Appian Way Energy Partners
Submitted 05/06/2026, 03:07 pm
1.
Please provide your organization’s feedback on the presentation by the Department of Market Monitoring and the following discussion on analysis and how to evaluate options for improving auction efficiency.
The DMM WBWS proposal would seriously harm the market for congestion contracts and hedges and, in the long run, will harm CAISO ratepayers by making it more difficult and expensive for competitive entry of new resources, and competitive contracting for existing resources.
The CRR Enhancements working group should instead focus on proposals to improve the CRR product so it can better accomplish the purpose of CRRs in the CAISO market design. First and foremost, this means addressing the levels of extreme and on-going revenue inadequacy of CRRs that devalues the products ability to serve its essential congestion hedging function. In this respect, Appian Way agrees with the various LSE representatives who submitted comments on February 6 stating that the core issue and highest priority in this working group should be addressing revenue inadequacy. We also support improvements to the CRR product definition.
If proposed by CAISO, the DMM proposal will (and should), in our opinion, be found unjust and unreasonable by the FERC because the proposal is inconsistent with FERC principles of open access and non-discrimination, and multiple FERC precedents regarding the role of CRRs as congestion hedges in LMP markets.
The WBWS proposal would severely harm liquidity --There are approximately 1500 unique generation nodes in the CAISO market, each potentially needing hedging serves from the market. The CRRs that non-utility physical generation and LSEs, and the financial traders that transact with them, need to best manage and hedge congestion risk in the LMP system are not the same set of CRRs that are given to LSEs as allocated CRRs. An essential value-creating aspect of the ISO-administered CRR market is in facilitating the reconfiguration of LSE allocated CRR sources/sink pairs into alternative source/sink CRR pairs that better match the business needs of the market participants who purchase them. The is why FERC has repeatedly and unanimously ordered that the open access requirements of Order 888, designed to make possible competition in electricity markets, necessitate that CRRs be made available by the ISO to market participants to allow for congestion hedging.
Past is prologue here. When CAISO’s market was being established in the 1990s, a great debate arose in CAISO between proponents of LMP and proponents of a “simpler” single-clearing price or zonal pricing market. The primary argument against the LMP system was precisely that liquidity in forward contracting and trading would be harmed with each node having separate unique pricing, and such circumstance would create complexity and barriers to liquidity in forward hedging and locational forward valuation. In fact, the LMP system is far more efficient because it aligns the prices generators see with the ISO-desired least-cost physical dispatch, but nevertheless the challenge of forward market liquidity at unique nodes is material. However, in all LMP markets, this challenge is met by well-functioning ISO-administered CRR markets or their equivalent, augmented by liquid forward trading at load zones and trading hubs. CAISO needs to significantly improve its CRR market, for sure, but a move toward WBWS would take CAISO’s market in the wrong direction.
As CAISO staff identified in the stakeholder session, it is not feasible to analyze the impact of the WBWS proposal on market liquidity using auction data. However, we believe CAISO should defer to the many CRR market participants who are quite certain that liquidity will be damaged and harm the market. Note in particular the analysis of DC Energy early in the process, as well as the comments from WPTF, representing many competitive physical players, and substantive presentations from Calpine Energy Solutions, Morgan Stanley and Vitol, among others in the stakeholder process. CAISO LSEs are notoriously conservative with respect to market participation in a volatile environment such as CRRs. It is a deeply flawed assumption that LSEs would participate in the WBWS auction and offer their allocated CRRs to the extent offered today, or that liquidity in the CRR market would not be irreparably impaired.
It is a fundamental tenant of Order 888 that transmission needs to be made available to a diverse set of market participants in order to facilitate competition in electricity markets. This principle is so fundamental, FERC named it after the address of their building. If the CRR Enhancements Stakeholder Group were to spend years discussing and developing a complex proposal around WBWS, when the proposal is clearly out of bounds with respect to existing FERC precedent and principles, this would not only represent a waste of time and resources for participating CAISO stakeholders, but also leave the pressing issues of revenue inadequacy, shortfall allocation, and CRR market functionality and efficiency unaddressed.
2.
Please provide your organization’s feedback on the discussion of how to group the potential enhancements into packages of complementary changes. Does your organization have a preference for any of the three hypothetical packages, preferred modifications to any of the packages, or an entirely new package to propose? Please provide your rationale for how any preferred package addresses the goals and problem statements developed by the working group.
Appian Way has proposed a simple reform to the Track 1B methodology for shortfall allocation that would bring this policy in line with cost causation principles. We rearticulate that proposal below, and believe that addressing the unintended consequences of the Track 1B reforms is a high priority which will repair the financial integrity of the CRR product, improve the CRR market’s ability to serve its intended purpose, and increase the value of auctioned CRRs that are for the benefit of load-serving entities representing transmission ratepayers. Of course, we also support any and all efforts to reduce revenue inadequacy by addressing some of the root causes identified by CAISO – loop flows, the shirt factor threshold cutoff, poor outage coordination, auction modelling that is misaligned with the actual market, etc. The proposal below explicitly addresses just shortfall allocation and can be carved out from other aspects of the stakeholder process.
As stated in Problem Statement 4: “Allocation of revenue shortfalls should be guided by cost causation principles.” In principle, this means that shortfalls that are caused by factors related to cost causation (such as transmission outages) can be specifically allocated on a constraint basis according to Track 1B, but shortfalls that are unrelated to cost causation, such as that associated with entities not paying for the congestion they cause (i.e. IFM shift factor cutoff, loop flows, EDAM CRA methodology, etc.), should be allocated broadly to the balancing account. Note that CAISO implicitly recognized the reasonableness of this approach in its June 2025 presentation to the EDAM policy initiative when it stated that CRR revenue inadequacy associated with constraints in external BAAs would be allocated to the balancing account. Note also the fundamental cost-allocation and FERC principle involved: assign costs specifically when specific beneficiaries can be identified and assign costs broadly when this is not possible.
To accomplish this, a cap can be placed on the amount of CRR shortfall allocation applied according to the track 1B methodology based on a simple calculated ratio, calculated hourly (just as CRR shortfalls are currently calculated hourly). The ratio numerator would be the actual physical line limit on a constraint in the IFM. The ratio denominator would be the CRR aggregate flow on the constraint from the CRR auction, summing up the flow on the constraint for all existing allocated and auctioned CRRs for the relevant hour.
Note that the Track 1B reform FERC filings implicated transmission outages and associated transfer capacity reductions in the IFM compared to the CRR market as the key driver of revenue inadequacy. The logic here would be to limit the shortfall allocation to no more than what is accounted for by the difference in transfer capability between the day-ahead market physical system capacity and what was modelled in the CRR auction. Such an approach would have the added benefit of ensuring that constraint-specific shortfall allocation to CRRs would never exceed the notional CRR expected value, regardless of the cause of the shortfall. The remaining shortfalls would be covered by the balancing account, following FERC cost allocation principles to assign costs specifically when specific beneficiaries can be identified and assign costs broadly when this is not possible.
Certainly, to the extent that other cost-causation-based reasons for shortfall can be specifically established by CAISO, it would be reasonable to allocate these amounts specifically to Track 1B. But to the extent that the shortfall cannot be specifically identified or is tied to non-cost-causation-based factors such as entities not paying for the congestion that they cause, then such shortfalls should be allocated broadly according to FERC precedent.
3.
If the initiative were to have multiple phases, what feedback does your organization have on the timing of reforms? Does your organization have any feedback on how to balance consideration of long-term reforms with immediate enhancements?
1) Address revenue inadequacy and shortfall allocation based on cost causation principles
2) Work with stakeholders to improve product definition to make CRRs more effective hedging tools. Reform Track 1A biddable nodes to allow for storage as a sink and additional physical market locations that would allow entities to better develop portfolio hedging.
We believe proposals to limit participation to certain classes of market participants is discriminitory and inconsistent with open access. One of the key tenents of ISO markets based on LMP is that physical transmission becomes unnecessary and is replaced by financial hedging. In any ISO market physical market participation in transmission decreases and is replaced by financial transactions. Some of these financial transactions are CRRs, but you also see a large decrease in physical delivery at specific OASIS hubs which are replaced by financial heding transactions at load zones or trading hubs such as NP15 or SP15.
4.
Please provide your organization’s feedback on the product definition portion of the discussion.
Bay Area Municipal Transmission Group (BAMx)
Submitted 05/06/2026, 03:39 pm
Submitted on behalf of
City of Santa Clara dba Silicon Valley Power and the City of Palo Alto Utilities
1.
Please provide your organization’s feedback on the presentation by the Department of Market Monitoring and the following discussion on analysis and how to evaluate options for improving auction efficiency.
The Bay Area Municipal Transmission group (BAMx[1]) thanks the CAISO for the opportunity to participate in the CRR Enhancements initiative and thanks the DMM for the presentation on the willing seller market design. Revenue inadequacy driven by the auction remains the central issue that this initiative must prioritize. The data continue to show that auctioned CRRs, not allocated CRRs, are the primary source of revenue inadequacy. As DMM's May 12, 2025, analysis demonstrated, allocated CRRs have been fully funded in 16 of 19 quarters from Q3 2020 through Q1 2025, with allocated CRR notional value averaging a surplus of about 17% of congestion rent.[2] After the auction, however, CRR revenue adequacy had shortfalls of about 25% of congestion rent.[3] The persistent pattern of auction underfunding demonstrates that the current CRR auction design systematically transfers value from transmission ratepayers to entities that include those that do not use the CAISO transmission system.
Our comments in this section consist of the following:
- Adoption of BAMx's Proposal to Limit Auction Participation Based on Historical Transmission Use
- Support Further Consideration of the Willing Seller Market Design
- Assessment of the Relationship Between the CRR Auction and Price Discovery
- Adoption of BAMx's Proposal to Limit Auction Participation Based on Historical Transmission Use
BAMx has proposed restricting CRR auction participation to entities with a demonstrated historical use of, or future contractual commitment to use, the CAISO transmission system. Such restrictions are consistent with the limitations placed on the allocation process. We believe this approach represents a reasonable and implementable improvement to the current auction framework that could later be incorporated into the comprehensive willing seller market design proposed by DMM. BAMx’s proposal—to limit auction participation to entities with demonstrated historical use or contractual commitment to use the CAISO transmission system—is a direct policy answer to the CAISO-identified problem Statement 2.[4] It aligns auction eligibility with the same cost-causation and use principles that already govern CRR allocations and it is consistent with FERC and CAISO precedent on the foundational role of CRRs.[5]
BAMx’s analysis of 2024 CRR Auction transactions and FERC Electric Quarterly Report (EQR) filings[6], presented at the May 12, 2025, working group session, demonstrated that a significant share of CRR auction activity is conducted by entities with no apparent corresponding physical energy transactions in the CAISO market. These entities are not using CRRs as the financial equivalent of firm transmission to hedge physical delivery obligations; rather, they are engaging in speculative activity that extracts value from the parties that pay for the transmission system without providing appreciable liquidity benefits. DMM also shows that large volumes of auction activity, particularly counterflow CRRs, are transacted by participants who are not using CRRs to hedge physical delivery.[7] BAMx concludes that this pattern reflects significant auction participation by entities without corresponding transmission system use.
Under the current auction framework, financial entities do not serve as market makers. Instead, the CAISO is the market maker, releasing transmission capacity at prices that systematically undervalue the congestion rent those CRRs ultimately pay out. Limiting auction participation to historical or committed transmission use would address this fundamental imbalance by ensuring that only entities with a genuine need for congestion hedging – load-serving entities, generators with scheduling obligations, and marketers engaged in physical energy transactions – can participate in the auction as CRR buyers. In a nutshell, a use-based participation screen would directly address this structural flaw by preventing non-hedging participants from extracting congestion rents without a corresponding physical exposure.
The presentation of the CAISO’s Market Performance and Planning Forum, dated April 27, 2026, highlights that revenue adequacy improvements are increasingly being achieved through conservative modeling assumptions, including global derating factors (GDFs) on contingency constraints.[8] CAISO acknowledges that “any measure that makes fewer CRRs available will increase the likelihood of revenue adequacy”, implicitly recognizing a tradeoff between adequacy and hedge availability.[9]
While conservative modeling may reduce underfunding, it does so by restricting CRR availability for all users, including CRR Entities with legitimate hedging needs. Restricting auction participation to entities with demonstrated historical use of, or future contractual commitment to use the CAISO transmission system, as proposed by BAMx, represents a more targeted and equitable reform. Such an approach directly addresses the source of auction inefficiency identified by DMM, preserves hedging availability for transmission customers, and aligns auction outcomes more closely with the foundational cost-causation principles governing the CRR allocation process. In summary, without auction reform, the burden of fixing underfunding shifts to restricting CRR volumes. Therefore, the BAMx-proposed approach of restricting who can participate in the auction is a more targeted and equitable approach than broadly shrinking hedging availability for load. Importantly, BAMx’s proposal is a reform that can be implemented using readily available information, independently or in combination with broader auction restructuring options.
- Support Further Consideration of the Willing Seller Market Design
BAMx continues to support the willing seller market design proposed by DMM and urges the CAISO to conduct further analysis of this approach. We believe that the willing seller design addresses the fundamental structural problem with the current auction: the CAISO currently releases auction CRRs at prices that are systematically lower than the payouts made to auction CRR buyers, creating a repeating transfer of value from transmission ratepayers to auction participants.
Under a willing seller design, CRRs would only be available for purchase from entities that either hold them or are willing take the opposite position of the buyers. This would create a genuine market with willing buyers and willing sellers, where prices reflect the true value that both parties place on the congestion hedging service. The current market only reflects the buyer’s value, and not the seller’s value, and thus cannot produce meaningful price signals.
BAMx believes the volume of auction CRRs available under a willing seller design would remain sufficient to meet legitimate hedging needs. CCAs and other LSEs will continue to need to auction CRR rights to rebalance their portfolios as their load and resource configurations change, and this rebalancing need does not diminish under a willing seller framework.
We also note that under a willing seller design, there is a legitimate role for financial entities as market makers: taking on risk and earning a premium to facilitate hedging transactions. This stands in contrast to the current framework, where financial entities profit at the expense of ratepayers from the structural underpricing of CAISO-released auction CRRs, without providing a commensurate market-making function.
- Assessment of the Relationship Between the CRR Auction and Price Discovery
Some auction participants have asserted that their participation in the CRR auction contributes to market liquidity and forward market price discovery, and that these benefits offset or justify the costs imposed on transmission ratepayers through auction underfunding.
This assertion has not been substantiated. We are not aware of any analysis by CAISO, DMM, or any other party that demonstrates a causal relationship between CAISO CRR auction activity and price formation in forward energy markets. Before giving weight to the market liquidity and forward market price discovery claims, CAISO should evaluate:
- Whether CRR auction prices have any statistically significant predictive or informational relationship with forward market congestion costs;
- Whether CRR auction participation by non-physical entities demonstrably improves market liquidity, reduces bid-ask spreads, or improves price convergence;
- Whether any observed price discovery benefits are proportionate to the documented costs of auction revenue inadequacy borne by transmission ratepayers.
Absent such evidence, restricting auction participation to demonstrable transmission users is a reasonable, low-risk reform for the CAISO to implement.
[1] The Bay Area Municipal Transmission group (BAMx) consists of the City of Santa Clara dba Silicon Valley Power and the City of Palo Alto Utilities
[2] Roger Avalos, CAISO Department of Market Monitoring, “Congestion revenue rights auction is fundamentally flawed – and continues to lose millions of dollars a year,” May 12, 2025, p.3. https://stakeholdercenter.caiso.com/InitiativeDocuments/Presentation-CRR-Enhancements-May-12-2025.pdf
[3] Id, p. 10.
[4] CAISO, “Congestion Revenue Rights Enhancements: Product definition, auction efficiency, and revenue adequacy.” Stakeholder Meeting, April 22, 2026, p.9.
[5] CAISO, “Congestion Revenue Rights Enhancements: Product definition, auction efficiency, and revenue adequacy.” Stakeholder Meeting, April 22, 2026, p.12.
[6] Bay Area Municipal Transmission Group (BAMx), “Analysis of CRR Auction Participation,” May 12, 2025. https://stakeholdercenter.caiso.com/InitiativeDocuments/Presentation-BAMX-Congestion-Revenue-Rights-Enhancements-May-12-2025.pdf
[7] Roger Avalos, CAISO Department of Market Monitoring, “Congestion revenue rights auction is fundamentally flawed – and continues to lose millions of dollars a year,” May 12, 2025, p.2.
[8] CAISO, “Market Performance and Planning Forum Q2” April 27, 2026, p.53.
[9] CAISO, “Congestion Revenue Rights Enhancements: Product definition, auction efficiency, and revenue adequacy.” Stakeholder Meeting, April 22, 2026, p.32.
2.
Please provide your organization’s feedback on the discussion of how to group the potential enhancements into packages of complementary changes. Does your organization have a preference for any of the three hypothetical packages, preferred modifications to any of the packages, or an entirely new package to propose? Please provide your rationale for how any preferred package addresses the goals and problem statements developed by the working group.
BAMx respectfully requests that any package of modifications adopted by CAISO include the restrictions on auction participation proposed by BAMx.
3.
If the initiative were to have multiple phases, what feedback does your organization have on the timing of reforms? Does your organization have any feedback on how to balance consideration of long-term reforms with immediate enhancements?
BAMx is skeptical of the potential benefits of the less impactful changes being considered. Rather than undertaking incremental measures, a more direct intervention is needed. BAMx’s proposal to limit auction participation based on the use of CAISO transmission could be implemented relatively quickly, with readily available information, and could produce greater benefits than the incremental measures.
4.
Please provide your organization’s feedback on the product definition portion of the discussion.
TOU Periods
BAMx supports aligning TOU periods with solar hours and evaluating whether Sundays and weekend solar hours are significantly different from weekday solar hours. We request that any proposed TOU changes be evaluated according to their potential impact on revenue adequacy and CRR underfunding before implementation. Changes to TOU periods should not be implemented until the CAISO has assessed whether such changes would exacerbate or mitigate the revenue adequacy concerns that are the primary focus of this initiative.
Regarding the treatment of long-term CRRs allocated under the current TOU structure, BAMx supports an approach that would continue to settle existing long-term CRRs using the current TOU periods and transition them to the new TOU periods as they expire and are renewed. This would avoid disruption to existing CRR holders while enabling the new TOU structure to take effect going forward. The feasibility of this transition approach should be evaluated prior to making the decision to change TOU periods.
Storage-As-A-Sink
BAMx remains concerned that allowing storage resources to serve as a CRR sink could undo the benefits of the 2019 Track 1A changes and increase CRR underfunding. We continue to believe that any storage-as-sink proposal must be accompanied by analysis demonstrating that it will not exacerbate revenue inadequacy. We urge the CAISO to prioritize the auction efficiency and revenue adequacy components of this initiative before exploring changes to the set of eligible CRR sinks.
We also support the DMM’s recommendation in their February 6, 2026, comments[1] that the CAISO clarify whether it intended for pumped storage to be eligible for allocation CRRs even after exempting pumping load from TAC charges in its FERC Order 841 compliance filing.
[1] CAISO Department of Market Monitoring, “Comments on Congestion Revenue Rights Enhancements Issue Papers,” February 6, 2026. https://stakeholdercenter.caiso.com/Comments/AllComments/c1bb341d-f8af-4c30-b826-fb786f07345a#org-db9a86bf-a569-4c69-87c2-01d3cebec742
California Community Choice Association
Submitted 05/06/2026, 03:53 pm
1.
Please provide your organization’s feedback on the presentation by the Department of Market Monitoring and the following discussion on analysis and how to evaluate options for improving auction efficiency.
The California Community Choice Association (CalCCA) provides these comments on behalf of its member Community Choice Aggregators (CCAs) that are load serving entities (LSEs) within the California Independent System Operator (CAISO) system. The Department of Market Monitoring’s (DMM) presentation on “Willing Seller Congestion Revenue Rights (CRR) Auction Design” helps to clarify the willing seller proposal’s potential impacts on LSEs and their participation in the auction. In its analysis, DMM finds that of the CRRs bought or sold by LSEs, 83 percent would have continued to clear if the willing seller model were adopted. While this statistic is helpful, it still leaves two questions that must be answered.
First, LSEs need to understand what portion of the 83 percent would have cleared under the willing seller mechanism with a counterparty that is an LSE, a generator, a marketer, or a financial entity?
Second, DMM has posited that the amount available for allocation under the willing seller proposal would increase for two reasons: (1) the amount of global derates could be reduced; and (2) the amount held for the auction at the conclusion of allocation rounds would no longer be held. To allow LSEs to determine the net impact of the proposal, the DMM should evaluate the quantity of additional megawatts (MW) that would have been allocated based on the additional availability and known allocation requests. This amount can then be compared to the 17 percent of LSE auction CRRs that did not clear.
2.
Please provide your organization’s feedback on the discussion of how to group the potential enhancements into packages of complementary changes. Does your organization have a preference for any of the three hypothetical packages, preferred modifications to any of the packages, or an entirely new package to propose? Please provide your rationale for how any preferred package addresses the goals and problem statements developed by the working group.
The CAISO should pursue all three packages listed in the DMM presentation. Each addresses revenue adequacy and auction efficiency in varying methods and degrees. Since there is still insufficient information to prioritize one package over any other, the CAISO should continue to explore all three. The field of options can be narrowed once more data has been provided, including the data requested in question 1, above, by CalCCA.
3.
If the initiative were to have multiple phases, what feedback does your organization have on the timing of reforms? Does your organization have any feedback on how to balance consideration of long-term reforms with immediate enhancements?
The CAISO should move forward expeditiously with refinements to time-of-use (TOU) periods and storage as a sink, especially if the timeframe for evaluation and implementation of options to address revenue sufficiency and auction efficiency is anticipated to be lengthy. Delaying important changes like the TOU, which can better reflect current grid congestion, and storage as a sink, for which the process is presently discriminatory, should not be delayed by reforms to the allocation structure and auction process. While implementation of all reforms in a timely manner is preferred, it is apparent that the revenue sufficiency and auction efficiency topic are far more controversial with more options for resolution than the TOU and storage as a sink items. In addition, the TOU and storage as a sink items are largely independent of the revenue sufficiency and auction efficiency topics.[1] Any future changes to these latter two items will impact all CRRs including any changes made to the TOU and storage as a sink elements.
[1] The storage as a sink element has caused some concern that making additional sinks available in the auction could exacerbate revenue sufficiency. At a minimum, the equity allowing pumped storage hydro as a sink in the allocation and auction while not allowing any other form of storage to serve as a sink must be addressed quickly and should not be delayed for larger revenue sufficiency and auction efficiency proposals.
4.
Please provide your organization’s feedback on the product definition portion of the discussion.
CalCCA provides feedback on three points below: (1) the CRR program should continue to follow Pacific Standard Time (PST) and Pacific Daylight Time (PDT) through the calendar year; (2) CalCCA addresses points raised by the DMM regarding the need for clarification on whether pumped storage hydro being eligible for CRRs; and (3) CalCCA reiterates its prior comments on the ability to use stand alone storage as a sink in the auction and allocation process.
First, the CAISO should continue to follow hourly through the calendar year as defined by PST and PDT. While congestion patterns may shift slightly (by one hour), treating the CRR product consistent with other products that recognize the switch between PST and PDT such as the ICE forward solar product is preferable to changing the hours of CRRs twice per year.
Second, CalCCA addresses points raised by the DMM in their February 6, 2026 comments regarding the original implementation of CRRs and pumped storage hydro (PSH) being assessed the transmission access charge (TAC). The CAISO later exempted pumped storage hydro load from paying the TAC in compliance with FERC Order 841. DMM goes on to state that the CAISO should clarify whether pumped storage hydro should continue to be eligible for CRRs after the TAC changes associated with Order 841.
DMM raises a valid issue and the CAISO must clarify its intent. The CAISO should strongly consider that the use of storage to serve customer load has become a significant resource. The California Energy Commission (CEC) states that 16,942 MW of storage were in use statewide in 2025 and the amount of storage is expected to grow to 52,000 MW by 2045.[1] This storage is being used to hold excess energy from renewable resources in the middle of the day and then discharge to serve load at night. Given this fundamental change in how LSEs serve load, the congestion exposure is the sum of congestion from generation to storage and then from storage to load. The CAISO should consider the total congestion exposure to customers when determining the eligible sinks.
In addition, the DMM correctly notes that there is a difference between making storage and eligible sink and using the load at storage as eligible load for determining the amount of CRRs provided. If storage is made an eligible sink, the quantity of CRRs should still be limited to the total amount of end use load served by the LSE. Using storage charging to calculate eligible load would double count the load of the LSE and should be avoided.
Third, CalCCA reiterates its prior comments on the ability to use stand alone storage as a sink in the auction and allocation process. The CAISO should allow CRRs to sink at all storage, regardless of technology, in the allocation process in addition to the auction process. Presently, the CAISO allows CRRs to sink at PSH nodes in the allocation process.[2] This provision was established during the implementation of CRRs when the only storage on the system was PSH. The technological shift to other forms of storage, including battery-based, compressed-air, gravity-based, or other methods, has simply made the current tariff provision outdated. During initial development, the CAISO recognized that the only form of storage at the time (i.e., PSH in 2006 when the Market Redesign and Technology Upgrade (MRTU) tariff was adopted) was a legitimate sink for an LSE to hedge congestion risk. Today, the CAISO should allow all forms of storage to serve as sinks in the allocation, as LSEs are contracting with or own such resources. Whether the technology is PSH or another form of storage, the congestion risk faced is identical.
During the stakeholder meeting, an issue was raised as to whether storage paid the TAC. The point was raised of whether LSEs should be allowed to nominate a sink point that does not pay the TAC, on the principle that LSEs are allocated CRRs because their load pays for the transmission system to exist. While storage does not pay the TAC, neither does PSH.[3] While storage does not pay the TAC, the storage is used by an LSE to hedge the two-legged congestion risk[4] to the load that does pay the TAC. Indeed, this has been the case with PSH from the beginning, as it has been an eligible sink for CRRs and has not paid the TAC.
For these reasons, the CAISO should treat all forms of storage consistently. The CAISO should allow LSEs to sink to nodes of any storage technology during the allocation process. This will correct the current discrimination occurring by allowing only a subset of LSEs and storage resources of a particular type to obtain CRRs in the allocation process.
[1] See https://www.energy.ca.gov/data-reports/energy-almanac/california-electricity-data/california-energy-storage-system-survey
[2] CAISO Tariff Section 36.8.2.
[3] CAISO Tariff Section 26.1.
[4] Load faces congestion risk when the generation occurs to charge the battery and again when the battery is later discharged to serve load. These legs involve different nodes, generation to storage and storage to load, as well as different times, typically from generation to storage during the solar irradiation hours and from storage to load in the evening and morning ramp periods.
California ISO - Department of Market Monitoring
Submitted 05/06/2026, 04:09 pm
1.
Please provide your organization’s feedback on the presentation by the Department of Market Monitoring and the following discussion on analysis and how to evaluate options for improving auction efficiency.
Comments on Congestion Revenue Rights Enhancements
Stakeholder Meeting Session #9
Department of Market Monitoring
May 6, 2026
Summary
The Department of Market Monitoring (DMM) appreciates the opportunity to comment on the Congestion Revenue Rights Enhancements Working Group Session #9.[1] DMM does not believe that a single uniform reserve price for flow and counterflow congestion revenue rights (CRRs) will address the design flaws inherent in the CRR auction design. DMM continues to recommend that the ISO develop a CRR auction design based on willing sellers, and that development of such an approach be the top priority for the current congestion revenue rights enhancements initiative. To address concerns expressed by the ISO and some stakeholders about this approach, DMM has outlined a potential backstop mechanism that could be implemented with the willing seller auction to provide opportunities for entities to obtain CRRs to hedge energy transactions if they do not receive them in the allocation or auction.
Comments
A single uniform reserve price cannot represent the costs of providing many different CRR paths
DMM continues to believe that it is not appropriate for the ISO to sell CRR products that clearly impose costs on transmission ratepayers with a zero dollar offer price. The single reserve price for flow CRRs and single reserve price for counterflow CRRs, as described by the ISO, cannot represent the value or costs of all the various CRRs offered by the ISO, whose values vary significantly. While this may be marginally better than zero dollar offer prices, such a blunt reserve price seems unlikely to be very effective and seems just as susceptible to adverse selection as the current auction.
Non-firm CRR backstop to willing seller auction
To address concerns that market approaches from the willing seller CRR auction will not provide sufficient liquidity for entities that may actually utilize CRRs as hedges, the ISO could intervene and provide liquidity in a more targeted and limited way than it intervenes today. If the ISO is going to intervene to provide additional liquidity, it should aim to:
- Maintain a market-based mechanism as the core design
- Target and limit ISO intervention to achieve the aim of facilitating hedging of actual energy contracts or generation
- Allow market participants to manage risk without simply transferring the risk to transmission ratepayers
- Limit distortions of the willing seller auction to the extent possible
Here we outline a non-firm CRR backstop mechanism that could be implemented by the ISO in conjunction with a willing seller auction. The concept is to provide entities that engage in actual energy market transactions the option to purchase non-firm CRRs if they were unable to buy the desired CRRs in the willing seller auction. The entities would pay a non-firm CRR rate consisting of a fixed rate per megawatt hour (if not already paying transmission or wheeling access rates), and a variable rate depending on the value of the CRR path they would like to purchase or sell.
Entities already paying transmission or wheeling access rates could be eligible to purchase non-firm CRRs. This backstop concept could also be designed to incorporate the release or sales of firm CRRs that entities were unable to sell in the willing seller auction.
The CRRs sold in the backstop mechanism would be non-firm in that excess day-ahead congestion rent after the firm CRRs (from the allocation) are settled could be used to support payouts to non-firm CRRs, but would not necessarily be sufficient to support all payouts. To maintain the value of the non-firm CRRs to provide a financial hedge, the variable rates would be used to pool and manage the risk of making the remaining payouts to non-firm CRRs at day-ahead prices.
The variable backstop rate to buy CRRs would consist of the expected value of the CRR path plus a premium and would not be known to auction participants in advance. The premium included in the variable rate would be set large enough to incentivize efficient participation in the willing seller auction since the backstop mechanism should not provide a “better deal” on any given CRR than purchasing in the willing seller auction if available. If an eligible entity bids into the willing seller auction and does not clear, the entity’s bid would then be evaluated in the backstop mechanism. If the bid to buy is greater than the variable rate in the backstop mechanism, the bid will clear and the entity will secure the CRR through the backstop mechanism.
Outline of non-firm CRR backstop mechanism
Provided below is a more detailed step-by-step initial draft outline of how a CRR backstop mechanism might be designed to work in conjunction with the willing seller design that has been proposed by DMM.
- Run CRR allocation, no deficit offsets (could increase transmission available in allocation).
- Run willing seller market, no deficit offsets.
- After willing seller market is run, entities can buy non-firm CRRs or release CRRs they already received in the allocation, if:
- The buyer is already eligible for allocation, has paid wheeling access charge (WAC) up to the value of the fixed rate, or pays a non-firm fixed rate (fixed rate paid before willing seller auction).
- For WAC, if historically paying WAC up to the level the short-term rate over past month; or if haven’t paid WAC pay the non-firm fixed rate, then if paying WAC over the period the fixed rate is refunded as WAC payments are made.
- The buyer bid for the requested non-firm CRR in the willing seller auction, and did not clear.
-
- The non-firm CRR is used for hedging energy
- Source and sink between eligible nodes related to hedging market transactions: (e.g., the requestor’s generation, trade hub, default load aggregation point, their contract ties).
- Entity has a scheduling coordinator ID code (SCID) for scheduling physical energy.
- The entity pays the non-firm variable rate for the specific CRR path. The ISO will set the variable non-firm CRR rate as the higher of:
- historical prices plus premium (if available),
- a forward-looking price forecast plus premium.
- The premium should be set to safely manage the risk of funding payments to non-firm CRRs when insufficient surplus rent is available.
- The source-and-sink and megawatts desired will be made known to auction participants before the willing seller auction runs.
- Balancing account for non-firm CRRs to be maintained between a lower and upper bound.
- Holds non-firm fixed rate payments, non-firm CRR variable rate payments, payouts to non-firm CRRs at day-ahead prices, and interest.
- Account seeded from CRR balancing account up to the lower bound.
- ISO aims to hold a reserve level in non-firm CRR balancing account between upper and lower bounds.
- When reserve falls below the lower bound, pull from CRR balancing account surpluses first, then remainder uplifted to non-firm CRRs holders to get back up to lower bound.
- When reserves go above the upper bound, first pay into the CRR balancing account up to total non-firm fixed rate payments; the next portion is paid out to non-firm CRR holders pro-rata by share of risk premiums paid not to exceed the risk premium payments made by each SCID for non-firm CRRs; account excess beyond this paid into the CRR balancing account to get back down to upper bound.
This outline is a draft starting point for creating a design that addresses the concerns raised about a willing seller design. All these points could be altered and improved, or additional design elements added, based on stakeholder and ISO input.
This non-firm CRR construct could also be modified to work without a willing seller auction to be similar to the proposal for a limited CRR mechanism for entities hedging physical transactions in the ISO’s energy markets, as suggested by the Bay Area Municipal Transmission Group (BAMx).
[1] Congestion Revenue Rights Enhancements Working Group Session #9, California ISO, April 22, 2026: https://stakeholdercenter.caiso.com/InitiativeDocuments/Presentation-Congestion-Revenue-Rights-Enhancements-Apr22-2026.pdf
2.
Please provide your organization’s feedback on the discussion of how to group the potential enhancements into packages of complementary changes. Does your organization have a preference for any of the three hypothetical packages, preferred modifications to any of the packages, or an entirely new package to propose? Please provide your rationale for how any preferred package addresses the goals and problem statements developed by the working group.
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.
If the initiative were to have multiple phases, what feedback does your organization have on the timing of reforms? Does your organization have any feedback on how to balance consideration of long-term reforms with immediate enhancements?
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.
4.
Please provide your organization’s feedback on the product definition portion of the discussion.
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.
Calpine
Submitted 05/06/2026, 04:54 pm
Submitted on behalf of
Calpine Energy Solutions, LLC and Calpine Energy Services, L.P.
1.
Please provide your organization’s feedback on the presentation by the Department of Market Monitoring and the following discussion on analysis and how to evaluate options for improving auction efficiency.
Calpine appreciates the Department of Market Monitoring presentation and the discussion on auction efficiency. We agree that auction efficiency metrics help frame the discussion, but Calpine does not view them as a complete measure of CRR performance. Calpine does not support the willing seller design proposal.
From Calpine’s perspective, CRRs provide benefits that are not reflected in revenue-to-payout ratios. We rely on CRRs to support forward congestion price signals and to reduce risk premiums in bilateral energy and capacity contracts – a benefit that is not captured or evaluated in the previously presented evaluations and analyses. Calpine also relies on CRRs to manage congestion exposure over longer horizons, which supports long-term procurement and lowers system costs passed through to customers.
When more buyers and sellers participate, extra risk premiums are competed away. In our experience in PJM and other regions, participants observed that once auction prices became widely used, the bilateral market adjusted as well. Sellers could no longer charge inflated premiums when comparable hedges were available through the auction. This reflects the market principle that high returns attract entry and arbitrage until mispricing disappears. Research on FTR/CRR markets shows the same pattern. In a liquid CRR auction, broader participation will reduce easy profits taken at load’s expense, as more bidders push prices closer to true value, ultimately benefiting consumers.
Calpine views muted auction prices as a response to risk. Since the 2019 policy changes, CRR holders face payout uncertainty driven by underfunding and volatile short pays. We and other participants discount bids to manage this risk. This behavior reflects reduced confidence in CRRs as reliable hedges, not failure of the auction construct. We attribute much of this lack of participation and price impacts due to risks primarily to the fundamental design of CAISO’s CRR construct, including the path specific underfunding allocation, limited path nomination, and other CRR policy design changes.
Calpine believes that improving alignment between CRR modeling and day-ahead outcomes addresses these issues directly. Better loop flow modeling, improved outage representation, and other related modeling refinements can reduce divergence and increase payout confidence. These steps support stronger auction outcomes without restricting participation or access.
Calpine does not support major structural changes, including a willing seller design, absent clear evidence such changes preserve liquidity, open access, and the ability to hedge common delivery paths. We do not believe that the need for such an approach that represents a major change with significant liquidity risk has been demonstrated to date.
2.
Please provide your organization’s feedback on the discussion of how to group the potential enhancements into packages of complementary changes. Does your organization have a preference for any of the three hypothetical packages, preferred modifications to any of the packages, or an entirely new package to propose? Please provide your rationale for how any preferred package addresses the goals and problem statements developed by the working group.
Feedback Regarding Package 1:
Calpine appreciates CAISO’s effort to organize potential reforms into packages. Calpine does not support Package 1 centered on full auction restructuring to a willing seller design at this stage. As explained in response to question #1 above, Calpine believes liquidity driven by broad, open participation is essential to well-functioning CRR markets, and that limiting participation risks undermining price formation and hedging effectiveness. The primary value of CRRs is their role in supporting forward congestion price signals, reducing risk premiums in bilateral contracts, and enabling longer-term procurement that lowers costs ultimately borne by consumers. Calpine believes muted auction prices reflect increased payout risk from CRR design and modeling issues, not auction failure, and that improving modeling and CRR payout confidence should be prioritized over major structural changes that risk liquidity and access.
Feedback Regarding Package 2:
We generally support further consideration of Package 2, which pairs conservative modeling assumptions with a minimum bid or price floor, as a more measured step than full auction restructuring.
In addition to consideration of a minimum bid or price floor, Calpine believes Package 2 (or any proposal that is advanced by CAISO) should also include consideration of complementary measures previously raised by Calpine. These include continued progress on loop flow and unscheduled flow modeling, tighter alignment of outage timing and representation in the CRR model, and reform of the CRR1b revenue shortfall allocation to reduce extreme path-specific payout volatility. Without these elements, Package 2 would address pricing symptoms while leaving the core drivers of underfunding and bidder risk in place.
We also support inclusion of increased auction frequency through Balance of Planning Period style auctions. More frequent auctions improve price discovery, allow us to adjust hedges as conditions change, and reduce risk premiums in forward contracts. These benefits apply regardless of auction structure.
From Calpine’s perspective, future Package 2 and minimum bid proposals will need additional structure and clarity on the following aspects:
- The analytical basis for setting the bid floor;
- Treatment of counterflow CRRs and negative bids;
- Interaction with CRR1b shortfall allocation; and,
- Attempt to quantify expected effects on participation, clearing volumes, and liquidity.
Without these types of additional reforms being addressed, a minimum bid risks reducing participation while leaving the drivers of underfunding unchanged.
Calpine also believes any CRR reform package should also address the shift factor threshold issue. Small shift factors excluded from the day-ahead market but included in the CRR model remain a material source of underfunding. This mismatch releases CRRs tied to congestion that never produces funding revenue. During the work group discussion, CAISO failed to respond or minimized this issue, but the root cause analysis shows repeated shortfalls linked to this divergence.
If CAISO does not plan to adjust the threshold, Calpine expects a clear explanation, a quantified impact assessment, and a demonstration of how Package 2 offsets the resulting revenue loss. A pricing floor alone may address symptoms rather than the underlying causes. If CAISO decides not to pursue and adjustments to shift factor thresholds, then potential changes to shortfall allocation should be prioritized to align costs with the drivers of model divergence.
Feedback Regarding Package 3:
Calpine continues to support certain elements aligned with Package 3, specifically reform of the revenue shortfall allocation method and consideration of shortfall allocation in part to Transmission Service Providers (TSPs). We proposed a similar approach with a more measured design in our prior written stakeholder feedback on the January 21st CRR work group meeting. We suggested a middle-ground approach to short-pay allocation reforms that draws on precedents from other regions. Large, path-specific short pay undermines hedging confidence and discourage holding CRRs through delivery. The current design that applies constraint-by-constraint shortfall allocation creates significant payout uncertainty, leading hedgers to discount bids or avoid chronically underfunded paths. Concentrated short-pay events erode confidence in CRRs as reliable hedges, depress auction prices, and ultimately weaken auction outcomes.
Calpine reiterates our prior recommendations for shifting to a broader pro-rata allocation of revenue shortfalls across CRRs with positive target value, consistent with practices in other ISOs. This approach spreads risk more evenly, reduces extreme path-specific volatility, and better supports CRRs’ core purpose as predictable congestion hedges, without returning to full load uplift. Combined with modeling improvements, this reform would help restore confidence, liquidity, and revenue adequacy in the CRR market.
While Calpine supports certain elements aligned with Package 3 noted above, particularly reforms to the revenue shortfall allocation methodology, we do not support the proposed two-tier CRR construct at this time.
Calpine is concerned that a bifurcated, two-tier approach, distinguishing between CRRs purportedly used for “hedging” versus “speculation,” or prioritizing CRRs based on end-use or participant type, would introduce new distortions and risks into the CRR market. Such a framework could negatively affect the secondary market for CRRs, which remains an essential source of hedging liquidity. Under a two-tier system, market participants seeking secondary-market hedges would likely face higher prices reflecting an embedded underfunding or priority premium, effectively penalizing those unable or unwilling to rely exclusively on the primary auction.
The two-tier concept also appears to assume that all LSEs can, or will, fully meet their hedging needs through CAISO-run auctions. In practice, that assumption does not hold. Participants, including non-LSEs, frequently rely on secondary market transactions to manage changing risk profiles, portfolio shifts, and evolving system conditions. A framework that implicitly prioritizes certain participants or uses of CRRs could materially impair secondary market liquidity and price transparency.
Calpine remains concerned that any attempt to classify CRRs based on intent, distinguishing “hedging” from “speculative” positions, would be inherently subjective and difficult to administer. It is unclear how CAISO would determine, in a consistent and enforceable manner, how a given CRR is intended to be used, or how such determinations would evolve over time as portfolios and risk exposures change. This ambiguity risks creating uncertainty for market participants and raises questions about consistent application and enforcement.
Calpine also questions whether a two-tier allocation framework could raise concerns under existing FERC precedent related to open access and non-discriminatory use of the transmission system. Prioritizing CRRs based on participant type or perceived use could undermine long-standing principles of broad, open access that underpin both transmission service and CRR markets.
For these reasons, Calpine does not support a two-tier CRR approach as part of Package 3, absent substantially more detail and analysis. At a minimum, such a proposal would require clear definitions, a robust impact assessment on participation and liquidity, legal justification under FERC precedent, and demonstration that the approach would not impair secondary market functionality.
Calpine continues to believe that reforming revenue shortfall allocation to socialize underfunding more broadly, consistent with approaches used in other regions, represents a more effective and less disruptive path forward. That aspect of Package 3, combined with modeling improvements, offers a more balanced means of restoring confidence in CRRs without introducing new structural barriers, prioritization schemes, or access concerns.
3.
If the initiative were to have multiple phases, what feedback does your organization have on the timing of reforms? Does your organization have any feedback on how to balance consideration of long-term reforms with immediate enhancements?
If CAISO proceeds in phases, Calpine supports focusing first on revenue adequacy and model divergence before structural auction changes.
From Calpine’s perspective, near-term priorities should include:
- Expanded loop flow and unscheduled flow modeling;
- Improved outage modeling and timing alignment; and,
- Evaluation of shortfall allocation approaches that reduce payout volatility.
These steps address the main reasons Calpine discounts CRR value today. Structural auction changes and prioritization tiers should only be further considered after CAISO evaluates the impact of these measures.
Regarding auction design reforms, Calpine supports more frequent Balance of Planning Period auction tenors to be included in CAISO’s CRR auction framework because they improve price discovery, allow hedges to adjust as conditions change, and reduce risk premiums in forward contracts, regardless of auction structure.
As noted in response to question #2 above, Calpine believes CAISO should address the shift factor threshold early in the process. This issue directly affects revenue adequacy. Deferring it while pursuing pricing floors or auction redesign risks masking a known source of underfunding rather than resolving it. We ask CAISO to either pursue further adjustments or clearly explain why other measures better address the funding gap.
4.
Please provide your organization’s feedback on the product definition portion of the discussion.
Calpine supports updating CRR products to reflect current grid conditions and congestion patterns.
Calpine supports splitting On Peak into Peak and Midday Peak products. We support including Sundays and holidays being included. Calpine supports allowing storage resources that charge from the grid to act as eligible sinks, starting with stand-alone storage and extending carefully to other configurations.
Calpine also believes product definition reforms should align with auction frequency and tenure enhancements. Longer-tenor CRRs with staged capacity release remain important for multi-year procurement and long-term contracting.
CPUC
Submitted 05/05/2026, 04:41 pm
1.
Please provide your organization’s feedback on the presentation by the Department of Market Monitoring and the following discussion on analysis and how to evaluate options for improving auction efficiency.
Energy Division staff (ED staff or staff) of the California Public Utilities Commission (CPUC) develop and administer energy policy and programs to serve the public interest, advises the CPUC, and ensures compliance with CPUC decisions and statutory mandates. ED staff provide objective and expert analyses that promote reliable, safe, and environmentally sound energy services at just and reasonable rates for the people of California.
ED staff thanks the Department of Market Monitoring (DMM) for presenting their Willing Buyer Willing Seller (WBWS) proposal to the stakeholder group. ED staff has consistently supported the adoption of the WBWS proposal since this initiative was re-launched in November 2024. ED staff has also supported other parties’ request for further data analysis tied to WBWS and finds DMM has now provided more than sufficient data. ED staff encourages CAISO to focus on immediate expedited reforms while continuing to explore the implementation complexities of WBWS — which ED staff recommends be adopted in a later phase of this initiative.
2.
Please provide your organization’s feedback on the discussion of how to group the potential enhancements into packages of complementary changes. Does your organization have a preference for any of the three hypothetical packages, preferred modifications to any of the packages, or an entirely new package to propose? Please provide your rationale for how any preferred package addresses the goals and problem statements developed by the working group.
ED staff thanks CAISO for being responsive to the load-serving entities and ratepayers who pay for the cost of the transmission grid via the transmission access charge (TAC) by refocusing this initiative around revenue inadequacy and auction inefficiency. ED staff appreciates CAISO developing three proposal packages and agrees with CAISO that more specific reforms regarding time-of-use periods, new sink locations, among other proposals, can work within any of the three packages. The more granular modifications such as additions of new time-of-use periods, for example, should not take priority over addressing auction efficiency.
ED staff prefers package #1 because it adopts DMM’s WBWS, which ED staff have long supported. WBWS creates a self-funding auction that eliminates or reduces auction inefficiency because transactions are between two willing counterparties who hold all or most of the risk, rather than ratepayers. Ratepayers may continue to have some risk if LSEs hold onto any CRRs that produce settlement reversals. However, ED staff understands that settlement reversal CRRs are a small component of the overall CRR portfolio. ED staff is aware though that WBWS requires fundamentals reform, but would eliminate auction inefficiency and the revenue inadequacy arising from auctioned CRRs. The auction, as currently designed, is meant to be an efficient predictor of day-ahead market (DAM) congestion. In other words, a CRR that sells at $1 should only generate $1 in congestion revenue, but this is not the case today. Often, there is very little price discovery on certain CRRs paths ( e.g., CAISO sells a CRR at $0 on behalf of ratepayers and an entity picks it up at $1).
In the following section, ED staff details our recommendations with the packages. However, ED staff recognizes package #1 involves more extensive implementation challenges that cannot be addressed on an expedited basis, so in response to question #3 below, ED staff discusses more extensively detailed reform timing recommendations.
ED staff recommends CAISO further explore and adopt the minimum bid component of package #2 on an expedited basis. In fact, during the Track 1B policy development process the Market Surveillance Committee (MSC) recommended introducing a minimum sale price in the CRR auction.[1] At this time, ED staff does not support consideration of attempts to reform or undo the Track 1B pro rata underfunding allocations that are currently in place.
ED staff supports further development of package #3 if the top tier of payout guarantees is for load or those willing to pay the TAC. Payout guarantees would reasonably decline on lower tiers because the cost of procuring a CRR on lower tiers is less than on higher tiers. ED staff understands that a priority-tier payout mechanism would require modifications to the Track 1B pro rata underfunding allocations currently in the CAISO tariff, and ED staff will engage in that conversation when those are discussed.
ED staff reiterates that CAISO is required to create hedging opportunities. CAISO is NOT required to fully fund such hedges and, as such, ED staff strongly opposes any shortfall allocation that would fall on load. It does not make sense to ask ratepayers to first pay the TAC, then finance or backfill revenue shortfall issues that arise from variables that are not caused by load (modeling issues, loop flows, etc.).
In the last round of this initiative, ED staff commented on the function and purpose of CRRs, concluding that, based on FERC precedent, CRRs are intended to be a hedging mechanism, not a speculative financial product.[2] Therefore, CAISO has no requirement to administer speculative financial auctions. ED staff repeats our prior comments on this in italics below:
Energy Trading Institute (ETI) presented background on the origin and historical precedent for CRRs/FTRs in organized locational marginal price (LMP) markets. ETI highlighted FERC statements, rulings, and orders in 1999, 2006, 2017, and 2022, addressing the critical importance of hedging instruments in a nodal market.[3] Each location on the grid in a nodal market has an LMP and the three components of LMPs are: the marginal cost of energy, congestion, and the marginal cost of losses. Each LMP refers to the network sink where load withdraws power, and the source where generators feed energy into the grid.[4] The ability to hedge in a nodal market provides market participants with the ability to protect themselves from locational differences in pricing between two locations.[5] Congestion is inherent in the composition of each LMP. The CRR market provides market participants with the ability to hedge the congestion component of the LMP. ED staff agrees with ETI that a hedging instrument is important for participants in a nodal market.
CRRs are intended to be the financial equivalent of firm transmission rights and are intended to serve as a hedging tool, not a speculative financial mechanism.[6] This is supported by FERC Order 2000, which indicates that firm transmission rights (FTRs or CRRs) should: “[p]rovide market participants with the opportunity to hedge locational differences in energy prices.”[7]
[1] CRR Issues and Responses, MSC Member James Bushnell, June 2018, CRR Issues and Responses
[2] CPUC Comments on Working Group Session 7 – Aug 08, Goals and Problem Statements P2, available at: https://stakeholdercenter.caiso.com/Comments/AllComments/7daa6493-7f77-4f4c-9fb0-5ddcd02334be#org-61a5f86d-5bd5-43d5-8293-a0f71a67a77b.
[3] Pg. 333 FERC Order 2000, December 20, 1999, available at: Regional Transmission Organizations, RTO Final Rule Part 1.PDF
[4] Slide 4, Energy Trading Institute, “The Legal Foundation for Congestion Revenue Rights.”, May 12th, 2025, available at: Presentation-Energy-Trading-Institute-Congestion-Revenue-Rights-Enhancements-May-12-202.pdf
[5] Pg. 333 FERC Order 2000, December 20,1999, available at: Regional Transmission Organizations, RTO Final Rule Part 1.PDF
[6] Slide 4, Sidney Austin for Energy Trading Institute, The Legal Foundation for Congestion Revenue Rights, May 12th, 2025, available at: Presentation-Energy-Trading-Institute-Congestion-Revenue-Rights-Enhancements-May-12-202.pdf
[7] Pg. 333 FERC Order 2000, December 20, 1999, available at: Regional Transmission Organizations, RTO Final Rule Part 1.PDF
3.
If the initiative were to have multiple phases, what feedback does your organization have on the timing of reforms? Does your organization have any feedback on how to balance consideration of long-term reforms with immediate enhancements?
ED staff reiterates that addressing underfunding from the current auction design is the fundamental issue that should be addressed in this initiative. DMM, BAMx, the Joint LSEs, and Energy Division have consistently supported addressing this issue directly. CAISO has a statutory obligation to reduce costs to consumers – California Public Utilities (Pub. Util.) Code § 345.5(b)(2) directs CAISO to manage the energy markets in a manner consistent with, “[r]educing, to the extent possible, overall economic cost to the state’s consumers.” Accordingly, the CPUC and CAISO have a shared interest in implementing solutions that reduce ratepayer costs wherever possible. The current CRR auction design results in unnecessary ratepayer losses due to CAISO selling additional CRRs at a $0 offer price on behalf of ratepayers. This has resulted in $1 billion dollars in ratepayer losses since 2012, which does not align with Pub. Util. Code § 345.5(b)(2).
ED staff thanks CAISO for producing three potential reform packages, but encourages CAISO to consider on an expedited basis, minimum bid floors in the auction. From ED staff’s understanding of the CRR Market model, minimum bid floors can be implemented rapidly into the CRR model without requiring large or technically complex changes. ED staff strongly encourages CAISO to separate minimum bid floors from package #2 in an expedited track, and continue to consider other CRR reforms on a longer-term track. Within the MSC’s Track 1A final opinion on Congestion Revenue Rights, the MSC recommended that “One alternative should include establishing a minimum price or per unit fee for auctioned CRRs.”[1] Therefore, this proposal has been reasonably vetted in the past, so an expedited track is appropriate. ED staff encourages CAISO to consult with DMM closely on this minimum bid proposal, as DMM raised some concerns with this proposal during the last round of stakeholder comments.[2]
[1] MSC Track 1B final opinion on Congestion Revenue Rights Efficiency, pg. 3, Microsoft Word - CRR_Track1b_Opinion_Final_2018_06_13.docx
[2] “DMM does not believe the ISO should continue selling financial contracts that are backed by ratepayers – and continually sell for a fraction of the payouts made by the ISO for these contracts. However, should the ISO continue to do so, then it should at least seek to offer these contracts thoughtfully rather than blindly offering contracts at $0. Rather than a simplistic blanket minimum offer price, this would require considering what the cost of selling particular contracts/constraints are, and setting the offer price to those estimated costs. The ISO does not have the expertise and resources to do this.” February 6th. 2026 DMM comments on CRRs: California ISO - All comments
4.
Please provide your organization’s feedback on the product definition portion of the discussion.
ED staff thanks CAISO for the product definition analysis. ED staff appreciates CAISO spending the majority of the April 22nd Stakeholder on addressing auction inefficiency and revenue inadequacy. ED staff finds that there could be value to expanded time-of-use (TOUs) periods for those trying to hedge significant solar and storage fleets. Regarding allowing storage as a sink, ED staff is interested in these conversations as they could improve hedging opportunities for market participants. However, as long as there is extensive underfunding, these new hedging products or opportunities will not deliver the value that they may theoretically produce. At worst, adding new products, time-of-use periods, or sink locations seems counterproductive while the fundamental issue of auction underfunding remains.
In addition, ED staff has some concerns about arbitrage opportunities with the addition of storage as a sink location. ED staff encourages CAISO to conduct more analysis on this aspect of this option. It remains unclear why hybrid or co-located storage would be eligible to be a sink when the charging location and sink location are the same node (thus eliminating any potential congestion to hedge).[1] ED staff is supportive of tying eligibility of storage resources to be designated as sinks to circumstances where there is a demonstrated need to hedge congestion cost risks for charging energy.[2] ED staff looks forward to further engaging in this material in a later phase of the initiative.
[1] Slide 51-52, Presentation-Congestion-Revenue-Rights-Enhancements-Apr22-2026 (4).pdf
[2] Ibid, slide 51.
DC Energy California, LLC
Submitted 05/06/2026, 12:58 pm
1.
Please provide your organization’s feedback on the presentation by the Department of Market Monitoring and the following discussion on analysis and how to evaluate options for improving auction efficiency.
Price Swap Construct
The proposal to replace the current CRR auction structure with a market dependent on “willing” sellers (“price swap construct”) would severely degrade access to future congestion hedges and eliminate the source of price discovery for future congestion, ultimately raising risk premiums and costs in the CAISO.
The price swap construct differs from a proposal that the Federal Energy Regulatory Commission already rejected,[1] only because it would require the CAISO to provide a platform for facilitating a simple nodal auction open to all market participants, which would include a second class of participants, e.g., generation owners, power marketers and financial participants. The addition of such a platform is inadequate to serve as the financial equivalent of firm transmission service and would not provide a robust congestion hedging function. Furthermore, it includes no concept of network topology and cannot find the simultaneously feasible solution that maximizes the use of networked transmission capacity.
The price swap construct is an incomplete and inferior solution to the problem of distributing congestion revenue in a market-efficient manner. Under this proposed construct, load gets sole access to the congestion revenue generated in the energy market by way of the CRR allocation process. This allocation does not comprise the entirety of the transmission capacity so inherently leaves excess congestion revenue undistributed. The new auction under the proposed construct would be a highly-constrained set of transactions where only direct nodal swaps can occur. This would not address the undistributed congestion revenue discussed previously and would not meet the needs of load to reconfigure their congestion hedges by selling unwanted allocations, something that is routinely done by load in today’s CRR auctions (although such is rarely done as near direct sales as required by under the willing seller auction proposal). Finally, under this proposed construct, undistributed congestion revenue is allocated back to load in a socialized manner that does not directly match their hedging requirements. In the end, the price swap construct accomplishes its objective of returning all congestion revenue to load, but at the cost of not directing the congestion revenue to the load participants as they experience congestion, and then creating little to no opportunity for other market participants, including generators, storage operators and power marketers, to obtain congestion hedges.
The DMM relies on a counterfactual optimization that uses the bids and offers submitted in CRR annual and monthly auctions in 2017-2018, before the CAISO restricted biddable CRR paths. It is not reasonable to assume that comparable volumes of bids and offers would occur under the DMM’s proposal as occurred in the open, single clearing auctions of residual transmission capacity that the CAISO held before it limited biddable paths. Currently, there are secondary markets that provide a market for path-based derivatives very similar to the price swap construct proposed by the DMM. Liquidity on these secondary markets at CAISO locations has been limited, particularly on paths at locations more granular than hubs. When transactions do occur, they generally happen very soon after a CRR auction has cleared, because only an open, liquid CRR auction based on the simultaneous feasibility of the transmission network can provide reliable market-based prices on which to base transactions.[2] The decline in available capacity would be particularly stark in monthly auctions, because much of the CRR capacity sold in monthly auctions is first acquired in an open annual auction for residual transmission capacity, and an open annual auction would no longer occur under the proposed price swap construct.
The DMM’s presentation claims that “significant volumes of CRRs would still clear” under its proposed price swap construct, but the same slide shows that only 53% of CRRs cleared at auction by generators in 2017-18 would have cleared in the counterfactual, even though it relies on unrealistically favorable assumptions regarding continued liquidity. The inability of generators to clear nearly half of all of their hedges acquired at auction highlights the price swap construct’s failure to provide adequate access to congestion hedges.
The inability of generators to hedge is even more apparent when looking at liquidity on individual paths. DC Energy has taken the stated assumptions, used the same public CRR bid data from 2017-18, and successfully replicated the counterfactual optimization. (See Appendix A slide 2, attached as a PDF to these comments). DC Energy examined the outcome for paths sourcing at particular settlement locations and types of settlement locations under the counterfactual optimization and found that, in certain instances, substantially less volume would clear on CRR paths sourcing from certain generation resources under the price swap construct than cleared in 2017-18 monthly and annual auctions.
For example, paths sourcing from several resource nodes corresponding to generation units owned by Calpine and sinking at NP15 would clear significantly less volume under the counterfactual. (See Appendix A, slides 3-4). Comparing the decreased cleared volume under the counterfactual on these example paths with the volumes that actually cleared in CRR auctions in 2017-18 demonstrates that insufficient volumes would clear under the price swap construct proposal to allow Calpine to hedge its units, even under the unrealistically positive assumption that the same volume of bids and offers would occur under the price swap construct as occurred in CRR auctions in 2017-18, i.e., before the CAISO limited biddable CRR paths.
In addition, price swap clearing prices on paths sourcing from the example resource nodes and sinking at NP15 are more volatile and less converged under the counterfactual than under the actual CRR auction results from 2017-18. (See Appendix A, slides 5-6). The mean absolute error between price swap clearing prices and actual day-ahead market settlement prices on the example paths increased by 112%-482% under the counterfactual compared to clearing prices in the actual CRR auctions in 2017-18. DC Energy expects that actual prices under the price swap construct proposal would likely be more volatile and less converged to actual day-ahead market settlement prices than in the counterfactual, because the actual market will likely be less liquid. Prices will be less efficient without the benefit of a single-clearing, simultaneously feasible market outcome designed to provide competitive, market-based prices for all transmission capacity on the CAISO’s system.
Additionally, significantly less volume cleared in the counterfactual on the four types of CRR paths that non-financial market participants cleared the most by volume in 2017-18. (See Appendix A, slide 8). The top four types of paths cleared by non-financial market participants by volume in 2017-18 were: (1) interfaces/ties to trading hubs; (2) load aggregation points to resource nodes; (3) resource nodes to trading hubs; and (4) load aggregation points to interfaces/ties. (See Appendix A, slide 7). Each of these types of paths cleared significantly less volume under the counterfactual optimization than in the actual CRR auctions with the same set of bids and offers. (See Appendix A, slide 8). The top path type cleared by non-financial participants (i.e., interfaces/ties to trading hubs) experienced an 83% reduction in cleared volumes. The general type of path in the Calpine examples above (i.e., resource nodes to trading hubs) experienced an overall reduction in cleared volume of 82%, demonstrating that the above examples illustrate a wider phenomenon. Meanwhile, delivery paths from resource nodes to load aggregation points experienced a 68% reduction in cleared volumes.
These substantial reductions demonstrate that the price swap construct proposal would fail to clear adequate volumes of hedges to day-ahead market congestion, and thus would fail to provide non-discriminatory open access to the financial equivalent of firm transmission, and also would fail to maximize the use of the transmission network. The reduction in cleared volumes in needed hedges for non-financial market participants in general and generators in particular under the price swap construct indicates that hedges will be less available and ultimately more expensive. More expensive hedges, or worse still, unhedged congestion risk, may ultimately result in barriers to entry and higher system costs.
Generators are only one category of market participant that the counterfactual indicates would be far less able to clear under the price swap construct proposal. Clearing rates for power marketers and financial market participants were even lower under the DMM’s counterfactual than they were for generators, at 38% and 41%, respectively.[3] Even under the unrealistic assumptions used in the counterfactual, there would be a drastic reduction in liquidity. Without adequate liquidity, prices would be volatile, undermining market certainty, and at times, bid-ask spreads would be unbridgeable, leaving transactions unfinished and would-be-buyers unhedged and exposed to congestion risk. The cost and risk would increase transaction costs.
Options to Increase Liquidity
The DMM’s suggestions to increase liquidity are unlikely to succeed and would introduce new issues and complications.
For instance, encouraging market participants to express interest in buying or selling congestion price swaps (i.e., pre-trade communications) introduces concerns with anti-competitive behavior, such as sellers strategically withholding supply from competitors or suppliers. Furthermore, there is no reason to assume that pre-trade communications would significantly improve liquidity.
The CAISO’s current, sealed bid single-round auctions obviate the need for pre-trade communications and thus generally avoid potential anti-market complications. Sealed bid single round auctions not only reduce opportunities for collusion, anti-competitive discrimination, and spoofing via false market signals, they also reduce transaction costs for participants. By aggregating all market participants’ interests in buying and selling into a single coordinated set of transactions, the current auction process is extremely effective in matching buyers and sellers and because of the simultaneous feasibility test, it enables transactions to buy excess transmission capacity as well as trade transmission capacity by way of equating bids/offers on paths to supply/demand for individual transmission elements. Furthermore, because auction participants only have one opportunity to bid and cannot see other bids and offers, they are incentivized to bid at their maximum willingness to pay (or minimum acceptable price to sell). Even those RTOs with multiple rounds in their annual CRR auctions treat each round as a separate sealed bid auction where bids from the prior round do not compete against one another.
The DMM also suggests that CAISO could “provide contracts in a manner that is targeted and limited to facilitate hedging” in the event a market participant cannot obtain adequate hedges under its price swap construct proposal.[4] It is not clear on what basis would the CAISO provide these contracts and how would it determine the price with no open auction with competing bids and offers. It is not the business of the CAISO to negotiate the price of congestion hedges. But there would need to be a price; otherwise, market participants would be incentivized to avoid paying for hedges in the price swap market in the hopes of obtaining free hedges from the CAISO later. This measure does not add liquidity to the price swap construct; instead, it suggests that the CAISO may need to step in to ensure that market participants are not left without the ability to hedge congestion after the market fails. It would be better to avoid creating the problem and thus the need for extraordinary intervention on the part of the system operator.
[1] See PJM Interconnection, L.L.C., 178 FERC ¶ 61,170 at P 44 (2022).
[2] See Nodal Exchange Presentation to CRR Enhancements Working Group (May 12, 2025).
[3] Department of Market Monitoring Presentation to CRR Enhancements Working Group, at slide 5 (April 22, 2026).
[4] Department of Market Monitoring Presentation to CRR Enhancements Working Group, at slide 13 (April 22, 2026).
2.
Please provide your organization’s feedback on the discussion of how to group the potential enhancements into packages of complementary changes. Does your organization have a preference for any of the three hypothetical packages, preferred modifications to any of the packages, or an entirely new package to propose? Please provide your rationale for how any preferred package addresses the goals and problem statements developed by the working group.
Each of the three packages put forth by the CAISO includes radical, unprecedented, and unwarranted changes to the existing CRR market design. Instead, the CRREWG initiative should pursue practical enhancements to the existing market design that improve the reliability and utility of CRRs, increasing auction participant confidence and ultimately auction revenue as a consequence.
Package 1
This package appears to be premised on the assumption that auction revenue is consistently much lower than the congestion paid to CRR auction participants, but that is not the case. Auction revenue has exceeded congestion paid to CRR holders in 14 months since January 2023, including a recent four-month stretch from November 2025 to February 2026.
See response to Question 1 above regarding the price swap construct proposal.
Package 2
A minimum bid or minimum clearing price is unnecessary and unworkable for CRRs in the CAISO. This proposal appears be based on the assumption that CRR auctions often award CRRs at little or no price that then produce substantial congestion revenue for their holders, but prior analysis by the CAISO demonstrated that this is not the case. CRRs that clear for prices at or close to zero do not account for an outsize portion of congestion revenues paid to CRR holders. According to data presented by Dr. Guillermo Bautista-Alderete at the February 27, 2025 working group meeting, CRRs acquired for prices ranging from $0MWh through $0.2MWh did not experience particularly high or the highest profits among CRRs by clearing price range in any month since 2019.[1] If a particular CRR clears at or just above zero, it reflects the market’s collective determination that the path is unlikely to experience congestion or could experience congestion in both directions that nets close to zero. In most cases, this collective determination is correct given the low profitability of CRRs that clear in this price range.
Furthermore, CRR allocation recipients continue to offer substantial volumes of capacity for sale in CRR auctions, indicating that at least some transmission customers find that offering allocated CRRs for sale at auction provides commensurate value compared to their internal valuations of expected future congestion.[2] Furthermore, the high rates at which offered capacity clears at auction indicate that auction prices are higher than the reservation prices CRR allocation recipients place on their offers.[3]
Additionally, DC Energy does not know how the CAISO could realistically establish a reservation price on all potential paths within the auction clearing mechanism itself. The CAISO cannot simultaneously offer all possible combinations of simultaneously feasible CRR obligation awards. That is, the CAISO cannot a priori offer the available capacity in the network as a set of CRR paths offered at reservation prices with volumes that together match the available capacity. The CAISO should not pre-process market bids, e.g., eliminate CRR bids with prices below the reservation price, because if there is not sufficient volume bid to consume capacity, then the market would clear at zero dollars, defeating the purpose of a reservation price. The CAISO also should not post-process market awards, e.g., cancel awards that are priced below the reservation price, because this could lead to infeasible solutions that would exacerbate revenue adequacy. Even a uniform minimum bid or clearing price of $1 or $0.10MW/h would require the CAISO to eliminate CRR bids from the auction or awards from the clearing results.
The CAISO cited PJM as an example of an equivalent auction with a minimum clearing price, but PJM’s minimum clearing price only applies to FTR options, not FTR obligations. The CAISO only auctions CRR obligations, not CRR options. There is a material difference between options and obligations that makes a minimum clearing price inappropriate for obligations. Unlike an obligation, the purchase price of an option is the most its holder can lose. So, a purchaser of $0 options essentially has no settlement risk and only financial upside. In contrast, the holder of an obligation always has potential settlement risk because an obligation can settle for negative value if congestion flows in the contrary direction. Thus, market participants cannot accumulate quantities of low or zero cost obligations without taking on market risk.
Package 3
Creating two classes of financial transmission rights raises concerns regarding undue discrimination between classes of market participants, as well as market fragmentation and inefficiencies.
This appears to be a proposal to create firm and non-firm CRRs distinguished by funding priority. If firm CRRs are offered at close to the CAISO’s full system capacity in order to provide open access to the financial equivalent of firm transmission to all market participants, without addressing the underlying root causes of congestion revenue inadequacy, then firm CRRs will face the same underfunding issue that CRRs do today. Will transmission customers be more willing to guarantee full funding of firm CRRs than they are to guarantee full funding of CRRs today? If firm CRRs are not available at a volume approaching the CAISO’s full system capacity, then how will this bifurcated market design ensure open access to the financial equivalent of firm transmission and sufficient access to hedging instruments to all classes of market participants?
If non-firm CRRs have a low funding priority, then they would have a substantial likelihood of underfunding that would make them too unreliable to be an effective hedging instrument. Market participants would bid for them subject to risk premiums, resulting in prices lower than their expected congestion revenue if fully funded. Even with different source and sink locations, non-firm CRRs would consume transmission capacity on the same underlying constraints as firm CRRs, but with prices determined more by expectations of underfunding than fundamental analysis regarding expectations of future congestion, detracting from their contribution to forward price discovery. So, non-firm CRRs would not provide a useful hedge and would be unlikely to contribute meaningfully to forward price discovery.
If the CAISO further bifurcates the CRR market and declares that firm CRR are only available to load-serving entities or to physical market participants to meet their verified hedging needs, then the division between firm and non-firm CRR would be blatantly discriminatory. Without financial market participants and power marketers, the market for firm CRRs would be highly illiquid because at times the only market participant eligible to hold firm CRRs sinking at a location would already own all the capacity via allocation. The lack of liquidity in this instance could lead to strange market outcomes, such as higher prices on a constraint for non-firm CRRs than for firm CRRs if all liquidity providers are relegated to the non-firm CRR market. What happens when a load-serving entity offers to sell an allocated CRR, which is presumably a firm CRR, into an auction, which is then in effect purchased by a financial market participant? Does it become a non-firm CRR, in which case the price will likely be significantly reduced relative to selling it as a firm CRR, however, there are no physical participants interested in buying? Also, how would a bifurcated market optimize and settle counterflow on a constraint when counterflow is always fully funded?
If the CAISO addressed the root causes of congestion revenue inadequacy, then there would be no reason to divide the market between firm and non-firm CRRs, because divergent funding priority is a way to allocate congestion revenue inadequacy. The concept of non-firm CRRs highlights the underfunding issue currently facing the CAISO’s CRR market. Potentially high and unpredictable CRR underfunding diminishes the reliability of CRRs as a hedging instrument and reduces market participant confidence, increases risk premiums, lowers auction revenue and detracts from the CRR market’s price discovery function. Firm CRRs on the other hand would clear based on current expectations of future congestion, but there would only be sufficient liquidity to ensure this outcome in an auction open to all classes of market participants.
Package Four – Incremental enhancements to the current CRR market design
The following outline identifies practical, incremental enhancements to the CAISO’s current CRR market design. The subheadings under each heading are not necessarily in order of operation or priority, but easier to implement and less disruptive incremental changes tend to be listed earlier.
Address Root Causes of Congestion Revenue Inadequacy
The CAISO’s current levels of congestion revenue inadequacy make CRRs a less reliable hedging instrument. Rational CRR auction participants consider the risk of CRR underfunding when bidding for CRRs (i.e., apply a risk premium), even if they have exposure to day-ahead congestion risk that they would otherwise be willing to pay a premium to hedge. This additional risk premium ultimately reduces auction revenue as market participants adjust their bids according to their view of underfunding risk. Auction revenue is further eroded as other market participants choose to leave some or all of their day-ahead congestion risk unhedged due to the unreliability of CRRs in the CAISO.
Practical improvements to reduce day-ahead congestion revenue inadequacy and thus enhance the reliability of CRRs as hedging instruments are:
- Better align the CRR and day-ahead market models
- The CAISO should continue with efforts to better align the CRR and day-ahead market models, including better modeling of outages and making updates to the CRR model more dynamically.
- Address unscheduled parallel flows (i.e., loop flows)
- The model used for CRR allocations and auctions should be improved to better account for unscheduled parallel flows. Better modeling would improve congestion revenue adequacy by better aligning the CRR market with actual flows in the day-ahead market.
- Unscheduled parallel flow is not only a modeling issue. The CAISO should pursue seams agreements with neighboring balancing areas, both in and out of EDAM, that secure payment for the use of transmission capacity in the CAISO and limit unscheduled flows.
- Reduce and standardize the shift factor cut-off threshold
- Reducing and standardizing the shift factor cut-off so that a lower, uniform cut-off applies to all types of settlement locations would ensure that market participants within the CAISO pay for their contribution to congestion on a greater number of constraints within the CAISO. Currently, the shift factor threshold systematically under-collects congestion revenue, and the discrepancy between shift factor thresholds has been identified as the primary cause of CRR settlement reversals.
- It would be better still if the CAISO followed MISO’s example and did not include a shift factor cut off at all in its day-ahead congestion revenue settlements in order to more accurately reflect all contributions to congestion in its CRR settlements.
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- Identifying process changes to ensure that line ratings in the CRR model are as consistent as practicable with the line ratings used to settle the day-ahead market.
- The CAISO should incentivize transmission owners to report outages in a more accurate and timely manner.
Reform Allocation of Congestion Revenue Inadequacy
Incremental improvements to congestion revenue inadequacy may not be enough to ensure that CRRs are subject to reasonable levels of funding. The allocation of congestion revenue inadequacy also must be reformed.
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- Net congestion revenue surplus and inadequacy over time
- The CAISO should initially net congestion revenue inadequacies and surpluses for the settlement month prior to allocating either. This would allow inadequacies accrued on certain days to be offset by surpluses collected on other days, similar to the approaches used by ERCOT, ISO-NE, MISO, PJM and SPP.
- Surpluses from one month should continue to be netted with inadequacies over the course of the settlement year. This would ensure that CRRs are funded to the extent possible based on congestion revenue collected within the settlement year while allocating any remaining surplus to load.
- Spread allocation among all CRR holders
- Congestion revenue inadequacy should be allocated evenly among CRR holders on a volumetric per MW/h portfolio basis. The CAISO’s current constraint-by-constraint allocation can result in extreme underfunding on individual CRR paths, which can be very difficult to predict, reducing the value of CRRs as a hedging tool.
- Allocate congestion revenue inadequacy consistent with cost causation principles
- Congestion revenue inadequacy associated with unscheduled parallel flows should not be allocated to CRR holders on a constraint by constraint basis.
- Transmission owners that cause congestion revenue inadequacy with outages that should have been scheduled with adequate time to account for them in the CRR model should be allocated the resulting congestion revenue inadequacy.
Increase Market Participant Confidence and Participation
Different market participants will assess the risk of holding a particular CRR differently, but all (explicitly or implicitly) include an underlying risk premium in their valuation. This is true in any CRR or equivalent market, even if CRRs are fully funded. The CAISO can reduce the collective underlying risk premium by improving market participant confidence in ways not directly tied to congestion revenue inadequacy.
- Time of Use (“TOU”) Reform
- As described in responses 3 and 4 below, the CAISO should prioritize the creation of a solar peak period for CRRs. The availability of peak solar hours would increase auction participant confidence, and the utility of CRRs as a hedging instrument, by better aligning expectations regarding day-ahead congestion with the CRR product definition. Currently, a market participant that predicts congestion during peak solar periods must account for the risk that congestion will flow in the opposite direction during other hours within the current on-peak definition.
- Increase Transparency
Improving access to timely and accurate information would increase CRR auction participant confidence and lower risk premiums.
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- Outages – There should be more accurate and timely collection and release of transmission outage data, including eliminating the CAISO’s practice of not updating its daily scheduled outages posting when notified of a future scheduled outage within a certain number of days (typically 20 days) before a CRR auction (“freeze period”).[4] The CAISO could eliminate this practice without amending its Tariff.
- Line Ratings – There should be greater transparency regarding day-ahead line ratings, including making process changes to ensure that line ratings in the CRR model are as consistent as practicable with the line ratings used to settle the day-ahead market.
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- Re-Balancing Monthly and Annual Auctions
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- Allocating less capacity in the annual process and shifting that capacity to the monthly allocation and auction process would reduce the amount of infeasible capacity allocated and auctioned off as there would be more modeling certainty regarding outages and loop flow. The improved confidence in modeling would lower perceived risk when the capacity is auctioned.
- Balance of Planning Period style auctions would allow market participants to bid with more confidence in annual and other auctions because they could rebalance and adjust their positions incrementally as market conditions develop over time.
[1] Congestion Revenue Enhancements, CAISO presentation, at slide 31 (Feb. 27, 2025), available at: https://stakeholdercenter.caiso.com/InitiativeDocuments/Presentation-Congestion-Revenue-Rights-Enhancements-Feb-27-2025.pdf
[2] See, Id. at slide 8.
[3] Id.
[4] See the CAISO Transmission Outages webpage, listing roughly 20-day cut off periods for inclusion of scheduled outages in the model of upcoming CRR auctions, at: https://www.caiso.com/market-operations/outages (certificate required for access); see also, https://www.caiso.com/documents/outagemanagementsystemtransmissionoutagereport-faq.pdf
3.
If the initiative were to have multiple phases, what feedback does your organization have on the timing of reforms? Does your organization have any feedback on how to balance consideration of long-term reforms with immediate enhancements?
DC Energy supports the CAISO’s current prioritization of TOU reform and expanding biddable locations for storage resources. TOU reform is a prerequisite to (or should be implemented simultaneously with) the expansion of biddable locations for storage resources, because they face different congestion patterns and opportunities in solar peak and non-solar peak hours. Similarly, the addition of solar peak hours would make CRRs a more useful hedging instrument that all market participants could better use to match expected congestion patterns. Also, TOU reform should be prioritized because it is a prerequisite to more accurately modeling unscheduled parallel flow. A model that accounts for capacity consumed by loop flow will only be accurate if it differentiates solar peak and non-solar peak hours.
Next, the CAISO should address the root causes of congestion revenue inadequacy by pursuing the practical enhancements outlined above under Package Four. Reducing and standardizing the shift factor cut-off threshold is particularly important in the new Extended Day Ahead Market (EDAM). Within the CAISO BAA, the current bifurcated shift factor thresholds prevent collection of most congestion revenue in other EDAM BAAs. This allows transmission customers in those BAAs to continue to consume CAISO transmission capacity at no cost, perpetuating a root cause of congestion revenue inadequacy in the CAISO. Reducing congestion revenue inadequacy will improve CRR funding, increase the reliability and utility of CRRs, and improve auction participant confidence, ultimately generating more CRR auction revenue.
The CAISO and stakeholders should then focus on further incremental, practical enhancements to the CAISO’s existing market design as outlined in Package Four.
4.
Please provide your organization’s feedback on the product definition portion of the discussion.
The CAISO should take a data driven approach to the specific definitions it adopts. For instance, regarding TOU reform, data demonstrates that similar solar driven congestion patterns occur on weekends and holidays as on other days, so a solar hours TOU should be available for these days as well. Similarly, data regarding congestion patterns should determine the hours defined as peak solar hours. Also, if data shows that some constraints flow in opposite directions in the non-solar peak morning hours than in non-solar peak afternoon hours, then separate TOUs should be available to allow CRR portfolios to reflect these differences.
Six Cities
Submitted 05/06/2026, 03:39 pm
Submitted on behalf of
Cities of Anaheim, Azusa, Banning, Colton, Pasadena, and Riverside, California
1.
Please provide your organization’s feedback on the presentation by the Department of Market Monitoring and the following discussion on analysis and how to evaluate options for improving auction efficiency.
Six Cities’ Comments: The DMM’s presentation at the 4/22/26 meeting reinforces the importance of redressing the persistent burden imposed on CAISO load as a result of the current structure of the CRR auction. The existing auction structure continues to force CAISO load to transfer congestion revenues to holders of auctioned CRRs that are far in excess of payments made to purchase those CRRs and that, for the vast majority, are not used for the intended purpose of CRRS to hedge physical deliveries of energy. The DMM presentation highlights the benefits of switching to a willing seller auction design that would not only eliminate the inequitable mismatch between auction payments and congestion revenue transfers but also would eliminate revenue shortfalls for auctioned CRRs, allow greater flexibility in the configuration of CRRs, and potentially allow for issuance of more CRRs, thereby enhancing performance of CRRs for hedging purposes.
The CAISO’s presentation for the 4/22 conference at slide 33 expresses concerns that DMM’s analysis of willing seller design outcomes is based on bid data from 2017-2018 that cannot be updated due to the changes in eligible source-sink pairs implemented in 2019. As an initial matter, DMM’s presentation includes more recent data that support an expectation that a willing seller auction design would have sufficient liquidity. DMM’s slide 4 demonstrates that from 2022 - 2024 LSEs consistently sold approximately 25% of allocated CRRs in the auction; as noted by a commenter in the 4/22 conference, there is no reason to expect that pattern to change substantially. In addition, DMM’s presentation at slide 13 identifies measures that could be incorporated in a willing seller design to enhance liquidity, particularly with respect to CRRs that would actually be used for hedging.
2.
Please provide your organization’s feedback on the discussion of how to group the potential enhancements into packages of complementary changes. Does your organization have a preference for any of the three hypothetical packages, preferred modifications to any of the packages, or an entirely new package to propose? Please provide your rationale for how any preferred package addresses the goals and problem statements developed by the working group.
Six Cities’ Comments: Of the three hypothetical packages illustrated on the 38th slide of CAISO’s 4/22 presentation, the Six Cities generally support Package 1, with emphasis on changes to the auction design to redress auction inefficiency. As discussed above, DMM’s presentation notes that the willing seller auction design would address simultaneously both revenue inadequacy and auction inefficiency by ensuring that all auctioned CRRs are supported by voluntarily accepted counterflow positions. The Six Cities also support prompt, parallel consideration of the proposal by BAMx to tie participation in the CRR auction to a demonstrated need for hedging.
With regard to Package 1, however, the Six Cities strongly oppose allocation of all revenue shortfalls to allocated CRRs or to load. DMM’s presentation at slide 3 demonstrates that allocated CRRs have been consistently revenue adequate from 2020 - 2025. It is the auctioned CRRs that primarily contribute to revenue insufficiency, as well as auction inefficiency. Further, BAMx’s analysis presented at the 5/12/2025 meeting demonstrates that only about 10% of auctioned CRRs actually are used for hedging. It would be utterly inconsistent with the core purposes of CRRs to allocate revenue shortfalls associated with speculative, auctioned CRRs not used for hedging to LSEs holding allocated CRRs that are used for hedging and do not contribute to revenue insufficiency.
Unless the willing seller auction design is implemented, the Six Cities also oppose proposals to reverse or substantially revise the provisions adopted in CRR Track 1A and 1B. The limitations on source-sink pairs eligible for CRRs provide at least some link between CRR definition and potential use for hedging. The allocation of revenue shortfalls to the holders of CRRs that give rise to the shortfalls also is more supportive of the hedging purpose of CRRs than broad socialization of revenue shortfalls.
Package 2 as illustrated on the 38th slide of CAISO’s 4/22 presentation appears to contemplate modest incremental changes to the existing CRR design. The Package 2 approach standing alone appears unlikely to move the needle significantly in terms of improving revenue adequacy or redressing auction inefficiency. However, the Six Cities do not oppose further evaluation of modeling enhancements or other potentially beneficial design elements in parallel and consistent with redesign of the auction process as discussed above.
It is not sufficiently clear to the Six Cities what the CAISO anticipates in connection with the Package 3 approach as illustrated on the 38th slide. Any creation of higher priority CRRs must attach the highest priority to allocated CRRs held by LSEs that pay for the CAISO transmission grid. The Six Cities would not oppose consideration of high priority auctioned CRRs (i.e., a class of auctioned CRRs with priority equal to the priority for allocated CRRs) in return for an auction payment equivalent to a proportional, fully-allocated share of the Transmission Access Charge revenue requirement. That concept would be comparable to the structure of charges for firm transmission service under Open Access Transmission Tariffs. Entities seeking the financial equivalent of firm transmission service should be prepared to pay to support the transmission grid on a basis comparable to the support provided by CAISO load. It would violate both the FERC’s open access policy and the cost causation principle to require load or allocated CRRs to guarantee full revenue recovery to auctioned CRRs under any circumstances (other than, perhaps, an auction payment greater than a proportional, fully-allocated share of the TAC revenue requirement). The core purposes of CRRs (providing opportunities for hedging price risk for physical energy deliveries and returning congestion revenues to the customers who pay for the transmission system) will not be served by modifications to the CRR design that impose increased risks or cost obligations on CAISO load.
The Six Cities generally agree with the description of the “Foundational Role of CRRs” set forth in the 12th slide in the CAISO’s 4/22 presentation. Application of the principles included, particularly open access transmission policy and the cost causation principle, must be guided by careful analysis of FERC decisions, as opposed to repetitive mischaracterizations of precedent by representatives of financial entities that are both unsupported by and inconsistent with the policies they purport to rely on.
With respect to open access policy, in response to a presentation by the Energy Trading Institute (“ETI”) at the 5/12/2025 stakeholder meeting, the Six Cities presented an extensive analysis of the role of CRRs and other financial transmission rights (“FTRs”) in comments submitted on 5/27/2025. As set forth in detail in those comments, the Energy Policy Act of 2005[1] ( “EPAct 2005”) and the Order No. 681 series,[2] both relied upon in the ETI presentation, emphasized the focus of EPAct 2005 on protection of the transmission rights of load-serving entities with service obligations and, in the Order No. 681 series, linked priority access to the transmission system for load-serving entities with on-going financial support of the transmission system. Nothing in EPAct 2005 or the Order No. 681 series requires a transmission organization to provide financial transmission rights to entities that do not use them for hedging at the expense of load-serving entities, and no FERC precedent has been identified that would require or support such an outcome.
FERC has described the cost causation principle as requiring that benefits relating to an allocated cost be roughly commensurate with the level of cost imposed.[3] While proponents of retaining the current auction design argue that financial participants who purchase CRRs at deeply discounted prices provide liquidity and price discovery benefits that justify their collection of congestion rents far in excess of the prices paid for the CRRs at the expense of load serving entities who have paid and continue to pay for the transmission system, none has offered any evidence based on CAISO market data that there are market benefits sufficient to justify the magnitude of congestion revenue transfers from load to financial participants that the CRR auctions routinely have produced. The Six Cities’ 5/27/2025 comments demonstrated that analyses performed by London Economics International, LLC relating to the PJM and MISO markets do not support a conclusion that benefits to California load are roughly commensurate with revenues transferred to financial participants through the current CRR auction design. In applying the cost causation principle, values considered in the required cost/benefit comparison should be at least approximately quantifiable and based on data from CAISO markets or markets demonstrated to be reasonably comparable to the CAISO markets in terms of market dynamics and structure of FTRs. Vague generalizations or anecdotal assertions from markets having different market and FTR structures, no matter how frequently repeated, can be given little or no weight. Further, assertions, or even showings, of benefits in other geographical markets (e.g., claims that the CRR auctions contribute to price discovery in bilateral markets) are irrelevant. There is no justification for imposing hundreds of millions of dollars in costs on California transmission customers to support benefits found in other regional markets.
[1] Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 549 (2005).
[2] Long-Term Firm Transmission Rights in Organized Electricity Markets, Order No. 681, 116 FERC ¶ 61,077 (2006), order on reh'g, Order No. 681-A, 117 FERC ¶ 61,201 (2006), order on reh'g, Order No. 681-B, 126 FERC ¶ 61,254 (2009).
[3] See, e.g., Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities, Order No. 1000-B, 141 FERC ¶ 61,044, at P 66 (2012) (order on reh’g) (describing cost causation principles).
3.
If the initiative were to have multiple phases, what feedback does your organization have on the timing of reforms? Does your organization have any feedback on how to balance consideration of long-term reforms with immediate enhancements?
Six Cities’ Comments: Reform of the auction design is long overdue and should be the highest priority for this initiative. Implementation of BAMx’s proposal to tie auction participation to a demonstrated need for hedging appears less challenging to implement and may be able to proceed more quickly than conversion to a willing seller design. Incremental changes to product definition to align CRRs more closely with hedging needs would be compatible with tying auction participation to hedging activity but should not delay implementation of changes to participation requirements or progress toward development of a willing seller design.
The Six Cities also note that enhancements to the CRR design for the CAISO BAA and potential changes to the methodology for allocating congestion revenues arising in the Extended Day-Ahead Market should be compatible and avoid conflicting incentives or inequitable outcomes. Notwithstanding the need for coordination of the two initiatives, redesign of the CRR auction should move forward expeditiously.
4.
Please provide your organization’s feedback on the product definition portion of the discussion.
Six Cities’ Comments: As noted in previous comments, the Six Cities support or do not oppose consideration of modifying CRR product definitions to align more closely with hedging needs. Consideration of such changes, however, should not delay or take priority over the more urgent objective of aligning auction design and participation more closely with actual hedging needs.
The Energy Authority
Submitted 05/06/2026, 04:19 pm
1.
Please provide your organization’s feedback on the presentation by the Department of Market Monitoring and the following discussion on analysis and how to evaluate options for improving auction efficiency.
The Energy Authority (TEA)[1] acknowledges the effort that went into DMM’s presentation and supporting analysis; however, TEA does not see merit in DMM’s “Willing Seller” proposal or even continuing to discuss it as in-scope for this round of potential CRR enhancements.
[1] TEA is a nationwide public power-owned, not-for-profit provider of wholesale energy market services. Within a broader suite of client services, TEA optimizes Congestion Revenue Rights portfolios, and their equivalent in the non-CAISO markets, to hedge supply and demand positions for Load Serving Entities.
2.
Please provide your organization’s feedback on the discussion of how to group the potential enhancements into packages of complementary changes. Does your organization have a preference for any of the three hypothetical packages, preferred modifications to any of the packages, or an entirely new package to propose? Please provide your rationale for how any preferred package addresses the goals and problem statements developed by the working group.
TEA appreciates the intent behind CAISO’s grouping of enhancements into packages of changes and understands the difficulty in trying to synthesize the multiple ideas stakeholders have brought forward during the early stages of this working group.
That said, TEA would much rather see CAISO move forward with a set of targeted, incremental enhancements that are more or less guaranteed to improve revenue adequacy and alignment between Congestion Revenue Rights (CRR) and day-ahead market models and outcomes, in addition to the two product reforms discussed below.
To do so, CAISO should target two key areas: (1) more equitably performing existing revenue adequacy management processes and (2) improving the accuracy of CRR model inputs and of the CRR model configuration.
The former should include moving to monthly netting of surpluses and revenues to smooth CRR revenue adequacy adjustments and exploring adjustments to underfunding uplift calculations that recognize the CRR holders are in many instances not directly responsible for the underfunding accruing on their constraints but simply are holding a position impacted by global modeling inaccuracies, unscheduled flow, and market-operator controlled baselining around transmission and generation outages.
The latter should target those global underfunding drivers themselves. Here, CAISO should focus on improving its modeling by focusing on the accuracy of outage reporting and its representation of the expected state of the transmission system, the modeling and incorporation of unscheduled flow under changed west-wide market conditions, and the reduction of the shift factor threshold in the day-ahead market to better align with the changing CAISO day-ahead market footprint and use of the CAISO system.
These recommended enhancements are not new – CAISO and stakeholders have been discussing them for at least 4-5 years in various workstreams and analysis efforts. What is needed now is a firm decision by CAISO, with stakeholder support, to prioritize fully running them to ground, identifying an analysis and action plan for them, and setting implementation targets that align with critical annual and/or monthly CRR process deadlines.
To that end, TEA strongly recommends CAISO act now to narrow the field of deliverables for this phase of CRR enhancements such that it can set an aggressive but achievable target for completing them. This action will not only allow market participants to realize their benefits in the CAISO CRR market but also will allow these changes to serve as a baseline for the developing long-term EDAM Congestion Revenue Allocation (CRA) reforms.
3.
If the initiative were to have multiple phases, what feedback does your organization have on the timing of reforms? Does your organization have any feedback on how to balance consideration of long-term reforms with immediate enhancements?
TEA recommends CAISO fast-track the two product reforms that appear to have near universal support: updating Time of Use (TOU) definitions and expanding the field of eligible sink locations for storage resources. If achievable without unduly disrupting other processes, TEA would also support a Balance of Planning Period option in the auction as has been requested by multiple stakeholders.
At the same time, CAISO can move forward with the model accuracy and underfunding management reforms discussed above, as it does not appear one effort needs to limit the other.
From there, to the extent CAISO wishes to entertain a long-term structural overhaul of its CRR market, any further efforts should be scoped and considered as part of developing a long-term comprehensive EDAM congestion revenue accrual and allocation framework that can be applied across the entire CAISO markets footprint.
4.
Please provide your organization’s feedback on the product definition portion of the discussion.
TEA appreciates the time and effort that went into CAISO’s TOU analysis and remains open to further analysis guiding initial and/or future-updated TOU definitions.
White & Case LLP for Financial Marketers Coalition
Submitted 05/06/2026, 01:36 pm
1.
Please provide your organization’s feedback on the presentation by the Department of Market Monitoring and the following discussion on analysis and how to evaluate options for improving auction efficiency.
We remain opposed to the DMM’s proposal as negatively impacting the CAISO market as a whole. This proposal will reduce liquidity, reduce hedging options and generally decrease the tools market participants of all types have to operate their assets and hedge their positions. CAISO acknowledged that these are the fundamental three flaws of the willing seller market in slide 20. These flaws are fatal to the willing seller proposal – this proposal will destroy liquidity in CAISO’s markets, eviscerate hedging potential and violate FERC’s open access policies, a bedrock policy for ISO design. This proposal also will harm the CAISO markets overall. We agree with Abram Klein’s comments noting potential harms to California ratepayers by not addressing the underlying flaws in CAISO’s CRR design including loop flow, and instead focusing on the willing buyer/seller model as the solution to all of the problems.
The DMM’s options to increase liquidity, shown on slide 13, will not actually increase liquidity and instead raise additional concerns. The DMM’s proposal that market participants “express interest” in buying certain paths is fraught with concerns. Will these offers be public? Will market participants in essence bid against one another for particular paths? The value of a sealed bid format is the ability to place bids that other market participants cannot see until after the auction has cleared. Multiple rounds would be beneficial; in prior comments, both the Coalition and other market participants have noted that other ISO/RTO markets offer incremental and reconfiguration auctions. Finally, the DMM’s proposal that CAISO offer additional liquidity to some entities is rife with the potential for undue discrimination. How will CAISO decide which entities may access such contracts?
Furthermore, the DMM’s proposal seeks to address solvable problems within the existing and functional CRR market construct by tossing out this construct entirely. This is akin to throwing out the baby with the bathwater. It is not clear how long it would take to re-design an implementable version of the DMM proposal, gain stakeholder and Board approval, and then complete the implementation – this may represent a multi-year effort, and in the meantime CAISO will not address real problems with the CRR marker that would be improved by instead working in the short-term within the existing construct. No other US ISO has attempted to implement a ‘willing buyer / seller’ market design, so CAISO would be likely to experience numerous unforeseen issues, false starts and need to invest time and resources that will exceed initial estimates. For these reasons, the DMM proposal has the potential to expose CAISO to criticisms that rather than taking a practical path to improving a functional market construct, staff prefers to launch an academic-style science project that may, or may not, represent an improvement to the existing construct.
Finally, to the extent that the DMM proposal rests on shaky ground with respect to FERC open access policies, the DMM proposal appears to put CAISO in the position of dedicating significant resources to designing a new market construct which may not survive likely challenges at FERC. It seems unwise for CAISO to embark down such a path in light of the substantial resources that might need to be deployed to defend challenges at FERC, and then if the challenges succeed, CAISO would be back to ‘square one’ and need to work on the near-term more practical enhancements we advocate for below.
CAISO has referred on several occasions to FERC precedent and CAISO precedent (see, e.g., April 22 Presentation at slide 12). CAISO may misunderstand the use of the term “precedent” or may be using that phrase incorrectly. Legal precedent is “prior reported opinion … which establishes the legal rule (authority) in the future on the same legal question decided in the prior judgment.” See e.g., Black’s Law Dictionary 2d. FERC is a quasi-judicial body which is bound by its prior decisions and must explain any departure from such decisions. Under the Administrative Procedure Act (“APA”), where an agency departs from established precedent without acknowledging the departure and offering a reasoned explanation, its decision may be overturned as arbitrary and capricious. FCC v. Fox Television Stations, Inc., 556 U.S. 502 (2009). CAISO’s policy preferences in making proposals to FERC for approval are not “CAISO precedent” and do not carry the same weight as decisions on the record by a regulator subject to the APA and bound by its prior decisions.
2.
Please provide your organization’s feedback on the discussion of how to group the potential enhancements into packages of complementary changes. Does your organization have a preference for any of the three hypothetical packages, preferred modifications to any of the packages, or an entirely new package to propose? Please provide your rationale for how any preferred package addresses the goals and problem statements developed by the working group.
Package 1: Willing seller design. We do not support this package, as outlined above.
Package 2: Minimum price, conservative modeling, capping of flows. We do not support this package as it does not address the identified causes of underfunding. With that said, implementing a minimum bid price for counterflow CRRs could help in certain cases, so we do not oppose this specific enhancement.
Package 3: Less conservative assumptions, CRR shortfall allocation to TSPs, bifurcated CRR design. We do not support this package. Again, this package does not address all of the identified causes of underfunding. Within this package, the component of shortfall allocation to TSPs for delayed outage reporting is a good step. But the concept of prioritizing CRRs is concerning and would require far more analysis; this raises some of the risks previously identified, including open access and it is unclear how this would support hedging. As Justin Cockrell of DC Energy noted, this has the potential of negatively impacting liquidity on individual paths.
Rather than the Packages 1-3, we would support a package to reform the CRR market that includes the fundamental elements identified as causing underfunding and shown on slide 36:
- Update CRR1b to allocate shortfall to TSPs for late-reported outages;
- Loop flow modeling;
- Intra-month model updates; and
- Reduce/eliminate shift factor threshold in day-ahead market.
As CAISO shows, a number of these elements are relatively simple to implement. A strong package would begin with these critical elements, then revisit other possible and more drastic changes after the above have been implemented.
3.
If the initiative were to have multiple phases, what feedback does your organization have on the timing of reforms? Does your organization have any feedback on how to balance consideration of long-term reforms with immediate enhancements?
We support potential multiple phases, particularly if the straightforward elements we list in response to question 2 are implemented in the short term, then long-term reforms are considered following a period of time where we assess the effectiveness of the short-term enhancements.
4.
Please provide your organization’s feedback on the product definition portion of the discussion.
Time of Use: as previously noted, we generally support the CRR Time of Use proposal, along with the proposal to add Balance of Planning Period (“BOPP”) auctions, as these will yield greater granularity in pricing, hedging and price discovery. BOPP auctions in particular are best practices in other ISO/RTO markets, and should be incorporated in CAISO’s CRR market. On the potential incorporation of TOU periods, the reformed TOU periods should account for the solar patterns on Sundays and weekends. This proposal is an opportunity to fine-tune CRR patterns for longer-term benefits.
Storage: We do not take a position on this issue beyond being generally supportive. We note that several commenters brought up an important point that co-located and hybrid storage resources should be included in this issue; we agree.
