Comments on Draft final proposal

1. Please provide your organization’s feedback on the ISO’s proposal to remove the $1,000/MWh cap on Default Energy Bids (DEB):

No comments at this time.

2. Please provide your organization’s feedback on the ISO’s proposal to modify the bid cap for energy storage resources to provide bidding flexibility using a proxy opportunity cost value:

Bay Area Municipal Transmission Group (BAMx)^[1] is pleased to submit these comments on the May 2, 2024 Draft Final Proposal Rules for bidding above the soft offer cap. Subsequent to our drafting of these comments, the ISO posted an alternative version of the Draft Final Proposal on May 7, 2024 with clarifications to enhance the clarity and comprehensiveness of the proposal without introducing substantive changes to its content. BAMx has reviewed the clarifications and agrees they do not substantively change the proposal. Given the extremely short time frame for commenting, BAMx is submitting its comments referencing the May 2, 2024 version of the Draft Final Proposal. 

 BAMx opposes the ISO’s proposal to modify the bid cap for energy storage resources to provide bidding flexibility using a proxy opportunity cost value in the Day-Ahead Market (DAM). Because the DAM optimizes over 24 hours, the opportunity cost of use limited resources is directly determined by the DAM, nullifying any need to raise the DAM bid cap for use-limited resources above $1,000. There has been no evidence presented during the Working Group process that the current DAM bid cap is resulting in inefficient market outcomes for use-limited resources in the DAM. BAMx is concerned that the rushed nature of this initiative could result in unintended consequences for the DAM.

BAMx is not opposed to making the proposed energy storage bid cap changes for the Real-Time Market (RTM), given that the extremely short time horizon for the RTM can lead to use-limited resources being dispatched inefficiently if the storage bids do not reflect intra-day opportunity costs. We are concerned, however, that as the ISO noted “The full degree of intended benefits from providing this additional bidding flexibility to storage resources may be partially reduced if a storage resource’s bid is mitigated due to market power.” [Draft Final Proposal at p. 21] CPUC Energy Division also has pointed out that the Maximum Import Bid Price (MIBP) used to set the energy storage bid cap is based on a thinly traded index that itself may not represent competitive prices. Further, the fact that during the stressed conditions the penalty factors for some export transactions could exceed the MIBP, would make this proposed solution ineffective at preventing energy storage resources from being dispatched inefficiently. While we believe a much better solution would be to have a longer RTM look-ahead, we acknowledge this is not possible in the near-term. BAMx urges the ISO to prioritize extending the RTM time horizon to directly account for use-limited resource opportunity costs as soon as possible.

Some parties in the Working Group have argued for the need for consistency between the DAM and RTM. While consistency across markets is generally a good objective, it is important to recognize that the proposed changes to the DAM bidding rules do not address the key inconsistency between the DAM and RTM (i.e., the lack of a sufficiently long RTM time horizon). Conversely, the proposed changes to the RTM bidding rules at least are an attempt to partially remedy the existing and continuing time horizon inconsistency across the DAM and RTM. BAMx is concerned that introducing the proposed energy storage bidding changes into the DAM will create unintended consequences, while providing little or no benefit. For these reasons, BAMx urges the ISO to not implement the storage bidding changes in the DAM.

[1] BAMx comprises City of Palo Alto Utilities and City of Santa Clara, Silicon Valley Power.

3. Please provide your organization’s feedback on the ISO’s monitoring and evaluation of the new bidding flexibility provided by the two proposals above. Are there elements and/or thresholds that you feel should be examined in particular?

 BAMx urges the ISO to closely monitor the RTM results to determine if the proposed changes actually result in energy storage resources being dispatched efficiently. The ISO should also monitor the impacts of the proposed changes on DAM outcomes.

4. Please provide any additional feedback:

 BAMx supports using a forward looking RTM time horizon to directly determine use-limited resource opportunity costs. The ISO should not limit its investigation to merely “informing real-time opportunity costs.”

1. Please provide your organization’s feedback on the ISO’s proposal to remove the $1,000/MWh cap on Default Energy Bids (DEB):

Bonneville is appreciative of the expedited effort CAISO staff have dedicated to this issue.  Bonneville fully supports the removal of the $1000/MWh cap on the DEB with implementation as soon as is feasible for the summer of 2024. The events during MLK weekend highlighted the negative operational outcomes that can arise from a subset of resources being capped at $1000/MWh, while other resources are able to accurately reflect their willingness to bid and be dispatched in the WEIM. Bonneville further urges the CAISO to initiate a process to develop a permanent solution as soon as possible after completion of the interim solution period.  The $1000/MWh cap currently unjustly devalues the opportunity costs of Bonneville resources and undermines their accurate placement in the WEIM energy supply stack during those conditions that elevate market prices above $1000/MWh.

During FERC 831 market conditions and when Bonneville’s hydro system has very limited operational flexibility, Bonneville believes its resources are very similar in operation to Energy Storage Resources (ESR).  Modeled as a Non-Generator Resource (NGR), the Bonneville hydro system may both store and provide energy according to its resource bid curves.  Similar to ESRs, there are daily maximum modeled energy limitations (inc/dec), but it is the operational management of this dual flexibility that is also finite.  It is critical for a cascading hydro system in tight market conditions to allow the value of its flexibility to accurately reflect the interdependent nature of intra-day temporal and day-to-day uses.

Bonneville believes it is important for its DEB and bid cap to recognize intra-day opportunity costs with respect to the impact on operational planning during tight market conditions and limited hydro system flexibility. In such conditions, within-day energy purchases may be necessary, in addition to daily energy purchases, to maintain load-resource balance in Bonneville’s balancing area authority.  Intra-day prices are not currently reflected in the hydro DEB calculation.  Bonneville looks forward to working with the CAISO to utilize existing processes that allow BPA to reflect intra-day prices in an adjusted DEB. 

2. Please provide your organization’s feedback on the ISO’s proposal to modify the bid cap for energy storage resources to provide bidding flexibility using a proxy opportunity cost value:

When CAISO begins addressing this topic as part of a more permanent solution, Bonneville would like to revisit a joint solution for both ESRs and hydro resources that utilize the NGR framework. While the resources have very different long-term storage horizons, Bonneville sees a great deal of similarity in how the resources are managed in the short-term, and particularly in very tight conditions, with limited flexibility. Both NGR hydro and batteries highlight the importance of maintaining the resource position in the bid stack and not prematurely deploying resources as to maintain the optimal timing of resource dispatch. For a more permanent solution, Bonneville believes there is potential to explore a common solution set for multiple resources that are bid-capped during 831 market conditions.

3. Please provide your organization’s feedback on the ISO’s monitoring and evaluation of the new bidding flexibility provided by the two proposals above. Are there elements and/or thresholds that you feel should be examined in particular?

No comment at this time. 

4. Please provide any additional feedback:

No additional feedback at this time. 

1. Please provide your organization’s feedback on the ISO’s proposal to remove the $1,000/MWh cap on Default Energy Bids (DEB):

The California Community Choice Association (CalCCA) appreciates the opportunity to comment on the California Independent System Operator’s (CAISO) draft final proposal for bidding above the soft offer cap. CalCCA continues to support a solution that will allow bids to capture resources’ opportunity costs more accurately. Such a solution will allow for both the resources’ recovery of costs and improved reliability by ensuring state-of-charge is preserved for times when the resources are most needed.

The last several working groups have revealed that the CAISO’s proposed solutions may come with unintended consequences. Before committing to implementing a new market design that would allow resources with intra-day opportunity costs to bid above the soft-offer cap by summer 2024, the CAISO must further explore any unintended consequences associated with pursuing an expedited solution. Should the CAISO, with input from the Market Surveillance Committee, conclude that it can implement an expedited solution without unintended consequences, CalCCA supports the CAISO moving forward with uncapping the default energy bid (DEB) to allow DEBs to rise above $1,000 per megawatt-hour and modifying the bid cap to reflect opportunity costs for summer 2024. Following the conclusion of this expedited effort, the CAISO should evaluate when and what type of alternative solution is needed for the long term.

2. Please provide your organization’s feedback on the ISO’s proposal to modify the bid cap for energy storage resources to provide bidding flexibility using a proxy opportunity cost value:

CalCCA has no additional comments at this time.

3. Please provide your organization’s feedback on the ISO’s monitoring and evaluation of the new bidding flexibility provided by the two proposals above. Are there elements and/or thresholds that you feel should be examined in particular?

CalCCA has no additional comments at this time.

4. Please provide any additional feedback:

CalCCA has no additional comments at this time.

1. Please provide your organization’s feedback on the ISO’s proposal to remove the $1,000/MWh cap on Default Energy Bids (DEB):

Please see the attached Comments from the Department of Market Monitoring.

2. Please provide your organization’s feedback on the ISO’s proposal to modify the bid cap for energy storage resources to provide bidding flexibility using a proxy opportunity cost value:

Please see the attached Comments from the Department of Market Monitoring.

3. Please provide your organization’s feedback on the ISO’s monitoring and evaluation of the new bidding flexibility provided by the two proposals above. Are there elements and/or thresholds that you feel should be examined in particular?

Please see the attached Comments from the Department of Market Monitoring.

4. Please provide any additional feedback:

Please see the attached Comments from the Department of Market Monitoring.

1. Please provide your organization’s feedback on the ISO’s proposal to remove the $1,000/MWh cap on Default Energy Bids (DEB):

ED Staff provides its response in #4 below.

2. Please provide your organization’s feedback on the ISO’s proposal to modify the bid cap for energy storage resources to provide bidding flexibility using a proxy opportunity cost value:

ED Staff provides its response in #4 below.

3. Please provide your organization’s feedback on the ISO’s monitoring and evaluation of the new bidding flexibility provided by the two proposals above. Are there elements and/or thresholds that you feel should be examined in particular?

ED Staff provides its response in #4 below.

4. Please provide any additional feedback:

CPUC ED staff appreciate CAISO’s efforts in facilitating the stakeholder process to address the complicated challenges related to storage bidding caps. While we recognize that there may be challenges to maintaining a state of charge for certain non-net peak hours during stressed system conditions (in the real-time market) due to intra-day opportunity costs, we would recommend implementing a more targeted solution rather than fast-tracking this proposal by Summer 2024. We are concerned that this proposal would be costly to ratepayers and may not necessarily address the intra-day opportunity costs.

Multiple stakeholders have shared similar concerns in comments regarding the potential risks and need for a slower process to develop and implement a targeted solution, and these concerns are magnified by CAISO’s latest revision to the proposal that would expand CAISO’s bidding flexibility proposal to the Day Ahead market.

DMM recommends focusing “on improving the ability of the small number of hydro resources with daily energy limitations to reflect intra-day opportunity costs in bids and DEBs, and rely on existing mechanisms for managing storage resources until a more comprehensive solution can be implemented.” Likewise, the Public Advocates Office argues that the CAISO should “utilize existing mechanisms to maintain appropriate resource SOC and develop any necessary long-term solutions through the Price Formation Enhancement Initiative.”  PG&E stresses that “the currently proposed solutions either do not address the core problem/and or come with significant risks.” Finally, Nevada Energy states that the “proposed solutions that might be technologically feasible for an interim late-Summer 2024 implementation come with risks that should be thoroughly vetted with stakeholders rather than pushed forward with a resolution that may or may not resolve the problem statement.”[1]

ED Staff agree with DMM’s proposal to allow bids with daily limitations (storage) to exceed $1,000/MWh in the hours other than those when the hard bid cap is in effect to avoid inefficient dispatch of those resources - but not for all hours in the day. CPUC ED staff consider DMM’s proposal to most directly address the problem of intra-day opportunity costs, although their proposal may warrant additional consideration. If the bid cap is lifted for the entire day, storage could still lack a price signal to avoid premature dispatch if the market clears $2,000. In the near term, the CAISO market can leverage existing tools to ensure storage resources can retain their charge to contribute to reliability, including self-schedules, enhanced exceptional dispatch, and end-of-hour State of Charge. The CAISO could also consider resurrecting the Minimum State of Charge tool that was replaced by Exceptional Dispatch.

Given the potential cost impacts, CPUC ED staff recommends against fast-tracking this initiative and recommends leveraging existing tools to hold day ahead schedules, until DMM’s proposal can be implemented.

[1] Comments on Feasibility Assessment and Straw Proposal, Price Formation Enhancement Initiative, CAISO, April 30, 2024.

1. Please provide your organization’s feedback on the ISO’s proposal to remove the $1,000/MWh cap on Default Energy Bids (DEB):

The Public Advocates Office at the California Public Utilities Commission (Cal Advocates) is the state-appointed independent ratepayer advocate at the California Public Utilities Commission (CPUC).  Our goal is to ensure that California ratepayers have affordable, safe, and reliable utility services while advancing the state’s environmental goals.  Our efforts to protect ratepayers include energy, water, and communications regulation advocacy. 

The Expedited Interim Solution for Summer 2024 is not Ready for Adoption and Creates Significant Cost Risks

The California Independent System Operator (CAISO) should not adopt the current proposal to remove the $1,000/megawatt-hour (MWh) cap on DEBs nor the proposal to allow energy storage resources to exceed the soft offer cap using a proxy value.  Both proposals create uncertain and unstudied impacts to market power protections provided by the CAISO’s local market power mitigation mechanism and general market power protections granted by the Federal Energy Regulatory Commission’s (FERC) soft offer cap.

The CAISO and stakeholders (including Cal Advocates) agree that developing a solution allowing economic bids to preserve state of charge (SOC) is desirable;[1] however, the issue does not warrant the expediency that the CAISO has exercised in developing interim solutions.  Scheduling coordinators and market operators have existing tools to help maintain a desired SOC, and these tools can be used as a reliability backstop until a long-term solution is developed in an appropriately paced manner.[2] 

The CAISO has identified general risks to implementing solutions by Summer 2024 but has not explored specific risks or impacts.[3]  Implementing solutions that would enable economic bids or DEBs to exceed the price cap for all hours of the day may also lead to undesirable price impacts, such as awarding dispatches up to $2,000,[4] during net peak hours when resources are intended to release their SOC through dispatches.  Seven stakeholders—spanning multiple local regulatory authorities, investor-owned utilities, and a WEIM entity—oppose implementing changes by Summer 2024.  These diverse stakeholders acknowledge that a solution to enable resources to maintain their SOC through bids should be developed but nonetheless recommend that the CAISO defer an interim solution until additional development can take place.[5]

Instead of adopting the current unvetted proposal, the CAISO should continue proposal development and analysis to manage resource SOC in the Price Formation Enhancements initiative with a 2025 implementation target.

Impacts to Existing Market Power Mitigation Tools have not been Investigated

The CAISO’s proposed interim solution to manage SOC through economic bids may result in the exercise of market power that would not be effectively mitigated by the CAISO’s local market power mitigation process.  The CAISO’s local market power mitigation process can reduce a resource’s economic bid down to the resource’s DEB if the process determines that uncompetitive conditions exist in the region.[6]  However, DMM notes that inaccurately high DEBs may reduce local market power mitigation effectiveness and could exacerbate bid cost recovery issues.[7]  The CAISO states that revising the cap on DEBs “would have important impacts to bidding rules and market power mitigation”[8] but has not investigated if local market power mitigation would effectively address market power.[9]

The CAISO’s Draft Final Proposal development has also not considered whether market power controls are weakened by allowing the DEB to exceed the $1,000/MWh soft offer cap itself.  The FERC has affirmed that bid caps are intended to protect against the exercise of market power.[10]  More discussion and development is needed to determine whether allowing DEBs to exceed the soft offer cap will increase the potential for market power exercise.

[1] CAISO, Rules for bidding above the soft offer cap: Draft Final Proposal, May 2, 2024 (Draft Final Proposal) at 8-9.  Available at: http://www.caiso.com/InitiativeDocuments/Draft-Final-Proposal-Price-Formation-Enhancements-May-2-2024.pdf.

[2] The CAISO Department of Market Monitoring (DMM) recommended:

In the interim, in order to ensure system reliability, the ISO can continue to rely on the tools it has to dispatch storage resources, such as enhanced exceptional dispatch ability and exceptional dispatch settlement rules for storage resources. DMM also notes that storage resources currently receive real-time bid cost recovery associated with buying back day-ahead schedules that are infeasible in real-time due to insufficient state of charge. 

DMM, Comments on Price Formation Enhancements, April 30, 2024 at 6.  Available at: https://stakeholdercenter.caiso.com/Common/DownloadFile/ac37ebba-8315-4320-8b2f-9052c1b3d7d5.

[3] Draft Final Proposal at 5.  See also CAISO’s rating and categorization of risks associated with solution options at: CAISO, Rules for bidding above the soft offer cap: Feasibility Assessment and Straw Proposal, April 23, 2024 at 15-16, 23, 29, and 35.  Available at: https://www.caiso.com/InitiativeDocuments/Price-Formation-Enhancements-Feasibility-Assessment-and-Straw-Proposal-Apr-22-2024.pdf.

[4] Staff from the California Public Utilities Commission’s Energy Division raised this concern during working group discussions.  See: April 23, 2024 – Price Formation Enhancements, at 56:33 to 57:25 and 1:59:46 to 2:02:04 https://youtu.be/kFOX3HCfLFg.

[5] Cal Advocates, Comments on Feasibility Assessment and Straw Proposal, April 30, 2024; CAISO DMM, Comments on Price Formation Enhancements, April 30, 2024; Northern California Power Agency, Comments on Issue Paper and Stakeholder Recommendations, April 19, 2024; NV Energy, Comments on Feasibility Assessment and Straw Proposal, April 30, 2024; Pacific Gas and Electric Company, Comments on Feasibility Assessment and Straw Proposal, April 30, 2024; Six Cities, Comments on Feasibility Assessment and Straw Proposal, April 30, 2024; and Southern California Edison Company, Comments on Feasibility Assessment and Straw Proposal, April 30, 2024.

[6] CAISO, 2022 Annual Report on market Issues & Performance, July 11, 2023 at 159.  Available at: https://www.caiso.com/Documents/2022-Annual-Report-on-Market-Issues-and-Performance-Jul-11-2023.pdf.

[7] DMM, Comments on Price Formation Enhancements: Rules for Bidding above the Soft Offer Cap Issue Paper, April 22, 2024 at 1-2.  Available at: https://stakeholdercenter.caiso.com/Common/DownloadFile/f18f442c-585e-42d8-bddd-cab7152ebcff.

[8] Draft Final Proposal at 14. 

[9] The CAISO performed counterfactual analysis of adjusting the DEB cap to judge the proposal’s effectiveness to enable bids to maintain SOC; however, the CAISO did not investigate impacts to the local market power mitigation program’s efficacy.  Draft Final Proposal at 15-17.

[10] “Our decision to establish a $250/MWh bid cap together with the other mitigation measures is a careful balance of the need to provide incentive for market entry by new generation investment with the need to protect markets from the potential of market power abuse.” 100 FERC ¶ 61,060, Order on the California Comprehensive Market Redesign Proposal, July 17, 2002 at paragraph 51.  See also: FERC Docket RM16-5-000 Final Rule, November 17, 2016 (FERC Order 831), paragraphs 83, 87, and 193. 

2. Please provide your organization’s feedback on the ISO’s proposal to modify the bid cap for energy storage resources to provide bidding flexibility using a proxy opportunity cost value:

Impacts to Market Power Need Further Study

Allowing energy storage resources to bid above the soft offer cap carries the same potential to reduce the effectiveness of the soft offer cap’s ability to mitigate market power as described above.  The CAISO should not enable storage resources to exceed the soft offer cap without further study.

Allowing Storage to Exclusively Bid Above the Soft Offer Cap is Likely to Increase the Wholesale Price of Energy

The CAISO’s proposal to allow storage resource economic bids to exceed the soft price cap enables storage resources to bid above any other resource technology’s economic bid in the day-ahead and real-time market.[1]  Exemption from the soft bid cap may grant the fleet of storage resources the ability to categorically bid as pivotal suppliers when load is high, supply is scarce, and the proposed “proxy cost” is above $1,000/MWh.[2]  Such a situation is most likely to occur in summer when the CAISO needs to dispatch storage as well as much of the rest of the fleet.  The CAISO should further investigate the potential effects on the wholesale price of energy of allowing storage resources to bid above the soft offer cap.

It is also unclear how allowing storage resources to bid above the soft offer cap at all hours of the day for the day-ahead market (DAM) and real-time market (RTM), especially during peak price periods, enables storage to maintain its SOC.  Cal Advocates agrees with DMM comments that an hourly DEB solution may be appropriate and that proposed solutions “should not be applied all day, particularly for resources able to recharge throughout the day, and should not apply during the highest priced hours when the intra-day opportunity costs are lowest.”[3]  While Cal Advocates acknowledges and appreciates that the CAISO is aiming to prevent premature dispatch of use-limited resources “prior to the critical net load peak evening hours,”[4] there is no purpose in applying solutions to those net load peak evening hours, when the resources are expected to discharge.  Doing so introduces substantial risks associated with loosening bid limits and decreasing market power mitigation through DEBs during net load peak hours. 

Impacts to the Day-Ahead Market Have Not Been Considered

Additionally, the Draft Final Proposal introduced a major change at the last minute by extending the proposal into the DAM as well.[5]  Up until the Draft Final Proposal, stakeholders—including the Market Surveillance Committee[6]—have been evaluating changes that were limited to the RTMs.  Cal Advocates was already concerned about implementing this proposal in the RTMs but extending it to day-ahead market substantially amplifies the potential effects and risks to ratepayers.  Enabling the DEB and storage bids to exceed the soft offer cap at the DAM significantly increases risk of additional ratepayer costs since the DAM transacts significantly more volume of energy than the RTM.  Cal Advocates opposes extending the proposal into the DAM due to the substantial potential consequences and the divergence from the normal stakeholder development process.

[1] Draft Final Proposal at 18.

[2] Storage resources would be able to bid up to the 4^th highest calculated hourly value of the maximum import bid price (MIBP) or highest cost-verified bid under the CAISO’s proposal.  Draft Final Proposal at 18.

[3] DMM, Comments on Price Formation Enhancements, April 30, 2024 at 2. 

[4] Draft Final Proposal at 5.

[5] Draft Final Proposal at 14.

[6] Market Surveillance Committee Meeting General Session, Price formation enhancements: rules for bidding above the soft offer cap straw proposal discussion, April 24, 2024.  Available at: https://www.caiso.com/Documents/PFE-rules-for-bidding-above-the-soft-offer-cap-straw-proposal-presentation-apr24_2024.pdf.

3. Please provide your organization’s feedback on the ISO’s monitoring and evaluation of the new bidding flexibility provided by the two proposals above. Are there elements and/or thresholds that you feel should be examined in particular?

The CAISO should defer adopting any of the proposed interim solutions at this time.  However, if the CAISO implements these solutions by Summer 2024, it must closely monitor the audit process described in the Draft Final Proposal.[1]  The CAISO should also closely monitor the economic bids and awards for storage and hydro resources, and analyze any increases or decreases in awarded bid prices for those technologies relative to other technologies and historical bid prices.  The CAISO should also commit to suspending one or both of the proposed solutions if monitoring by the CAISO and/or DMM detects either the exercise of market power or consistent increases in the prices of awarded bids related to the implementation of the proposed interim solutions. 

[1] Draft Final Proposal at 21.

4. Please provide any additional feedback:

The CAISO’s proposals to remove the DEB cap and to allow storage resources to bid above the soft bid cap risk adverse market interactions with the potential dispatch of Strategic Reliability Reserve (SRR) resources.  These SRR resources include several large long-start once-through-cooling (OTC) gas-fired generation units, as well as 263.5 megawatts (MWs) of fast-start SRR resources.[1]

With respect to long-start SRR resources, the prospect of bids from RA resources as high as $2,000/MWh may encourage the CAISO to  commit long-start SRR resources more often, and/or to delay executing Exceptional Dispatch orders to end long-start SRR resource operations.[2]  Such outcomes would unnecessarily increase the dispatch of the OTC units, with local criteria pollutant emissions, including in disadvantaged communities. 

With respect to fast-start SRR resources, the CAISO’s emergency operations procedure state that these resources “may submit bids for all hours in the real-time market for the next trade date, limit[ing] availability of the resources using an outage card with the Environmental Restrictions nature of work category” – i.e., not the DAM.  To the extent that day-ahead bids from resource adequacy (RA) resources as high as $2,000/MWh result in an Energy Emergency Alert (EEA) Watch, the fast-start SRR resources’ bids would be made available to the market.[3]  The participation of fast-start SRR resources in the CAISO’s RTM may mitigate the high day-ahead prices.  However, because the fast-start SRR resource participation is triggered by the EEA Watch, high day-ahead prices are not necessary to achieve this benefit.  Instead, the high day-ahead prices create divergence with real-time prices, sending inefficient signals associated with the lack of fast-start SRR capacity.  Moreover, if RA resources continue to submit high energy bids in the RTM, then the availability of fast-start SRR resources in RTM, at likely lower bids, would result in SRR resource dispatch before RA resources with high bids.  Such an outcome would be antithetical to the purpose of the SRR, which is to augment rather than supplant RA fleet dispatch,[4] and would increase the negative attributes of SRR dispatch, such as greenhouse gas and local criteria pollutant emissions.

[1] Department of Water Resources, Progress Report: Electricity Supply Reliability Reserve Fund, December 2023 at 8 and 11.  Available at: https://water.ca.gov/-/media/DWR-Website/Web-Pages/Programs/Electricity-Supply-and-Strategic-Reserve-Office/202312-ESRRFJLBC-Progress-ReportFINAL.pdf

[2] CAISO, Operating Procedure 4420: System Emergency, Version 15.6, at 6 and 19.  Available at: https://www.caiso.com/Documents/4420.pdf

[3] CAISO, Operating Procedure 4420: System Emergency, Version 15.6, at 6.  Available at https://www.caiso.com/Documents/4420.pdf.

[4] California Department of Water Resources, Progress Report: Electricity Supply Reliability Reserve Fund, December 2023 at 1-2.  Available at: https://water.ca.gov/-/media/DWR-Website/Web-Pages/Programs/Electricity-Supply-and-Strategic-Reserve-Office/202312-ESRRFJLBC-Progress-ReportFINAL.pdf.

1. Please provide your organization’s feedback on the ISO’s proposal to remove the $1,000/MWh cap on Default Energy Bids (DEB):

CESA supports removing the $1,000/MWh cap on DEBs.  Capping DEBs when calculated costs exceed $1,000 is inconsistent with FERC Order No. 831. 

2. Please provide your organization’s feedback on the ISO’s proposal to modify the bid cap for energy storage resources to provide bidding flexibility using a proxy opportunity cost value:

Support with caveat.  The interim solution to allow storage resources to bid up to a proxy opportunity cost (highest 4^th highest maximum import bid price or cost verified bid) enables storage resources to be positioned in the hourly bid stack to avoid inefficient discharge earlier in the day.  However, the storage DEBs will continue to be suppressed in the real-time market because short run marginal costs from real-time intraday opportunity costs are not included. 

3. Please provide your organization’s feedback on the ISO’s monitoring and evaluation of the new bidding flexibility provided by the two proposals above. Are there elements and/or thresholds that you feel should be examined in particular?

No comment. 

4. Please provide any additional feedback:

CAISO should address including intraday opportunity costs in storage resources DEBs in the real-time market in the upcoming Scarcity Pricing initiative.  CAISO must ensure that an operating reserve demand curve and the FERC Order No. 831 implementation of intraday opportunity costs are complementary in the real-time market during high priced conditions. This is less of a concern during routine price conditions because DEBs and bid caps are not linked, unlike during high price conditions when this is more of a concern because they are linked.

The real-time market does not have a method to calculate intraday opportunity costs prior to the real-time market.  Since the real-time market horizon is limited to 175 to 105 minutes there currently is not the ability to calculate the intraday opportunity cost.  CAISO should consider approaches, such as the approach suggested by CESA in prior comments, to estimate the intraday opportunity cost to include in the reasonableness threshold for storage resources.  This would allow the automated reference level change request process to enable storage resources to request changes to their DEB and bid cap similar to other resources.  

Currently, the CAISO is able to calculate an intraday opportunity cost in the day-ahead market. The day-ahead market DEBs use the 4^th highest unmitigated price from the market power mitigation run to set the opportunity cost component.  Since the day-ahead market power mitigation run covers the full 24-hour horizon the opportunity cost can be set before the start of the integrated forward market run. 

The changes to the storage DEB in the real-time market can be implemented independently of the scarcity pricing design and should be implemented expeditiously.

1. Please provide your organization’s feedback on the ISO’s proposal to remove the $1,000/MWh cap on Default Energy Bids (DEB):

After fully evaluating the CAISO’s Draft Final Proposal, PG&E does not support expediting any price formation enhancements for the summer of 2024.  PG&E appreciates the CAISO collaborating with stakeholders and the importance of this initiative. Updates to price cap rules have potential to significantly impact customer costs, and potential changes warrant additional stakeholder evaluation and market testing prior to implementation.  PG&E requests the CAISO continue to work with stakeholders to work through market design details and target implementation of this initiative for the summer of 2025.  In the interim, PG&E supports the CAISO’s utilization all existing tools necessary to support summer reliability.

PG&E agrees that current DEB calculations, as approved by FERC, can be considered “cost verified” bids. This could require CAISO to enable bidding of energy-limited hydro and SOC-constrained NGRs up to their calculated DEBs.  However, PG&E suggests that allowing DEBs to go above $1000/MWh requires additional stakeholder discussion due to emerging concerns regarding the underlying inputs to the DEB calculations. These concerns should be addressed concurrently with any corresponding bid cap policy changes.  PG&E recommends that the first part of CAISO’s proposal should be presented to FERC for consideration without requiring expedited resolution for summer 2024.

2. Please provide your organization’s feedback on the ISO’s proposal to modify the bid cap for energy storage resources to provide bidding flexibility using a proxy opportunity cost value:

PG&E agrees that intra-day opportunity costs are likely valid for both energy-limited hydro and SOC-constrained NGRs during certain market conditions.  However, PG&E expresses concerns about defining a proxy for intra-day opportunity costs that does not recognize the possibility that such costs may vary by hour.  There are risks associated with expediting software implementation, which could result in unforeseen consequences such as extended price inflation, thus increasing costs for loads across more hours of the day than anticipated.  PG&E believes the concept of intra-day opportunity costs should be systematically developed and tested more by CAISO through a stakeholder process with the aim of implementing changes by summer 2025. 

3. Please provide your organization’s feedback on the ISO’s monitoring and evaluation of the new bidding flexibility provided by the two proposals above. Are there elements and/or thresholds that you feel should be examined in particular?

PG&E requests the CAISO provide stakeholders with a well-defined monitoring and evaluation plan, detailing how the finalized proposal will be assessed during stressed system conditions. The plan should include clear examples of how various outcomes will be assessed in terms of both economics and reliability perspectives.  Given the potential significant impacts on both reliability and costs during stressed grid conditions, PG&E requests additional time for a stakeholder process to develop/review monitoring and evaluation details.

4. Please provide any additional feedback:

PG&E appreciates the clarity of CAISO’s presentations, white papers, and proposal drafts around this issue.  PG&E believes it is very important that these, along with the whole range of stakeholder feedback, serve as the foundation for an initiative with planned implementation in summer 2025.  In interim, PG&E fully supports the CAISO’s use of all existing tools that enhance reliability.  

1. Please provide your organization’s feedback on the ISO’s proposal to remove the $1,000/MWh cap on Default Energy Bids (DEB):

PacifiCorp supports the CAISO’s proposal to revise the cap on DEBs. PacifiCorp believes this is the right interim solution for the following reasons: 

• There is low regulatory risk because it is reasonable to consider DEBs as being cost-verified.  

• The gas floor and short-term components of the hydro DEBs likely rise high enough to allow hydro resources to bid themselves to an appropriate place in the bid stack to preserve reservoir levels during midday hours.  

• There is no risk of bids above the soft offer cap being lowered below the soft offer cap due to market power mitigation when resource costs as calculated by DEBs are greater than the soft offer cap. 

• The approach is resource-agnostic for resources with DEBs.  

2. Please provide your organization’s feedback on the ISO’s proposal to modify the bid cap for energy storage resources to provide bidding flexibility using a proxy opportunity cost value:

PacifiCorp believes the CAISO’s proposal to allow storage resources to bid to the higher of the fourth highest MIBP or highest cost-verified bid is a reasonable interim solution. Based on the CAISO’s analysis showing a comparison of storage LMPs and the hourly MIBP, the proposal will likely allow storage resources to bid so that they are at an appropriate place in the bid stack to preserve state of charge during midday hours. In PacifiCorp’s opinion, this will lead to more efficient dispatch of storage resources, which in turn will lead to more efficient dispatch of all resources in the WEIM. 

3. Please provide your organization’s feedback on the ISO’s monitoring and evaluation of the new bidding flexibility provided by the two proposals above. Are there elements and/or thresholds that you feel should be examined in particular?

PacifiCorp does not have any specific elements or thresholds that the CAISO should evaluate. PacifiCorp does request the CAISO provide comprehensive analysis, after the summer, on resource dispatches and prices on any days when the hard offer cap was triggered. 

4. Please provide any additional feedback:

PacifiCorp requests that the CAISO begin publishing the hourly MIBP and highest cost-verified bid over $1,000/MWh so there is more transparency on why the hard offer cap is triggered. 

1. Please provide your organization’s feedback on the ISO’s proposal to remove the $1,000/MWh cap on Default Energy Bids (DEB):

Portland General Electric (“PGE”) is supportive of the ISO’s proposal to remove the $1,000/MWh cap on DEBs. This proposal would provide more accurate price reflection by allowing hydro generators to submit bids that reflect the full value of their generation. Further, bids would be able to correctly reflect real-time conditions and the opportunity costs when market prices are high due to scarcity or peak demand. In addition, this proposal would improve capacity management such that hydro generators would have more flexibility in managing intra-day hydro capacity limits. This could potentially reduce the need for artificial outages and allow for more accurate capacity offered to the market and for the Resource Sufficiency test. Lastly, this proposal would provide market efficiency since it would have a more accurate reflection of hydro's value which would ensure the right resources are dispatched to meet demand at the most competitive prices.

2. Please provide your organization’s feedback on the ISO’s proposal to modify the bid cap for energy storage resources to provide bidding flexibility using a proxy opportunity cost value:

PGE has no comments on this topic at this time.

3. Please provide your organization’s feedback on the ISO’s monitoring and evaluation of the new bidding flexibility provided by the two proposals above. Are there elements and/or thresholds that you feel should be examined in particular?

PGE has no comments on this topic at this time.

4. Please provide any additional feedback:

PGE appreciates the ISO’s engagement with stakeholders and PGE on this topic and willingness to work through the issue regarding hydro resources and water management. Although, PGE sees this as an interim solution, we are supportive of this solution for Summer 2024 and encourage the ISO to continue to collaborate with stakeholders for a more accurate solution that may require technical support going forward.

1. Please provide your organization’s feedback on the ISO’s proposal to remove the $1,000/MWh cap on Default Energy Bids (DEB):

 While this is not the ideal long-term solution from PGP’s perspective, we support this as an interim solution that can be built upon in future design conversations. Removal of the bid cap and the usage of documented and agreed upon DEB calculations will enable hydro resources to better reflect resource and locality-specific costs in their offers and improve the ability to manage resources throughout the operating day in RT. This interim design should also meet or partially meet the design objective of enabling resources to better retain their position in the supply stack between DA and RT.

2. Please provide your organization’s feedback on the ISO’s proposal to modify the bid cap for energy storage resources to provide bidding flexibility using a proxy opportunity cost value:

 PGP understands the need to balance current design objectives with the availability of existing tools and the feasibility of implementation, particularly if this is going to be implemented quickly as an interim solution. We support the direction of the draft final proposal as a foundation that can enable further updates to hydro or storage DEBs calculations, the MIBP calculations, and enhancements to current systems such as the RLCR process.

3. Please provide your organization’s feedback on the ISO’s monitoring and evaluation of the new bidding flexibility provided by the two proposals above. Are there elements and/or thresholds that you feel should be examined in particular?

 PGP is interested in the continuation of monitoring of the bilateral indexes, MIBP, MEC, and DEB relationships to inform later dialogue. Any enhanced granularity such as calculations by region would help to facilitate future design discussions. 

4. Please provide any additional feedback:

PGP is appreciative of the flexibility shown in this working group process and the CAISO’s agility and responsiveness to an urgent issue raised by multiple stakeholders and participant groups. We appreciate the CAISO, MSC, and stakeholder efforts within this topic to take a step back and look at the varying participation frameworks under the current WEIM and CAISO markets, and PGP encourages continued diligence in this area, from a design perspective and also from a market analysis perspective.  We look forward to continuing to engage in this working group and the broader topics encompassed by the Price Formation Enhancements initiative, including continued exploration of a more durable long-term solution to this issue.

1. Please provide your organization’s feedback on the ISO’s proposal to remove the $1,000/MWh cap on Default Energy Bids (DEB):

REV Renewables (REV) supports removing the $1,000/MWh cap on DEBs. While REV understands the limitations in allowing this solution for storage resources for summer 2024, REV encourages CAISO to continue working on a proposal to revise the DEBs for energy storage resources when calculated costs exceed $1,000/MWh. 

2. Please provide your organization’s feedback on the ISO’s proposal to modify the bid cap for energy storage resources to provide bidding flexibility using a proxy opportunity cost value:

REV supports CAISO’s proposal to modify the bid cap for energy storage resources to provide bidding flexibility using a proxy opportunity cost value as an interim solution. REV agrees this proposal can help storage resources better reflect their intra-day opportunity costs and be better positioned in the resource stack to avoid premature dispatch during stressed grid conditions.

3. Please provide your organization’s feedback on the ISO’s monitoring and evaluation of the new bidding flexibility provided by the two proposals above. Are there elements and/or thresholds that you feel should be examined in particular?

REV has no comment at this time. 

4. Please provide any additional feedback:

REV recommends that CAISO continue discussions for a longer-term solution to this issue so that a more durable and comprehensive solution can be in place for summer 2025. In this longer-term process, REV also recommends consideration of different storage durations in calculating the DEB. In particular, not all batteries are 4 hour duration, some are 1 hour and some are (or will soon be) more than 4 hour. For these different duration resources, the DEB formula should accommodate the specific resources’ intra-day opportunity costs.

1. Please provide your organization’s feedback on the ISO’s proposal to remove the $1,000/MWh cap on Default Energy Bids (DEB):

The Salt River Project Agricultural Improvement and Power District (SRP) appreciates the opportunity to submit comments on the draft final proposal on rules for bidding above the soft offer cap. SRP agrees removing default energy bids (DEB) cap is a proper interim solution.

2. Please provide your organization’s feedback on the ISO’s proposal to modify the bid cap for energy storage resources to provide bidding flexibility using a proxy opportunity cost value:

SRP agrees that using a proxy opportunity cost value is a proper interim solution.

3. Please provide your organization’s feedback on the ISO’s monitoring and evaluation of the new bidding flexibility provided by the two proposals above. Are there elements and/or thresholds that you feel should be examined in particular?

SRP agrees using the monitoring and evaluation method proposed is a proper interim solution.

4. Please provide any additional feedback:

 No additional feedback at this time.

1. Please provide your organization’s feedback on the ISO’s proposal to remove the $1,000/MWh cap on Default Energy Bids (DEB):

While SDG&E appreciates CAISO’s efforts to address this issue, due to the accelerated timeline of this initiative SDG&E does not believe that parties have had enough time to fully vet the impacts of this proposal and therefore does not support proceeding with implementation of this change in summer 2024. 

As stated in the Draft Final Proposal, the goal of this initiative was to support energy limited resources’ ability to hold their positions in the supply stack and maintain their day-ahead schedules in real-time during higher-priced, and often more challenging, operating periods. In contrast, CAISO’s proposal would revise the cap on all DEBs to $2,000/MWh in both the day-ahead and real-time markets, without re-evaluating the DEB calculations to better capture opportunity costs (which was out-of-scope for an interim summer 2024 solution). However, as CAISO and stakeholders have noted, while this solution might narrow the price gap, it does not actually address the concerns with premature dispatch of these resources. Further, we do not think it is necessary or wise to uncap the DEB in the day-ahead market without deeper analysis on the pricing impacts of this change.  

2. Please provide your organization’s feedback on the ISO’s proposal to modify the bid cap for energy storage resources to provide bidding flexibility using a proxy opportunity cost value:

SDG&E believes additional time is needed to carefully consider the policy and the tradeoffs for this proposed market design. It has become clear that there are outstanding concerns with using the fourth-highest Maximum Import Bid Price (MIBP) as a proxy for the storage resource’s verifiable opportunity costs as an interim solution. SDG&E is not confident that using a static value like the fourth-highest MIBP would not overstate the intra-day opportunity cost for these resources. The analysis presented in the Draft Final Proposal shows how, in certain hours and under certain conditions, the real-time storage prices do not track well with the real-time MIBP. This approach risks distorting the real-time market and warrants additional discussion. 

3. Please provide your organization’s feedback on the ISO’s monitoring and evaluation of the new bidding flexibility provided by the two proposals above. Are there elements and/or thresholds that you feel should be examined in particular?

No comment.

4. Please provide any additional feedback:

The inability of storage to bid above the soft offer cap in stressed system conditions is an important issue and SDG&E understands the desire for urgency in this initiative. However, implementing a solution that is not fully vetted and does result in adverse market consequences could be an impediment to reaching a different or better solution in the future.  

Even if the proposed solutions are technologically feasible for a late-summer 2024 implementation, at this point SDG&E does not believe they have been sufficiently vetted with stakeholders to guarantee they will accomplish the objectives of this initiative. Moreover, if there are significant unintended consequences from implementation of this proposal, it is unclear how CAISO might rapidly mitigate those undesirable conditions, and customers could end up paying higher prices that do not reflect opportunity cost. Parties need more time to thoroughly evaluate the proposals and analyze their impacts so that the adopted policy will meet the goals of the initiative without adding unreasonable risks.  

1. Please provide your organization’s feedback on the ISO’s proposal to remove the $1,000/MWh cap on Default Energy Bids (DEB):

Seattle City Light (City Light) supports lifting the $1000/MWh cap on DEBs. Doing so as proposed in the draft final proposal will allow hydro resources the ability to better reflect intra-day opportunity costs in tight system conditions. Without a measure to address this current limitation, City Light would likely have to pull its resources from the market during these system conditions in order to ensure reliability for our BAA and to prevent operational issues in our cascading hydro system. City Light acknowledges the draft final proposal is the most viable option implementable by August 1 and that this issue will continued to be assessed to determine a the potential for durable long-term solution.

2. Please provide your organization’s feedback on the ISO’s proposal to modify the bid cap for energy storage resources to provide bidding flexibility using a proxy opportunity cost value:

City Light is supportive of the proposal to modify the bid cap for energy storage resources.

3. Please provide your organization’s feedback on the ISO’s monitoring and evaluation of the new bidding flexibility provided by the two proposals above. Are there elements and/or thresholds that you feel should be examined in particular?

City Light appreciates the monitoring and evaluation measures that the ISO is proposing and at this time does not have additional elements or thresholds that it feels should be examined.

4. Please provide any additional feedback:

City Light would like to thank CAISO staff’s responsiveness to this issue and compliment how they have conducted this stakeholder process. The work on the soft offer bid cap is a great example of CAISO utilizing the stakeholder process to efficiently address an important issue and we are greatly appreciative of the considerable effort in the past few months. We are also appreciative of stakeholder consideration of the impact the bid cap can have on BAAs with storage resources that are participating in the WEIM.  

As we detailed in our comments in February, this is a very important issue that, left unaddressed, can result in operational and reliability challenges. This near-term solution will help City Light to ensure reliable operations for our BAA and to continue to offer our resources to the market during tight conditions.

1. Please provide your organization’s feedback on the ISO’s proposal to remove the $1,000/MWh cap on Default Energy Bids (DEB):

As the Six Cities understand the proposal to remove the $1,000/MWh cap on Default Energy Bids, it would not apply to storage resources nor address the concern with inefficient dispatch of storage resources.  That being the case, it is unclear to the Six Cities why expedited removal of the cap on DEBs is necessary.  It is unclear to the Six Cities how costs to support a DEB greater than $1,000/MWh will be established and evaluated, and the CAISO has not provided an analysis of estimated price impacts likely to result from this proposed change.  Absent demonstration of a compelling need to implement this change quickly, the Six Cities do not support adoption of this proposal based on the extremely accelerated stakeholder process that has occurred to date.  The Six Cities do not oppose further consideration of this aspect of the Draft Final Proposal, including more extensive analysis and explanation of anticipated benefits as well as risks of unintended consequences.  Additionally, if this proposal is needed to address the concerns raised by operators of hydroelectric resources, then the Six Cities would not oppose consideration of narrowing this proposal to be more closely focused on this subset of the resource fleet. 

2. Please provide your organization’s feedback on the ISO’s proposal to modify the bid cap for energy storage resources to provide bidding flexibility using a proxy opportunity cost value:

Subject to consideration of points that may be raised in further stakeholder discussions or comments, the Six Cities at this time do not oppose implementation of the CAISO’s proposal to allow bidding flexibility for energy storage resources, on an interim basis and in the Real-Time Market only, using a proxy opportunity cost value.  The Six Cities’ position with respect to implementation of the CAISO’s proposal in the Real-Time Market by the 2024 summer period is based upon the potential for inefficient dispatch of storage resources during periods when the bid cap for other types of resources may exceed $1,000/MWh and related adverse effects on reliability.

The Six Cities strongly oppose application of the CAISO’s proposal in the Day-Ahead Market until there has been further demonstration of the need for such bidding flexibility in the Day-Ahead Market, further evaluation of the appropriateness of the proposed approach to proxy opportunity cost values, and further exploration of the potential for adverse consequences.  The concerns that gave rise to this initiative have been observed in the Real-Time Market, and it has not been established that there is any need to implement bidding flexibility for energy resources in the Day-Ahead Market.  The CAISO’s suggestion that application of the proposal in the Day-Ahead Market is necessary to promote consistency and symmetry between the Day-Ahead and Real-Time Markets is unpersuasive in view of the major differences that currently exist between the Day-Ahead and Real-Time Markets, including the geographic footprints, numbers of participants, and range of participating resources. 

This initiative has occurred at an unusually accelerated pace due to concerns with potential distortions and adverse effects on reliability in the Real-Time Market of differences in bid caps applicable to storage resources as compared with other types of resources as the summer period approaches.  An urgent need to address concerns in the Real-Time Market does not justify expedited implementation of changes in bidding rules in the Day-Ahead Market, where unintended consequences may impact far greater volumes of energy transactions.  In their previous comments in this initiative, the Six Cities urged the CAISO to craft a narrowly-tailored solution focused on the limited subset of resources with a short-term opportunity cost and to consider potentially broader revisions through a longer term initiative.  Other stakeholders similarly cautioned against accelerated adoption of rule changes that would have broad impacts without adequate analysis and explanation.  The Draft Final Proposal contravenes those stakeholder concerns and goes entirely in the opposite direction.

3. Please provide your organization’s feedback on the ISO’s monitoring and evaluation of the new bidding flexibility provided by the two proposals above. Are there elements and/or thresholds that you feel should be examined in particular?

The CPUC’s Energy Division Staff has raised questions regarding the appropriateness of the proposed approach for determining proxy opportunity costs for storage resources based on liquidity of hub index prices and availability of transmission between market hubs during stressed system conditions.  The CAISO’s evaluation and monitoring of the bidding rule changes should include additional analysis of the bases for proxy opportunity costs.

In addition, the Department of Market Monitoring’s April 30, 2024 comments question the appropriateness of allowing resources to submit bids greater than $1,000/MWh for an entire day when elevated opportunity costs may exist only for subsets of hours within the day.  The Six Cities strongly recommend that the CAISO’s monitoring and evaluation processes include consideration of limiting flexibility to submit bids greater than $1,000/MWh to hours when elevated opportunity costs occur or reasonably can be expected to occur, rather than applying for an entire day.

4. Please provide any additional feedback:

The Six Cities are continuing to evaluate the additional information contained in the May 7th revisions to the Draft Final Proposal, but do not have any further comments at this time.

1. Please provide your organization’s feedback on the ISO’s proposal to remove the $1,000/MWh cap on Default Energy Bids (DEB):

SCE is encouraged that the CAISO is addressing this key issue. However, SCE is concerned about the highly accelerated timeline within which the CAISO expects to address this issue. While providing for this summer’s needs is key, SCE cautions that rushed policy may cause more problems than the ones it attempts to address.

SCE echoes BAMx’s concerns that a proposal is not necessary for the DA. In the DA, all costs, and thereby opportunities, are visible to the CAISO. There are no lost opportunities, since with the entire day’s visibility, the CAISO will commit resources optimally. Thus, there is no need to introduce any proposal for the DA.

2. Please provide your organization’s feedback on the ISO’s proposal to modify the bid cap for energy storage resources to provide bidding flexibility using a proxy opportunity cost value:

Given that there is not a need for a DA proposal, SCE is primarily focused on the RT. Here, SCE is concerned with the CAISO’s proposal for the proxy opportunity cost calculation. The CAISO’s analysis of 9/6/22, 8/16/23, 1/14/24, shows that the 4^th highest MIBP is static and shows substantial offset from the RTPD LMPs. Thus, using MIBP as a proxy for opportunity cost calculation appears to be the incorrect method for defining energy storage bid caps.

Instead, only the highest cost verified bid is a reasonable candidate for a proxy cost variable for RT bid cap. The highest cost verified bid should be determined hourly, with the bid cap being thus updated hourly.  

3. Please provide your organization’s feedback on the ISO’s monitoring and evaluation of the new bidding flexibility provided by the two proposals above. Are there elements and/or thresholds that you feel should be examined in particular?

Please see above.

4. Please provide any additional feedback:

1. Please provide your organization’s feedback on the ISO’s proposal to remove the $1,000/MWh cap on Default Energy Bids (DEB):

Tacoma Power would like to thank CAISO for its proposal to remove the $1,000/MWh cap on Default Energy Bids (DEB), ideally in time for Summer 2024.  We believe that this is a meaningful change that will help us better manage our hydroelectric resource participation in the WEIM during scarcity conditions.    

2. Please provide your organization’s feedback on the ISO’s proposal to modify the bid cap for energy storage resources to provide bidding flexibility using a proxy opportunity cost value:

Tacoma Power supports enhancements to bidding flexibility for energy storage resources.

In response to stakeholder comments during the recent workshops on this topic, Tacoma Power observes that the circumstances surrounding hydro resources can differ from battery storage resources in that undesired dispatch of hydro resources can occur even during net-peak hours, and it can potentially have season lasting detrimental impacts on resource availability if not adequately managed. We believe CAISO’s proposal appropriately recognizes our concern.

3. Please provide your organization’s feedback on the ISO’s monitoring and evaluation of the new bidding flexibility provided by the two proposals above. Are there elements and/or thresholds that you feel should be examined in particular?

While Tacoma Power believes CAISO’s proposal is helpful, we think that establishing a complete solution that allows hydro resource operators to fully reflect their opportunity costs in their WEIM bids may require additional work. As a result, we support ongoing monitoring and evaluation. 

4. Please provide any additional feedback:

1. Please provide your organization’s feedback on the ISO’s proposal to remove the $1,000/MWh cap on Default Energy Bids (DEB):

Terra-Gen, LLC. (Terra-Gen) thanks CAISO for the opportunity to comment on its draft final proposal. Terra-Gen supports CAISO’s proposal. Terra-Gen expresses a great appreciation for CAISO’s efforts to address the current gaps in storage bidding rules and resolving a significant concern for storage resource owners in advance of Summer 2024.

Terra-Gen is supportive of the intent of this element of the CAISO’s proposal to uncap the DEBs, as it would be an improvement over the status quo. However, Terra-Gen recommends that CAISO should also commit to immediately continuing its stakeholder engagement regarding Default Energy Bids (DEB) provisions for storage resources to achieve a more robust and durable storage DEB formulation. Terra-Gen highlights that the current limited real-time market horizon will continue to result in artificially low storage DEBs in the real-time market because real-time intraday opportunity costs cannot be determined in advance. A broader discussion on how to further improve storage DEBs in the future is warranted.

2. Please provide your organization’s feedback on the ISO’s proposal to modify the bid cap for energy storage resources to provide bidding flexibility using a proxy opportunity cost value:

Terra-Gen generally supports this aspect of the CAISO’s proposal as an interim solution. Terra-Gen agrees that the proposal to cap storage bids utilizing a proxy opportunity cost based on the higher of (1) $1,000/MWh, (2) 4^th highest MIBP across the day, and (3) cost-verified offer in that hour, will enable storage resources to be better positioned in the hourly bid stack by attempting to include a proxy for their intra-day opportunity costs, with the intent of avoiding inefficient discharge earlier in the day. Terra-Gen stresses that this interim proposal will not completely resolve all concerns for storage resource owners, as mitigation of these resources in real-time will still present challenges by continuing to pose a risk of improperly dispatching storage resources prematurely if mitigated to a DEB level that does not accurately reflect opportunity costs in the real-time market.

Terra-Gen also requests that CAISO commit to publishing additional price cap related information for transparency purposes. This information is important to enable storage resource schedulers to have all information necessary for informing acceptable levels of bids for submission. Terra-Gen understands that real-time market bid caps are posted, as well as the hourly shaping factors used to determine the MIBP, however, the applicable bid cap may not be transparent to storage resource schedulers without additional information being provided. Terra-Gen believes that CAISO should also consider specifically posting the applicable bid cap effective for storage resources in both the day-ahead and real-time markets, or at least posting the specific hourly Maximum Import Bid Prices.

3. Please provide your organization’s feedback on the ISO’s monitoring and evaluation of the new bidding flexibility provided by the two proposals above. Are there elements and/or thresholds that you feel should be examined in particular?

No comment.

4. Please provide any additional feedback:

Terra-Gen urges CAISO to move forward with implementation as quickly as possible, with the assumption that regulatory approvals will be granted in a timely manner, to avoid any further implementation delays of its chosen interim solution proposal.

Terra-Gen also feels strongly that CAISO should believe in its proposed modifications as an improvement over the status quo and not allow unfounded concerns regarding unforeseen outcomes to undermine its wherewithal towards pursue these vital storage bidding improvements. Terra-Gen strongly agrees with CAISO’s proposal that will allow storage resources to have a better ability to protect their position in the resource bid stack. CAISO’s market efficiency and reliability outcomes will improve under the proposed enhancements.

Terra-Gen recommends that CAISO should commit to continue collaborating with stakeholders on a long-term durable solution targeting implementation before Summer 2025. CAISO has now provided a great deal of education and analysis on these issues through its process to date. Therefore, CAISO should continue its efforts to wholistically review and update related market participation provisions, including review and revisions to its storage and hydro bidding caps, storage market power mitigation, and overall scarcity pricing rules and processes. These discussions should continue through ongoing stakeholder initiative efforts actively throughout 2024. Terra-Gen believes it is vital that CAISO maintain its momentum and press onward towards a long-term solution to avoid delaying the discussions and implementation beyond Spring 2025.

1. Please provide your organization’s feedback on the ISO’s proposal to remove the $1,000/MWh cap on Default Energy Bids (DEB):

TEA supports the CAISO’s proposal to remove the $1,000/MWh cap on DEBs as doing so will allow more participating resources to reflect their actual/expected costs in the market during tight system conditions and higher-price periods, subject to DEB calculation limitations (frequency, accuracy, etc.).

2. Please provide your organization’s feedback on the ISO’s proposal to modify the bid cap for energy storage resources to provide bidding flexibility using a proxy opportunity cost value:

TEA supports the CAISO’s proposal to set the bid cap for energy storage resources to the higher of $1,000/MWh, the 4^th highest calculated MIBP across the day, and the highest cost-verified offer. While TEA is concerned that the MIBP may at times understate the in-market vs. bilateral-market and forward opportunity costs faced by hydroelectric resources in the Pacific Northwest region of the WEIM footprint, TEA agrees with WPTF and others that using the 4^th highest MIBP is the most appropriate approach for this interim policy and strikes a reasonable balance among available options for near-term implementation.

3. Please provide your organization’s feedback on the ISO’s monitoring and evaluation of the new bidding flexibility provided by the two proposals above. Are there elements and/or thresholds that you feel should be examined in particular?

TEA has confidence that CAISO and CAISO DMM staff will provide appropriate after-the-fact reporting regarding the performance of the new policy once implemented and notes its appreciation for the reporting and market data transparency enhancements that each group has made in recent years.

4. Please provide any additional feedback:

TEA commends the targeted work that CAISO staff has put into developing a feasible approach to addressing the identified bidding flexibility issues on an accelerated timeline. TEA has greatly appreciated CAISO staff’s engagement with stakeholders and its proactive assessment of available solutions from an implementation-planning perspective. As noted by the MSC, it would have been preferable to get an earlier start on the work, which may have opened alternative solutions or the opportunity to implement solutions prior to the actual start of the Summer 2024 operating season; however, acknowledging that does not detract from the excellent work that has been done in the time since the problem statement crystalized among stakeholders and staff, it simply points toward continuing to look for opportunities to enhance the pathways for market participants to surface issues like this that are market-critical and worth committing policy and implementation resources to as quickly as possible.

With that in mind, TEA supports WPTF’s and others’ request that the CAISO continue working on these issues to develop a long-term, durable solution that addresses some of the shortcomings of the interim solution pertaining to the timeliness of reference level / DEB updates during volatile market periods as soon as possible – preferably prior to Winter 2024/25, or Summer 2025 at the latest.

__________________________

About TEA: The Energy Authority is a public power-owned, nonprofit corporation that as a national energy marketing company, evaluates challenges, manages risks, and executes solutions to help its clients maximize the value of their assets and respond competitively in the changing energy markets. TEA partners with over 60 public power clients, managing approximately 30,000 MW of peak load and 24,000 MW of generation in North America’s organized and bilateral wholesale energy markets. TEA’s Western Interconnect partners are directly engaged in and impacted by the CAISO’s existing and evolving day-ahead and real-time energy markets.

1. Please provide your organization’s feedback on the ISO’s proposal to remove the $1,000/MWh cap on Default Energy Bids (DEB):

WPTF generally supports this element of the CAISO’s proposal. We agree that to the extent current processes in place have limited the ability for resources to reflect costs in the market, this change is an improvement over the status quo.

2. Please provide your organization’s feedback on the ISO’s proposal to modify the bid cap for energy storage resources to provide bidding flexibility using a proxy opportunity cost value:

WPTF generally supports the CAISO’s proposal as an interim solution. We do ask that the CAISO confirm that the bid cap will be based on the higher of (1) $1,000/MWh, (2) 4^th highest MIBP across the day, and (3) cost-verified offer in that hour (or clarify if it’s the highest cost verified offer across the day). We do not agree with stakeholder’s concerns that using the 4^th highest MIBP is not just and reasonable. FERC has already opined on that topic when it approved the CAISO’s existing market rules related to how the MIBP is currently used to set bid caps. Rather, and based on the data provided by the CAISO, we believe the 4^th highest MIBP provides a more accurate and reasonable estimate of intra-day opportunity costs that should be reflected in market offers.

3. Please provide your organization’s feedback on the ISO’s monitoring and evaluation of the new bidding flexibility provided by the two proposals above. Are there elements and/or thresholds that you feel should be examined in particular?

No comment at this time.

4. Please provide any additional feedback:

WPTF has the following additional comments:

• We strongly encourage the CAISO to continue these discussions for the long-term durable solution such that implementation by Summer 2025 is feasible. We recommend this be done in a separate track or entirely new policy process such that we do not risk delaying the discussions if it remains under the Price Formation Enhancements umbrella which already contains several other large policy topics. It would be unfortunate for us to be in a similar situation at this time next year because we opted to pause the conversations.
• We respectfully request that the CAISO commit to publishing additional data for transparency purposes. While we appreciate the real-time market bid caps are posted ($1,000/MWh or $2,000/MWh) and the hourly shaping factors used to determine the MIBP, we ask that the CAISO evaluate if it’s also feasible to post the bid cap effective for storage resources in both the day-ahead and real-time markets; alternatively simply posting the Maximum Import Bid Prices would be an improvement over what is posted today.