Comments on 4/16 SH call

1. Please provide a summary of your organization's comments on the March 16, 2025 gas resource management stakeholder call.

Comments on Gas Resource Management:

Straw Proposal Scoping and Alignment

Department of Market Monitoring

May 2, 2025

Summary

The Department of Market Monitoring (DMM) appreciates the opportunity to comment on the Gas Resource Management Issue Straw Proposal Scoping and Alignment presentation.[1] The purpose of the presentation is to review the policy objectives and approaches stakeholders prioritized during stakeholder meetings, discuss next steps for policy development and timeline feasibility, and review lower-priority scope items to determine if any should be re-considered for near term policy development. DMM provides comments here on the following topics discussed in the ISO’s latest presentation:

• Informing fuel procurement. DMM believes the ISO and stakeholders should continue discussions on the D+2 advisory model inputs, outputs, and accuracy assessment, particularly regarding the appropriateness of bids used to inform advisory schedules that inform gas procurement in extreme conditions. DMM also agrees with the ISO that scheduling coordinators are in a better position than the ISO to forecast gas burn based on advisory schedules for individual resources.
• Accommodating cost variation. DMM believes reference levels should allow resources to reflect their costs accurately, without being unnecessarily high for all hours. The ISO should focus on targeted approaches to cover gas cost variation as opposed to general increases in reference levels which can result in inefficiently high prices.
• Managing gas burn limitations. DMM supports continued discussion on improving gas-electric coordination to reduce inefficiencies in electric market outcomes during gas supply limitations, however DMM continues to recommend not including operation flow order (OFO) costs in reference level calculations.

Comments

The ISO and stakeholders should continue to develop the D+2 model inputs, outputs, and accuracy assessment

Stakeholders seek accurate information from the ISO to inform fuel procurement for market awards, while making sure Western Energy Imbalance Market (WEIM) participants are treated equitably. DMM supports the ISO assessing the accuracy of the D+2 advisory report to inform gas procurement targets during the timely gas nomination cycle, and to determine if there are opportunities to improve the report’s alignment with the day-ahead and real-time markets. DMM also supports the ISO identifying market inputs that could be improved by a “D+1.5” report, but agrees this can be left as a future policy enhancement.

DMM appreciates the goal of aligning the D+2 report as closely as possible to the next day’s day-ahead market run to inform fuel procurement decisions. However, the modeling assumptions regarding using historic bids outlined in the ISO’s recent presentation may not result in accurate outputs. Using historic bids from seven days prior to the relevant trade date (or sooner as suggested by PacifiCorp) may be appropriate inputs to a model during typical system conditions, when loads and gas prices aren’t expected to be drastically different within a week.

However, stakeholders are interested in the D+2 accuracy during stressed conditions, pipeline restrictions, and specific weather events when the system conditions in the days leading up to these events may not be an accurate representation of what bids will be like for the relevant trade date. For these days, the ISO may want to explore modelling expected real-time bids based on similar historic observations, or simply using the bids from historic observations that match anticipated system conditions. Such estimations may be more accurate than using bids from seven days prior.

DMM agrees with the ISO that forecasting gas burn for individual resources is an exercise better left to scheduling coordinators than the ISO. Any gas burn calculations the ISO can make would be an approximation based on CAISO MasterFile data. Some of the inputs to the calculation, such as the incremental heat rate curve in the CAISO MasterFile, are approximations themselves. These approximations are necessary for the ISO to use as inputs to the market, but calculating a gas burn value that is accurate enough to inform gas purchase is not the intent of the data generating process. DMM believes that scheduling coordinators have more detailed knowledge of their resources and therefore are in a better position to calculate gas burn from advisory schedules.

Targeted approaches to accommodate gas price variation are preferable to general reference level price increases

DMM agrees with the stakeholder objectives that gas resource management policies should incentivize the procurement of gas at least cost, and should incentivize resources to provide accurate cost information. DMM further agrees that cost adjustment processes should not impede resources’ ability to provide that information. DMM supports the suggested changes to SIBR to allow requests to be made at the fuel region level and for multiple resources at a time. DMM also supports continued discussions to educate stakeholders in how to utilize all the tools available to accommodate gas cost variation.

Many stakeholders want the ability to recover intra-day gas purchases and purchases made outside of active fuel zones under extreme conditions. Some of the suggested approaches to do so include a weather triggered protocol to temporarily adjust threshold values, temporary modifications to the manual reference level chance request (RLCR) process, and negotiated commitment costs for unique supply arrangements.

Accurate reflection of gas costs is important to ensure accurate application of market power mitigation procedures, and DMM recognizes that entities around the West may face a variety of different challenges in accurate gas cost reflection during extreme conditions. However, DMM would like to reiterate that commitment costs and default energy bids should reflect resource costs without being unnecessarily high to allow exercise of market power or result in inefficient market prices. DMM recommends the ISO and stakeholders focus on ways to make targeted changes to reference level calculations and default energy bids to accommodate gas price variation in extreme conditions. This approach would be preferred to general increases in reference levels or reasonableness thresholds that may cover gas price spikes in specific circumstances, but overestimate costs the rest of the time.

Operational flow order (OFO) penalties should not be included in reference level calculations

Stakeholders have recommended capturing gas limitations in price formation, such as incorporating expected OFO penalties in the opportunity cost component of default energy bids (DEBs). DMM supports continued discussion on improving gas-electric coordination to reduce inefficiencies in electric market outcomes during gas supply limitations. However, DMM continues to recommend not including OFO costs in reference level calculations. If participants can recover costs that signal gas system constraints through reference levels in the electric market, their demand for gas may not be as sensitive to these price signals.

DMM supports the ISO creating a “User Guide” to address immediate stakeholder requests regarding gas nomograms, the interplay between regional gas pipeline practices and electric system reliability, and managing intra-day gas limitations using available tools.

[1] Gas Resource Management: Straw Proposal Scoping and Alignment, California ISO, April 16, 2025: https://stakeholdercenter.caiso.com/InitiativeDocuments/Presentation%20-%20Gas%20Resource%20Management%20-%20Apr%2016%202025.pdf

2. Are the policy development objectives missing any high priority objectives?

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. Should any of the scope items be re-considered for near-term policy development?

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. Are there topics your organization would prefer to engage with in certain settings (ie working groups, paper and public comments, sub-group policy development)?

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.

5. Does your organization have any additional feedback not already captured?

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

1. Please provide a summary of your organization's comments on the March 16, 2025 gas resource management stakeholder call.

Idaho Power supports, appreciates, and values CAISO’s continued effort with the Gas Resource management stakeholder initiative. Notwithstanding, Idaho Power feels the D+2 will have little to no effect on the market as whole as the results are not financially binding. Why would someone purchase financially binding fuel based on a non-financially binding commitment result? The gas market as whole has several factors that are regional, pipeline, utility, and commercial and industrial specific. Assuming an electricity market (ISO) can simplify another commodity market’s specific macro and micro-economic factors into a simple extended market run or DEB proxy cost calculation and call it sustainable is unrealistic.

In general, Idaho Power disagrees with Page 21 of the Gas Resource Management: Straw Proposal scoping and alignment presentation. Economics from a competitive market should influence and incentivize resources to offer at least cost. Policy should disincentivize resources from not offering at cost due to penalties.

All resources should be able to fully recover expenses accrued during intra-day gas purchase or sales, inside or outside normal active fuel zones, caused/instructed by the market. Extreme conditions are only a very small part of a complex set economic condition that cause the spread pricing between next-day and intra-day fuel pricing. Since most intraday fuel purchase or sales (long/short fuel positions) stem from deviations from planned (DA) operational run schedules, market Participants should communicate intra-day pricing in their RT bid curves. RT bids then indicate the implied cost of moving the unit outside of it planned DA/operational run parameters.

2. Are the policy development objectives missing any high priority objectives?

The D+2 does not align the gas and power days. It simply covers up one whole gas day. CAISO should consider making the D+2 a D+2.5, meaning dispatch will include the HE 01–08:00 of Day +3 better aligning the gas and power days. Idaho Power generally agrees with PAC that D+2 pricing should use Day-ahead pricing out of the options listed in the presentation but giving market participants the ability to submit estimated pricing would be ideal.

3. Should any of the scope items be re-considered for near-term policy development?

Idaho Power does not support CAISO communicating fuel burn schedules in the form of publishing MMBtus. We feel this is out of scope and CAISO communicating a MW schedule is sufficient.

4. Are there topics your organization would prefer to engage with in certain settings (ie working groups, paper and public comments, sub-group policy development)?

Exceptional circumstances or weather triggered scarcity protocols would be a great topic for a working group. Weather triggered scarcity protocols temporarily require all generator operators to offer at actual costs (mandatory cost-based bid).

Actual cost will be compared and evaluated by the market monitor, and all outlies will be subject to mitigation. The evaluation criteria will need to be flexible as no two events are the same and over the same region.

5. Does your organization have any additional feedback not already captured?

N/A

1. Please provide a summary of your organization's comments on the March 16, 2025 gas resource management stakeholder call.

LADWP appreciates the opportunity to participate in the Gas Resource Management stakeholder process and emphasizes the growing need for CAISO to address natural gas procurement challenges in a manner that supports reliability and aligns with economic dispatch outcomes across all time horizons. As an EIM participant and an entity preparing for potential EDAM participation, LADWP operates with both physical gas constraints and complex cost recovery mechanisms that must be reflected accurately in market operations.

In parallel with our commitment to transform LADWP’s power system to 100% clean energy by 2035, we recognize the overall utilization of natural gas will trend downward over time. However, as the grid become increasingly dependent on intermittent renewables resources, the strategic of natural gas and a firming and contingency resource becomes even more critical, especially during extreme events. Whether due to wildfires, prolonged heat storms, earthquakes, or freeze-offs, these high impact, low-frequency events require dependable and predictable gas supply and procurement structures that ensures system reliability for both the energy grid and pipelines.

A key concern raised by LADWP was the lack of accurate representation of tiered gas pricing within CAISO’s modeling assumptions. Tiered pricing structures are a fundamental component of accurate gas cost capture. When these structures are not captured accurately (especially for EDAM), particularly the volumetric thresholds that escalate pricing tiers, the market results fail to reflect the true marginal cost of generation. This distorts commitment and dispatch signals and may result in either under-procurement or uneconomic commitment decisions, especially during periods of constrained gas supply or elevated demand.

Additionally, LADWP reiterated its view that D+2 advisory schedules must be improved in accuracy and transparency. The current advisory outputs do not provide sufficient confidence to support actionable procurement decisions, nor do they reflect the intra-day volatility or the non-linear cost implications of imbalance reserves or burn limitations. The coordination between gas and electric market timelines continues to be misaligned, and this misalignment grows more pronounced as entities begin preparing for real-time gas nominations within CAISO’s extended day-ahead market structure.

2. Are the policy development objectives missing any high priority objectives?

LADWP encourages CAISO to include the following in the policy development objectives:

Tiered Pricing Accuracy: Establish modeling improvements that allow CAISO to reflect tiered gas pricing in commitment and dispatch cost calculations. This includes both fixed volumetric brackets and dynamic thresholds affected by regional gas supply conditions. In addition, Gas Daily Average (GDA) flat is not always an option for natural gas procurement, we recommend that modeling also accounts for potential GDA premium adders.

Gas-Electric Market Coordination Under Stress Conditions: Develop formal communication or modeling protocols for high-volatility or low-visibility events (e.g., cold weather events, pipeline maintenance, or force majeure events), where gas availability and pricing can diverge significantly from modeled assumptions.

Enhanced Support for Vertically Integrated Utilities in Market Design: Recognize the operational differences of entities like LADWP that hold both generation and gas procurement responsibilities and design policies to avoid economic disincentives for participants that procure natural gas and are subject to pipeline balancing constraints.

3. Should any of the scope items be re-considered for near-term policy development?

LADWP agrees with the following:

D+2 Advisory Schedule Enhancements: This effort is foundational. Without timely, accurate forecasts that align with the gas procurement cycle, market participants are left to react with corrective measures, which can increase costs due to uneconomic decisions being made for the sake of reliability.

(Reference Level Change Request) RLCR Process Flexibility and Responsiveness: Both automated and manual RLCR mechanisms need refinement to address real-world price spikes, particularly in intra-day cycles. These cycles often reflect new system and/or market conditions not captured in previous day or DA1 forecasts.

Fuel Usage Limit Modeling, OFO, and Pipeline Coordination: Recognizing aggregate pipeline constraints, beyond individual unit burn limits, is essential for understanding regional gas deliverability and market reliability.

LADWP strongly recommends the following topics be advanced in the near term:

Tiered Pricing Modeling and Validation: Incorporating tiered pricing mechanisms into market cost models is critical to accomplishing economic dispatch. CAISO should consider a stakeholder-driven validation framework to test implementation against real-world cost behaviors for gas generators.

4. Are there topics your organization would prefer to engage with in certain settings (ie working groups, paper and public comments, sub-group policy development)?

LADWP supports a multi-layered engagement strategy:

Working Groups and Sub-Groups: Topics requiring modeling development, cost index methodology, or technical enhancements (e.g., D+2 modeling, gas burn limits, tiered pricing structures) should be explored through working groups or sub-groups with opportunity for technical exchange.

Public Comment Process: Broader policy discussions, such as exceptional circumstances or market-based commitment cost transitions, are well suited to public comment with associated issue papers.

Targeted Technical Workshops: For topics such as GPI calculation methods, RLCR process reform, or tier pricing optimization modeling, technical workshops could provide a productive space to review methodologies, assumptions, and stakeholder experiences in depth.

5. Does your organization have any additional feedback not already captured?

LADWP reiterates the importance of this working group in helping CAISO close the longstanding gap between electricity market operations and natural gas market realities. As CAISO transitions from solely being an electricity market operator to a broader regional energy market architect through EIM and the development of EDAM, its ability to anticipate and incorporate gas market behavior becomes essential. The gas system is not just an input; it is a parallel market with its own dynamics, risks, and constraints.

CAISO’s ability to model gas accurately, particularly with tiered pricing, intra-day volatility, and regional delivery constraints, will directly impact the efficiency, cost, and reliability of EDAM participation. These issues are no longer edge cases, they are becoming central to system operations in the West.

LADWP stands ready to support this process and encourages CAISO to prioritize solutions that reflect the integrated operational challenges faced by gas-fired generation, especially under increasingly volatile market and climate conditions.

1. Please provide a summary of your organization's comments on the March 16, 2025 gas resource management stakeholder call.

NV Energy appreciates CAISO’s continued effort with the Gas Resource Management stakeholder initiative to help resolve concerns with gas management in EDAM. However, NV Energy is concerned with the latest direction and is not certain that any gas management issues that have been identified by NV Energy will be addressed. It would be a significant mistake if the initiative did not address any of the stakeholder concerns from stakeholders in the Desert Southwest region that face difficulty with gas management in the EIM, which will likely be exacerbated in the Day Ahead Timeframe.

During the April 16^th stakeholder meeting, CAISO proposed to focus on enhancements to the D+2 advisory market schedules to provide accurate results that could be relied upon for the Timely gas nomination cycle. While NV Energy understands that the D+2 result will never be a completely perfect forecast, NV Energy supports enhancements to the D+2 that improve the accuracy and reliability of the market advisory results to inform gas procurement and support CAISO’s recommended base analysis plan.

A stakeholder also mentioned further refinement to the analysis plan by adding in a real-time comparison to the CAISO’s base analysis. NV Energy supports this refinement because it is important to accurately forecast the amount of gas used each day which correlates to the real-time dispatch. NV Energy supports the proposal to add D+1.5 market run to the parking lot at this time after considering the amount of effort it will take to achieve an accurate and reliable D+2 advisory market report. However, this item should be added as a high priority for future phase 2 of this initiative. 

CAISO proposes to provide training and develop specific detailed requests for the implementation teams for the reference level change request function to address concerns with accommodating cost variation.  NV Energy is disappointed in CAISO’s response to accommodate or recognize the constraints that are being communicated by stakeholders. To reiterate, NV Energy supports a reevaluation of the market-based commitment cost approach that has been approved by the CAISO Board.

Finally, CAISO has indicated that from previous experience with FERC that it is not possible to incorporate gas limitations from the market participants into the electric markets. Therefore, CAISO proposes to work directly with the pipelines to incorporate gas constraint nomograms similarly to their coordination in California today.  NV Energy opposes this approach if CAISO solely works with the pipelines to develop the constraint and not involve market participants. It is unclear what if any benefit this will provide. NV Energy is concerned that the misalignment with the gas and electric markets could conceivably award resources from the Day Ahead Market sufficiently outside the gas pipeline nominations that occurred from earlier market cycles. As previously mentioned by stakeholders, it is possible that the later gas market cycles may not be liquid enough for a market participant to meet the Day Ahead Market awards causing a reliability risk for the participant and the pipeline. Therefore, NV Energy would like to discuss a Day Ahead Market constraint to inform the market about the variability that is even possible from gas resources. This constraint could indicate how much variability exists within the pipeline and gas markets for both the upward and downward Day Ahead Market awards. As a reminder, the EDAM is a voluntary market upon which the market participant should provide enough market bid in capacity to pass the resource sufficiency test. If a market participant provides more than enough bid in capacity to pass this test, then the market operator should have no reason to oppose a market constraint that is well beyond this most basic requirement. NV Energy requests that CAISO work with market participants to develop a maximum burn constraint that indicates there is no further room for resource movement in the up and down directions.

In conclusion, the gas management issues that NV Energy has raised were discussed in the latest May 2, 2025 Market Surveillance Committee meeting by Scott Harvey[1]. NV Energy supports the approach laid out by Dr. Harvey and reiterates that issues consistent with his presentation must be addressed to facilitate EDAM participation.  

[1] Harvey,S. (2025,May 2). “Market Power Mitigation Issues”. https://www.caiso.com/documents/presentation-market -power-mitigation-harvey-may-02-2025.pdf. Market Surveillance Committee General Session.

2. Are the policy development objectives missing any high priority objectives?

See comments under question 1.

3. Should any of the scope items be re-considered for near-term policy development?

 See comments under question 1.

4. Are there topics your organization would prefer to engage with in certain settings (ie working groups, paper and public comments, sub-group policy development)?

 NA

5. Does your organization have any additional feedback not already captured?

 NA

1. Please provide a summary of your organization's comments on the March 16, 2025 gas resource management stakeholder call.

San Diego Gas and Electric (SDG&E) appreciates the opportunity to comment on the Gas Resource Management stakeholder call on March 16^th. SDG&E values CAISO’s consideration of stakeholder input on these topics and supports moving forward to a straw proposal on this initiative.

2. Are the policy development objectives missing any high priority objectives?

SDG&E believes the presented policy development objectives are sufficient to serve as the basis for the forthcoming Straw Proposal for the Gas Resource Management initiative. We would, however, like to emphasize the need for the development of the following two items that fall within the proposed scope.

First, the D+2 must be evaluated for its effectiveness both during implementation and following go-live. To this end, SDG&E recommends the development of a scorecard or other evaluation tool to prove the precision of the results of the D+2 in the upcoming Straw Proposal. This could be accomplished by testing the results against current forecasting or historical data. This additional step to demonstrate the accuracy of the D+2 results would build the confidence necessary to use these results as fuel procurement targets, and we suggest CAISO to include this concept in the Straw Proposal.

Second, regarding the Accommodation of Cost Variation, we recommend CAISO further define the parameters for when “exceptional circumstances” are in effect, and how this will be communicated to stakeholders. SDG&E requests that the CAISO clarify in the Straw Proposal whether an exceptional circumstance is to be determined by meeting only one of the listed criteria in the March 16 presentation, or if multiple of the criteria must be met. Additionally, as decisions on gas procurement are typically made in the very early morning, it will be critical to provide a timely alert to stakeholders such that they may effectively integrate the flexibility and inform decision making. SDG&E looks forward to the provision of these additional details in the Straw Proposal.

3. Should any of the scope items be re-considered for near-term policy development?

SDG&E appreciates the thorough response from CAISO regarding our request for the gas burn to be published in MMBtus. We understand CAISO’s concerns for publishing this data, even though the task is technically feasible. As such, SDG&E supports removing this item from the scope of this initiative.

4. Are there topics your organization would prefer to engage with in certain settings (ie working groups, paper and public comments, sub-group policy development)?

SDG&E does not have any comments at this time.

5. Does your organization have any additional feedback not already captured?

SDG&E does not have any comments at this time.

1. Please provide a summary of your organization's comments on the March 16, 2025 gas resource management stakeholder call.

WPTF appreciates the opportunity to submit these brief comments. The comments below support continuing discussions around two topics that CAISO has categorized as “in the parking lot” at this point. Specifically, the blended fuel region and modifications to the reasonableness threshold. We do not believe these should be placed in the parking lot at this time as both of these topics support the objective of accommodating cost variation.  

2. Are the policy development objectives missing any high priority objectives?

No comment.

3. Should any of the scope items be re-considered for near-term policy development?

WPTF believes that CAISO should continue policy discussions on both the blended fuel region and modifications to the reasonableness threshold, rather than placing these topics in the parking lot at this time.

Blended Fuel Region:
We would like to take this opportunity to remind CAISO that one of the key reasons for this topic is the need to account for opportunity costs that are not captured through other venues/options. These costs include timing delays and complexities involved in updating Masterfile parameters and completing the negotiation process. The Department of Market Monitoring's support for enhancements to reflect multiple fuel price regions underscores the need for greater policy clarity and guiding principles. Such improvements would help ensure that "exceptional circumstances" are addressed with consistency and predictability.

Reasonableness Threshold Modifications:
WPTF also supports continued policy discussions on modifying the reasonableness threshold. This threshold exists to enable resources to reflect higher costs under exceptional circumstances—specifically when existing bidding restrictions prevent accurate cost representation. It provides a mechanism for incorporating these costs into the market when justified by conditions. Therefore, we support identifying and considering potential enhancements as part of the current policy development effort, rather than deferring this issue

4. Are there topics your organization would prefer to engage with in certain settings (ie working groups, paper and public comments, sub-group policy development)?

No comment.

5. Does your organization have any additional feedback not already captured?

No comment.