Comments on Draft Final Proposal

1. Please submit your organization's comments on the draft final proposal and Mar 21 meeting discussion:

Comments on Subscriber Participating Transmission Owner Market Scheduling Option - Draft Final Proposal

Department of Market Monitoring

April 4, 2025

Summary

The Department of Market Monitoring (DMM) appreciates the opportunity to comment on the Subscriber Participating Transmission Owner (S-PTO) Market Scheduling Option Draft Final Proposal.[1] In the draft final proposal, the ISO responds to stakeholder questions and provides more clarity on non-subscriber usage, the ETC to CRR Option conversion process, and outlines additional actions that may need to be considered in the future after policy implementation.

DMM supports the ISO’s general efforts to refine the S-PTO model as an approach to incentivize new transmission construction, and deliver generation to help satisfy municipal, state, or federal energy policy requirements or directives outside of the scope of the transmission planning process.

The S-PTO model allows for non-subscriber use of transmission developed under this model in exchange for a non-subscriber usage rate (NSUR). DMM understands many stakeholders are concerned with how the NSUR costs associated with the S-PTO model will affect California ratepayers, and whether gaming opportunities exist.

DMM acknowledges the concerns raised by stakeholders, and supports the ISO’s proposal to monitor non-subscriber usage on the SunZia transmission line after it is operational, and determine if a new policy initiative to re-examine the NSUR is necessary. DMM also intends to monitor for potential gaming activity on subscriber intertie scheduling points.

Comments

The NSUR may have implications for the optimization of non-subscriber imports

Some stakeholders have expressed concern that the exclusion of the NSUR from the market optimization when dispatching non-subscriber import bids may cause inefficient dispatch. The NSUR represents an additional transmission cost to load associated with the delivery of a non-subscriber import. If this additional cost of transmission from non-subscriber imports at subscriber intertie scheduling points is paid after the fact and not considered in dispatch decisions, these imports may appear cheaper to the optimization compared to other imports or internal CAISO resources that may have higher energy costs, but for which CAISO load does not incur any additional transmission charges beyond the transmission access charge (TAC). If the cost of the cleared non-subscriber import combined with the NSUR exceeds that of a higher cost resource not subject to NSUR, the total cost to load may be higher than if the NSUR cost were included in the optimization.

DMM understands some stakeholders have suggested including the NSUR in non-subscriber import bids as a solution to this issue.  Including the NSUR in non-subscriber import bids may improve the merit order of supply bids, however this approach would have price formation consequences since the NSUR would then be reflected in LMP.  This may be inefficient from a price formation perspective as this is not a marginal cost of the importing resource.  Further, this approach may also cause load to incur the NSUR twice since it is incorporated into the LMP, in addition to the monthly NSUR payment.

DMM agrees with the ISO that the manner in which any adder is implemented (i.e. by the CAISO or market participants) and the impact it may have on price formation needs to be carefully deliberated before implemented.

DMM intends to monitor for potential gaming at S-PTO interties

DMM has had conversations with stakeholders about concerns with potential gaming scenarios involving wheeling transactions on S-PTO scheduling points to increase NSUR charges. DMM greatly appreciates these concerns, and continues to assess the potential incentives and ability to engage in such behavior. DMM intends to closely monitor wheel transactions at S-PTO scheduling points for any potential gaming activity.

[1]  Subscriber Participating TO Market Scheduling Option Draft Final Proposal, March 14, 2025: https://stakeholdercenter.caiso.com/InitiativeDocuments/DraftFinalProposal-Subscriber-PTO-Market-Scheduling-Option-Mar-13-2025.pdf

2. Please submit any additional feedback:

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 submit your organization's comments on the draft final proposal and Mar 21 meeting discussion:

Energy Division staff of the California Public Utilities Commission (ED staff or staff) develops and administers energy policy and programs to serve the public interest, advises the CPUC, and ensures compliance with CPUC decisions and statutory mandates. Energy Division staff provides objective and expert analyses that promote reliable, safe, and environmentally sound energy services at just and reasonable rates for the people of California.[1] 

ED staff appreciates the opportunity to comment on the CAISO’s Subscriber PTO Scheduling initiative. We address the following new and remaining concerns:

• Annual reporting:  In its draft final proposal, CAISO proposes an annual non-subscriber usage charge (NSUR) reporting requirement in order to promote transparency, stating that,  “all Subscriber Participating TOs with operational transmission lines will submit an annual report of total non-subscriber usage payments received to the CAISO, which will be posted on the CAISO website similar to how for [sic] transmission revenue requirements of Participating TO is currently posted today.”  ED staff appreciates this proposal to address transparency, but recommends more frequent reporting, given that this is a new and entirely untested model, with potentially large cost implications for California ratepayers. In addition, ED staff requests that CAISO provide the quarterly payments to Participating Transmission Owners  information, along with volumetric usage data on whether the NSUR payments are due to imports, exports, or wheels and which direction these flows occur, given the complex nature of the settlements, as seen in the examples shown in Appendix A in the previous iteration of the proposal.
• Clarification on wheeling:  ED staff requests that in the final proposal, CAISO clarify whether high priority and low priority wheels will be allowed on the transmission line from Pinal Central to Palo Verde. ED staff raise this issue because it is our understanding that these both would be new intertie points and while California LSEs may have native load needs/rights at Pete Heinrichs, they would not have those rights at Pinal Central, meaning that it is possible that the capacity at Pinal Central could be viewed as available for high priority wheels and, if so, high priority wheels at Pinal Central could potentially prevent CAISO BAA load from accessing New Mexico wind for reliability purposes during stressed system conditions.  (ED staff understands that this would only be the case if Pattern converts its ETCs to CRRs.) In addition, it would be helpful if CAISO clarified whether low priority wheels would be allowed at Pinal Central and how the penalty parameters for the low priority wheels and load would allow those low priority wheels to be curtailed during stress system conditions, in order to allow CAISO to access the New Mexico wind.
• Clarification on non-subscriber usage:   ED staff requests more definitive clarification on what constitutes non-subscriber usage, given some seemingly conflicting language in the draft final proposal. Notably, in the draft final proposal, CAISO states that it proposes that subscribers register in the Masterfile the “export and import system resources” and that  “if the subscribers don’t utilize these export and import system resources, they will be charged the WAC and be counted as non-subscriber usage.”  However, at another point, CAISO states that if that all “subscriber usage on interconnected generation will be treated as subscriber usage.”  At the same time, CAISO indicates that “Under the CRR option, the subscribers will be free to exchange ETCs for CRRs and schedule using economic bids” and that “Without ETCs, the market awards appear no different than the market awards of non-subscribers that are scheduling imports and exports on the Subscriber Participating TO transmission path” -- thereby making the import and export system registration necessary should the subscriber convert to CRRs.
  • Can the subscriber choose to be treated as interconnected generation or choose to bid in as an intertie resource, at its discretion?
  • What is the difference between using a subscriber interconnected generation versus using import and export system resources?
  • If Pattern has 3,000 MW of subscriber usage at Pete Heinrichs and generates 3,000 MW and 1,000 MW is exported at Pinal Central (with a self-scheduled export), how much counts as subscriber generation and how much counts as non-subscriber usage subject to the NSUR and why?
• Potential costs if additional non-subscriber resources are built at Pete Heinrichs: If additional non-subscriber resources are built at Pete Heinrichs substation and take up the space (on the line to Pinal Central and/or Palo Verde) not used by subscribers, is it possible that non-subscriber usage charges could theoretically reach $196 million?  That is:
  • Available on the line:  3000 MW x 8760 = 26,280,000 MWH
  • Subscriber wind usage by 3,500 MW of  40% capacity factor = 12,264,000 MWH
  • Non-subscriber costs at current WAC = 14,016,000 MWH x $14/MWH  = $196 million

[1] More information about the CPUC Energy Division is available at: https://www.cpuc.ca.gov/about-cpuc/divisions/energy-division

2. Please submit any additional feedback:

Energy Division offers additional comments below on prior versions of the straw proposal and reiterates them here since many of these comments remain relevant to the overall stakeholder initiative.  

1. Please submit your organization's comments on the straw proposal Jan 27 meeting discussion:

Energy Division staff of the California Public Utilities Commission (ED staff or staff) develops and administers energy policy and programs to serve the public interest, advises the CPUC, and ensures compliance with CPUC decisions and statutory mandates. Energy Division staff provides objective and expert analyses that promote reliable, safe, and environmentally sound energy services at just and reasonable rates for the people of California.[1] 

ED staff appreciates the opportunity to comment on the CAISO’s Subscriber PTO Scheduling initiative and CAISO’s responsiveness and consideration for stakeholder concerns, especially concerns about affordability for California customers (ratepayers).  ED staff describes our understanding of the initiative and ask several questions that were not addressed during the meeting.  ED staff also suggests CAISO consider addressing whether the Non-Subscriber Usage Rate is beneficial for California customers, especially given new information that California customers could pay for usage that we do not consume.  ED staff suggests CAISO consider alternative options instead of adopting the Congestion Revenue Rights (CRR) Option at this time due to existing challenges with CRR design.  

Background  on the Initiative

The Federal Energy Regulatory Commission (FERC) approved the CAISO’s Subscriber Participating Transmission Owner (Subscriber PTO) Model on March 12, 2024 (ER23-2917).  This model provides a new form of transmission ownership and operations that are outside of CAISO’s Transmission Planning Process.  The Subscriber PTO will place their facilities under the operational control of CAISO and in exchange the Subscriber will receive scheduling priority and a perfect congestion hedge using Existing Transmission Contracts (ETC) and Contract Reference Numbers (CRN).  The Subscriber PTO does not file a transmission rate at FERC because it will contract with load and generators directly to subscribe and pay the full costs associated with construction and operation of the transmission line. 

Where there is additional capacity available, Non-Subscribers can use the transmission line, and the Subscriber PTO can collect a Non-Subscriber Usage Rate (NSUR).  As proposed by CAISO and approved by FERC, this NSUR will not exceed the current Transmission Access Charge (TAC) for the transmission control area.[2]  CAISO’s High Voltage TAC recently increased by nearly $2.50/MWh in a 6-month timeframe from $11.6304/MWh (effective July 1, 2024) to $13.9929/MWh (effective January 1, 2025).[3] 

SunZia Transmission System, LLC (SunZia) filed an NSUR at FERC in October 2024, proposing “to recover the lower of (1) the applicable Regional Access Charge in effect at the time … and (2) the proposed Non-Subscriber Usage Rate for the segment used to provide service to the non-subscriber.”[4]  If approved, the calculated NSUR would be $24.375 per MWh for the SunZia Transmission segment (Pete Heinrich to Pinal Central), a weighted average hourly rate of $7.572 per MWh for the Arizona segment (Pinal Central to Palo Verde), and a total weighted average NSUR for the transmission system plus Arizona entitlements of $31.946 per MWh.[5]  Further, SunZia proposes increasing the NSUR by one-half of one percent (0.5%) annually.[6]

CAISO started this initiative to address implementation complexities associated with scheduling Subscriber PTO usage including:

1. Subscribers using the Subscriber PTO line cannot bid into the market at the source point of generation.  Instead, they must use a self-schedule import and export bid on the Subscriber PTO line to use the ETC, and then a self-schedule import to enter the CAISO BAA.   
2. Subscribers cannot obtain a “perfect hedge” beyond the point of interconnection with the CAISO BAA absent additional transmission rights.
3. Under the Extended Day Ahead Market (EDAM) that will be operational in 2026, import/export pairs at an internal intertie or transfer point are not allowed. 
4. Subscribers of the Subscriber PTO lines must self-schedule their bids and cannot bid economically, which could be less efficient.  

In this initiative, CAISO proposes using a Congestion Revenue Rights (CRR) exchange option with economic bidding as an alternative to self-scheduling using ETCs.  This would work as follows:

• Subscribers exchange ETCs for CRRs which provides the Subscriber with the benefits of a CRR Option, and none of the liabilities (only positive CRR payments).[7] 
• The CRR will receive a Day Ahead congestion hedge in the Integrated Forward Market (IFM) for the entire transmission path.
• Subscribers economically bid their resources. 
• The generation provider is not required to participate in the Merchant CRR allocation process. 
• This type of CRR Option is not open to all generation providers.  It is currently only allowed for PacifiCorp and TANC. 
• Subscribers pre-register specific Scheduling Coordinator IDs (SCID) and CRN/export-import resource combinations in order to be counted as subscriber usage.  Usage of the Subscriber PTO line without this export-import combination would be considered Non-Subscriber Usage.  

Questions Asked During the Initiative Meeting:

CAISO indicated that it only intends to make changes to how Subscriber PTO lines are scheduled, but does not intend to make any changes to what was already approved at FERC, especially issues relating to the how Subscriber PTOs are compensated for Non-Subscriber usage.  ED staff and other stakeholders were encouraged to put many questions into the comments.  Some of these questions include:

• EDAM Access Charge and NSUR Calculation: CAISO stated that if a line is fully subscribed, then CAISO does not need to evaluate imports and exports to determine if there is Non-Subscriber usage on that line.  CAISO also stated that a new filing was made at FERC to allow Subscriber PTOs to recover the NSUR through the EDAM access charge. 
  • Question: Under the EDAM access charge that CAISO filed at FERC, Non-Subscriber usage is based on historical usage.  If the Subscriber PTO line is 100% subscribed, and we do not know historical usage or future expected Non-Subscriber Usage, how would the NSUR to be recovered through the EDAM access charge be determined?  
• NSUR Payment for Load Not Sinking in California and Bidding Efficiency: CAISO staff explained the method it would use to tell whether load on the Subscriber PTO line would be considered Subscriber or Non-Subscriber usage.  Pacific Gas & Electric (PG&E) staff gave an example where Non-Subscribers imported into the CAISO BAA and then exported to a neighboring BAA.  ED staff and PG&E staff asked whether CAISO ratepayers would be responsible for the NSUR payment even if it did not sink in California.  CAISO indicated that the NSUR for an import would be reimbursed to the Subscriber PTO through the CAISO TAC.  CAISO also stated that California load would pay for what is consumed and that CAISO does not net out import/exports from a particular intertie.
  • Question: The NSUR payment is a new system and different than any other payment.  How could CAISO track Non-Subscriber usage to ensure that California load and CAISO ratepayers do not pay transmission costs for generation that does not sink in California? 
  • Question:  What happens if there are non-subscriber import bids that fill the line from Pinal Central to Palo Verde that are bid into the CAISO system and dispatched, but then exported to another BAA in the WEIM or the EDAM, with no WAC charges. For example, assume 2,000 MW of imports at Pinal Central with a 60% capacity factor and assume that the 2,000 MW of these non-subscriber exports at Palo Verde. Would this result in $79 million of NSUR payments from CAISO customers from the TAC charge (i.e., 2000 MW x 8760 hours x 60% capacity factor x $7.57/MWH NSUR for Pinal Central to Palo Verde)? If not, why not?
  • Question: The NSUR is an ex-poste payment.  The cost of transmission is typically included in a supplier’s bid.  If the NSUR is paid on a monthly basis and is not included in a supplier’s bid, then that seems like it could be inefficient in terms of price formation.  For example, assume that there are two generators – one located internal to the CAISO whose bid/cost is $40/MWH and another located at Pinal Central, with a bid/cost of $39/MWH. Assuming no losses or congestion, CAISO will dispatch the $39/MWH resource, but including the ex poste NSUR or $7.57/MWH  will cost California customers $46.57/MWH, which results in fairly substantial inefficient dispatch. Given that one of the main benefits of the CAISO market is the efficient dispatch of resources across the West, how does this not result inefficient dispatch and higher costs for CAISO customers?   

2. Please submit any additional feedback:

ED staff suggest CAISO use this opportunity to address concerns with the NSUR.  ED staff also suggest CAISO consider alternatives to the CRR Option at this time because the current implementation should work for most Subscribers and other options could address the identified complexities. 

Non-Subscriber Usage Rate (NSUR)

ED staff suggests CAISO use this opportunity to address concerns with the Non-Subscriber Usage Rate.

Potential Windfall Payment Without Basis in Cost of Service: One stakeholder during the January 27, 2025 meeting suggested that the NSUR was a windfall payment because there is no cost of service basis for charging this fee.  ED staff share these concerns and concerns from stakeholders like Southern California Edison (SCE) in their December 4, 2024 comments to CAISO and in a limited protest filed by SCE and PG&E to the NSUR rate filed by SunZia Transmission System, LLC at FERC.[8]   The NSUR is a rate for using the Subscriber PTO line that is separate from the rate used to recover costs of construction, servicing and maintaining the transmission line, and any rate of return.  SCE and PG&E stated that “[t]raditional cost of service calculations would yield a rate of $0, since (as the CAISO has acknowledged),” a Subscriber PTO’s costs “must be fully funded by its own [S]ubscribers, leaving costs to be recovered from Non-Subscribers of $0.”[9]  Further, as SCE described in its December 4, 2024 comments to CAISO, each time a new Subscriber PTO goes online, it will need to file a NSUR with FERC, which results in new litigation at FERC.  ED staff suggest CAISO consider whether the NSUR is reasonable for CAISO customers (ratepayers).  

CAISO BAA Liability for Non-Subscriber Usage that Does Not Sink In California:  California law requires CAISO to “manage the transmission grid and related energy markets in a manner that is consistent with… [r]educing, to the extent possible, overall economic cost to the state's consumers.”[10] In this way, CAISO is responsible for ensuring that market prices for California customers are reasonable.  This initiative is the first time stakeholders have worked through different real-life examples of how the Subscriber PTO model would work.  It is therefore not surprising that we all discover examples that we were unaware of before.  When the FERC approved the Subscriber PTO model, stakeholders were not aware that it could result in CAISO customers paying an NSUR for generation that flows through California and is then exported to serve external load. 

Similarly, CAISO started this initiative to address complexities it encountered as it was implementing the new Subscriber PTO model.  If CAISO finds it reasonable to address these complexities after the model has already been approved by FERC, it would also be reasonable to address the concern about CAISO customers paying the NSUR for load that does not sink in California.  ED staff suggests CAISO consider whether the NSUR is reasonable for CAISO customers (ratepayers).  ED staff suggest that at a minimum, CAISO consider evaluating different ways to identify Non-Subscriber versus Subscriber usage and usage that does not sink in California, so that California customers do not pay for transmission costs for generation that they do not use.   

Congestion Revenue Rights (CRR)/Economic Bidding Option  

CRR Option Could be Considered a Double-Payment:  Congestion revenue may be considered unnecessary because the Subscriber PTO is allowed to charge an NSUR.  ED Staff question whether it is necessary to create a new revenue stream for the Subscriber PTOs in addition to the Subscriber rate and the NSUR. ED staff understand that the NSUR is not a congestion payment. The CRR Option proposed is a more favorable option than traditional CRRs because these CRRs receive the benefits without any risk.[11]  This lack of sharing in the risk could exacerbate issues with the current CRR framework.  

Existing Challenges with CRRs:  ED staff suggest CAISO consider problems identified in the CAISO’s CRR Enhancements initiative including loss to CAISO ratepayers and underfunding of CRRs. 

Potential Alternative to Address Identified Implementation Complexities 

ED staff suggests CAISO modify the EDAM rules to allow import/export bid pairs at an internal intertie or transfer point.

[1] More information about the CPUC Energy Division is available at: https://www.cpuc.ca.gov/about-cpuc/divisions/energy-division

[2] SunZia Transmission System, LLC (SunZia) Transmission Operator (TO) Tariff Filing in FERC Docket ER25-170, Attachment I, Appendix I, “Non-Subscriber Usage Rate” (stating that the NSUR shall not exceed the CAISO Regional Access Charge) available at: https://elibrary.ferc.gov/eLibrary/filelist?accession_number=20241021-5164;  Note that FERC action in Docket ER25-170 is still pending, docket available at: https://elibrary.ferc.gov/eLibrary/docketsheet?docket_number=er25-170&sub_docket=all.

[3] CAISO’s High Voltage Access Charge Rates effective July 2024, available at:  https://www.caiso.com/documents/high-voltage-access-charge-rates-effective-jul-01-2024-revised-oct-08-2024.pdf; and CAISO’s High Voltage Access Charge Rates effective January 2025, available at: https://www.caiso.com/documents/high-voltage-access-charge-rates-effective-jan-01-2025.pdf.

[4] SunZia TO Tariff Filing Transmittal Letter, page 7, and TO Tariff Filing Attachment I, Appendix I, “Non-Subscriber Usage Rate,” both available at: https://elibrary.ferc.gov/eLibrary/filelist?accession_number=20241021-5164.

[5] SunZia TO Tariff Filing in FERC Docket ER25-170, Attachment II, “Calculation of Non-Subscriber Usage Rates Chart,” available at: https://elibrary.ferc.gov/eLibrary/filelist?accession_number=20241021-5164;

[6] SunZia TO Filing in FERC Docket ER25-170, Attachment I, Appendix I, “Non-Subscriber Usage Rates,” available at: https://elibrary.ferc.gov/eLibrary/filelist?accession_number=20241021-5164.

[7] The CAISO’s Congestion Revenue Rights Business Practices Manual on page 3, defines the CRR Option and highlights that there are no CRR charges in the opposite direction of CRR options:

CRR Option – A CRR Option entitles its Holder to a CRR Payment if the Congestion is in the same direction as the CRR Option, but requires no CRR Charge if the Congestion is in the opposite direction of the CRR (See ISO Tariff § 36.2.2). CRR Payments to CRR Holders of CRR Options are based on the per-MWh cost of Congestion, which equals the positive amounts of Marginal Cost of Congestion (MCC) at the CRR Sink minus the MCC at the CRR Source multiplied by the MW quantity of the CRR.  There are no CRR Charges associated with Congestion in the opposite direction of CRR Options.

The CAISO CRR BPM is available at: https://bpmcm.caiso.com/Pages/BPMDetails.aspx?BPM=Congestion%20Revenue%20Rights

[8] Filed on November 12, 2024 in FERC Docket ER25-170 and available at: https://elibrary.ferc.gov/eLibrary/filelist?accession_number=20241112-5301.

[9] Id. at 10-11. 

[10] California Public Utilities Code § 345.5(b)(2).

[11] The CAISO’s Congestion Revenue Rights Business Practices Manual defines the CRR Option and highlights that there are no CRR charges in the opposite direction of CRR options, at 3, available at: https://bpmcm.caiso.com/Pages/BPMDetails.aspx?BPM=Congestion%20Revenue%20Rights

1. Please submit your organization's comments on the draft final proposal and Mar 21 meeting discussion:

Pattern Energy supports the adoption of CAISO’s CRR option/economic bidding proposal outlined in the draft final proposal.  The ability for subscriber generation to economically bid energy in the market is critical for the commercialization of CAISO’s SPTO policy and the draft final proposal represents the most efficient path for enabling this common market practice within the new SPTO structure. 

Pattern Energy welcomes the draft final proposal to gain operational experience with the non-subscriber usage rate for two years before discussing any redesign.  Pattern Energy reserves the right to review any additional requirements placed on SPTO facilities at the time they are firmly defined and required, but at this time we do not anticipate any complications with reporting annual NSUR payments and are generally pleased to support a fact-based discussion on any concerns around the NSUR going forward. 

2. Please submit any additional feedback:

Pattern Energy appreciates the many examples that were provided in this stakeholder process to explain how the proposal will work in practice.

1. Please submit your organization's comments on the draft final proposal and Mar 21 meeting discussion:

The Salt River Project Agricultural Improvement and Power District (SRP) appreciates the opportunity to comment on the draft final proposal. As acknowledged by CAISO in the draft final proposal, use of the Arizona Entitlements is bounded by the terms and conditions set forth in SRP’s Open Access Transmission Tariff (OATT), associated business practices and various transmission service agreements by and between SRP and SunZia on SRP’s transmission system. Any non-subscriber seeking to use SRP’s transmission system must also become a transmission customer of SRP. SRP appreciates CAISO’s acknowledgement of the necessity to acquire transmission rights on SRP’s system and utilize those rights in compliance with SRP’s OATT, business practices and transmission service agreements in this context.

2. Please submit any additional feedback:

1. Please submit your organization's comments on the draft final proposal and Mar 21 meeting discussion:

The Draft Final Proposal introduces additional details on the Merchant CRR option (now called MT_TOR CRRs), including how a Subscriber PTO and its subscriber entities could choose MT_TOR CRRs, for some or all of the facility capacity in lieu of ETC rights.  The Proposal is seriously flawed in SCE’s view because it allows for the SPTO to receive both the Non-Subscriber Usage Charge (NSUC”) and MT_TOR CRRs for the same portion of SPTO capacity.  SCE believes that the NSUC would be fully compensatory to the S-PTO for Non-Subscriber use of the facility, and this aspect of the Proposal should be reconsidered.   

More problematic though, there appear to be issues relating to the pending implementation of the Extended Day Ahead Market (“EDAM”) with respect to S-PTO Non-Subscriber revenues.  To the extent that the boundary of the S-PTO corresponds to an EDAM Transfer Point between the SPTO/CAISO BAA and another adjacent EDAM BAA, there will be no NSUC revenue, or Wheeling Revenue, at that Transfer Point (Page 8).  If all such points are EDAM Transfer Points, there would therefore be no NSUC revenue for the S-PTO, regardless of Non-Subscriber or EDAM market use. 

Instead, the Proposal sets forth a mechanism which would use the EDAM Access Charge as a vehicle for generating revenue for the S-PTO related to Non-Subscriber use.  Depending on whether the S-PTO facility is placed in service before or after the adjacent BAA becomes an EDAM BAA, the S-PTO would be eligible to recover funds through either the New Transmission or Historic Transmission revenues component of the EDAM Access Charge.  However, in SCE’s view, this proposal is unworkable because it relies on forecasts of Non-Subscriber usage that either never occurred or for which there is no significant history (EDAM is scheduled to be in operation in 2026, roughly coincident with the first S-PTO operation).  When considering the EDAM impacts, the superiority of the Merchant CRR option over the NSUC-only or a mixture of the NSUC and Merchant CRRs becomes more apparent.

The Draft Final Proposal provides for netting of NSUC revenues against Wheeing Revenues received from CAISO customer separately for Imports (which generate no Wheeling Revenue for the ISO) and for exports (which do generate Wheeling revenue).  SCE believes this provision (stated on Page 7) is not consistent with Section 15.1 of Schedule 3, Appendix F.  The tariff language in 15.1 is clear that there should be one periodic (presumably monthly) determination NSUC revenues to be paid to the S-PTO, including whether there is any required TAC contribution.  Individualized netting will inevitably result in a higher probability of accessing funds from the TAC in order to fund the NSUC Amounts.

SCE has previously submitted comments in favor of using Merchant CRRs instead of the NSUC.  In this Draft Final Proposal, the CAISO sets aside SCE’s proposal, stating:

“While the CAISO appreciates the proposal, the CRR option does not provide the same congestion hedge or scheduling priority as the ETC option, and reducing CRR rents to the Subscriber Participating TO is a fundamental change to the existing CRR mechanism that needs to be considered carefully. Moreover, as described below, the CAISO believes that there may not be significant non-subscriber usage on the line to drive significant non-subscriber congestion rents being paid out to the Subscriber Participating TO.”

It is not clear to SCE that there will be limited congestion on S-PTO lines, particularly for the SunZia S-PTO which, at inception at least, will have a bottleneck between Pinal Central and Palo Verde where total capacity drops by about 1/3 (as well as providing an opportunity for others to schedule in to the CAISO at Pinal Central, and thereby creating more congestion).

SCE proposes that the Merchant CRR Option be redefined to apply to the entire capacity of the S-PTO, and to include Scheduling Priority through real time for S-PTO subscriber use.  This provides the S-PTO with a full hedge through real-time (important for variable resources such as wind).  It also provides the S-PTO with revenue associated with Non-subscriber use, and would be durable for the life of the project (unlike the NSUC which may not even survive the implementation of EDAM).  The NSUC rate, given the issues noted above, should be eliminated.    

Finally, the CAISO proposes to move forward with the current Draft Final Proposal, including a two + year operational experience period. (See page 11).  During this “operational experience” period, there would be annual information submissions, after which stakeholders could require a reopening of the issues in a new policy initiative.  SCE is not in favor of this aspect of the Draft Final Proposal.

2. Please submit any additional feedback:

SCE has no additional comments.