Comments on May 10, 2022 Stakeholder Call

1. Provide summary of your organization’s comments on the Flexible Ramping Product Refinement design to isolate and limit base transfers into the failed Western EIM Balancing Authority Area (BAA):

APS had not previously appreciated the requirement to procure the flex ramp product in a WEIM BAA that failed the resource sufficiency evaluation would require zero incremental transfers in the in the direction of failure by that BAA. While it remains unclear if the limitation was understood by stakeholders during the policy development and approval, APS appreciates the CAISO bringing forward the impact to failure consequences of resource insufficient BAA’s at this time. APS believes that the failure consequence for the resource sufficiency evaluation should remain to the least restrictive of the base transfer or the previous 15-minute interval amount. APS had not previously appreciated the requirement to procure the flex ramp product in a WEIM BAA that failed the resource sufficiency evaluation would require zero incremental transfers in the in the direction of failure by that BAA. While it remains unclear if the limitation was understood by stakeholders during the policy development and approval, APS appreciates the CAISO bringing forward the impact to failure consequences of resource insufficient BAA’s at this time. APS believes that the failure consequence for the resource sufficiency evaluation should remain to the least restrictive of the base transfer or the previous 15-minute interval amount.

2. To the extent that a BAA is not completely isolated, please provide your organization's thoughts on impacts to the alignment of the cost allocation with the FRP procurement:

APS does have concerns about the price impact to FRP and energy when a failing BAA is required to procure its FRP within its BAA. With the proposed resolution in the FRP Refinements – Implementation Update document resulting in increased WEIM transfers into the failing BAA from the multi-interval optimization ahead of the failed interval, APS is unclear to the magnitude of the increased transfers and how this solution may impact FRP and energy prices in both the failed BAA and BAAs who passed. APS recommends that the FRP shadow price after policy implementation be reported on by DMM to evaluate magnitude of pricing impacts to all WEIM Entities.

3. Provide your organization’s comments on the proposed tariff change to section 29.34.n.1.B, and the potential impact to the WEIM Resource Sufficiency Evaluation:

APS does not support the proposed tariff change to no longer allow for the last 15-minute interval to set the incremental transfer limit, due to the potential reliability impact to a failing BAA from not having adequate ramp capability to replace the WEIM transfers that would no longer be available.

4. Please provide your organization's comments on the potential conflict between the FRP design of isolating failed WEIM RSE BAA’s and the proposed scope of WEIM Resource Sufficiency Evaluation Enhancements Phase 2:

APS acknowledges that the appropriate forum to discuss potential changes to RSE failure consequences is in the RSE Enhancements Phase 2 initiative and supports keeping it as-is until that initiative is completed.

5. Provide any additional comments:

1. Provide summary of your organization’s comments on the Flexible Ramping Product Refinement design to isolate and limit base transfers into the failed Western EIM Balancing Authority Area (BAA):

Please see attached comments.

2. To the extent that a BAA is not completely isolated, please provide your organization's thoughts on impacts to the alignment of the cost allocation with the FRP procurement:

3. Provide your organization’s comments on the proposed tariff change to section 29.34.n.1.B, and the potential impact to the WEIM Resource Sufficiency Evaluation:

4. Please provide your organization's comments on the potential conflict between the FRP design of isolating failed WEIM RSE BAA’s and the proposed scope of WEIM Resource Sufficiency Evaluation Enhancements Phase 2:

5. Provide any additional comments:

1. Provide summary of your organization’s comments on the Flexible Ramping Product Refinement design to isolate and limit base transfers into the failed Western EIM Balancing Authority Area (BAA):

Under the current Flexible Ramping Product proposal, it is our understanding that should an entity fail the resource sufficiency (RSE), energy imbalance market (EIM) transfers would be set to zero, rather than to the last feasible schedule.  As noted by CAISO in its paper, this could cause reliability concerns (“For example, to the extent that any import transfers above zero have been scheduled in the previous run for a BAA that has failed the upward RSE in the next interval, reducing the net transfer import in the next run worsens the ability to meet the BAA’s demand, potentially causing a reliability problem.”)  CPUC staff agrees that this reliability issue needs to be addressed (i.e., CPUC staff does not believe it would be tenable for RSE failure to result in transfers going to zero, rather than the last feasible interval).

It appears that CAISO is proposing a solution to address this and that this solution “will ensure that incremental dynamic WEIM transfers will continue to be limited to the least restrictive of the net base transfer or the net transfer in the previous interval, while not allowing the FRP requirement of the BAA that fails the RSE to be met by FRP awards to external resources.” CPUC staff supports addressing this issue and supports the overall outcome of maintaining the status quo regarding the RSE (i.e., defaulting to the last feasible schedule).

In sum, CPUC staff agrees that it would not be tenable to implement the FRP with this newly identified design flaw, CPUC staff supports CAISO’s efforts to address it before implementation, and CPUC staff supports maintaining the status quo with regard to RSE failures (i.e., maintaining the approach of defaulting to the last feasible schedule and not setting transfers to zero).

2. To the extent that a BAA is not completely isolated, please provide your organization's thoughts on impacts to the alignment of the cost allocation with the FRP procurement:

See comments above.

3. Provide your organization’s comments on the proposed tariff change to section 29.34.n.1.B, and the potential impact to the WEIM Resource Sufficiency Evaluation:

See comments above.

4. Please provide your organization's comments on the potential conflict between the FRP design of isolating failed WEIM RSE BAA’s and the proposed scope of WEIM Resource Sufficiency Evaluation Enhancements Phase 2:

See comments above.

5. Provide any additional comments:

1. Provide summary of your organization’s comments on the Flexible Ramping Product Refinement design to isolate and limit base transfers into the failed Western EIM Balancing Authority Area (BAA):

During the May 10, 2022, stakeholder call CAISO presented on a reliability issue that would result from a potential tariff change to implement the Board approved Flexible Ramp Product (“FRP”) Enhancements prior to implementation this Fall 2022. While NV Energy and PacifiCorp appreciates that the CAISO has brought this item forward on a stakeholder call rather than move to implement such a fundamental departure from the current failure consequences of the EIM resource sufficiency evaluation (RSE). NV Energy and PacifiCorp are concerned that CAISO did not recognize the significant reliability risk that would result from the proposal and did not highlight the potential consequences to stakeholders or to the Board during the stakeholder process.  We share the concern that the analysis, record and communication around this proposal has been insufficient and falls short of the CAISO’s own stakeholder engagement standards.

Under Section 15 of the CAISO Tariff, any amendment or other modification of any provision of this CAISO Tariff must be in writing and approved by the CAISO Governing Board in accordance with the bylaws of the CAISO.  The Board did not approve a change to the failure consequences of the RSE as this was never presented to them.  To the contrary, the Board Memo and Presentation stated a proposal to address a particular issue,

“The current design does not allow the market to consider locational constraints when procuring the flexible ramping product. This results in the market awarding the flexible ramping product to resources that may not be fully deliverable when and where uncertainty materializes.” [1]

The proposed response was to implement nodal procurement of the flexible ramp product. This sounds reasonable, but there was never a discussion of any implication on RSE failure consequences and certainly not identification that CAISO’s proposed implementation would restrict EIM Transfers as a result of RSE failures. 

To be clear, a proposal to limit an EIM Entity to base transfers is a fundamental change in how the concept of a freeze has been implemented since the start of the EIM.  As such it was incumbent on CAISO Staff to fully explain the change and potential reliability consequences to the Board.  It cannot simply be thrown-in as an after-the-fact thought on additional tariff language. Furthermore, the CAISO has a duty as the market operator to identify and mitigate any negative consequences associated with its initiatives.  Stakeholders have different interests and responsibilities and not all are responsible for Balancing Authority Area operations.

On May 18, 2022, CAISO published an implementation update that included a proposed solution to this reliability issue.  As NV Energy and PacifiCorp understand the proposal, this proposed solution would keep the current RSE failure mechanism in place for the EIM dynamic transfers while restricting the FRP deployment into Balancing Authority Areas that have failed the RSE. If this understanding is correct, then no change is necessary for tariff section 29.34.n.1.B..

“the CAISO will hold the EIM Transfer limit into or from the EIM Entity Balancing Authority Area or the CAISO Balancing Authority Area, as specified in Section 29.34(n)(2), at the value for the last 15-minute interval.” [2]

However, if this understanding is not correct and this solution would result in any changes to the RSE failure that reduces the transfers to the failed RSE Entity then those changes must be presented to the Board for consideration. Thus, if the proposed solution rectifies the reliability issue and maintains the spirit of the proposed FRP enhancements without the need to make any additional tariff changes, then the CAISO should move forward implementing the FRP enhancements this Fall with this proposed solution. It is important to note, that NV Energy and PacifiCorp will not support the current Board approved FRP enhancements without a solution for this reliability issue and will protest any filing at FERC.  

A proposal to limit an EIM Entity that fails to the base schedule transfers only would be a violation of good utility practice.  Rather than using the market as a powerful reliability tool to provide assistance to an EIM Entity under stressed conditions at an appropriate price, this change would exacerbate the existing flaw in the current design by taking additional transfers away from the EIM Entity that failed the RSE, thereby increasing the reliability challenge. Moreover, there has been no study and demonstration by CAISO that EIM Entities have the ramping capabilities to recover from such a direct and immediate challenge. There has been no data that identified the maximum volume of EIM Transfers that could be lost and no review of how reliability could be maintained.

[1]  CAISO. September 30, 2020. “Memorandum: Decision on flexible ramping product refinements proposal.” DecisiononFlexibleRampingProductRefinementsProposal-Memo-Sept2020.pdf (caiso.com). Accessed May 23, 2022.

[2] CAISO. April 1, 2022. “California Independent System Operator Corporation Fifth Replacement FERC Electric Tariff (Open Access Transmission Tariff) Effective as of April 1, 2022”. Conformed-Tariff-as-of-Apr1-2022.pdf (caiso.com). Accessed May 23, 2022.

2. To the extent that a BAA is not completely isolated, please provide your organization's thoughts on impacts to the alignment of the cost allocation with the FRP procurement:

NV Energy and PacifiCorp understand that CAISO’s proposed solution from the May 18, 2022 paper preserves the settlement of the FRP.  Therefore, this proposed solution sounds like it resolves any unintended consequences from the settlements perspective. We request that CAISO provide more information about the settlement changes that would result from this proposed solution along with the settlement calculations. Barring any unintended outcomes that CAISO has not stated, NV Energy supports this proposal.

3. Provide your organization’s comments on the proposed tariff change to section 29.34.n.1.B, and the potential impact to the WEIM Resource Sufficiency Evaluation:

The revised draft tariff language that was posted on March 15, 2021, did not contain any proposals to this section of the tariff. NV Energy and PacifiCorp have not seen any proposed changes to the revised draft tariff language for this section of the tariff.

As noted above, the potential proposed change to 29.34.n.1.B presented a reliability challenge to EIM Entities currently participating in the EIM.  If CAISO pursues revisions to this section of the tariff, then these proposed changes must be taken to the Board for a vote as it would represent a fundamental change in the current RSE failure consequences and has not been explained to and approved by the Board.  

4. Please provide your organization's comments on the potential conflict between the FRP design of isolating failed WEIM RSE BAA’s and the proposed scope of WEIM Resource Sufficiency Evaluation Enhancements Phase 2:

A properly designed and administered market works to improve reliability by using market prices to incent supply when and where needed at an appropriate price. On the other hand, poorly designed and administered markets can threaten reliability posing unwarranted risks of outage and causing a loss of confidence in the overall market design by participants, customers, and regulators. The proposal to limit EIM dynamic transfers into the EIM Entity that fails the RSE was fundamentally flawed. At a time when CAISO is focusing in both EIM and EDAM on using prices as a means to address shortage conditions, the unwarranted regression to not only artificially limit incremental EIM Transfers to the distresses EIM Entity but to exacerbate the shortfall by “zeroing-out” the previously relied on supply represents an inappropriate reliability change in violation of good utility practice.

The RSE Enhancements Phase 2 should continue to the work that was being developed under the RSE emergency actions workshop to develop an enhancement that prevents blackouts with financial consequences to be implemented prior to Summer 2023.  

5. Provide any additional comments:

1. Provide summary of your organization’s comments on the Flexible Ramping Product Refinement design to isolate and limit base transfers into the failed Western EIM Balancing Authority Area (BAA):

The CAISO has filed Tariff changes on the following three items for Flexible Ramping Products (FRP) (i.e., the original three FRP refinements):

• Procures FRP on a nodal basis ensuring deliverability

• Develops new methodology to calculate net load uncertainty (quantile regression)
• Procures FRP on a demand curve based upon expected cost of foregoing procurement, i.e., likelihood foregoing procurement causing power balance infeasibility

On May 10^th, CAISO held a stakeholder meeting soliciting stakeholders’ feedback on implementation of the FRP refinements, and pointed out a change to the consequences of a Balancing Authority Area (BAA) failing the RSE flex test as follows:

• Revises FRP implementation in the WEIM

• Passing BAA’s receive one FRP requirement as a whole, reflective of diversity benefit of passed footprint, and can participate in incremental WEIM transfers
• Failing BAA’s are isolated, receive full BAA specific FRP requirements, absent the existing credit, and are not able to access incremental WEIM transfers.

According to the CAISO, this change of BA flex test failure consequences (i.e., FRP/RSE change) is not explicitly stated in the Tariff, but is included in the technical appendix to the Draft Final Proposal of FRP refinements.[1]

PG&E does not support the CAISO to implement the proposed FRP/RSE change, which undermines the value of the original three FRP changes. PG&E supports the CAISO’s plan to implement the original three FRP refinements on Oct 1, 2022 as part of the Fall 2022 market release and requests that the CAISO retain the current RSE failure consequence.    

[1] Revised Tariff Language- Flexible ramping product refinements, available here: https://www.caiso.com/InitiativeDocuments/RevisedDraftTariffLanguage-FlexibleRampingProductRefinements.docx .

The description of the FRP/RSE change is in Section 1.2, Draft Technical Description – FRP refinements and deployment scenarios, available here: http://www.caiso.com/InitiativeDocuments/DraftTechnicalDescription-FlexibleRampingProductRefinements-Procurement-DeploymentScenarios.pdf

2. To the extent that a BAA is not completely isolated, please provide your organization's thoughts on impacts to the alignment of the cost allocation with the FRP procurement:

See comments under 5. 

3. Provide your organization’s comments on the proposed tariff change to section 29.34.n.1.B, and the potential impact to the WEIM Resource Sufficiency Evaluation:

See comments under 5. 

4. Please provide your organization's comments on the potential conflict between the FRP design of isolating failed WEIM RSE BAA’s and the proposed scope of WEIM Resource Sufficiency Evaluation Enhancements Phase 2:

See comments under 5. 

5. Provide any additional comments:

1. PG&E requests that the CAISO retain the current RSE failure consequence, i.e., holding the EIM Transfer limit into or from the BA at the value for the last 15-minute interval.

• • PG&E is very concerned that the FRP/RSE change will expose California to significant reliability risks by limiting the transfer to 0MW. Since today’s Short-Term Unit Comment (STUC) does not consider BAs’ failures of RSE, a sudden cutoff of net transfers will not allow the failing BAs enough time to access those units, which requires 1-4 hours to start, even if the capacities are available. There are also other similar problems that are pending resolution, and PG&E urges the CAISO to address those before applying the FRP/RSE change.
  • PG&E requests the CAISO provide stakeholders more thorough analyses and adequate time to identify proper solutions. Implementing the FRP/RSE change this fall will undermine the value of other FRP refinements that stakeholders support. PG&E understands that the CAISO is working on a potential solution to the reliability problem caused by the FRP/RSE change.[1] To minimize the risk to EIM entities, PG&E requests the CAISO provide stakeholders periodic updates on the solution’s development while continuing the current practice of RSE consequences.

2. PG&E supports the CAISO’s plan to implement the original three FRP refinements excluding the part of RSE failure consequences (i.e., implement nodal procurement, demand curve, and target estimation based on quantile regression) this fall.   
   • PG&E believes the original three FRP refinements are independent of the FRP/RSE change. Implementing the original three FRP refinements without the FRP/RSE should not affect their effectiveness in addressing the zero-pricing issue of FRP, nor should it have any other side effects. PG&E requests the CAISO confirm this understanding.
   • PG&E is concerned that delaying the implementation of the original three refinements will damage the market. Those refinements were developed to address important and persistent problems of FRP, such as deliverability, underestimated procurement targets, and distorted FRP price (at $0).  The CAISO has already delayed implementation of FRP refinements several times, which resulted in high RTM costs due to flawed FRP design to persist and potentially increase[2].  
   • PG&E believes that integrating FRP design with the WEIM RSE will be a moving target. The CAISO is currently conducting a separate RSE enhancements initiative. It is not clear how the changes in that initiative will interact with the FRP/RSE change. PG&E is concerned whether extra revision efforts are needed at this point.  To streamline the stakeholder process, PG&E recommends the CAISO consolidate any FRP/RSE changes related to WEIM RSE under a single initiative.
   • PG&E hopes that implementing the original three FRP refinements this fall will provide valuable insights to other initiatives, i.e., DAME.  DAME’s Imbalance Reserve Products (IRP) are analogous to FRP in day-ahead.  The refined procurement approach of FRP will help tailor the design of IRP, which will serve development of the E-DAM initiative which is currently targeted for implementation in Fall, 2023.      

[1] CAISO, Flexible ramping product refinements- implementation update, Section 5, May 20, available here: http://www.caiso.com/InitiativeDocuments/FlexibleRampingProductRefinements-ImplementationUpdate.pdf

[2] CAISO, Market Analysis and Forecasting, Flexible ramping product performance report, March 29, 2022, available here http://www.caiso.com/Documents/Report-FlexibleRampingProductPerformance.pdf

1. Provide summary of your organization’s comments on the Flexible Ramping Product Refinement design to isolate and limit base transfers into the failed Western EIM Balancing Authority Area (BAA):

On May 10, 2022, the CAISO held a stakeholder meeting to review issues it discovered during its implementation and tariff filing preparation efforts for the Flexible Ramping Product (FRP) Refinements Phase 2 (FRP-R2) as it relates to the Energy Imbalance Market (EIM) Resource Sufficiency Evaluation (RSE) performance and recent policy efforts in the EIM RSE Enhancements (RSE-E) Phase 1b analysis and Phase 2 “Failure Consequences” areas.

The CAISO explained that when preparing the tariff filing and proceeding with implementation for the FRP-R2 policy, it discovered that the implementation would lead to EIM areas that fail the RSE in the upward direction having their import transfer limit set at zero for the failed intervals, which the CAISO believes could lead to reliability concerns during tight system conditions. The CAISO also highlighted that this result would be out of step with recent policy work that is looking to develop failure consequences that are financial in nature and do not cause disruptions in transfers that could harm system reliability.

While Portland General Electric Company (PGE) appreciates the CAISO bringing this to the attention of stakeholders prior to implementation, it remains concerning that such a fundamental impact to the EIM RSE failure consequences experienced by the EIM BAAs was only identified after the proposal had already been approved.  Moreover, it is also concerning that the implementation impact was identified through the Business Requirements Specification (BRS) process (which was published on March 2021) yet stakeholders weren’t made aware of this until over a year later (despite the fact that the Resource Sufficiency Evaluation Enhancements (RSEE) Initiative had commenced in May 2021).  CAISO made references to other aspects of the pending FRP Refinements proposal throughout the RSEE Initiative, so it seems unreasonable to assume that a discussion about this element of the proposal wasn’t prudent to include as part of the RSEE discussion.  Furthermore, it seems clear to PGE that repeated delays in the FRP proposal’s implementation (and, ultimately, a delay in the finalization of the tariff) contributed to the discontinuity between two policy initiatives with interdependent elements.

Ultimately, the implementation of the FRP-R2 proposal results in WEIM RSE Failure Consequences were not presented to or approved by the CAISO Board of Governors (Board) and clearly contradicts the proposals being developed under the RSEE Phase 2 Initiative.  Moreover, implementation of the pending proposal would require a tariff revision and it is PGE’s understanding that any amendment to or other modification of any provision of the CAISO Tariff must be in writing and approved by the Board in accordance with the bylaws of the CAISO.  As such, moving forward with the proposed tariff revision would not only introduce reliability concerns but would also have the potential to further delay the implementation of other elements of the FRP-R2 proposal because the CAISO would need to seek re-approval from the Board. 

On May 18, 2022, CAISO published an implementation update that included a proposed solution to the reliability issue.  If PGE’s understanding is correct, the proposed solution would keep the current RSE failure mechanism in place for the EIM transfers while restricting the FRP deployment into Balancing Authority Areas that have failed the RSE.  As such, no change is necessary for tariff Section 29.34.n.1.B:

             “The CAISO will hold the EIM Transfer limit into or from the EIM

Entity Balancing Authority Area or the CAISO Balancing Authority

Area, as specified in Section 29.34(n)(2), at the value for the last

15-minute interval.” [1]

However, if this understanding is not correct and this solution would result in any changes to the RSE failure that reduces the transfers to the Entity who failed the RSE then those changes must be presented to the Board for consideration.  It is PGE’s position that if the proposed solution resolves the reliability issue and maintains the spirit of the proposed FRP enhancements without the need to make any additional tariff changes, then the CAISO should move forward with implementing the FRP enhancements this Fall with the proposed solution.

[1] CAISO. April 1, 2022. “California Independent System Operator Corporation Fifth Replacement FERC Electric Tariff (Open Access Transmission Tariff) Effective as of April 1, 2022”. Conformed-Tariff-as-of-Apr1-2022.pdf (caiso.com). 

2. To the extent that a BAA is not completely isolated, please provide your organization's thoughts on impacts to the alignment of the cost allocation with the FRP procurement:

It is PGE’s understanding that the CAISO’s proposed solution from the May 18, 2022 paper preserves the settlement of the FRP and would ensure appropriate cost allocation that leaving the RSE failure consequences just as they are would circumvent.  As such, any unintended consequences from a settlements perspective appear to be resolved under the CAISO’s proposal.  However, PGE requests that CAISO provide more information about the settlement changes that would result from their proposed resolution along with the settlement calculation to ensure that this assessment is accurate.  

3. Provide your organization’s comments on the proposed tariff change to section 29.34.n.1.B, and the potential impact to the WEIM Resource Sufficiency Evaluation:

It is PGE’s understanding that the potential proposed change to 29.34.n.1.B presented a reliability challenge to EIM Entities who participate in the EIM.  If CAISO pursues revisions to this section of the tariff, then these proposed changes must be taken to the Board for a vote as it would represent a fundamental change in the current RSE failure consequences and has not been explained to and approved by the Board.  

It is also PGE’s understanding that the alternative proposal that the CAISO introduced as part of the May 18, 2022 implementation update did not require a tariff change as it would leave the RSE failure consequences referenced in Section 29.34.n.1.B unchanged. 

4. Please provide your organization's comments on the potential conflict between the FRP design of isolating failed WEIM RSE BAA’s and the proposed scope of WEIM Resource Sufficiency Evaluation Enhancements Phase 2:

5. Provide any additional comments:

1. Provide summary of your organization’s comments on the Flexible Ramping Product Refinement design to isolate and limit base transfers into the failed Western EIM Balancing Authority Area (BAA):

Please see Powerex’s comments available at CAISO Flexible Ramping Product Refinements Implementation Update Comments

2. To the extent that a BAA is not completely isolated, please provide your organization's thoughts on impacts to the alignment of the cost allocation with the FRP procurement:

Please see Powerex’s comments available at CAISO Flexible Ramping Product Refinements Implementation Update Comments

3. Provide your organization’s comments on the proposed tariff change to section 29.34.n.1.B, and the potential impact to the WEIM Resource Sufficiency Evaluation:

Please see Powerex’s comments available at CAISO Flexible Ramping Product Refinements Implementation Update Comments

4. Please provide your organization's comments on the potential conflict between the FRP design of isolating failed WEIM RSE BAA’s and the proposed scope of WEIM Resource Sufficiency Evaluation Enhancements Phase 2:

Please see Powerex’s comments available at CAISO Flexible Ramping Product Refinements Implementation Update Comments

5. Provide any additional comments:

Please see Powerex’s comments available at CAISO Flexible Ramping Product Refinements Implementation Update Comments

1. Provide summary of your organization’s comments on the Flexible Ramping Product Refinement design to isolate and limit base transfers into the failed Western EIM Balancing Authority Area (BAA):

No comment.

2. To the extent that a BAA is not completely isolated, please provide your organization's thoughts on impacts to the alignment of the cost allocation with the FRP procurement:

No comment.

3. Provide your organization’s comments on the proposed tariff change to section 29.34.n.1.B, and the potential impact to the WEIM Resource Sufficiency Evaluation:

SDG&E strongly disagrees with this change. As a consequence of failing the Resource Sufficiency Evaluation (RSE), WEIM currently freezes transfers at the last 15-minute interval that passed the RSE. CAISO now proposes to reduce transfers to zero. This is a dramatic increase in the penalty for failing the RSE.

From a reliability standpoint, this increases the severity and implications to a Balancing Authority Area (BAA) that may already have trouble serving its load obligations. Furthermore, this could also impact neighboring BAAs and their transfers that may be wheeling through the failing BAA.

This situation potentially worsens in light of the California Public Utilities Commission’s concerns raised on the May 10, 2022 call. The current design of the CAISO markets is such that it puts CAISO at artificial risk of failing the RSE. Because hour-ahead schedules are cleared at T-75 minutes, when CAISO goes into the RSE in Real-Time, and those hour-ahead schedules are set. Any export that clears is locked into the RSE and becomes part of CAISO’s load requirements. But those exports may have cleared the market based on EIM advisory transfers. Those advisory transfers may not show up for any number of reasons. But the export is still counted as part of CAISO’s load obligation without consideration for any supply intended to support that export. Effectively CAISO is firming up the export for free with its own supply, and potentially doing so at the risk of CAISO’s reliability and curtailing demand during the operating hour.

Beyond the physical implications of this change, SDG&E also questions the financial implications. Every entity fails the RSE from time to time, and usually this does not coincide with an actual reliability event. If SDG&E is understanding this correctly, when this happens and the transfer limit is reduced to zero, then the failing entity goes from being part of the FRP pool to then having to meet its entire FRP obligation on its own. This would potentially cause the failing entity, along with any neighboring BAAs relying on wheels through the failing entity, to be subject to higher bilateral market prices or, in extreme circumstances, having to take EEA actions to make up the obligations that were expected to be served by the transfers. Given that RSE failures happen in a not-insignificant proportion of intervals, given that these intervals are rarely indicative of actual reliability events, and given that the new penalty is a substantial increase in potential costs to meet the FRP, it seems to SDG&E that this could be a large windfall to generators who provide FRP, and SDG&E is unsure what, if any, benefits such price signals would have. To be clear, SDG&E is not opposed to changes that could increase costs, so long as those price signals serve a purpose. For example, scarcity pricing would increase costs, but those costs come with clear benefits to reliability. But this change to FRP seems to be a large cost increase without any such benefit.

Lastly, this seems to violate the spirit of WEIM. SDG&E would not want to lock others out of WEIM transfers nor would SDG&E want CAISO to be locked out of WEIM transfers for failing the RSE if there is both transfer capacity and supply available in the market. If there is excess supply in WEIM, we would prefer to help WEIM BAAs in need and SDG&E hopes that others would do the same. This change moves that needle in the wrong direction, in SDG&E’s opinion.

4. Please provide your organization's comments on the potential conflict between the FRP design of isolating failed WEIM RSE BAA’s and the proposed scope of WEIM Resource Sufficiency Evaluation Enhancements Phase 2:

SDG&E believes such considerations for RSE penalties should be handled in the RSE Enhancements discussion.

5. Provide any additional comments:

No comment.

1. Provide summary of your organization’s comments on the Flexible Ramping Product Refinement design to isolate and limit base transfers into the failed Western EIM Balancing Authority Area (BAA):

The Six Cities note that these comments address the approach for implementation of the Flexible Ramping Product Refinements design described in the Flexible ramping product refinements – Implementation Update dated May 18, 2022 and posted on May 20, 2022 (the “FRP Implementation Update”), not the proposal for implementation of the FRP refinements discussed during the May 10, 2022 stakeholder call.  The Six Cities would strongly oppose the proposal for implementation of the FRP Refinements discussed in the May 10^th meeting on the grounds that (i) the design discussed on May 10^th was not properly addressed with stakeholders, the Market Surveillance Committee, or the CAISO Board of Governors prior to that meeting, (ii) the design discussed on May 10^th would have a disproportionate and discriminatory impact on the CAISO BAA due to the absence of CAISO Base Schedules, and (iii) the design discussed on May 10^th would create significant reliability risks for the CAISO BAA (and perhaps other BAAs) for multiple reasons.

Based on the recent FRP Implementation Update, however, the Six Cities understand that the CAISO no longer proposes to reduce Western Energy Imbalance Market (“WEIM”) transfers to zero for BAAs that fail the Resource Sufficiency Evaluation (“RSE”) flexibility test as an element of implementing the FRP refinements.  Rather, the Six Cities understand that the CAISO now proposes to retain the currently-effective limitations on WEIM transfers into BAAs that fail the RSE test to the least restrictive of Base Schedules or transfers scheduled in the most recent interval in which the BAA in question passed the RSE.  If the foregoing description correctly describes the CAISO’s current proposal for implementing the FRP refinements, the Six Cities support that approach.

2. To the extent that a BAA is not completely isolated, please provide your organization's thoughts on impacts to the alignment of the cost allocation with the FRP procurement:

The Six Cities have no comments on this topic at this time.

3. Provide your organization’s comments on the proposed tariff change to section 29.34.n.1.B, and the potential impact to the WEIM Resource Sufficiency Evaluation:

Based on the FRP Implementation Update, the Six Cities assume that the CAISO no longer proposes any change to Tariff Section 29.34.n.1.B.

4. Please provide your organization's comments on the potential conflict between the FRP design of isolating failed WEIM RSE BAA’s and the proposed scope of WEIM Resource Sufficiency Evaluation Enhancements Phase 2:

Because the WEIM Resource Sufficiency Evaluation Enhancements Phase 2 initiative has not been completed and continues to evolve, it is not clear to the Six Cities that there is a potential conflict with the proposal for implementation of the FRP refinements described in the FRP Implementation Update.

5. Provide any additional comments:

The Six Cities have no additional comments on implementation of the FRP refinements at this time.

1. Provide summary of your organization’s comments on the Flexible Ramping Product Refinement design to isolate and limit base transfers into the failed Western EIM Balancing Authority Area (BAA):

See attachment.  

2. To the extent that a BAA is not completely isolated, please provide your organization's thoughts on impacts to the alignment of the cost allocation with the FRP procurement:

3. Provide your organization’s comments on the proposed tariff change to section 29.34.n.1.B, and the potential impact to the WEIM Resource Sufficiency Evaluation:

4. Please provide your organization's comments on the potential conflict between the FRP design of isolating failed WEIM RSE BAA’s and the proposed scope of WEIM Resource Sufficiency Evaluation Enhancements Phase 2:

5. Provide any additional comments:

1. Provide summary of your organization’s comments on the Flexible Ramping Product Refinement design to isolate and limit base transfers into the failed Western EIM Balancing Authority Area (BAA):

Salt River Project Agricultural Improvement and Power District (SRP) appreciates the CAISO identifying potential inconsistencies between the Flexible Ramping Product (FRP) Refinements and WEIM Resource Sufficiency Evaluation (RSE) Enhancements and requesting additional stakeholder feedback prior to filing tariff changes with FERC. SRP supports the CAISO reopening the stakeholder process for the FRP Refinements initiative.

2. To the extent that a BAA is not completely isolated, please provide your organization's thoughts on impacts to the alignment of the cost allocation with the FRP procurement:

SRP appreciates the CAISO’s recent issue paper and requests further discussion of the alignment of the cost allocation with the FRP procurement during a future stakeholder meeting.

3. Provide your organization’s comments on the proposed tariff change to section 29.34.n.1.B, and the potential impact to the WEIM Resource Sufficiency Evaluation:

The proposed tariff change could result in reliability and settlements implications that should be further assessed by the CAISO and the stakeholder community.

4. Please provide your organization's comments on the potential conflict between the FRP design of isolating failed WEIM RSE BAA’s and the proposed scope of WEIM Resource Sufficiency Evaluation Enhancements Phase 2:

SRP is not able to comment on potential conflicts at this time because Phase 2 of the WEIM RSE initiative has not started. A benefit of reopening the stakeholder process for the FRP Refinements would be coordination with Phase 2 of the WEIM RSE initiative.

5. Provide any additional comments:

SRP is concerned that the proposed resolution the CAISO presented in its May 18 issue paper could result in additional leaning on the WEIM. SRP requests the CAISO reopen the stakeholder process to include further discussion of the proposed resolution and examination of potential unintended consequences.