Please share your organization’s overall position on the final proposal:
Oppose with caveats
Vistra opposes the CAISO progressing the Final Proposal in its entirety to the next step of this process – Western Energy Imbalance Governing Body and Board of Governors approval. Vistra can only support the proposal if the Ancillary Service elements are deferred.
When filed at FERC, the CAISO proposals are expected to be non-severable from each other. This necessitates Vistra to take a position on the effort in its entirety. As a whole package, the CAISO proposal is expected to be detrimental to the ability of Scheduling Coordinators, as well as CAISO operators, to manage the storage fleet. We request the CAISO pause the forward progress and instead allow for storage owners, operators, or scheduling coordinators to come to the table collaboratively with the CAISO in the new working group model. Working group meetings, including in-person meetings, will allow CAISO staff, operators, and stakeholders to discuss the technical issues affecting scheduling coordinators and grid operators to allow a robust development of the problem statements that need to be addressed with new functionality or rules.
The CAISO’s Final Proposal states: “The goal of this initiative is to explore enhancements that could help storage scheduling coordinators better manage resource state of charge and continue to ensure efficient market outcomes”. At its near conclusion, the CAISO has failed to produce a proposal that can be supported because instead this proposal has only raised concerns with how it will reduce, potentially harmfully, the ability of storage resources to be managed through the market. Further, the CAISO has shown a resistance to develop the appropriate scope to address challenges facing storage operations felt by the storage owner, operator, or scheduling coordinator. It is also clear that stakeholder input has not been incorporated into the iterative development of these proposals.
The CAISO has failed to facilitate a robust, open stakeholder process. Instead, this effort has steadfastly pushed forward proposals that only CAISO staff supports, and for which CAISO staff has failed to adequately define the problem being solved or demonstrate whether the proposals will provide benefits. If the CAISO heeds stakeholder feedback, we can correct the course and work collaboratively on arriving to the appropriate scope and associated proposals that further storage operations, instead of harming its operations.
Vistra is disappointed to reach a point in the proposal, where the CAISO has not addressed our concerns such that we must oppose the Final Proposal. We believe there are elements of this proposal that Staff did develop and that should be advanced to the Western EIM Governing Body and Board of Governors for approval and approved for filing at FERC under Federal Power Act’s section 205 filing rights. Alternatively, the CAISO has failed to sufficiently establish a record to support submitting the Ancillary Service proposals and should not advance these to the Western EIM Governing Body and Board of Governors for approval, let alone filing at FERC under Federal Power Act’s section 205 filing rights. The remainder of our comments will address these two categories of proposals.
Vistra opposes the CAISO progressing the Ancillary Service proposals to the Western Energy Imbalance Governing Body and Board of Governors approval and will oppose the entire proposal if not these elements are not deferred.
The Ancillary Service proposed elements have not been sufficiently supported and Vistra believes could lead to infeasible or inefficient market dispatches for storage. CAISO states, “if a storage resource has insufficient state of charge, the real-time market will force a buy back of an ancillary service award and rescind the day-ahead ancillary service payment… This can result in incremental ancillary services procurement”.
Vistra agrees with the CAISO that the Ancillary Service (“AS”) State of Charge (“SOC”) constraint will drive energy awards for charge or discharge depending if there is either too much or too little state of charge on the asset to meet the AS SOC requirements in the real-time market. We are not yet convinced the CAISO has found it is not able to issue these energy awards to meet the State of Charge such that there are real-time AS buy backs subject to no pay performance and subsequent incremental AS awards. The limited instance for which the market would be challenged in using the AS SOC constraint to resolve this concern is in the instance that a storage asset does not submit energy offers in real-time to support these awards. This can only be the case for non-Resource Adequacy storage. Vistra believes the amount of non-RA storage is de minimis. The CAISO has not provided data to quantify the concern and we do not believe this is a significant problem confronting operators.
The least desirable outcome arises from the AS proposal, where the CAISO proposal, rather than resolving known issues, is anticipated to create at best inefficient and at worst infeasible market dispatches. CAISO proposes to revise the SOC calculation that will be used in the AS SOC constraint, and other applicable constraints, to include an assumed usage of regulation up and down in the SOC constraint in the day-ahead and real-time markets. However, the CAISO does not then propose a necessary change to the AS SOC constraint to require a different SOC level after the assumed usage has been removed. By failing to fully develop the proposal, the CAISO has formulated a proposal that only partially addresses the stated problem and in doing so will lead to infeasible market outcomes. This proposal cannot be advanced as formulated.
The CAISO’s proposal for energy bids is expected to lead to more inefficient and suboptimal market dispatches rather than to improve market outcomes. While Vistra believes the market will be able to avoid market infeasibilities that the prior proposal risks, the current proposal appears to limit the offers made available to the market such that less flexibility is made available to the market. Flexibility is an attribute sought after by the CAISO and it would be imprudent to limit the ability of the market to choose the optimal market outcome. Further, as we note above, RA resources are required to submit energy offers, economic or self-schedules, into real-time. We expect most, if not all, storage operating today and in the near future will be RA, such that we believe the CAISO’s concerns are unsupported. Vistra believes the CAISO is in good faith trying to address a concern communicated to the CAISO ESE team, but lacks a deep understanding of the drivers such that this proposal is unnecessary and potentially harmful by limiting flexibility to the market. For instance, if the CAISO is concerned with regulation signals being sent to storage resources when other regulation resources are available to receive that signal, then the problem is the logic used for regulation signal in the Automatic Generator Controls, not the offers submitted to the market.
Vistra does believe there are challenges with the interplay between AS and energy offers and awards, but that in failing to work collaboratively with storage owners, operators, and scheduling coordinators the CAISO has missed an opportunity to understand the issues facing market participants and CAISO operators and to work towards solutions that resolve these concerns. We support the need to investigate and develop a problem statement that should be addressed in a future stakeholder effort and ask the CAISO to defer these scope items for continued development.
Vistra would support the CAISO progressing the Exceptional Dispatch and Co-Located proposals to the Western Energy Imbalance Governing Body and Board of Governors approval with the caveat that additional review is needed.
Vistra believes the CAISO is proposing the exceptional dispatch (“ED”) for a hold SOC ED to be compensated based on opportunity costs and the proposals to allow co-located scheduling coordinators to identify projects that do not want to charge from grid energy because of reasonable concerns raised by storage owners, operators, or scheduling coordinators. While we can support these proposals as put forward in the Final Proposal, we believe that it will be important to monitor the use of the new ED and co-located model and any impacts to market efficiency.
For instance, if hold SOC ED are frequently being used by CAISO operators to manage the grid and compensated through out-of-market payments this raises broader questions about the market’s ability to integrate storage resources. If the new ED becomes a tool relied on regularly or results in significant, persistent out-of-market payments then Vistra requests the CAISO allow for working groups to explore whether a more durable, in-market solution can be put forward. We remind the CAISO that out-of-market dispatches should not be overly relied upon, to the detriment of market efficiency.
Vistra’s hesitation with the co-located model proposal is that we are still evaluating impacts of the Inflation Reduction Act on storage as an asset class whether stand-alone, co-located, or hybrid. As lessons are learned about how the IRA impacts developers’ decisions on how to build storage assets it will likely be necessary to review these assumptions in the near future. We also note that we believe this proposal may trigger the need to revisit other market rules that assume contract limitations or financial considerations are not appropriately reflected in the physical availability of conventional assets to ensure that conventional resources that also seek to reflect market-based parameters in their availability are not unduly discriminated against. Vistra supports advancing this proposal to distinguish between market-based and design-based parameters through opting into this co-located model and extending this proposed policy change to all resources.
Vistra recognizes the CAISO is unlikely to be willing to separate these elements with merit from the proposal in its entirety. However, if the CAISO were willing to do so and only advance these proposals for approval, then Vistra would support the proposals. We are disappointed that the success of these proposals is in question because they are bundled with the AS proposal that cannot be supported as just and reasonable.
 Final Proposal at 5.
Please provide any additional input not included above related to the final proposal.
The CAISO struggled to consistently provide feedback on questions and feedback provided by stakeholders. Vistra lacks confidence that the CAISO considered stakeholder feedback in this effort in a meaningful way. Further, the CAISO failed to respond to stakeholder requests for analysis or discussions on technical questions in a meaningful way.
Our concerns were shared by other stakeholders at the April workshop, and communicated in such force that Vistra and other stakeholders were successful in convincing the CAISO to provide a stakeholder comment matrix with responses on May 24, 2022. Since May, the CAISO has issued a second revised straw proposal and draft final proposal with limited responses to stakeholder feedback and questions. At the August 25, 2022 stakeholder call on the Draft Final Proposal, Vistra and others again asked the CAISO to please respond to our comments by answering stakeholder questions and by identifying how requests made by stakeholders have or have not impacted the Draft Final Proposal. We appreciated others urging the CAISO to be responsive and recognize that the format can be flexible, but the point is we should have confidence our comments have been read, responded to, and factored into the process to have confidence in the stakeholder process.
Vistra requests the CAISO review its processes going forward and to formally incorporate stakeholder comment responses in its policy efforts. For a well-functioning stakeholder process, an integral part of the ISO’s governance model, it is crucial the CAISO strive to meaningfully engage with stakeholders rather than focus on establishing an appearance of doing so.