the RA program, these improvements must be data-driven, cost-effective, and well-integrated with existing regulations. The MURA proposal requires substantial development and comprehensive impact analysis before CAISO proceeds with implementation.

2. Please provide your organization’s feedback on the MURA design options leaning which includes: defining availability as meeting the must offer, using Tx/RMO/EEA hours as the assessment period, determining the penalty administratively based on RA bilateral trades, and allocating the penalty collected to load.

SDG&E appreciates CAISO’s efforts to outline the MURA mechanism and propose various design options. Based on the information available to date, the assessment period recommendation (Tx/RMO/EEAs) seems reasonable, while additional information and discussions regarding the mechanics of the other elements (availability, penalty price, and cost allocation) would be helpful. 

SDG&E is supportive of further exploring this topic, however, as mentioned above, SDG&E has concerns with MURA. It may be premature to design and implement this proposal given that the market does not yet have experience with UCAP. Implementing UCAP first could give stakeholders and CAISO critical insight into the impact UCAP will have on the issues CAISO is seeking to address and the need for an additional mechanism (if any). This insight could then help to inform the design and implementation of such a mechanism, if needed. 

3. Please provide your organization’s feedback to Walter Graf’s overview of PJM’s Capacity Performance mechanism.

No comment.

1. Please provide your organization’s feedback to the MURA discussion.

Six Cities’ Comments:  As described more fully below in response to Question 2, the Six Cities generally support or do not oppose elements of the CAISO’s “design option leaning” with respect to the MURA concept.  However, the Six Cities strongly recommend that the CAISO defer further efforts to refine the MURA design until there is additional clarity with regard to other elements of RA redesign, including UCAP, the Planning Reserve Margin (“PRM”), and the design of the outage substitution pool.  Further detail and clarification regarding such basic elements of the revised RA framework are necessary to understand the appropriate role for any mechanism intended to provide an availability incentive or non-availability penalty and to ensure that the design for any such mechanism is consistent with the intended objectives.

For example, the Six Cities agree with the many commenters during the March 4, 2025 working group conference that opposed implementation of double (or even triple) penalties or NQC reductions for the same outages.  To the extent that outages are reflected fully in reduced NQC for UCAP counting purposes or in increased PRM targets, it is questionable whether imposition of an additional non-availability penalty (even if characterized as an “availability incentive”) would be necessary or appropriate. 

Another aspect of RA design that has received insufficient attention thus far is the definition of various categories of outages.  As the Six Cities (and several other stakeholders) previously have commented, the CAISO’s practice of classifying outages based solely on when the outage is submitted to OMS is non-sensical and inconsistent with NERC definitions.  Outage classifications should be based on the conditions that give rise to the outage (rather than the time reported to OMS) and should be eligible for reclassification under appropriate circumstances.  For example, an outage previously requested as a Planned outage should be eligible for reclassification as a Forced outage where delaying the outage will increase risk of equipment failure or non-availability during peak periods.  Conversely, an outage that begins as a Forced outage due to equipment failure should be eligible for reclassification to a Planned outage where performing extended maintenance or replacement of equipment makes more sense from the perspective of reliability and economy than implementing a quick fix that is not likely to be durable.  This initiative should include reformation of the CAISO’s outage definitions as well as development of sensible default rules for the treatment of different classifications of outages.

2. Please provide your organization’s feedback on the MURA design options leaning which includes: defining availability as meeting the must offer, using Tx/RMO/EEA hours as the assessment period, determining the penalty administratively based on RA bilateral trades, and allocating the penalty collected to load.

Six Cities’ Comments:  On a preliminary basis only, and subject to their recommendation to defer further development of details for any availability incentive or non-availability penalty until after other elements of the default RA policy are clarified, the Six Cities support the following “design option leanings” discussed in the March 4^th working group:

• Defining availability based on offering the requisite RA capacity into the CAISO’s markets.  Further discussion is necessary, however, with regard to determining the appropriate scope of the must offer obligation (i.e., whether based on NQC included in RA showings versus installed capacity).
• Using Tx/RMO/EEA hours as the assessment period.
• Administrative determination of any non-availability penalty based generally on bilateral trades.  The Six Cities continue to oppose establishing any metric for RA performance, including but not limited to any non-availability penalty, based on Value of Lost Load (“VOLL”); discussions during working groups in the Price Formation Enhancements initiative relating to Scarcity Pricing have identified challenges and complexities with calculating VOLL in a way that produces just and reasonable outcomes.
• Allocating penalties collected to load.  This is reasonable in view of the fact that load pays for RA resources to support reliability.

In addition, if and when further development of any non-availability penalty moves forward, the Six Cities support consideration of a stop-loss provision.  Imposition of excessive penalties may become counter-productive if they increase risks of market participation to levels that result in significant increases in RA costs, reduced participation by resources, or barriers to resource development.  A reasonably balanced stop-loss provision would be appropriate to mitigate the potential for penalties so severe as to result in unintended negative consequences.

3. Please provide your organization’s feedback to Walter Graf’s overview of PJM’s Capacity Performance mechanism.

Six Cities’ Comments:  Based on Mr. Graf’s description of PJM’s Capacity Performance mechanism as currently implemented, many elements of the PJM mechanism seem to be reasonably balanced.  In particular, PJM’s stop-loss provision appears to allow penalties that are commensurate with the seriousness of resource failure to perform during a period of critical system need without becoming ruinous.  The Six Cities also support excusing from penalties resources that are on approved planned outages when adverse system conditions arise, presumably unexpectedly.  Despite the generally balanced nature of the PJM mechanism, however, the Six Cities question the practical benefit of a performance incentive that applies only very infrequently, as appears to be the case with the PJM mechanism.  An incentive mechanism that creates a low but tangible risk of incurring a very high penalty may increase costs for risk premiums (charged by resources and paid by load) out of proportion to enhancement of reliability.

1. Please provide your organization’s feedback to the MURA discussion.

Terra-Gen appreciates the opportunity to comment on the CAISO’s Resource Adequacy (RA) enhancements efforts and specifically RAMPD initiative and its March 4 stakeholder working group topics.  

Please note Terra-Gen’s feedback and recommendations on topics covered at CAISO’s February 10-11 RAMPD working group meetings are also included in the linked attachment available below.

Terra-Gen expresses significant concerns regarding the proposed Measuring Unavailable Resource Adequacy (MURA) mechanism, particularly considering ongoing Unforced Capacity (UCAP) and Price Formation Enhancements (PFE) initiatives.

Terra-Gen questions the necessity of MURA and believes that UCAP and PFE initiatives already provide strong incentives for resource availability. UCAP, by adjusting Net Qualifying Capacity (NQC) based on historical performance, directly incentivizes availability. PFE's scarcity pricing reforms aim to ensure generator availability during tight supply conditions. Terra-Gen asserts that MURA appears duplicative, creating a risk of double penalties for the same deficiency. For example, a forced outage penalized under MURA could also result in a reduction of NQC under UCAP. Such outcomes are not appropriate and would require complex implementation to ensure that double penalization is not enforced between UCAP capacity accreditation and MURA settlement processes.

Terra-Gen also expresses concerns about MURA's complexity and potential impact on ratepayer costs. The introduction of penalties, as demonstrated in the PJM market, can significantly increase RA procurement costs. Terra-Gen disagrees with assertions that entities deliberately incur penalties under existing Resource Adequacy Availability Incentive Mechanism (RAAIM) provisions because of a lack of impact from the penalty pricing. Terra-Gen also emphasizes the need for MURA to be harmonized with existing RA programs, particularly UCAP, to avoid conflicting requirements.

Terra-Gen recommends that if MURA is implemented, penalties should not be based on the subjective Value of Lost Load (VOLL). Terra-Gen also concurs with other stakeholder recommendations to defer further MURA refinement until there is clarity on UCAP, the Planning Reserve Margin (PRM), and the outage substitution pool concepts. Terra-Gen believes that MURA, as currently proposed, is duplicative and potentially detrimental. Terra-Gen urges the CAISO to prioritize the implementation of UCAP and PFE, and to thoroughly analyze the need for MURA considering these related initiative efforts. Terra-Gen recommends deferring MURA implementation until a clear need is demonstrated and its design is harmonized with existing RA programs. CAISO should first propose to remove the RAAIM mechanism if it intends to implement UCAP. Once UCAP has been in place for some time and CAISO can subsequently observe related outage rates and outcomes then it would be more appropriate to consider further developing the MURA concept.

2. Please provide your organization’s feedback on the MURA design options leaning which includes: defining availability as meeting the must offer, using Tx/RMO/EEA hours as the assessment period, determining the penalty administratively based on RA bilateral trades, and allocating the penalty collected to load.

Terra-Gen reiterates the recommendation to defer implementation until UCAP's impact is fully understood and a clear need for MURA is demonstrated. However, should MURA development proceed, Terra-Gen offers the following comments on penalty design considerations.

Terra-Gen supports the view that assessment periods should be closely tied to true emergency conditions. Terra-Gen believes that CAISO’s proposed assessment periods, including Restricted Maintenance Operations (RMO) may be overly broad. Terra-Gen recommends that EEA Watch or EEA 1 are more appropriate triggers for potential penalties.

Terra-Gen agrees that penalty prices should be predictable to allow resources to understand potential risks. Terra-Gen supports the use of the RA benchmark price, published monthly, as a reasonable penalty price. Terra-Gen cautions against including real-time prices, as they are unpredictable and could expose resources to exorbitant penalties, particularly in forced outage situations. Furthermore, scarcity pricing already incentivizes real-time availability.

Terra-Gen recognizes the potential benefits of allocating penalties to load to compensate LSEs for unavailable resources. Terra-Gen also suggests that CAISO should consider the potential for allocating a portion of penalties to available resources as payments to provide a performance incentive, similar to the current RAAIM process. Terra-Gen supports consideration of a stop-loss provision to mitigate the risk of excessive penalties, which could increase RA costs and reduce market participation.

Terra-Gen emphasizes the importance of harmonizing MURA with existing RA programs, particularly UCAP. Terra-Gen reiterates that CAISO should propose the removal of the Resource Adequacy RAAIM if UCAP is implemented. Terra-Gen supports implementing UCAP prior to advancing any MURA or similar availability penalty proposals to provide critical insights into the necessity of such mechanisms when combined with UCAP and PFE proposed modifications. Terra-Gen maintains that MURA implementation should be deferred until UCAP's impact is observed and a clear need is demonstrated. Should development proceed, Terra-Gen urges CAISO to carefully consider the proposed penalty design elements, including assessment periods, penalty price, allocation, and a stop-loss provision, to ensure a balanced and effective mechanism.

3. Please provide your organization’s feedback to Walter Graf’s overview of PJM’s Capacity Performance mechanism.

Terra-Gen recognizes the CAISO's exploration of performance incentive mechanisms, including the potential adoption of elements from PJM's Capacity Performance mechanism. However, Terra-Gen cautions against proposing a model similar to PJM’s without careful consideration of the significant differences between the two regional markets and RA constructs, which are vast. Terra-Gen shares the concerns regarding the complexities and potential pitfalls of adopting PJM's mechanism.

Terra-Gen agrees that imposing severe penalties, often due to factors outside a generator’s control, may not effectively incentivize improved availability and reliability. The significant differences between PJM and CAISO market structures further complicate the transfer of this mechanism.  

Terra-Gen acknowledges that some elements of the PJM mechanism, such as the stop-loss provisions and the exemption for resources on approved planned outages are appropriate if such an approach was adopted. However, Terra-Gen cautions that a performance incentive that applies only infrequently may increase bilateral RA market prices due to the inherent risk premiums that would likely result. There may be a low risk of high penalties that could lead to increased costs for load without a commensurate improvement in resource availability.  

Terra-Gen reiterates that proper price formation, based on the marginal cost of generation, should incentivize performance during stressed conditions. Terra-Gen believes that focusing on enhancing existing market mechanisms, such as price formation and regulatory enforcement, may be more effective than adopting a complex penalty-based system. Terra-Gen recommends prioritizing the refinement of existing market mechanisms and regulatory enforcement and conducting a thorough analysis of the differences between PJM and CAISO markets before implementing any significant changes. Terra-Gen does not take any position on this potential proposal concept at this time. Terra-Gen generally supports concepts that would result in a balanced approach that incentivizes performance without imposing excessive penalties or creating undue market risks.

Additionally, please see attached PDF linked below that provides Terra-Gen’s feedback and recommendations on topics covered at CAISO’s February 10-11 RAMPD working group meetings.