Comments on Straw Proposal

1. Provide a summary of your organization’s comments on the straw proposal:

The Bonneville Power Administration (Bonneville)^[1] appreciates the opportunity to comment on the CAISO’s Market Enhancements for Summer 2021 Readiness Straw Proposal dated January 26, 2021. Bonneville notes its general support for the comments submitted by the EIM Entities and seeks to expand on them here in specific topic areas.

Bonneville emphasizes that the most important step California should take to ensure reliable operations in summer of 2021 is to forward procure adequate resources. As discussed more thoroughly in these comments, the CAISO forecasted thousands of megawatts of capacity shortfall for summer 2020 in net peak hours back in September 2019. The capacity gap was not remedied and resulted in significant reliability challenges, impacting not just the CAISO BAA but also its adjacent BAAs. The market enhancements proposed as part of this initiative are helpful in addressing some of the symptoms and repercussions of a resource inadequate system, but these enhancements are not enough to ensure reliable operations for summer 2021 and should not be a replacement to proper forward procurement. It is critically important to the reliability of the CAISO BAA and to the reliability of the western grid that the CAISO BAA have adequate forward procured resources available to meet its summer 2021 needs.

As such, Bonneville underscores the recommended priorities provided in the EIM Entity comments for summer 2021 readiness:

• Reconsider treatment of wheel-through schedules for summer 2021 by maintaining current priority level and pursue a more durable solution for future years
• Prioritize resource sufficiency enhancements for summer 2021 to ensure the EIM RS test is accurate and that all BAAs participating in EIM are required to come in balanced with sufficient capacity to meet their obligations
• Defer System Market Power Mitigation and Scarcity Pricing to the more comprehensive and thorough Scarcity Pricing Enhancements initiative scheduled to begin in Q2 of 2021.

Bonneville also provides a summary of its recommendations for each topic area:

1. Export and load priorities
   • Exports supported by a non-RA resource that have been contracted for by an external entity should not be identified by the market and curtailed to address supply shortfalls in the CAISO BAA.
   • Until such time as CAISO develops a process to allow wheel through schedules to be treated similar to a PT export, avoid making changes to the priority of wheel-throughs. 
2. EIM Coordination and Resource Sufficiency Test
   • The Straw Proposal does not resolve the underlying causes of inaccurate resource sufficiency test results.
   • Changes need to be made to ensure an accurate RS test ahead of summer 2021 and every effort should be made to achieve this.
   • The current failure consequence does not support reliability and needs to be revisited.
3. Import and Export Market Incentives during tight system conditions
   • Bonneville supports CAISO’s Option 1: to modify settlement of real-time market imports and exports based on the higher of the HASP or the FMM LMP during tight system conditions.
4. Real-time Scarcity Pricing
   • Bonneville recommends any new pricing rules under tight system conditions be considered as part of CAISO’s more comprehensive scarcity pricing initiative scheduled to begin in Q2 2021.
   • Instead more direct incentives should be pursued to ensure accurate scheduling in the day-ahead market when tight conditions are anticipated.
5. System Market Power Mitigation (SMPM)
   • Analysis to date does not justify SMPM.
   • SMPM does not enhance reliability and should not be prioritized for summer 2021.
   • The SMPM initiative has been very contentious amongst stakeholders and does not have broad support.
   • Bonneville does not support the SMPM draft final proposal as it results in triggering of mitigation when there is no potential for market power to be exerted.
   • The SMPM proposal needs revision and should be considered as part of the comprehensive scarcity pricing initiative scheduled to begin Q2 of 2021.
   • Bonneville agrees with the CAISO that LSEs engaging in long-term contracting is fundamentally essential protection against market power and should be actively pursued as a solution for summer 2021.

[1] Bonneville is a federal power marketing administration within the U.S. Department of Energy that markets electric power from 31 federal hydroelectric projects and some non-federal projects in the Pacific Northwest with a nameplate capacity of 22,500 MW. Bonneville currently supplies 30 percent of the power consumed in the Northwest. Bonneville also operates 15,000 miles of high voltage transmission that interconnects most of the other transmission systems in the Northwest with Canada and California. Bonneville is obligated by statute to give preference in sales to Northwest municipalities, public utility districts, cooperatives and then other regional entities prior to selling power out of the region. 

2. Provide your organization’s comments on the export and load priorities topic as described in slides 7-15:

Bonneville strongly supports the comments provided by select EIM Entities on this topic and reiterates the EIM Entities’ recommendations:

• Exports supported by a non-RA resource that have been contracted for by an external entity should not be identified by the market and curtailed to address supply shortfalls in the CAISO BAA.
• Until such time as CAISO develops a process to allow wheel through schedules to be treated similar to a PT export, CAISO should avoid making changes to the priority of wheel-throughs. 

3. Provide your organization’s comments on the EIM coordination and resource sufficiency test review topic as described in slides 16-20:

1. The Resource Sufficiency test is a foundational element of EIM design

Bonneville agrees with the CAISO that the purpose of the Resource Sufficiency (RS) test, along with the definition of leaning and repercussions of failure are foundational elements of EIM design. Consequently, to the extent the outcomes of the RS test result in a violation of the foundational principles of the EIM, which Bonneville believes is the case, modifications to the RS test should be prioritized and resolved without delay.

The CAISO has been clear about the purpose of the RS test from the inception of the EIM:

• A fundamental principle is that each EIM Entity will have a balanced resource plan for each operating hour, which would provide sufficient resources for that BAA to operate reliably without “leaning” on other EIM Entities or on the ISO. EIM then provides opportunity for EIM Entities and EIM Participating resources within their areas to operate more efficiently than they could on their own.”  - Energy Imbalance Market Draft Final Proposal dated September 23, 2013[1]

• The purpose of the resource sufficiency evaluation is to ensure each EIM entity can adequately balance their own supply and demand prior to participating in the energy imbalance market… The resource sufficiency evaluation ensures that balancing authority areas do not inappropriately lean on the capacity, flexibility and transmission of other balancing authority areas in the EIM footprint. - EIM Resource Sufficiency Evaluation White Paper dated September 19, 2018[2].

A well-functioning resource sufficiency test that accurately assesses each EIM Entity’s resources and obligations, with failure consequences that prevent leaning and incent appropriate forward procurement to ensure reliability, has been and continues to be a foundational element in Bonneville’s decision to join the EIM, scheduled for Spring 2022. Bonneville is concerned about the CAISO’s statements that the RS test “performed as intended” during the August 2020 heat wave events and about the lack of commitment to ensure that changes needed to address both inaccurate passes of the RS test and failure repercussions that allow leaning on the EIM will be addressed in a timely manner.

2. The EIM RS test is not producing accurate results

The CAISO BAA did not have sufficient resources to operate reliably during the heat wave events of summer 2020.  As Bonneville has stated in its written comments to the Resource Sufficiency Evaluation workshop held on January 13, 2021 and oral comments provided on January 27, 2021, the CAISO BA was passing the EIM RS test during several intervals in which it was declaring an Energy Emergency Alert Stage (EEA) 2 and 3. NERC defines the circumstances around EEAs as follows[3]:

• EEA 1: All available generation resources in use.
  • The BA is experiencing conditions where all available generation resources are committed to meet firm load, firm transactions, and reserve commitments, and is concerned about sustaining its required Contingency Reserves.
  • Non-firm wholesale energy sales (other than those that are recallable to meet reserve requirements) have been curtailed.

• EEA 2: Load management procedures in effect
  • The BA is no longer able to provide its expected energy requirements and is an energy deficient BA.
  • An energy deficient BA has implemented its Operating Plan(s) to mitigate emergencies.
  • An energy deficient BA is still able to maintain minimum Contingency Reserve requirements

• EEA 3: Firm load interruption is imminent or in progress
  • The energy deficient BA is unable to meet minimum Contingency Reserve requirements.

Yet the RS test results showed CAISO passing the EIM RS test while declaring EEA 2 and EEA 3, enabling the CAISO to fully participate in the EIM for these intervals. This outcome does not reflect that the EIM RS test “worked as intended” as stated by the CAISO in several public forums. No BAA should be passing the EIM RS test while at the same time declaring an EEA 2 or and EEA3. Instead, the results of the RS test during these intervals signify that underlying components of the RS test are not properly evaluating the resources and obligations of the CAISO BAA. Changes are needed to ensure that the RS test is producing accurate results.

3. The Straw Proposal does not resolve causes of inaccurate RS test results

In its Market Enhancements for 2021 Summer Readiness Straw Proposal, CAISO proposed additional improvements to the EIM RS test for summer 2021 that CAISO stated on the January 27 stakeholder call would correct the RS test and produce accurate results. These improvements included:

• Adding uncertainty requirements to the capacity test (the flexible ramping requirement for the BAA less the diversity benefit)
• Modifications to resource capacity accounting to better reflect actual availability (e.g. exclude offline resources whose startup time is greater than 1 hour).

Bonneville acknowledges that these are helpful improvements and should be pursued. However, Bonneville is concerned that these enhancements alone do not lead to an accurate RS test. For example, CAISO provided the following comparison of its RS capacity test requirement and the capacity shown to meet the requirement at the January 13 Resource Sufficiency evaluation workshop[4]:

During every interval of hour ending 18 of August 14, 2020, CAISO was declaring an EEA 2, which means that all available resources within the CAISO BAA were in use and CAISO was energy deficient.[5] Thus the blue bars in the graph above should show CAISO’s bid-range capacity below 0 MW.

• CAISO’s first proposed change would increase the capacity requirement by the uncertainty requirement (flexible ramping requirement for the BAA less the diversity benefit). The flexible ramping requirement for the CAISO BAA less the diversity benefit for hour ending 18 on August 14, 2020 was approximately 479 MW[6].
  • Bonneville would like to better understand the interplay between the uncertainty that is already included in the capacity test and what uncertainty CAISO is proposing to add to the capacity test? Bonneville assumes it is additive but requests CAISO confirm this assumption.

• CAISO’s second proposed change would supposedly reduce the blue bar to better reflect actual resource availability. Bonneville requests CAISO provide the modifications it proposes to resource capacity accounting to better reflect actual availability along with the impact of each on resource capacity accounting.

Bonneville requests CAISO provide the re-calculated requirement and the re-calculated capacity values with these proposed improvements for all of the intervals in which CAISO was in an EEA2 or EEA3 provided in the below graph from Powerex’s presentation[7] at the January 13 RS workshop.

Bonneville urges the CAISO to prioritize changes to the RS test that are needed to produce accurate results, demonstrable by showing that the capacity test would have shown an available resource capacity shortfall for the CAISO BA while in an EEA. We urge the CAISO to fully investigate all of the root causes that contributed to the capacity test showing over 3,000 MW of available resource capacity for the CAISO BAA during periods it was declaring an EEA and develop a plan for resolving each issue. These enhancements should be prioritized for summer 2021 and every effort should be made to achieve this.

4. The EIM RS failure consequence does not support reliability

1. 1. The EIM RS failure consequence enables leaning

As stated earlier, the RS test is intended to support reliability by ensuring each EIM Entity and the CAISO BA have enough supply to meet their own needs on a stand-alone basis and prevent entities from leaning on the EIM. Bonneville defines leaning as an entity relying on the EIM to meet its energy, capacity, and/or flexibility needs less the diversity benefit in place of procuring sufficient resources (i.e. schedules and economic bids offered into the EIM) to meet those needs prior to the operating hour.  In other words, a BAA is leaning on the EIM if the BAA cannot operate reliably or needs to take operator actions (i.e. curtail exports, shed firm load, etc.) to meet its obligations absent the EIM.

For the intervals in which CAISO failed the RS test while declaring EEAs, CAISO was relying on those EIM transfers to meet its own energy, capacity, and flexibility needs, thereby leaning on the EIM.  For example, in all intervals of hours ending 17 and 18 on August 14, 2020, CAISO was importing between 1,500 and 2,500 MW of EIM imports which could not be economic displacement for the CAISO’s own resources given that all available CAISO generation resources were in use for those periods (according to NERC’s definition of EEA). Additionally, CAISO’s diversity benefit for hour ending 17 and hour ending 18 on August 14, 2020 was approximately 341 MW and 480 MW respectively[8], significantly less than the amount of EIM imports CAISO received for those hours. In conclusion, the EIM failure consequence of allowing prior hour EIM imports to continue enables a BAA that failed the test to lean on the EIM.

1. 2. The EIM RS failure consequence undermines incentives for proper forward procurement

Bonneville believes the lack of meaningful repercussions for failing the EIM RS test undermine incentives to adequately forward procure resources needed to pass the RS test. This can lead to detrimental reliability challenges in real-time as was experienced in summer 2020.

Following rolling blackouts from the previous days, CAISO’s former CEO, Steve Berberich opened the CAISO ISO Board of Governors meeting on August 17, 2020 with these statements:

“The situation we are in could have been avoided. For many years, we [CAISO] have pointed out to the procurement authorizing authorities that there was inadequate power supply available during the net peak… We have indicated in filing after filing after filing that the Resource Adequacy program was broken and needed to be fixed. We told the CPUC that there was a 4,700 MW shortfall through 2022 and that the gap started in 2020. We even undertook notice of ex parte communications with the Commission on the matter. Despite all of that, only 3,300 MW was authorized for procurement and not starting until 2021. The bet has been that uncontracted imports will fill any void. We have told regulators over and over again that imports were drying up and that more imports should be contracted for. That was rebuffed.[9]”

Bonneville acknowledges that CAISO has been reporting on projected capacity shortfalls for its BAA far in advance of the CAISO BAA experiencing those shortfalls in real-time. CAISO provided a briefing to the ISO Board of Governors on September 18, 2019[10] that showed the following estimated capacity shortfalls at 7 p.m.:

The CAISO submitted a filing[11] to the CPUC on August 12, 2019 informing the CPUC of the projected capacity shortfalls and urging the CPUC to take immediate action on the basis of these deficiencies to ensure short-term resource adequacy sufficiency. The CPUC responded with a decision[12] requiring incremental procurement of 3,300 MW with resources to come online at least 50 percent by August 1, 2021, 75 percent by August 1, 2022, and 100 percent by August 1, 2023.  The CPUC did not address the projected 2,300 MW capacity shortfall for 2020 and required 1,650 MW less procurement than the CAISO’s projected shortfall for 2021 and 2,775 MW less than the CAISO’s projected shortfall for 2022.

At the CAISO’s Board of Governor’s meeting on August 17th, CAISO estimated a resource deficiency for August 17 of up to 4,400 MW[13].

Bonneville believes that part of the reason the CPUC and California LSEs are not incented to adequately procure resources to meet the needs of the CAISO BA is that the direct consequences of failure to do so, such as failing the resource sufficiency test, are minimal. Yet these significant capacity shortfalls projected for the CAISO BAA that continue to increase dramatically year after year impose considerable reliability and financial risk to both the CAISO BAA and to adjacent EIM BAAs. For these reasons, it is important that the consequences for failing the RS test incent EIM Entities and LSEs within the CAISO BAA to procure the energy, capacity, and flexibility they need prior to the operating hour. The EIM is not a capacity market and should not be relied upon to meet those needs.  Bonneville strongly recommends CAISO expand the current EIM RS failure consequence to include new physical, financial and oversight consequences which ensure that entities who fail the RS test are not enabled to lean on the EIM and sufficient incentives are provided for appropriate forward procurement of capacity. We request this be taken up as part of a comprehensive stakeholder process on resource sufficiency to begin in Q2 of 2021.

Regarding the calculation of uncertainty requirements, Bonneville appreciates the CAISO’s work to date on developing a new calculation approach through the Flexible Ramping Product Refinements initiative. We will provide more detailed feedback on CAISO’s specific proposal as part of that stakeholder forum.

[1] Reference: Page 38 of CAISO’s Energy Imbalance Market Draft Final Proposal dated September 23, 2013

[2] Reference: Page 3 of CAISO’s EIM Resource Sufficiency Evaluation White Paper dated September 19, 2018

[3] See NERC Attachment 1-EOP-011-1

[4] Reference: Slide 17 of CAISO’s January 13 Resource Sufficiency Workshop presentation

[5] “At 3:25 p.m., the CAISO declared a Stage 2 Emergency for the CAISO BAA from 3:20 p.m. to 11:59 p.m.” “At 6:38 p.m., the CAISO declared a Stage 3 Emergency because it was deficient in meeting its reserve requirement. The CAISO was not able to cure the deficiency with generation, because all generation was already online, and solar was rapidly declining while demand remained high.” “At 8:38 p.m., the CAISO downgraded from a Stage 3 to Stage 2, and Stage 2 was cancelled at 9:00 p.m.”  Final Root Cause Analysis, CAISO, CPUC, CEC, January 13, 2021, pages 28-29 referring to the events of August 14, 2020.

[6] Reference: Slide 31 of CAISO’s January 13 Resource Sufficiency Workshop presentation

[7] Reference: Slide 4 of Powerex’s January 13 Resource Sufficiency Workshop presentation

[8] Reference: Slide 31 of CAISO’s Resource Sufficiency Evaluation presentation from January 13, 2021

[9] Reference: CAISO Board of Governors August 17, 2020 meeting Audio Recording

[10] Reference: Slide 6 of CAISO’s Post 2020 Grid Operational Outlook briefing; September 18, 2019

[11] Reference: Rulemaking 16-02-007. Reply Comments of the California Independent System Operator filed August 12, 2019

[12] Reference: D.19-11-06; November 7, 2019

[13] Reference: Slide 6 of CAISO’s Briefing on System Operations; August 17, 2020

4. Provide your organization’s comments on the import and export market incentives during tight system conditions topic as described in slides 21-25:

Bonneville supports CAISO’s Option 1: to modify settlement of real-time market imports and exports based on the higher of the HASP or the FMM LMP during tight system conditions. Bonneville believes this option provides the greater incentive for hourly block imports during tight supply conditions.  Bonneville’s preference is also informed by our understanding that Option 1 would be incorporated within the market optimization rather than Option 2 which we understand would be an “out of market” administrative pricing adjustment.

5. Provide your organization’s comments on the real-time scarcity price enhancements topic as described in slides 26-30:

Bonneville agrees with comments made on the January 27 stakeholder call that CAISO’s proposals on scarcity pricing for summer 2021 should be characterized more as “pricing rules under tight system conditions” rather than scarcity pricing enhancements. Bonneville believes more work needs to be done to understand all of the implications of implementing these pricing rules and the interaction with implementation of Order 831.

Bonneville recommends any new pricing rules under tight system conditions be considered as part of CAISO’s more comprehensive scarcity pricing initiative scheduled to begin in Q2 2021.

Bonneville believes a more direct approach to incent more accurate scheduling in the day-ahead market should be pursued for summer 2021. One option may be to require day-ahead load schedules be at least 95% of the forecast when conditions are expected to be tight. 

6. Provide your organization’s comments on the reliability demand response dispatch and real-time price impacts topic as described in slides 31-33:

No comments.

7. Provide your organization’s comments on the management of storage resources during tight system conditions topic as described in slides 34-36:

No comments.

8. Provide your organization’s comments on the system market power mitigation topic as described in slides 37-38:

1. Analysis to date does not justify System Market Power Mitigation

CAISO is proposing to implement system market power mitigation (SMPM) in August 2021 without providing the further analysis it committed to provide that would show a strong need for SMPM prior to this summer[1]. CAISO’s SMPM proposal attempts to solve a problem that analysis to date has shown does not exist. In its Report on System Market Issues for August and September[2], DMM stated that it “found no evidence that market results on August 14-15 were the result of market manipulation”. And in its 2019 Annual Report on Market Issues and Performance[3] stated that “overall prices in the ISO energy markets in 2019 were competitive, averaging close to what DMM estimates would result under highly efficient and competitive conditions, with most supply being offered at or near marginal operating cost… DMM estimates an average price-cost markup of $0.71/MWh or just under 2 percent… [which] indicates that prices have been very competitive, overall, for the year.”

2. Current SMPM Proposal results in inappropriate mitigation

SMPM has been a very contentious initiative and various stakeholders have raised significant concerns with the revised draft final proposal. And while Bonneville understands the desire to mitigate the risk of market participants potentially exerting system market power, we believe there are significant consequences of applying SMPM when there is not actually potential for market power. In CAISO’s SMPM Revised Draft Final Proposal, CAISO stated:

“Applying system market power mitigation when there is not actually potential for market power:

• Discourages supply participation
• Leads to market prices that do not support suppliers’ real operating costs
• Discourages LSEs from engaging in long-term contracting, which is fundamentally essential protection against market power.”

Bonneville also reiterates that we do not support CAISO’s revised draft final SMPM proposal as it results in inappropriate triggering of mitigation. CAISO’s analysis showed that the proposal would have inappropriately triggered SMPM in around 50% or more of the intervals between HE13 and HE 21 on August 14, 15, 17, 18, and 19, 2020 and in 231 fifteen-minute intervals in 2019[4]. Bonneville believes further refinements are needed in order to ensure the SMPM framework does not inappropriately trigger SMPM, which would discourage supply participation, exacerbate reliability challenges and violate CAISO’s principle of having an SMPM design that maintains strong incentives for suppliers and consumers to economically participate in the CAISO’s market and to enter into long-term forward energy contracts.

3. A revised SMPM proposal should be considered with comprehensive scarcity pricing initiative

Bonneville agrees with the CAISO that LSEs engaging in long-term contracting is fundamentally essential protection against market power and should be actively pursued as a solution for summer 2021. Bonneville recommends the CAISO defer implementation of a revised SMPM framework as part of the comprehensive Scarcity Pricing initiative scheduled to begin in Q2 2021. 

[1] Reference: System Market Power Mitigation, Revised Initiative Schedule Market Notice

[2] www.caiso.com/documents/reportonmarketconditionsissuesandperformanceaugustandseptember2020-nov242020.pdf

[3] www.caiso.com/documents/2019annualreportonmarketissuesandperformance.pdf

[4] See CAISO’s presentation to the Market Surveillance Committee on October 9, 2020: www.caiso.com/documents/systemmarketpowermitigation-presentation-oct9_2020.pdf

9. Provide your organization’s comments on the other items considered in this initiative based on stakeholder feedback as described in slides 39-42:

No comments.

10. Provide your organization’s comments on the proposed EIM Governing Body role as described in slide 45:

Based on the current EIM Governing Body Charter and rules for decisional classification, Bonneville understands CAISO’s proposed EIM Governing Body role for each topic described in slide 45. Bonneville strongly supports the CAISO’s recommendation that the EIM Governing Body role is primary authority for resource sufficiency.  While Bonneville recommends CAISO defer the scarcity pricing and system market power elements of this initiative, Bonneville asks the CAISO to be open to reconsidering the EIM Governing Body decision classification for a combined scarcity and SMPM initiative.  Bonneville believes scarcity pricing mechanisms could meet the decision classification rules for EIM Governing Body primary authority and believes that changes to the competitive LMP may also meet the decisional classification rules for primary authority.

11. Additional comments on the Market Enhancements for Summer 2021 Readiness straw proposal:

No further comments.

12. Provide your organization's suggestions for how to prioritize the topics included in the proposal:

Bonneville reiterates the recommended priorities provided in the EIM Entity comments for summer 2021 readiness:

• Reconsider treatment of wheel-through schedules for summer 2021 by maintaining current priority level and pursue a more durable solution for future years
• Prioritize resource sufficiency enhancements for summer 2021 to ensure the EIM RS test is accurate and that all BAAs participating in the EIM are required to come in balanced with sufficient capacity to meet their obligations
• Defer System Market Power Mitigation and Scarcity Pricing to the more comprehensive and thorough Scarcity Pricing Enhancements initiative scheduled to begin in Q2 of 2021.

1. Provide a summary of your organization’s comments on the straw proposal:

Boston Energy recognizes the CAISO's desire moving rapidly to increase reliability in Summer 2021 and provides the following comments on the energy storage management item.  Boston Energy's position on the item has been consistent since the ISO  proposed it early 2020.  We continue to oppose the ISO's proposal and urge the ISO to consider the continued feedback it has received on this topic from stakeholders.

2. Provide your organization’s comments on the export and load priorities topic as described in slides 7-15:

No comments at this time.

3. Provide your organization’s comments on the EIM coordination and resource sufficiency test review topic as described in slides 16-20:

No comments at this time.

4. Provide your organization’s comments on the import and export market incentives during tight system conditions topic as described in slides 21-25:

No comments at this time.

5. Provide your organization’s comments on the real-time scarcity price enhancements topic as described in slides 26-30:

No comments at this time.

6. Provide your organization’s comments on the reliability demand response dispatch and real-time price impacts topic as described in slides 31-33:

No comments at this time.

7. Provide your organization’s comments on the management of storage resources during tight system conditions topic as described in slides 34-36:

Boston Energy’s position from the very beginning has been that the ISO market principles of a three-settlement system should apply to all resource equally.  While we appreciate the ISO listening to stakeholders and limiting the enforcement of the minimum charge constraint, Boston Energy still views the current proposal as discriminatory against storage resource and not consistent with FERC Order 841.  The ISO should be working on policies to enhance the value of fast and flexible resources on its system, not restricting or limiting that value from being received by customers. Therefore, Boston Energy cannot support this element as currently proposed.

Consistent with feedback provided by CESA and other energy storage resource owners the only way to avoid discriminatory treatment of energy storage resources is to implement an opportunity cost payment that makes energy storage resources indifferent to whether the ISO restricted real-time market flexibility of not. Such an opportunity costs payment, if implemented properly, would accomplish this and given the ISO the reliability benefits the current energy market apparently is not. Such a method would calculate the energy lost opportunity associated with holding back the resource in real-time from otherwise economic energy dispatch.  The ISO has all the information to perform this calculation in clear and consistent manner.

An opportunity cost payment approach must be implemented at the same time the ISO starts enforcing the minimum charging constraint.  Without this payment structure we see no other way to avoid treating energy storage resources differently than all other resources participating in the ISO’s market.  If the ISO can’t commit to developing opportunity cost payments at the same time and enforcing this constraint then the ISO should postpone this element of the proposal.   

8. Provide your organization’s comments on the system market power mitigation topic as described in slides 37-38:

No comments at this time.

9. Provide your organization’s comments on the other items considered in this initiative based on stakeholder feedback as described in slides 39-42:

No comments at this time.

10. Provide your organization’s comments on the proposed EIM Governing Body role as described in slide 45:

No comments at this time.

11. Additional comments on the Market Enhancements for Summer 2021 Readiness straw proposal:

No additional comments at this time.

12. Provide your organization's suggestions for how to prioritize the topics included in the proposal:

No comments at this time.

1. Provide a summary of your organization’s comments on the straw proposal:

• CalCCA supports implementing the System Market Power Mitigation proposal whether or not scarcity pricing is implemented for Summer 2021.
• CalCCA supports CAISO’s proposal to enhance its independent study process to increase interconnected capacity on an interim basis.
• CalCCA supports treating wheel through schedules as LPT exports, since these schedules are not supported by intertie allocations.
• CalCCA does not support prioritizing PT exports above CAISO native loads, since there is not reciprocal treatment of exports in the tariffs of other BAs in the West. CalCCA supports a future stakeholder process to address reciprocal treatment of exports for neighboring BAs, along with appropriate verification procedures and clarifying rules to ensure that only non-RA resources get high priority export status.
• CalCCA does not support either of CAISO’s proposed options for providing import and export incentives (i.e., Option 1: modifying settlement of real-time imports and exports based on the higher of HASP or FMM LMP during tight supply conditions; or Option 2: providing for make-whole payments to bid price for real-time market hourly block economic imports). CalCCA suggests that CAISO consider a third option: pay HASP prices to hourly blocks during specified emergency conditions.
• CalCCA is opposed to CAISO’s scarcity pricing proposal because of unclear and potentially harmful price formation implications, the potential for exercise of market power and gaming concerns.
• CalCCA opposes making the EIM resource sufficiency capacity test more stringent because doing so would make it more likely that BAs will fail the test and thereby reduce the ability of neighboring BAs to transfer energy during the periods when such transfers are most needed.
• CalCCA opposes accelerating the implementation of the RA Enhancements storage proposals for Summer 2021.

2. Provide your organization’s comments on the export and load priorities topic as described in slides 7-15:

CalCCA supports treating wheel through schedules as LPT exports, since these schedules are not supported by intertie allocations. CalCCA does not support prioritizing PT exports above CAISO native loads, since there is not reciprocal treatment of exports in the tariffs of other BAs in the West (i.e., native loads of other BAs receive higher priority before transmission is released to support exports). CalCCA supports a future stakeholder process to address reciprocal treatment of exports for neighboring BAs, along with appropriate verification procedures and clarifying rules to ensure that only non-RA resources get high priority export status. In particular, CAISO would need to implement an attestation process to ensure that high priority exports are supported only by non-RA resources that generate in real-time. CAISO should audit these exports and impose penalties if these requirements are not met. CAISO also needs to clarify that Use Limited non-RA resources can only export in the Day Ahead Market up to their NQC, while Use Limited RA resources should not be allowed to export power below their must offer obligation. Further, resources without full network deliverability (energy-only resources) and demand response resources should not be eligible for PT export status.

3. Provide your organization’s comments on the EIM coordination and resource sufficiency test review topic as described in slides 16-20:

CalCCA opposes making the EIM resource sufficiency capacity test more stringent because doing so would make it more likely that BAs will fail the test and thereby reduce the ability of neighboring BAs to transfer energy during the periods when such transfers are most needed. While a more stringent test in the future could send an appropriate signal for long-term forward resource procurement, there are limited benefits to doing so in the near-term.

4. Provide your organization’s comments on the import and export market incentives during tight system conditions topic as described in slides 21-25:

CalCCA does not support either of CAISO’s proposed options for providing import and export incentives (i.e., Option 1: modifying settlement of real-time imports and exports based on the higher of HASP or FMM LMP during tight supply conditions; or Option 2: providing for make-whole payments to bid price for real-time market hourly block economic imports). These options could create gaming and arbitrage opportunities for virtual bids (and electrically nearby points) and could create opportunities for parties with market power to drive HASP prices higher, unless CAISO were to implement a mechanism to suspend virtual bids in emergency conditions. CalCCA suggests that CAISO consider a third option: pay HASP prices to hourly blocks during specified emergency conditions. This approach would provide stronger price signals and price certainty, but would not provide additional, unnecessary “upside” for suppliers.

5. Provide your organization’s comments on the real-time scarcity price enhancements topic as described in slides 26-30:

CalCCA is opposed to CAISO’s scarcity pricing proposal because of unclear and potentially harmful price formation implications, the potential for exercise of market power and gaming concerns. CalCCA further believes CAISO’s proposal is unlikely to deliver its reliability goal and it would be infeasible to be implemented by the summer.

6. Provide your organization’s comments on the reliability demand response dispatch and real-time price impacts topic as described in slides 31-33:

CalCCA has no comment on this issue at this time.

7. Provide your organization’s comments on the management of storage resources during tight system conditions topic as described in slides 34-36:

CalCCA opposes accelerating the implementation of the RA Enhancements storage proposal for Summer 2021. As evidenced by the significant concerns raised in parties most recent comments in the RA Enhancements stakeholder process, more work is needed before implementing the storage proposal.

8. Provide your organization’s comments on the system market power mitigation topic as described in slides 37-38:

CalCCA supports implementing the System Market Power Mitigation (SMPM) proposal whether or not scarcity pricing is implemented for Summer 2021. SMPM has undergone a full stakeholder process through completion of a revised draft final proposal, with significant input from the Market Surveillance Committee, and is ready to be implemented for Summer 2021. In addition, if CAISO provides additional intertie block scheduling price certainty as suggested by CalCCA in its response to Item 4 above, it would eliminate the major concerns expressed by parties related to SMPM. CAISO should not link implementation of SMPM to the much less-developed scarcity pricing proposal implementation.

9. Provide your organization’s comments on the other items considered in this initiative based on stakeholder feedback as described in slides 39-42:

CalCCA supports CAISO’s proposal to enhance its independent study process to increase interconnected capacity on an interim basis.

10. Provide your organization’s comments on the proposed EIM Governing Body role as described in slide 45:

11. Additional comments on the Market Enhancements for Summer 2021 Readiness straw proposal:

12. Provide your organization's suggestions for how to prioritize the topics included in the proposal:

CalCCA urges CAISO to implement SMPM as the highest priority. The second priority should be to explore CalCCA’s proposed import/exporting HASP pricing proposal. The third priority should be to address the export and load priorities per CalCCA’s suggestions. The fourth priority should be to enhance the independent study process. The remaining proposals should not be implemented/should be low priority.

1. Provide a summary of your organization’s comments on the straw proposal:

The California Department of Water Resources (CDWR) is generally supportive of the goals in CAISO’s Market Enhancements for Summer 2021 Readiness Initiative.

However, CDWR agrees with other stakeholders that attempting too many changes before Summer 2021 could produce unforeseen and costly market surprises.  CDWR encourages CAISO to scale back the proposed changes before Summer 2021 and start a separate process to prepare for Summer 2022.    

2. Provide your organization’s comments on the export and load priorities topic as described in slides 7-15:

CDWR supports refining scheduling priorities as proposed by the CAISO on slide 10. (see attached file for image)

3. Provide your organization’s comments on the EIM coordination and resource sufficiency test review topic as described in slides 16-20:

No Comment.

4. Provide your organization’s comments on the import and export market incentives during tight system conditions topic as described in slides 21-25:

CDWR supports more time for assessments during the stakeholder process.   

5. Provide your organization’s comments on the real-time scarcity price enhancements topic as described in slides 26-30:

CDWR supports Real-Time Scarcity Price Enhancements that will attract greater participation during stressed grid conditions.  

6. Provide your organization’s comments on the reliability demand response dispatch and real-time price impacts topic as described in slides 31-33:

CDWR believes such changes should be postponed for more thorough discussions. 

7. Provide your organization’s comments on the management of storage resources during tight system conditions topic as described in slides 34-36:

CDWR does not support expedited changes to the management of storage resources at this time.  

8. Provide your organization’s comments on the system market power mitigation topic as described in slides 37-38:

CDWR needs more information to fully understand any possible interactions between SMPM and Scarcity Pricing proposals.  

9. Provide your organization’s comments on the other items considered in this initiative based on stakeholder feedback as described in slides 39-42:

CDWR supports discussions of enhancements to the Interconnection process that can be safely implemented to provide additional capacity for Summer 2021.

10. Provide your organization’s comments on the proposed EIM Governing Body role as described in slide 45:

No Comment.

11. Additional comments on the Market Enhancements for Summer 2021 Readiness straw proposal:

CDWR supports the Market Enhancements for Summer 2021 Readiness Initiative and believes that an ongoing Summer Readiness Initiative would be beneficial for future discussions. 

12. Provide your organization's suggestions for how to prioritize the topics included in the proposal:

CDWR believes priority should be given to topics #1, #2, #4, and #8 (Slide 6) before Summer 2021.  The remaining topics can be addressed after Summer 2021, but before Summer 2022.  (see attached file for image)

1. Provide a summary of your organization’s comments on the straw proposal:

The California Efficiency + Demand Management Council (Council) appreciates the CAISO’s efforts to improve the functioning of its market for summer 2021.  The Council’s comments do not pertain to the straw proposal, but rather, what is currently missing from it.

The Council is concerned that the CAISO has not taken steps to ensure that Proxy Demand Resources (PDR) are being fully awarded in the day-ahead market (DAM) when the market clearing price exceeds the bid price.  This occurred on several occasions to at least one demand response (DR) provider during the August 2020 heat event.  The CAISO should work with the DR community and investigate the cause of this issue so that it can be fixed in time for summer 2021 deployment. 

One potential solution the CAISO might want to consider is adopting a trigger similar to the one in place for Reliability Demand Response Resources (RDRR) that would allow the CAISO to dispatch PDRs capable of real-time market (RTM) dispatch that were not scheduled in the DAM under emergency conditions pursuant to Operating Procedure 4420.  The CAISO DAM is designed to clear based on economics and not on system conditions, so emergency events are not reflected in the DAM.  To the extent that the CAISO is not economically scheduling PDRs in the DAM despite bids below the market clearing price, this will ensure that those capable of 30-minute dispatches can be used during emergency events.

Another critical issue the CAISO should address for summer 2021 is the accuracy of its DR baselines.  The Council is very concerned that the CAISO’s DR baseline options undercount DR performance under extreme heat conditions which can lead to under-compensation of DR participants.  This can have a disenfranchising impact on participants and reduce the amount of DR capacity that is available to maintain reliability.

The CAISO’s 10-in-10 baseline caps the day-of adjustment at +/- 20% and its 5-in-10 baseline, which is only available to residential customers, has a day-of adjustment capped at +40%/- 29%. In some instances, the sustained extreme heat events during August 14-19 and September 5-7 resulted in such high and sustained customer loads relative to their baselines that even with the day-of adjustment, curtailed customer loads were still greater than the adjusted baseline, despite the customer’s actions to execute their load reduction plans which resulted in no compensation for their load reductions.

The CAISO should consider alternative baselines, including a higher day-of adjustment, to ensure accurate measurement of DR resource performance.  One potential approach could be to work with the IOUs to assess the August 14-19, 2020 and September 5-7, 2020 loads of customers not participating in a DR program to determine an appropriate alternate day-of adjustment.  As a corollary, this alternate day-of adjustment could be attached to a trigger such that it is only applied during emergency or high-heat conditions so that it does not over-count performance under less-than-extreme heat conditions.    

2. Provide your organization’s comments on the export and load priorities topic as described in slides 7-15:

3. Provide your organization’s comments on the EIM coordination and resource sufficiency test review topic as described in slides 16-20:

4. Provide your organization’s comments on the import and export market incentives during tight system conditions topic as described in slides 21-25:

5. Provide your organization’s comments on the real-time scarcity price enhancements topic as described in slides 26-30:

6. Provide your organization’s comments on the reliability demand response dispatch and real-time price impacts topic as described in slides 31-33:

7. Provide your organization’s comments on the management of storage resources during tight system conditions topic as described in slides 34-36:

8. Provide your organization’s comments on the system market power mitigation topic as described in slides 37-38:

9. Provide your organization’s comments on the other items considered in this initiative based on stakeholder feedback as described in slides 39-42:

10. Provide your organization’s comments on the proposed EIM Governing Body role as described in slide 45:

11. Additional comments on the Market Enhancements for Summer 2021 Readiness straw proposal:

12. Provide your organization's suggestions for how to prioritize the topics included in the proposal:

1. Provide a summary of your organization’s comments on the straw proposal:

CESA appreciates the work of the ISO to ensure the necessary market updates are applied in advance of this year’s summer months. Given the reliability deficiencies that were exposed by the August 2020 heatwave, CESA recognizes the commitment of the ISO to identify and address issues with its market tools and processes that could, even inadvertently, exacerbate reliability concerns during periods of grid stress.

While these objectives are reasonable, CESA believes urgent market changes should be limited and targeted to the areas and issues the ISO and other pertinent authorities have identified as key during the August 2020 events. To this end, the ISO should base its prioritization on the findings of the Preliminary and Final Root Cause Analyses, two reports the ISO co-authored with the California Energy Commission (CEC) and the California Public Utilities Commission (CPUC). In these reports, the authors note that only 200 MW of RA battery storage were operating in the ISO market, and that “it is difficult to draw specific conclusions about fleet performance from such a small sample size.”[1] In this context, CESA does not believe there is sufficient evidence to preempt solutions to unsubstantiated “problems” and advance the implementation of a proposal such as the minimum state-of-charge (MSOC) requirement.

Moreover, CESA continues to be concerned with particular elements of the Straw Proposal as currently drafted. Namely, the MSOC proposal continues to lack clarity regarding its trigger condition, the compensation or settlement related to its application, and the period for which it will be applicable. As such, CESA’s comments can be summarized as follows:

• The ISO should not implement the MSOC as currently defined in the Resource Adequacy (RA) Enhancements Draft Final Proposal; instead, it should consider applying the proposal put forth by LS Power.
• If the ISO moves forward with the current MSOC proposal, it should include the following modifications:
  • Update the RA Enhancements Draft Final Proposal to properly reflect the reservations stakeholders have regarding the MSOC requirement.
  • Include a sunset provision for December 31, 2021 and commit to develop a market-oriented solution within its forthcoming storage-focused initiative.
  • Provide stakeholders with the data analyses on the different trigger conditions considered in order to evaluate their impact and pertinence.
  • Hold an additional stakeholder call within the RA Enhancements Initiative to timely incorporate stakeholder feedback prior to the March Board of Governors meeting.

[1] Final Root Cause Analysis, at 6.

2. Provide your organization’s comments on the export and load priorities topic as described in slides 7-15:

CESA offers no comment at this time.

3. Provide your organization’s comments on the EIM coordination and resource sufficiency test review topic as described in slides 16-20:

CESA offers no comment at this time.

4. Provide your organization’s comments on the import and export market incentives during tight system conditions topic as described in slides 21-25:

CESA offers no comment at this time.

5. Provide your organization’s comments on the real-time scarcity price enhancements topic as described in slides 26-30:

CESA offers no comment at this time.

6. Provide your organization’s comments on the reliability demand response dispatch and real-time price impacts topic as described in slides 31-33:

CESA offers no comment at this time.

7. Provide your organization’s comments on the management of storage resources during tight system conditions topic as described in slides 34-36:

The ISO should not implement the MSOC as currently defined in the RA Enhancements Draft Final Proposal; instead, it should consider applying the proposal put forth by LS Power.

While CESA recognizes and shares the ISO’s commitment to reliability, we have previously expressed serious concerns with regards to the MSOC proposal. In essence, this requirement is unwarranted, potentially discriminatory by virtue of its targeting of a specific technology class, unduly restrictive, and currently incomplete given its omission of a clear compensation structure. As such, the MSOC proposal as currently drafted does not represent a workable solution and the ISO should refrain from rushing its implementation to summer 2021.

Given this context, and recognizing the ISO commitment to implement market changes that will ensure all storage resources contribute to the grid’s reliability, CESA supports the alternative proposal put forth by LS Power in its comments relative to the RA Enhancements Draft Final Proposal.[1] In this proposal, LS Power offers a pathway to improve the ISO’s multi-interval optimization (MIO) tool to mitigate its current unintended negative impacts on the state-of-charge (SOC) of storage assets. Currently, the MIO is a design aspect of the Real Time (RT) market that estimates market conditions several intervals in the future, known as the advisory intervals, in order to optimize the dispatch signals given to resources in the immediately following interval, known as the binding interval. Storage resource dispatch signals (DOTs) are moved up and down in the binding interval in a way that is beyond the control of resource owners any time CAISO estimates a very low or high price materializing in the advisory intervals. Unfortunately, the MIO tool does not consider Day Ahead (DA) schedules in any way when determining RT market dispatches. This results in DOTs being often awarded at LMPs outside of the resource’s bid curve in any given interval. Moreover, this means CAISO sometimes discharges resources for lower prices than the resource has offered into the market, leaving them emptier than they would otherwise be in intervals prior to their DA schedules. As a result, the current MIO formulation creates the very risks the ISO is trying to mitigate.

Considering the need to modify the MIO, LS Power’s proposal recommends only discharging and charging storage assets at the prices they have indicated in their bid curves. This would minimize the unintended effects of the MIO while granting additional financial certainty to resource owners. LS Power also recommends minimizing the number of advisory intervals considered in the issuance of DOTs. These modifications will strengthen the already existing incentives that link financial risk and rewards to reliability-driven outcomes.

With these core modifications applied, LS Power offers an MSOC alternative that is based on market principles, limits the number of days and intervals affected by a MSOC-like requirement, and ensures the tracking of this requirement in a manner consistent with exceptional dispatch (ED). LS Power’s alternative framework can be summarized as follows:

1. The ISO should focus on market-based tools first such as a revised MIO; out-of-market tools such as MSOC should only enforced when CAISO sees a reliability risk or an imminent System Emergency.
2. The ISO should run sufficiency tests on a regular basis throughout the day to determine if MSOC is still needed, not limiting itself to a single test after the DA schedules are determined.
3. The ISO should set MSOC to the minimum amount and time needed given the results of the sufficiency tests. This should result in the minimum quantities of charge power (in MW) and stored energy that must be maintained across the storage fleet (in MWh). Once the ISO counts the MW of DA storage awards in each hour and sum over the appropriate time scales, it should estimate the appropriate fraction of a resource’s storage capacity to be reserved from the RT market, as opposed to all of it.
4. The ISO should ramp MSOC requirements smoothly and linearly to allow grid and resource flexibility on days where the sufficiency tests described above indicate that a certain MSOC is needed across the storage fleet for system reliability. The portion of each resource’s capacity subject to the MSOC requirement should be proportional to its maximum energy capacity relative to the total storage on the grid. The ramp should take place over N hours immediately preceding the start of that resource’s DA schedule, where N is the number of hours it would take to charge that resource from empty to achieve an SOC equal to the quantity of MWh it is needed to discharge based on DA, plus a safety factor (LS Power offers 20% as an example).
5. The ISO should modify the bid cost recovery (BCR) mechanism to ensure storage resources are compensated for the reliability service they provide.[2]
6. The ISO must track and report MSOC usage in a manner consistent with ED.

In sum, the framework offered by LS Power represents a workable solution that could be applied by summer of 2021. This proposal targets fundamental issues related to the ISO’s optimization tools, better equipping the ISO’s systems for the expected rise of energy storage assets. As such, CESA supports adopting LS Power’s proposal rather than pursuing the MSOC as currently drafted.

If the ISO moves forward with the current MSOC proposal, it should include the following modifications.

As previously stated, CESA opposes the implementation of the MSOC proposal as currently drafted within the RA Enhancements Initiative. In this section, CESA puts forth several modifications the ISO must address of it decides to move forth with the MSOC requirement despite the reservations communicated by stakeholders.

• Update the RA Enhancements Draft Final Proposal to properly reflect the reservations stakeholders have regarding the MSOC requirement: CESA considers the current RA Enhancements Draft Final Proposal does not fully capture the type and magnitude of reservations communicated by stakeholders during the development of the MSOC requirement. Specifically, the ISO has not captured CESA’s and other stakeholders’ comments regarding the potentially discriminatory nature of this requirement, nor does it reflect the provision of alternative requirements by engaged parties.
• Include a sunset provision for December 31, 2021 and commit to develop a market-oriented solution within its forthcoming storage-focused initiative: CESA considers the MSOC proposal as currently drafted is incomplete and overlooks the need for urgent modifications to the ISO’s systems to properly operate storage assets. In this context, CESA appreciates the ISO commitment to institute a new storage-focused initiative in the upcoming weeks.[3] CESA believes this future initiative will be the adequate venue for the ISO and stakeholders to develop a permanent solution to the issues the MSOC proposal seeks to address. In order to guarantee this outcome and allow the ISO to implement an interim solution for this year’s summer, CESA recommends including a sunset provision to the MSOC proposal for December 31^st, 2021. CESA believes this provision will enable the ISO to manage immediate risks while communicating to stakeholders and investors this measure will not be permanent and shall be improved in the near term.
• Provide stakeholders with the data analyses on the different trigger conditions considered, to evaluate their impact and pertinence: If the ISO decides to move forward with its current MSOC proposal, CESA requests it shares detailed data analyses on the different trigger conditions staff has considered over the course of its development. As of February 2021, CESA has heard the ISO put forth at least three different trigger methodologies for the MSOC requirement; nevertheless, we have yet to see analyses that demonstrate the pertinence of said methods. CESA recognizes that the ISO has committed to share this information as part of the Final Proposal, and urges staff to do so expeditiously.[4] The lack of information related to the probability of the MSOC requirement to become binding for any given day seriously hinders stakeholders’ ability to provide substantial feedback on the methodologies considered by the ISO. In order to guarantee market participants have an adequate understanding of the new conditions they will face, the ISO must share this data in advance of the March Board of Governors meeting, where this proposal is set to be voted.
• Hold an additional stakeholder call within the RA Enhancements Initiative to timely incorporate stakeholder feedback prior to the March Board of Governors meeting: During the January 29^th Market Enhancements for Summer 2021 Readiness Q&A call, CESA noted that the current procedural schedule grants little time for stakeholders to offer substantial feedback on the proposal and ISO staff to incorporate said feedback prior to the March Board of Governors meeting. In order to mitigate this concern and ensure stakeholders are heard, CESA recommends the ISO schedule and additional stakeholder call under the RA Enhancements Initiative dedicated to the MSOC proposal.

[1] See LS Power, LS Power’s Comments on RA Enhancements Draft Final Proposal, filed January 21, 2021.

[2] See LS Power, LS Power’s Comments on the Market Enhancements for Summer 2021 Readiness Initiative, filed January 14, 2021.

[3] This was noted by Gabriel Murtaugh during the January 29^th Market Enhancements for Summer 2021 Readiness Q&A call.

[4] Ibid.

8. Provide your organization’s comments on the system market power mitigation topic as described in slides 37-38:

CESA offers no comment at this time.

9. Provide your organization’s comments on the other items considered in this initiative based on stakeholder feedback as described in slides 39-42:

CESA offers no comment at this time.

10. Provide your organization’s comments on the proposed EIM Governing Body role as described in slide 45:

CESA offers no comment at this time.

11. Additional comments on the Market Enhancements for Summer 2021 Readiness straw proposal:

CESA offers no comment at this time.

12. Provide your organization's suggestions for how to prioritize the topics included in the proposal:

CESA offers no comment at this time.

1. Provide a summary of your organization’s comments on the straw proposal:

Please see the following link for comments from the Department of Market Monitoring:

http://www.caiso.com/Documents/DMMCommentsonMarketEnhancementsforSummer2021Readiness-StrawProposal-Feb32021.pdf

2. Provide your organization’s comments on the export and load priorities topic as described in slides 7-15:

Please see item 1 for comments from the Department of Market Monitoring.

3. Provide your organization’s comments on the EIM coordination and resource sufficiency test review topic as described in slides 16-20:

Please see item 1 for comments from the Department of Market Monitoring.

4. Provide your organization’s comments on the import and export market incentives during tight system conditions topic as described in slides 21-25:

Please see item 1 for comments from the Department of Market Monitoring.

5. Provide your organization’s comments on the real-time scarcity price enhancements topic as described in slides 26-30:

Please see item 1 for comments from the Department of Market Monitoring.

6. Provide your organization’s comments on the reliability demand response dispatch and real-time price impacts topic as described in slides 31-33:

Please see item 1 for comments from the Department of Market Monitoring.

7. Provide your organization’s comments on the management of storage resources during tight system conditions topic as described in slides 34-36:

Please see item 1 for comments from the Department of Market Monitoring.

8. Provide your organization’s comments on the system market power mitigation topic as described in slides 37-38:

Please see item 1 for comments from the Department of Market Monitoring.

9. Provide your organization’s comments on the other items considered in this initiative based on stakeholder feedback as described in slides 39-42:

Please see item 1 for comments from the Department of Market Monitoring.

10. Provide your organization’s comments on the proposed EIM Governing Body role as described in slide 45:

Please see item 1 for comments from the Department of Market Monitoring.

11. Additional comments on the Market Enhancements for Summer 2021 Readiness straw proposal:

Please see item 1 for comments from the Department of Market Monitoring.

12. Provide your organization's suggestions for how to prioritize the topics included in the proposal:

Please see item 1 for comments from the Department of Market Monitoring.

1. Provide a summary of your organization’s comments on the straw proposal:

CAISO should address the bidding rules for proxy demand resources so they are dispatched prior to reliability demand response resources.  See the response to question 6 for more details.

CAISO should implement restrictions on charging of batteries during the times of Alerts, Warnings, and Stage 1-3 Emergencies. See the response to question 7 for more details.

2. Provide your organization’s comments on the export and load priorities topic as described in slides 7-15:

3. Provide your organization’s comments on the EIM coordination and resource sufficiency test review topic as described in slides 16-20:

4. Provide your organization’s comments on the import and export market incentives during tight system conditions topic as described in slides 21-25:

5. Provide your organization’s comments on the real-time scarcity price enhancements topic as described in slides 26-30:

6. Provide your organization’s comments on the reliability demand response dispatch and real-time price impacts topic as described in slides 31-33:

CLECA is concerned that CAISO is only focusing on the performance of Reliability Demand Response Resources (RDRR) and is ignoring improving the performance of Proxy Demand Resources (PDR).  Per the CAISO’s Department of Market Monitoring (DMM) Report on events on August and September,2020, the following occurred:[1] 

For August 14 delivery, out of 244 MW of supply plan DR, 48 MW were not bid into peak net load hours in the day-ahead market.[2].  Out of these 244 MW of supply plan DR for August, 133 MW were not bid into the day-ahead market for August 15 delivery.  Furthermore, only about 53% of supply plan DR was available to the CAISO on August 15. 

Real-time availability was worse.  On August 14 there was 53 MW less capacity available in real-time compared to day-ahead and on August 15 there was 30 MW less available in real-time compared to day-ahead. The majority of supply plan PDR that did not bid into the market is less than 1 MW so it is exempt from resource adequacy availability incentive mechanism (RAAIM).

On August 14 in hours ending 19 and 20, about 50% of supply plan DR was dispatched by the CAISO and on August 15, during those hours, only about 25% of supply plan DR was dispatched.  None was manually dispatched despite the manual dispatch of RDRR.[3]  DMM stated contributing factors were the use of $1000/MWh bid cap offers and the use of start-up bids and minimum load costs resulting is resources being uneconomic in the day-ahead market.

All PDR should be dispatched before RDRR.  Since RDRR bids between 95-100% of the bid cap, the bid cap for PDR should be set at 94% of the maximum bid price.  The CAISO should also consider removing start-up bid parameters for PDR to prevent them being used as a tool to increase the bid cost further and which can result in its dispatch after RDRR resources.  The CAISO should also investigate how it can improve the exceptional dispatch of PDR prior to exceptional dispatch of RDRR.

The CAISO should also consider the proposals for supply plan demand response resources listed in the DMM report:

1. The ISO should be able to manually dispatch supply plan demand response before needing to resort to exceptional dispatch of non-resource adequacy capacity and firm load curtailment. The ISO has the ability to manually dispatch utility demand response and did so on high load days in August and September.

2. Consider removing the exemption for long-start proxy demand response to be available in the residual unit commitment process. This exemption does not exist for other types of long-start resources providing resource adequacy.

3. Continue to review why demand response resources in the same sub-lap continue to be sized less than 1 MW. Consider applying RAAIM to demand response resource adequacy capacity at the demand response provider and sub-lap level rather than the resource level to ensure this capacity remains exposed to resource adequacy availability incentives.[4]

The CAISO should provide more detail on what changes the CAISO will be making to expected performance of Reliability Demand Response Resources the Load Forecast Adjustment as mentioned on slide 32.[5]

CAISO’s proposal to have scheduling coordinators spread the bids of RDRR between $950-1000 is problematic because it involves equity issues among participating customers.[6]  For the Base Interruptible Program, which consists of relatively few customers with very large loads, spreading the bids means that some customers could be dispatched more than other customers.  This would result in equity issues among customers that receive the same incentive.  This is an issue that would need to be resolved prior to implementation.  CLECA does not believe there is sufficient time to resolve this before Summer 2021, and this aspect of the proposal should be dropped.

[1] CAISO DMM, (November 24, 2020) Report on System and Market Conditions, Issues and Performance: August and September 2020  at 55-56.

[2] Most of the supply plan DR is proxy demand resources.

[3] CAISO DMM, (November 24, 2020) Report on System and Market Conditions, Issues and Performance: August and September 2020  at 56.

[4] CAISO DMM, (November 24, 2020) Report on System and Market Conditions, Issues and Performance: August and September 2020 at 60.

[5] CAISO, (Jan 27, 2020) Market Enhancements for 2021 Summer Readiness, Slide 32.

[6] CAISO, (Jan 27, 2020) Market Enhancements for 2021 Summer Readiness, Slide 33.

7. Provide your organization’s comments on the management of storage resources during tight system conditions topic as described in slides 34-36:

Batteries were charging during Stage 2 and Stage 3 Emergencies or during the times when Reliability Demand Response Resources were utilized.  This occurred five times on August 14-15, August 18, and September 5-6.  (See attachment A which shows the battery operation chart from the CAISO website with the times of Warnings, Stage 2, and Stage 3 events.)  It does not make sense for batteries to charge during times when customers are on rotating outage (August 14) or when the CAISO has, or anticipates having, insufficient operating reserves, resulting in activation of which RDRR. The optimization may be producing dispatch anomalies that do not make sense during conditions when the system is unable to maintain the necessary number of operating reserves.  The final root cause analysis report does not address this issue. 

While CLECA supports improvements to encourage storage to have sufficient charge during periods of resource need, it is not clear the CAISO’s proposal will actually prevent a reoccurrence of what happened last year.  With 1700 MW of batteries expected for summer 2021, there need to be changes so that the storage can be sure to resolve shortfalls, not contribute to resource shortfalls.  There should be a set of rules that apply just during periods of stress on the electrical grid.  CLECA recommends the following rules:

• When a Grid Alert occurs (which forecasts by 3 pm the day before of operating reserve deficiencies), storage will not be given day-ahead awards to charge from the grid during specified times of expected reserve deficiency.
• When a Warning is called, Storage is not allowed to charge from the grid and prior dispatch awards for charging are canceled.  If charging from the grid does occur without a dispatch instruction there is a penalty charged.
  • An exception is made for a manual (exceptional) instruction from the grid operator; this would waive any penalty
• During any Stage Emergency storage is not allowed to charge from the grid. If storage charges from the grid it is subject to a penalty.

CLECA believes this set of rules will offer several benefits to prevent storage from contributing to resource shortfall.  With a day-ahead notice that storage is not permitted to charge during certain hours, the operator can change its real-time bidding strategy to charge outside the restricted hours.  The prohibition to charging during Warnings and Stage Emergencies will prevent any market anomalies that contribute to operating reserve shortfalls instead of resolving shortfalls.  Yet, there should be a manual (exceptional) dispatch provision for operators in case there is some unusual reason for the grid operator to request some storage to charge, with no penalty. 

8. Provide your organization’s comments on the system market power mitigation topic as described in slides 37-38:

9. Provide your organization’s comments on the other items considered in this initiative based on stakeholder feedback as described in slides 39-42:

10. Provide your organization’s comments on the proposed EIM Governing Body role as described in slide 45:

11. Additional comments on the Market Enhancements for Summer 2021 Readiness straw proposal:

12. Provide your organization's suggestions for how to prioritize the topics included in the proposal:

1. Provide a summary of your organization’s comments on the straw proposal:

2. Provide your organization’s comments on the export and load priorities topic as described in slides 7-15:

3. Provide your organization’s comments on the EIM coordination and resource sufficiency test review topic as described in slides 16-20:

4. Provide your organization’s comments on the import and export market incentives during tight system conditions topic as described in slides 21-25:

5. Provide your organization’s comments on the real-time scarcity price enhancements topic as described in slides 26-30:

6. Provide your organization’s comments on the reliability demand response dispatch and real-time price impacts topic as described in slides 31-33:

7. Provide your organization’s comments on the management of storage resources during tight system conditions topic as described in slides 34-36:

8. Provide your organization’s comments on the system market power mitigation topic as described in slides 37-38:

9. Provide your organization’s comments on the other items considered in this initiative based on stakeholder feedback as described in slides 39-42:

10. Provide your organization’s comments on the proposed EIM Governing Body role as described in slide 45:

11. Additional comments on the Market Enhancements for Summer 2021 Readiness straw proposal:

12. Provide your organization's suggestions for how to prioritize the topics included in the proposal:

1. Provide a summary of your organization’s comments on the straw proposal:

First, do no harm.  The scale and scope of CAISO proposed initiatives is impressive.  Implementing a fraction of the proposals will require significant dedication on both the part of the CAISO and its vendors, but also significant effort on the part of market participants.  In fact, the CAISO can create a platform for reliability and market confidence by winnowing this list early and applying uncommon diligence to understanding programmatic interactions, software testing, market simulations and roll-out preparedness. 

The CAISO may be exposed to challenging market conditions this summer driven by exogenous climate factors. In the past, the CAISO has recognized that reliability risks can be amplified by unintended consequences as well as “bugs” embedded in new operational systems software.  As such, it has avoided software changes during or near summer peak conditions.  Nonetheless, the CAISO appears to be headed to major software drops and or activations in June, and possibly on August 1, at the height of summer.  The CAISO may not be able to avoid the challenges of a hot summer, but it can avoid the self-inflicted harm of attempting to do too much at the wrong time and with too little preparation. 

With that, Calpine recommends that the CAISO prioritize the following initiatives to be implemented as soon as possible before summer.    We base our priorities on our own perception of implementation difficulty as well as the need to address real and present danger to reliability or irreparable harm.   All other proposals can and should be pursued diligently, but implemented, as needed, after this summer.

• Modify and rationalize the priority for intertie transactions including wheel-through, exports, loads and imports.
• Consider bid-assurance for HASP imports, coupled with transparency and limits on operator load bias.
• Move RDRR into the 15 minute market and bias the cleared load to avoid price suppression.

We strongly discourage any changes that affect market optimization, scheduling or dispatch on August 1 or anytime during the summer/fall peak period.

2. Provide your organization’s comments on the export and load priorities topic as described in slides 7-15:

As one of the highest priorities, Calpine supports the realignment / clarifications of scheduling priorities identified in the presentation.  Rationalizing the treatment of wheels-through, exports, imports and load is absolutely critical to the CAISO obtaining the incremental energy it needs to support reliable operations. 

We agree with commenters that the CAISO must specifically define “non-RA capacity” that can be used to support the higher priority for PT exports.  It seems the intent is that non-RA capacity is NQC of an internal resource that is not submitted on any RA supply plans.

3. Provide your organization’s comments on the EIM coordination and resource sufficiency test review topic as described in slides 16-20:

Calpine supports modifications, if administratively feasible, to rationalize the quantities demanded or supplied in the resource sufficiency tests.  In the longer term, we support modifications such as those proposed by Powerex and WPTF to create scarcity prices when a BAA test reveals capacity insufficiency.  This can be consider as part of the holistic review of scarcity pricing proposed by the CAISO.   

4. Provide your organization’s comments on the import and export market incentives during tight system conditions topic as described in slides 21-25:

With caveats regarding operator load biasing incentives, Calpine supports the proposal to grant bid assurances to HASP imports during tight market conditions. 

The CAISO eliminated BCR for HASP imports in about 2012 as it implemented FERC Order 764.  The CAISO’s intention was to eliminate BCR in order to avoid a disincentive to 15 minute scheduling at the interties. Nonetheless, the volume of 15 minute intertie scheduling has never met expectations and the absence of BCR continues to place significant risk on hourly intertie transactions.  This risk discourages intertie bids – which are generally required for reliability, particularly during stressed system conditions.

The risk is manifest in the difference between HASP (hourly) and FMM (15-minute) pricing.  Intertie transactions are confirmed in the hourly market, based on hourly bids, but settled at the 4 individual FMM prices.  Under normal conditions, one would not anticipate substantial price difference given the close sequential clearing of these markets.  However, because they lack confidence in other market products (specifically, but not isolated to ineffective Flexible Ramping awards), the CAISO grid operators substantially increase (bias) the load forecasts in HASP – increasing the demand for HASP cleared imports and subsequently reducing the demand for FFM capacity.  

The resulting higher prices in HASP are of course applied to imports – and would be assured by BCR -- but those prices are not available to internal resources.  This discriminatory access to a preferred market should be eliminated over time, but given the exigent circumstances Calpine understands the CAISO’s desire to eliminate the disincentive to import bidding during tight system conditions. 

While paying ALL resources (including internal resources) the higher-of HASP or FMM would resolve this discrimination, Calpine assumes that such a fundamental change might create implementation infeasibility as well as unintended consequences. 

Rather, Calpine asks that if the CAISO moves forward with this proposal that the CAISO report, in a transparent matter, and as close to RT as possible, the amount and direction of load biasing performed by the CAISO operators.  While this may not reduce market intrusion necessary for reliability, the transparency could create a discipline on overly-conservative actions that harm price formation. 

5. Provide your organization’s comments on the real-time scarcity price enhancements topic as described in slides 26-30:

The CAISO proposes two modifications that it coins “scarcity pricing” and proposes to implement concurrently with its system market power mitigation mechanism. The CAISO proposes that this “balanced approach” would be activated on August 1^st. 

First, Calpine disagrees with the characterization that the implementation of the two proposed “scarcity” modifications in any significant way “balances” the ubiquitous, and continuous imposition of system market power mitigation.  The two scarcity proposals would only be triggered when the CAISO is in a dire circumstance (either SMEC over $800 or load shedding is “armed”) and even then, their impacts on price formation are entirely speculative due to likely contemporaneous factors.  On the other hand, the evaluation of system market power would apply to every internal resource during every interval of the entire year.  Calpine urges the CAISO to once again commit to a holistic review of scarcity pricing and not presume that the largely toothless proposals it puts forward here are a sufficient replacement for a more comprehensive review. 

Second, with respect to the specific scarcity proposals, Calpine can support implementation so long as they do not deter from other more important initiatives and as long as the CAISO restates its commitment to a holistic review of scarcity pricing. 

The first proposal suggests that if DA SMEC is $800 or other conditions are met, the pricing parameters in RT would be raised to or above the hard bid cap. The possible increase in pricing parameters above the hard cap was mentioned in the discussion, but not included in the presentation materials.  Since these speculative proposals have a direct and consequential influence on market confidence, expectations and near term hedging, the CAISO must either dispel this possibility or provide details of the proposal immediately.

There has been no detailed discussions of how this proposal may interact with Order 831 Enhancements, SMPM, or how these proposed systemic differences in DA-RT price expectations would affect virtual bidding incentives.  Nonetheless, one might reasonably conclude that this new trigger for higher pricing parameters is likely over shadowed and subsumed by triggers in the 831 Enhancements proposal – for example, the maximum import bid screen -- making this proposal ineffectual and unnecessary.

The second proposal would set prices at the bid cap (either soft or hard cap, depending on circumstances) whenever the CAISO has run short of reserves, is on the verge of blackouts, and therefore must “arm” load shedding as a contingency reserve.  The CAISO presentation does not describe the duration of this proposed administrative pricing – that is, whether the price would be set at the cap for a single interval, or as Calpine would propose, for the duration of “arming’ and any subsequent load drop. 

Calpine’s tepid support for these measures is driven by the fear that the CAISO may conclude that they have done enough – that the measures are sufficient (albeit ineffective) to (1) deem the proposal “balanced” with SMPM or (2) avoid or significantly defer consideration of a more holistic review of scarcity and price formation. 

6. Provide your organization’s comments on the reliability demand response dispatch and real-time price impacts topic as described in slides 31-33:

The joint report on the events of the summer 2020 blackouts observed that RDRR was “manually dispatched” on several, if not all occasions.  The unstated, but logical conclusion of manual dispatch is that RDRR, (as well as PDR) did not set or affect prices.  Ironically, rather than raise price, the manual dispatches of load curtailments most likely had the effect of suppressing prices as the load reductions softened demand. 

In part, the need for manually dispatching RDRR is attributed to the fact that RDRR is not included in the 15-minute pre-dispatch runs (RTPD) and does not generate start-up instructions.  The CAISO proposes to correct this by allowing RDRR to be dispatched in RTPD and carry through to each of the succeeding 3, 5-minute RTD periods.  Calpine supports this change.

Calpine also supports the process of load-biasing to avoid the double-counting of DR.  That is, it appears that when DR supply is dispatched up, telemetered data also shows a demand reduction.  Counting a single action with both a supply response and a demand response would have the outcome of reducing prices rather than reflecting an accurate representation of marginal cost.   The CAISO indicates that to solve this, operators will inject a positive load bias coincident with demand reductions.  While Calpine seeks much more detailed discussion of how much and when this biasing occurs, we support this correction to support proper price formation.  Additionally, we support further analysis of historic performance of DR programs as well as a critical review of the crediting processes performed at the CPUC. 

However, Calpine has remaining concerns about the durability of price signals created by load interruptions.  On one hand, if the load biasing is performed for the duration of the DR dispatch prices could reasonably reflect the appropriate marginal cost of shedding load.  However, if load biasing lasts only the initial or a few intervals, prices may only sporadically represent those true costs.   As such, perhaps the CAISO could revisit the application of fast-start (or constrained-output generation) modeling to DR supply resources.  In essence, these programs model resources as if they are fully dispatchable, and able to set LMP for the full duration of dispatch. 

7. Provide your organization’s comments on the management of storage resources during tight system conditions topic as described in slides 34-36:

Calpine would set a fairly low priority on implementing a state-of-charge constraint prior to the summer of 2021.  However, we understand the CAISO’s concern that a storage device must be positioned to meet a DA award, especially during tight conditions.  As such, Calpine would not object if the CAISO and its consultants have the bandwidth to build, test and implement this scaled down proposal. 

8. Provide your organization’s comments on the system market power mitigation topic as described in slides 37-38:

Calpine objects to the implementation of SMPM, especially in the middle of the summer. 

The CAISO has presented no evidence that market power has been exercised by the resources that would be targeted by this proposal (i.e., internal generation).  In fact, the ISO appropriately suspended action on this initiative in November pending further demonstrations of need.  The cryptic and unsupported rebirth of the initiative presents no further evidence which would compel a rushed implementation of a potentially transformative policy.

The CAISO’s own analysis concluded that SMPM would have triggered in a majority of the intervals during the summer tight conditions. These triggers could have resulted in false-positive indications of market power, mitigated bids and lowered prices when the CAISO’s need to attract imports was at its peak. Alternatively, or possibly concurrently, mitigated bid prices from internal resources coupled with operator fears of inadequacy could cause aggressive biasing of the HASP load forecast, favoring imports and as described above, putting further downward pressure on the 15 and 5 minute mitigated prices applicable to internal generation. 

Calpine recommends that the CAISO consider implementation of SMPM at a later date (and certainly not in the middle of the summer) after the interactions of SMPM, Order 831 and the prospective implementation of scarcity pricing can be evaluated with due diligence and any unintended interaction and consequences can be discovered and addressed.  Only this would be a truly balanced approach to implementation. 

9. Provide your organization’s comments on the other items considered in this initiative based on stakeholder feedback as described in slides 39-42:

The CAISO has not provided any evidence or cause to modify the provisions of RAAIM.  Such evidence should be presented and evaluated before consideration of changes.  For example, changing RAAIM assessment hours could be a time-consuming and complicated endeavor, distracting programming and vendor time.  Given the higher relative priorities of other initiatives, this proposal should be dropped – only to reemerge if and when specific problems can be identified.  And then, the CAISO should consider whether RAAIM is appropriately structured (if in fact, UCAP efforts are unsuccessful).  Eastern markets have used much stronger performance incentives, such as New England’s Pay-for-Performance mechanisms. 

Additionally, RAAIM should not be changed in the middle of an RA cycle.  Parties have made decisions to sell/buy, or not sell/not buy NQC based on current penalty structures.  Any modifications should only be made prospectively and for the next (2022) RA cycle.

10. Provide your organization’s comments on the proposed EIM Governing Body role as described in slide 45:

No Comment

11. Additional comments on the Market Enhancements for Summer 2021 Readiness straw proposal:

No Comment

12. Provide your organization's suggestions for how to prioritize the topics included in the proposal:

As stated in the summary, above, Calpine recommends that the CAISO prioritize the following initiatives to be implemented as soon as possible before summer.    We base our priorities on our own perception of implementation difficulty as well as the need to address real and present danger to reliability or irreparable harm.   All other proposals can and should be pursued diligently, but implemented, as needed, after this summer.

• Modify and rationalize the priority for intertie transactions including wheel-through, exports, loads and imports.
• Consider bid-assurance for HASP imports, coupled with transparency and limits on operator load bias.
• Move RDRR into the 15 minute market and bias the cleared load to avoid price suppression.

1. Provide a summary of your organization’s comments on the straw proposal:

In addition to the comments in the paragraphs below, which mirror those submitted by the EIM Entities, Salt River Project (SRP), Arizona Public Service (APS), Tucson Electric Power (TEP), and NV Energy (NVE) would like to highlight concerns with the CAISO proposed reprioritization of loads and exports. The reprioritization results in a significant modification to previous scheduling priorities and is being done on an extremely tight timeline.  The modifications as proposed can directly impact the ability of Desert Southwest load serving entities to import power contracted to serve load.  SRP, APS, TEP, and NVE contract for energy with the Northwest, whether for resource adequacy, month ahead, day ahead or bilateral trades.  With the proposed reprioritization of exports and loads for next summer, firm energy purchased from the Northwest could be curtailed by the CAISO to address the insufficient supply within its own Balancing Authority Area (BAA), leaving the Southwest short.

2. Provide your organization’s comments on the export and load priorities topic as described in slides 7-15:

The Commenters appreciate and support the CAISO’s proposal to modify scheduling priorities to better align CAISO’s priority practices with those of other Balancing Authorities (BAs) across the West.  By establishing Price Taker (PT) Exports as a primary priority within the Day Ahead and Real-Time market runs, CAISO would help to ensure that it does not inadvertently transfer any reliability issues it may face to other BAs across the West. 

However, in proposing to differentiate Residual Unit Commitment (RUC) exports without generation, CAISO’s proposal fails to consider how curtailment of generation originating outside of its BAA, transported through the CAISO BAA, and delivered to another BAA for firm load (wheel-through generation) would be consistent and aligned with practices and protocols across other utilities in the West.  SRP, APS, TEP, and NVE are significantly concerned with the CAISO’s proposal to lower the priority of wheel-through schedules in favor of CAISO Resource Adequacy schedules in the RUC process. Such an approach would be inconsistent with practices and protocols across other utilities in the West and would likely pass along reliability issues from CAISO to Desert Southwest entities.  Throughout the West, wheel-through transactions are afforded the same opportunity to acquire and use firm transmission service to deliver energy from one BA to another as import transactions, and BAs are unable to selectively de-prioritize and/or curtail wheel-through schedules to address a supply shortfall in their own BAA.  This concept is also reflected within the EIM, where some entities experience a significant volume of wheel-through transactions across their areas.  When an EIM Entity BA fails to pass relevant sufficiency tests, net imports or net exports to and from that BA are frozen, but wheel-through transactions can continue unaffected.  This reflects the principle of not passing along issues from a deficient EIM participant to other participants.  In lacking consistency, it is clear that CAISO wishes to have it both ways – limiting wheel through when it is detrimental for its own system, but establishing rules to ensure wheeling is fundamentally available through other BAAs when it is beneficial to CAISO. This is a particular concern in light of CAISO’s own challenges in meeting EIM sufficiency tests and its dependence upon wheel-through itself within the EIM environment.

CAISO’s proposal is problematic in two ways.  First, CAISO’s proposal does not consider the many opportunities and competitive practices that occur in a forward environment.  Load serving entities across the west routinely compete for forward products to ensure resource adequacy needs are met.  Competitive processes exist for capacity and energy in the forward markets and allow entities to ensure deliverability attributes and firmness of transmission.  Such products often come at a premium price in the marketplace due to the deliverability attributes – load serving entities all across the Western Interconnection willingly compete in these processes. CAISO’s proposal would fundamentally upend competitive practices for energy and capacity across the West.  SRP, APS, TEP, and NVE view the congestion issues faced by CAISO as resulting from deficiencies of forward products procured by load serving entities within CAISO, and such entities should further consider the deliverability of the product and not merely the economics of the product. 

The second manner in which CAISO’s proposal to deprioritize RUC without generation is problematic is that it is likely to result in fundamentally affecting the products, priorities, and customers of other transmission service providers.  For example, if CAISO were to curtail a wheel-through generation import provided by an entity with firm point-to-point transmission up to CAISO’s BAA in favor of generation supply with lesser non-firm transmission rights (such as Hourly or Daily Service), CAISO will have materially affected the priority and product firmness of the transmission service provider adjacent to CAISO’s BAA, potentially overriding established North American Electric Reliability (NERC) Transmission Service Priorities^[1] as well as the Open Access Transmission Tariff priorities established by the transmission provider for CAISO’s own benefit and priority.

Such an action would upend current transmission pricing and products, as well as substantially disincentivize long-term investment in transmission if an entity could no longer ensure the service offered and sold is fundamentally met.  In addition, it creates questions of reciprocity and fairness, as open access and fair treatment requirements would substantially limit a transmission provider’s ability to modify its product offerings as result of these changes.

The changes CAISO has proposed should not take place at the last minute through a rushed process that will materially affect planning processes across the West, but rather should be engaged through a more robust stakeholder process where notifications and timing can better fit broader planning efforts in the West.

[1] https://www.nerc.com/pa/rrm/TLR/Pages/Transmission-Service-Reservation-Priorities-.aspx

3. Provide your organization’s comments on the EIM coordination and resource sufficiency test review topic as described in slides 16-20:

4. Provide your organization’s comments on the import and export market incentives during tight system conditions topic as described in slides 21-25:

5. Provide your organization’s comments on the real-time scarcity price enhancements topic as described in slides 26-30:

6. Provide your organization’s comments on the reliability demand response dispatch and real-time price impacts topic as described in slides 31-33:

7. Provide your organization’s comments on the management of storage resources during tight system conditions topic as described in slides 34-36:

8. Provide your organization’s comments on the system market power mitigation topic as described in slides 37-38:

9. Provide your organization’s comments on the other items considered in this initiative based on stakeholder feedback as described in slides 39-42:

10. Provide your organization’s comments on the proposed EIM Governing Body role as described in slide 45:

11. Additional comments on the Market Enhancements for Summer 2021 Readiness straw proposal:

12. Provide your organization's suggestions for how to prioritize the topics included in the proposal:

1. Provide a summary of your organization’s comments on the straw proposal:

EDF-Renewables appreciates the CAISO’s expedited effort to ensure reliability for summer 2021.

EDF-R opposes the RA Enhancements Minimum State of Charge (MSOC) proposal for energy storage resources.  EDF-R does not believe the CAISO has demonstrated a need for such a blunt and restrictive market action and believes the best way to ensure generation resources perform is to send proper price signals.  EDF-R would prefer an effort to enhance market price signals to incent generation to be available when needed. 

EDF-R especially opposes the MSOC proposal when taken together with the scarcity pricing proposal in this summer 2021 effort.  The MSOC is designed to ensure battery storage resources are available to meet their day-ahead schedule.  But generation schedules change from day-ahead to real-time all the time across generation types.  It is discriminatory that one resource type, storage, may not have the benefit of responding to higher real-time price signals under scarcity pricing conditions.  This is not in the spirit of wholesale market design.

CAISO must narrow the summer 2021 effort and focus time, energy, and resources on things that are feasible for summer 2021 and that will address the issues identified in the final root cause analysis- demand which exceeded existing RA targets, planning targets that have not kept pace to ensure sufficient resources to meet demand in the early evening hours, and some day-ahead market practices which exacerbated the supply challenges under highly stressed conditions. After multiple stakeholder calls over the last two weeks, it is apparent CAISO is pursuing a collection of disparate efforts some of which lack basic consensus.  Meetings have gone long and not all stakeholders have had a chance to ask their questions.  EDF-R believes CAISO should quickly eliminate topics that are non-starters due to time and complexity such as the EIM coordination and resource sufficiency evaluation, import and export market incentives during tight system conditions, real-time scarcity pricing, and system market power mitigation.  This pruning is critical to making sure that there is sufficient time for all commenters to be heard in the next stakeholder meeting.[1]

CAISO should also publish a paper in the likeness of a draft final proposal on the remaining proposals in this initiative.  The presentation format was an efficient way to generate stakeholder engagement on a short-term basis.  Now we are getting to the mature stage of these proposals but without any reference material except for a few bullets on a slide.  The lack of written discussion coupled with the inability to ask questions at stakeholder meetings warrants, at a minimum, more detail in writing.  As of February 1, the videos from Jan 27^th and Jan 29^th meetings were not posted online to review.  If a stakeholder were to want to review the CAISO’s discussion for comments due February 3^rd one would have to go off a few bullet points on a slide and memory from the call. This is perhaps an extreme example but highlights the critical nature of having these proposals in writing for fair review. For the same reasons, EDF-R also requests the CAISO publish a stakeholder comments matrix to demonstrate that comments and suggestions have been duly considered. 

EDF-R requests a representative from the CAISO Project Management Office (PMO) present a comprehensive list of what projects are in the queue, from which initiative, and the timeline for implementation.  EDF-R makes this request because it seems CAISO has a variety of items planned for MAP stage deployment, and, we are concerned about what is within the realm of the possible for IT implementation by summer 2021.  EDF-R believes this communication from the PMO during the Market 2021 meeting is very important as a way of demonstrating that the CAISO is internally aligned for this large lift and short development timeline across all its divisions -- from policy design through IT implementation.  Also please clarify the planned MAP Stage deployment date.

• • RAAIM changes
  • RDRR
  • MSOC
  • Export and load priorities
  • Import and export incentive
  • New OASIS report showing gross exports and imports by intertie 
  • Independent study interconnection enhancements
  • FERC Order 831

[1] Example of a previous stakeholder comments matrix:

http://www.caiso.com/Documents/CommentsSummary-RegionalResourceAdequacy-DraftRegionalFrameworkProposal.pdf

2. Provide your organization’s comments on the export and load priorities topic as described in slides 7-15:

EDF-R requests CAISO provide detailed and careful tariff definitions for the terms (1) non- Resource Adequacy capacity and (2) supporting resource. 

3. Provide your organization’s comments on the EIM coordination and resource sufficiency test review topic as described in slides 16-20:

None

4. Provide your organization’s comments on the import and export market incentives during tight system conditions topic as described in slides 21-25:

None

5. Provide your organization’s comments on the real-time scarcity price enhancements topic as described in slides 26-30:

EDF-R supports market prices reflecting market conditions and appreciates the CAISO intention behind the real-time scarcity price enhancements.  

EDF-R is very concerned about possible adverse pricing impacts to battery storage resources and cannot support this proposal when coupled with the RA Enhancements Minimum State of Charge (MSOC) proposal for battery storage resources. The MSOC proposal was crafted to ensure battery storage resources are available to meet their day-ahead schedule.  But, the day-ahead schedule may differ from real-time conditions, especially in special weather and market situations like those encountered last August.  Under the MSOC proposal a battery resource would be restricted from responding to real-time conditions and excluded from accessing the high real-time prices.  Not only is this potentially inefficient market dispatch, but this is also discriminatory to one resource type.  

EDF-R requests that the CAISO explicitly renew its commitment to undertake the proposed Scarcity Pricing stakeholder initiative this summer and appreciates CAISO’s clarification on the January 27^th call that the scarcity pricing proposal in this initiative is not meant to replace the stakeholder initiative planned for this summer. 

6. Provide your organization’s comments on the reliability demand response dispatch and real-time price impacts topic as described in slides 31-33:

None

7. Provide your organization’s comments on the management of storage resources during tight system conditions topic as described in slides 34-36:

EDF-R reiterates it supports a reliability-via-markets approach where possible.  Where energy storage resources are uniquely suited to solve supply problems, they should be compensated for doing so, rather than being corralled into forgoing revenue opportunities as would happen with the RA Enhancements Minimum State of Charge (MSOC) proposal.  And, CAISO has not demonstrated with empirical evidence that economic signals alone are insufficient to appropriately position storage or hybrid generators. 

EDF-R continues to oppose the MSOC proposal in the CAISO’s RA Enhancements draft final proposal because it limits battery storage generators wholesale market participation.  Currently, the MSOC proposal would apply restrictions to storage when traditional resources cannot meet demand. 

If the CAISO insists that some form of generator command measure is needed to prevent future blackouts, then the proposal should be generator attribute driven so that they apply to all resources uniformly (use-limited resources, for example) rather than being specifically and only applicable to battery storage. EDF-R believes that storage resources are no less predictable than “traditional generation” nor are battery storage resources specifically responsible for causing or solving supply problems.  

CAISO has not provided data to support the proposal that battery storage resources must be restricted in the market.  The joint agencies final root cause analysis report states that during the mid-August 2020 events and early September 2020 events there were approximately 200MW of RA battery storage resources in the CAISO market but it was difficult to draw specific conclusions about the fleet performance.  The report also states CAISO would work with storage providers to effectively incentivize and align storage charge and discharge behavior with the reliability needs of the system.  Again, CAISO has provided no supporting evidence to suggest battery storage resources do not respond appropriately to price signals and optimize charge and discharge based on day-ahead awards and real-time price signals. 

EDF-R requests more information about the proposed AGC algorithm changes to ensure regulation dispatch does not overly deplete storage resources.  On both the January 27^th and January 29^th call, the storage proposal piece was rushed towards the end of each call.  Stakeholders have not been given adequate time or information to address this piece of the proposal.  It would be very helpful to have a straw proposal in writing to have any greater sense of what is actually being proposed.

8. Provide your organization’s comments on the system market power mitigation topic as described in slides 37-38:

EDF-R believes it is important to develop and implement market changes that will make an impact for summer 2021, and it isn’t abundantly clear system market power mitigation (SMPM) is needed in the market or is going to make the impact necessary for summer 2021 readiness.  EDF-R understands this proposal is in partnership with the idea of increasing scarcity prices in the real-time market and the concern of increased incentives to exert market power and benefit from higher prices. 

CAISO has not demonstrated market power to be an issue in the CAISO market even under the idea of increased scarcity prices in the real-time market.  On the Friday, January 29^th call CAISO stated CAISO hasn’t seen anything that would have immediately triggered review and an implementation of changes to market power mitigation.  EDF-R requests supporting data and analysis to show this is really an issue. 

Additionally, CAISO has DMM to review market performance.  Has DMM indicated this is an issue?  EDF-R sees DMM as the answer to any market power concerns for summer 2021.

We have limited time and resources to focus on market changes to make an impact for summer 2021 and EDF-R does not believe SMPM is an efficient use of time and resources based on the fact the CAISO has the DMM in place to investigate market power and CAISO hasn’t show market power to be an issue to this point.

9. Provide your organization’s comments on the other items considered in this initiative based on stakeholder feedback as described in slides 39-42:

EDF-R supports a new OASIS report showing gross exports and imports by intertie and appreciates CAISO’s effort at increased transparency.  

EDF-R also supports independent study interconnection enhancements which will apply to a limited set of projects which will provide LSEs the potential to procure additional available RA capacity for summer of 2021.

10. Provide your organization’s comments on the proposed EIM Governing Body role as described in slide 45:

None

11. Additional comments on the Market Enhancements for Summer 2021 Readiness straw proposal:

CAISO must narrow the summer 2021 effort and focus time, energy, and resources on things that are feasible for summer 2021 and that will address the issues identified in the final root cause analysis- demand which exceeded existing RA targets, planning targets that have not kept pace to ensure sufficient resources to meet demand in the early evening hours, and some day-ahead market practices which exacerbated the supply challenges under highly stressed conditions. After multiple stakeholder calls over the last two weeks, it is apparent CAISO is pursuing a collection of disparate efforts some of which lack basic consensus.  Meetings have gone long and not all stakeholders have had a chance to ask their questions.  EDF-R believes CAISO should quickly eliminate topics that are non-starters due to time and complexity such as the EIM coordination and resource sufficiency evaluation, import and export market incentives during tight system conditions, real-time scarcity pricing, and system market power mitigation.  This pruning is critical to making sure that there is sufficient time for all commenters to be heard in the next stakeholder meeting.

CAISO should also publish a paper in the likeness of a draft final proposal on the remaining proposals in this initiative.  The presentation format was an efficient way to generate stakeholder engagement on a short-term basis.  Now we are getting to the mature stage of these proposals but without any reference material except for a few bullets on a slide.  The lack of written discussion coupled with the inability to ask questions at stakeholder meetings warrants, at a minimum, more detail in writing.  As of February 1, the videos from Jan 27^th and Jan 29^th meetings were not posted online.  If a stakeholder were to want to review the CAISO’s discussion for comments due February 3^rd one would have to go off a few bullet points on a slide and memory from the call. This is perhaps an extreme example but highlights the critical nature of having these proposals in writing for fair review. 

If CAISO will not publish a paper, EDF-R requests, at a minimum, publishing a comments matrix to understand the CAISO’s proposal and where stakeholders stand on issues. It is apparent from stakeholder conferences there are a range of feelings on each topic and this should be clear and in writing as these efforts charge ahead. 

EDF-R requests the PMO present a comprehensive list of what projects are in the queue, from which initiative, and the timeline for implementation.  EDF-R makes this request because it seems CAISO has a variety of items planned for MAP stage deployment, and, we are concerned about what is within the realm of the possible for IT implementation by summer 2021.  EDF-R believes this communication from the PMO during the Market 2021 meeting is very important as a way of demonstrating that the CAISO is internally aligned for this large lift and short development timeline across all its divisions -- from policy design through IT implementation.  Also please clarify the planned MAP Stage deployment date.

• • RAAIM changes
  • RDRR
  • MSOC
  • Export and load priorities
  • Import and export incentive
  • New OASIS report showing gross exports and imports by intertie 
  • Independent study interconnection enhancements
  • FERC Order 831 

12. Provide your organization's suggestions for how to prioritize the topics included in the proposal:

1. Provide a summary of your organization’s comments on the straw proposal:

Idaho Power Company appreciates the opportunity to comment on the outline of CAISO’s proposed market design changes to be implemented prior to the summer of 2021. Given the challenges of last summer, Idaho Power understands the CAISO’s desire to make targeted changes to market rules to improve performance during the upcoming peak season. However, Idaho Power is concerned that the speed of this initiative may limit CAISO’s and stakeholders’ ability to thoroughly vet the proposals.  With the complex nature of the CAISO’s markets and the extremely tight timeframe for this initiative, any expedited changes should be changes that are able to be thoughtfully vetted in the time available. Idaho Power offers three general recommendations:

1. Any proposed revisions must consider not only the impact on the CAISO BAA, but also the effects on the EIM and the broader Western market. The continued integration of the western market is a vital component of achieving decarbonization goals at reasonable cost. Improvements should foster that integration.

2. Any changes should be foundational to the EDAM and other future market enhancements. The Summer 2021 initiative should not proceed with changes that will need to be reconsidered, or worse, undone, as part of an EDAM, as that would likely delay broader market improvements.

3. Any significant or potentially controversial market design changes should be reflected in tariff changes and reviewed by FERC.  The CAISO should not make major market design changes through modifications to procedures or BPMs without a tariff change reviewed by FERC. Under the Commission’s “rule of reason” actions that “significantly affect rates and services” fall within the directive of section 205 of the Federal Power Act.

2. Provide your organization’s comments on the export and load priorities topic as described in slides 7-15:

As a general matter, CAISO should carefully consider whether its proposals comport with FERC’s open access and nondiscrimination requirements.  

3. Provide your organization’s comments on the EIM coordination and resource sufficiency test review topic as described in slides 16-20:

Any proposed changes to the RS test and especially the consequences of failure must be carefully considered. The test needs to ensure that an entity cannot lean on others.  At the same time, the consequences of failing the test (such as limitations on transfer capacity) should not be so sudden or severe as to jeopardize a BA’s ability to respond to events.  Idaho Power believes there may be some changes to the test than can be accomplished by summer but CAISO timelines must also allow sufficient time for thoughtful consideration of the options presented by stakeholders.

4. Provide your organization’s comments on the import and export market incentives during tight system conditions topic as described in slides 21-25:

No comments.

5. Provide your organization’s comments on the real-time scarcity price enhancements topic as described in slides 26-30:

Idaho Power questions the need to include scarcity pricing in this initiative as it is a complex, challenging issue that is the subject of an upcoming, separate stakeholder process. 

6. Provide your organization’s comments on the reliability demand response dispatch and real-time price impacts topic as described in slides 31-33:

No comments.

7. Provide your organization’s comments on the management of storage resources during tight system conditions topic as described in slides 34-36:

No comments.

8. Provide your organization’s comments on the system market power mitigation topic as described in slides 37-38:

No comments.

9. Provide your organization’s comments on the other items considered in this initiative based on stakeholder feedback as described in slides 39-42:

No comments.

10. Provide your organization’s comments on the proposed EIM Governing Body role as described in slide 45:

Idaho Power agrees that the EIM Governing Body should have primary authority over resource sufficiency and advisory authority over scarcity pricing.  Idaho Power recommends that the EIM Governing Body also have advisory authority over export and scheduling priorities as these can directly affect EIM Entities and their customers.

11. Additional comments on the Market Enhancements for Summer 2021 Readiness straw proposal:

No comments.

12. Provide your organization's suggestions for how to prioritize the topics included in the proposal:

No comments.

1. Provide a summary of your organization’s comments on the straw proposal:

IID is concerned with the Straw Proposal’s approach to wheel-through transactions, which destabilizes one alternative for adjacent Balancing Authority Areas potentially to utilize in response to the de-prioritization of LPT exports imposed through Business Practice Manual Proposed Revision Request 1282.

2. Provide your organization’s comments on the export and load priorities topic as described in slides 7-15:

IID acknowledges Powerex’s comments at the Jan. 27. 2021 stakeholders’ meeting and shares its position concerning the need for confidence in wheel-through transactions.

IID’s concerns with the emergency changes implemented September 5, 2020, in Business Practice Manual Proposed Revision Request 1282, have been reflected in prior comments.  As a result of the emergency changes, IID is investigating whether wheel-through transactions are viable alternatives to exports that have been de-prioritized, such that IID can use such wheel-throughs as an emergency means for importing power in the event of tight market conditions. 

IID is a load serving entity and balancing authority adjacent to the CAISO with import capability exceeding 600 MW and summer peak load over 1100 MW.  In the current market environment, IID is challenged with procuring Non-RA resources from within the CAISO, which from the Straw Proposal, is one of the preferred solutions to obtain resources featuring a higher-level priority for export from the CAISO.  Relying on non-RA exports does not realistically address or enable IID to reliably plan for and serve load for the 2021 summer.

The next best alternative for IID is to seek resources that utilize wheel-throughs as a means to obtain reliable resources from outside of the CAISO.  However, the CAISO’s Straw Proposal indicates wheel-throughs will be treated as lower-priority LPT exports.  The CAISO proposes a subsequent stakeholder process to consider elevating wheel-throughs to a higher priority, but that will not provide any relief for IID or others with regard to the 2021 summer.

While IID is sympathetic to the difficult situation that the CAISO is placed in preparing for summer 2021 and its desire to prioritize protection of its own load, it appears from the Straw Proposal this priority will lead to the CAISO at certain, stressed times operating as an isolated system.  By de-prioritizing exports not contracted to specific resources and destabilizing reliance on wheel-through transactions, the Straw Proposal discounts the needs of adjacent systems and load-serving entities that face the same issues.  Taking away wheel-throughs as a viable alternative to LPT exports from the CAISO Balancing Authority Area discredits the value of balancing authorities’ interconnection with each other and is in conflict with open access, regionalization, and coordination.

IID encourages the CAISO to seek solutions aiming to address the challenging summer 2021 circumstances with consideration of grid reliability as a whole.  IID continues to search actively for Non-RA resources to strengthen the priority of its exports from the CAISO and appreciates the opportunity to provide feedback.

3. Provide your organization’s comments on the EIM coordination and resource sufficiency test review topic as described in slides 16-20:

4. Provide your organization’s comments on the import and export market incentives during tight system conditions topic as described in slides 21-25:

5. Provide your organization’s comments on the real-time scarcity price enhancements topic as described in slides 26-30:

6. Provide your organization’s comments on the reliability demand response dispatch and real-time price impacts topic as described in slides 31-33:

7. Provide your organization’s comments on the management of storage resources during tight system conditions topic as described in slides 34-36:

8. Provide your organization’s comments on the system market power mitigation topic as described in slides 37-38:

9. Provide your organization’s comments on the other items considered in this initiative based on stakeholder feedback as described in slides 39-42:

10. Provide your organization’s comments on the proposed EIM Governing Body role as described in slide 45:

11. Additional comments on the Market Enhancements for Summer 2021 Readiness straw proposal:

12. Provide your organization's suggestions for how to prioritize the topics included in the proposal:

The CAISO should prioritize shoring up aspects of its Straw Proposal, such as its proposed treatment of wheel-through transactions, that rather than improving the stressed conditions at issue, would exacerbate those conditions among interconnected systems.

1. Provide a summary of your organization’s comments on the straw proposal:

MRP is troubled by many aspects of the proposal in this initiative, both in terms of process and substance. 

First, after decades of sensibly refusing to implement even minor software modifications during the summer peak season, the CAISO is now proposing to simultaneously implement two software modifications – scarcity pricing and system market power mitigation – on August 1, 2021.   This rush to implement complex market modifications in the middle of the summer peak demand season is both difficult to understand and even more difficult to believe is achieveable, especially when viewed in light of (1) the CAISO’s recent inability to timely implement Phase 1 CC-DEBE modifications[1] and (2) the CAISO’s recent petition to delay implementation of Order 831 provisions first ordered by FERC in 2016 and approved by FERC in September 2020.[2]  

Second, in contradiction to a November 2020 market notice, and as will be discussed below, the CAISO is, without explanation, reversing course on its pledge to implement system market power mitigation and scarcity pricing in concert.[3]   Not only has the CAISO not provided the analysis referenced in this market notice, but, more concerningly, the CAISO’s “scarcity pricing” proposal is not scarcity pricing, at least as how that term is typically and reasonably used.   Instead, what the CAISO proposes is to (1) increase the real-time penalty price when the CAISO’s day-ahead market clears at $800/MWh or greater and the CAISO issues a warning or emergency notice in real-time.  Merely setting the real-time penalty price to a high value, however, does not amount to scarcity pricing; the penalty price will only set the real-time price if the CAISO relaxes the power balance constraint.  As a result, this aspect of the CAISO’s proposal does not constitute scarcity pricing as that term is generally understood to mean “a series of automatic, graduated increases in market clearing prices that reflect increasing scarcity of supply”; it merely constitutes either the possibility of high prices or the realization of high prices after reserves levels have dropped to unacceptable levels.   Similarly, the CAISO’s proposal to set the market clearing price to the offer cap if the CAISO arms load to be shed because it has run out of operating reserves is not scarcity pricing.  While it is perfectly appropriate to set the market clearing price at the offer cap when the CAISO has run out of reserves, at this point the “scarcity horse has already left the barn”.   Such an action should not be the first and only scarcity pricing action; it should be the last.  

What the CAISO has proposed would not affect the real-time price under scarcity conditions unless the CAISO relaxes the power balance constraint or runs out of reserves.  As such, what the CAISO proposes cannot reasonably considered to be scarcity pricing.  To cobble these two hastily-derived things together at the 11^th hour and purport to pair them with system market power mitigation – which has already undergone a fifteen-month stakeholder process – to create the perception of some kind of balanced way undermines any semblance of a meaningful stakeholder process. 

Third, as the CAISO is well aware, in the 23 years since the CAISO has been in operation, the CAISO’s annual peak demand has occurred in June or July nine times – approximately 40% of the time, including the CAISO’s all-time peak demand in July 2006. Even if the CAISO could achieve the proposed August 1, 2021 implementation date, which seems highly questionable, given the CAISO’s recent track record related to CC-DEBE and Order 831 modifications, there is a substantial chance the modifications would come after the summer peak demand, exposing CAISO and market participant systems to significant risk for questionable gain.  Trying to implement complicated market design modifications in the middle of the summer peak season, after the CAISO has sensibly avoided doing so for decades, is highly questionable. 

MRP respectfully encourages the CAISO to stop the damage already done to what is supposed to be a collaborative stakeholder process by dropping the dangerous idea of implementing software modifications in the middle of the summer operating season (and, quite possibly, beyond the time of peak demand) and instead resuming work on a cooperative and collaborative stakeholder process to develop a reasonable and effective scarcity pricing program to pair with system market mitigation.  

[1] See http://www.caiso.com/Documents/CommitmentCost-DefaultEnergyBidEnhancementsPhase1DeploymentPostponed.html.

[2] See http://www.caiso.com/Documents/Jan26-2021-PetitionLimitedTariffWaiver-FERCOrder831-ER19-2757.pdf. 

[3] See http://www.caiso.com/Documents/SystemMarketPowerMitigationRevisedInitiativeSchedule.html. 

2. Provide your organization’s comments on the export and load priorities topic as described in slides 7-15:

The CAISO proposes these priorities: 

Day-Ahead Market (RUC)

1.PT Export

2.Load

3.LPT Export

4.Economic Bid Export

Real-Time Market

1.RUC Export w/ Gen

2.PT Export

3.Load

4.RUC Export w/o Gen

5.LPT Export

6.Economic Bid Export

MRP strongly supports the CAISO’s proposal to give exports with supporting capacity the highest priority. 

MRP agrees with the CAISO that prioritizing CAISO load over CAISO BAA export commitments in all cases would run counter to long-standing western interconnection practice and would be disruptive and counterproductive. 

In MRP’s view, where a resource is providing both RA and non-RA capacity, and the resource suffers a de-rate, that the RA and non-RA capacity be reduced pro-rata.  As an example, where a 200 MW resource is providing 150 MW of RA capacity and 50 MW of non-RA capacity, as is re-rated to 100 MW, that resource should be deemed to be providing 75 MW of RA capacity and 25 MW of non-RA capacity.  Such treatment of RA and non-RA capacity is completely consistent with the CAISO recognizing that its forward obligations to other BAAs within the western interconnection are at least at par with the CAISO’s obligation to load within its BAA.  To avoid any doubt, MRP requests the CAISO articulate and memorialize how it treats RA and non-RA capacity from the same unit as part of this initiative. 

3. Provide your organization’s comments on the EIM coordination and resource sufficiency test review topic as described in slides 16-20:

While the fact that the CAISO passed EIM sufficiency tests during some hours on August 14 and 15 in which it was simultaneously shedding firm load seems clear evidence that the sufficiency tests need to be changed, it does not seem responsible to try to make those changes to complex tests that have the potential to exacerbate supply challenges before Summer 2021.

4. Provide your organization’s comments on the import and export market incentives during tight system conditions topic as described in slides 21-25:

The CAISO has proposed these two options:

• Option 1: Modify settlement of real-time market imports and exports based on higher of HASP or FMM LMP during tight system conditions, where tight system conditions are hours in which the CAISO issues an alert in the day-ahead time frame,or issues a warning or emergency in the real-time.   According to the CAISO, this treatment would not apply to Price-Taker (“PT”) exports. 

• Option 2: Provide for make-whole payment to bid price for real-time market hourly block economic imports during tight system conditions.

MRP does not support either of these options.  Under tight supply conditions, CAISO operators will be strongly incented to bias the HASP dispatch (already a routine practice), which will drive up prices in a market in which internal resources do not participate.   Biasing HASP will drive up the HASP price, but the additional import supply obtained in the biased HASP market will then serve to suppress prices in the fifteen-minute market (“FMM”), to the detriment of all resources, especially internal resources.  Moreover, paying the better of HASP or FMM prices to only import supply is discriminatory towards internal resources that can only earn the HASP-suppressed FMM price.  Because the CAISO’s proposal will further benefit import supply to the detriment of internal supply, MRP cannot and does not support it.  If the CAISO were proposing to pay the better of HASP or FMM prices to all supply dispatched in the HASP or FMM. MRP would consider supporting the CAISO’s proposal, but does not support it as currently proposed. 

MRP does not support the second option because of the problematic outcomes articulated by the CAISO on the January 27 call.

5. Provide your organization’s comments on the real-time scarcity price enhancements topic as described in slides 26-30:

As noted above, while MRP does not object to the CAISO’s “scarcity pricing” proposals as they are considered in isolation, MRP strongly objects to either of these proposals being referred to as “scarcity pricing” and even more strongly objects to these hastily-contrived things being presented as a meaningful scarcity pricing program with which to pair system market power mitigation. 

The CAISO’s first proposal is to set the real-time penalty price to $2,000/MWh under tight supply conditions.  As an initial matter, if the CAISO had timely implemented Order 831 provisions, the real-time penalty price would already be at $2,000/MWh.  Moreover, merely setting the penalty price to $2,000/MWh provides absolutely no guarantee that real-time prices will reflect scarcity.  The only time that the real time price will reflect scarcity is if the CAISO must relax the power balance constraint; absent this, setting the real-time penalty price to $2,000/MWh means nothing.  Offering a chance that real-time prices will reflect scarcity conditions is not the same as ensuring real-time prices reflect scarcity conditions.  MRP therefore does not support this completely inadequate proposal. 

The CAISO’s second proposal – to set real-time prices to the offer cap with the CAISO must arm load to be shed as reserves – is likewise inadequate.   Without question, the CAISO’s real-time price should be at the offer cap when the CAISO must arm load to be shed to maintain reserve levels.  But any kind of reasonable scarcity pricing should have already acted to drive up the real-time price well in advance of the CAISO reaching this point.  MRP supports the CAISO implementing this proposal, but also strongly objects to the CAISO referring to this as “scarcity pricing”.  

The CAISO’s November 20, 2020 market notice[1] indicated that the CAISO believed that “…the SMPM initiative would be best implemented in concert with scarcity pricing measures.”    That same market notice indicated that the CAISO could move forward with system market power mitigation “…in the event further analysis shows a strong need for the proposal prior to next summer.”  Since that market notice was published, the CAISO has not offered any kind of analysis purporting to show a “strong need” for system market power mitigation.  Instead, MRP perceives that the CAISO has cobbled together two proposals that the CAISO asserts amount to some kind of scarcity pricing regime, but, as MRP has noted above, amount to nothing of the kind, in order to justify moving forward with system market power mitigation.  This hasty and unsupported about face creates the perception that the CAISO is not acting in good faith.  It is difficult to think that the CAISO could come up with a scarcity pricing proposal to appropriately balance its system market power mitigation proposal in a few days when it spent fifteen months working with market participants to develop and refine its system market power mitigation proposal.   

To be clear, MRP would not object to the CAISO implementing these proposals.  But MRP strongly objects to the CAISO considering these to be "scarcity pricing" propsals that would serve to balance the system market power mitigation propsal.  

[1] Available at http://www.caiso.com/Documents/SystemMarketPowerMitigationRevisedInitiativeSchedule.html. 

6. Provide your organization’s comments on the reliability demand response dispatch and real-time price impacts topic as described in slides 31-33:

MRP supports the CAISO’s proposals to (1) dispatch RDRR in the real-time pre-dispatch market run and (2) to have RDRR set price when it is dispatched.   RA resources – and RDRR is an RA resource because it directly affects the amount of RA that an LSE must acquire and show – should be integrated into the CAISO’s spot energy markets.  In fact, the CAISO’s spot markets are THE way that RA capacity is operationalized.   Allowing RDRR to be used outside of the CAISO markets without having it set price improperly opens the door for this reliability product to be used for something other than reliability. 

7. Provide your organization’s comments on the management of storage resources during tight system conditions topic as described in slides 34-36:

MRP continues to support implementation of a real-time minimum state-of-charge (“SOC”) requirement to support four-hour battery resources having sufficient charge to be able to operate continuously across the operationally challenging net peak demand period.  As MRP understands the CAISO’s proposal, the minimum SOC requirement would require storage resources that discharged prior to the discharge period set forth in their day-ahead schedule to charge uneconomically so as to maintain the SOC needed to satisfy their day-ahead schedule, or could preclude storage resources from discharging if there was insufficient time left to re-charge before they were scheduled to discharge according to their day-ahead schedule.   Given storage resources’ ability to respond to real-time conditions very quickly, in a perfect world (i.e., one in which these resources were not so duration-limited), allowing these resources to respond to real-time events without limitation would be ideal; given, however, the very limited duration of these resources, MRP believes it is rational to preserve storage resources’ limited discharge duration for more predictable, longer duration operational challenges.   In MRP’s view, enforcing the real-time minimum SOC requirement is reasonable because these resources count at their nameplate capacity values towards RA requirements, the same way that duration-unlimited resources count.  Allowing these resources to deplete their SOC and be unavailable across the net load peak demand period would be inconsistent with the idea that the purpose of the RA program is to make capacity available to the CAISO to meet the CAISO’s operational needs.  The CAISO’s proposal to limit enforcement of this minimum state of requirement to days in which the storage is required to meet 110 percent of forecast net peak demand is a reasonable condition that should help ensure that the minimum SOC constraint is applied only when necessary. 

8. Provide your organization’s comments on the system market power mitigation topic as described in slides 37-38:

The CAISO’s “scarcity pricing” proposal does not constitute anything like the “balanced approach for market pricing” that the CAISO asserts it is proposing on slide 38.   Moreover, implementing scarcity pricing and system market power mitigation together in the middle of the summer operating season in August 2021 is risky and likely to be ineffective, given the likelihood that the CAISO will realize its annual peak prior to August 1.   MRP respectfully urges the CAISO to drop this idea and to begin, with real, collaborative stakeholder involvement, work on a credible and effective scarcity pricing proposal to pair with system market power mitigation in a balanced and reasonable way

9. Provide your organization’s comments on the other items considered in this initiative based on stakeholder feedback as described in slides 39-42:

MRP hesitates to comment on possible RAAIM changes, given that the CAISO has not actually proposed them yet.  As with other aspects of the CAISO’s proposal, MRP is concerned that the CAISO might propose to modify aspects of this long-standing program, which were developed over the course of many years and much discussion, with little notice and even less collaborative effort.  Should the CAISO be tempted to modify any aspect of RAAIM, MRP strongly encourages the CAISO to lay out a carefully developed and persuasive argument as to how RAAIM contributed to the events of last summer, identify how any proposed modifications would better help the CAISO manage this summer, and provide adequate time (commensurate with how long it took the existing provisions to be developed) for any modifications to be considered.

10. Provide your organization’s comments on the proposed EIM Governing Body role as described in slide 45:

MRP has no comment.  

11. Additional comments on the Market Enhancements for Summer 2021 Readiness straw proposal:

MRP has no comment.  

12. Provide your organization's suggestions for how to prioritize the topics included in the proposal:

The CAISO’s already-enacted modifications to RUC and its proposed export priorities should help ensure that the CAISO does not inadvertently export power when conditions other wise suggests it should not. 

The CAISO should ensure that RDRR appropriately setts price when it is used, consistent with its status as an RA resource. 

The CAISO should not pursue any modifications that that would require changes to market systems in the middle of the summer. The CAISO should only pursue modifications that can be adequately tested prior to the summer operating season. 

The CAISO should not enact settlement modifications that further disadvantage internal resources due to operator actions taken to bias HASP. 

The CAISO should, in good faith, conduct a thorough stakeholder process to develop a reasonable and effective scarcity pricing proposal that can be paired with system market power mitigation in a balanced way. 

1. Provide a summary of your organization’s comments on the straw proposal:

Morgan Stanley Capital Group Inc. (“MSCG”) has reviewed and generally supports the CAISO’s straw proposal for Market Enhancements for 2021 Summer Readiness with respect to export and load priorities.  MSCG is an active participant in the CAISO markets and is a provider, among other products, of Import RA to California Load Serving Entities “LSE”s.

2. Provide your organization’s comments on the export and load priorities topic as described in slides 7-15:

MSCG appreciates the CAISO clarifying the scheduling priorities for load, exports and wheel throughs. As a market participant, MSCG follows price signals and relies on CAISO to set clear rules and to have the tools necessary to manage the reliability of the grid. These proposed rules provide that clarity.

MSCG agrees with CAISO’s proposed scheduling priorities of PT export (a schedule backed by specific contract with non-RA generation), load, LPT export (not backed by specific non-RA generation), followed by economic export bids.  MSCG encourages ongoing and open transparency as model changes are implemented and business practices updated to accommodate these enhancements. CAISO is part of an integrated western grid and benefits greatly from the wholesale markets and import transactions.  That participation should continue to allow for exports from CAISO to neighboring regions in need when California load reliability is not at risk.

MSCG supports the CAISO’s proposed treatment of Wheel Through schedules for summer 2021.  We feel it is important that non-RA wheel through schedules are not granted the right to outbid Import RA for intertie transfer capability that is granted pursuant to MIC allocations to California LSEs.  We note that pursuant to ISO Tariff Section 40.4.6.2.2.3 Holders of Import Capability for year 2021 include 169 entries between LSEs and associated Branch Groups.  We understand that the majority of the MIC allocations are associated with import RA products serving California LSE load.  It would devalue the import RA program to allow, particularly during tight system conditions, a non-RA wheel through schedule to outbid and acquire transmission into California by bumping, or otherwise causing an Import RA schedule to be curtailed.  The MIC allocation and Import RA contract for load serving entities, while different in process, can be considered similar to the designated network resource designation under the OATT.  No external BA in WECC would allow a wheel through to bump their designated network resource schedule.  We believe CAISO’s proposal is consistent with this general concept, but future enhancements after summer 2021 should consider whether the full MIC allocation should have priority over wheel through schedules or whether only MIC that has contracted for external import RA contracts in at least the month ahead timeframe should have priority.

On Slide 15, CAISO states as part of its Policy catalog – it will consider a process to allow wheel through schedules to be treated similar to a PT export (presumably backed by non RA source).  MSCG supports further consideration of this initiative as part of the Policy catalog so market participants can deliberate the various issues. 

3. Provide your organization’s comments on the EIM coordination and resource sufficiency test review topic as described in slides 16-20:

4. Provide your organization’s comments on the import and export market incentives during tight system conditions topic as described in slides 21-25:

MSCG is supportive of Option 2, which would provide for make-whole payment to bid price (Bid Cost Recovery “BCR”) for real-time market hourly block economic imports during tight system conditions.  The HASP price is advisory only, so this additional assurance that an importer will get at least what they bid will provide greater incentive to offer imports to CAISO.  During tight system conditions, it is likely that other neighboring markets are also experiencing high prices; therefore this would allow the CAISO to better compete for available supply when importers would prefer a known price rather than an unknown FMM price. The additional scheduling priorities being implemented by CAISO for loads vs. exports should prevent any of this BCR uplift being used to serve LPT or economic exports.

The CAISO notice for when BCR applies should be very clear to avoid any settlement miscues. 

To provide the greatest notice to market participants, any Day Ahead (“DA”) notice by CAISO should align with the WECC preschedule calendar.  Taking last August’s heat wave as an example, a majority of preschedule decisions for Friday August 14^th and Saturday August 15^th, were being made by market participants early on the morning of Thursday August 13^th.  Similarly, for Sunday and Monday August 16^th/17^th decisions were being made on the morning of Friday August 14^th.  To encourage the greatest number of DA imports, any market notices or alerts from CAISO regarding tight system conditions should take these WECC preschedule timelines into account and be issued prior to DA trading in broader west markets.

It should also be noted, MSCG believes that BCR on imports should be revisited after this summer as a long term initiative to improve import liquidity at all times, not just during stress conditions.  This would afford imports the same treatment as internal generation which gets BCR.  In MSCG’s opinion the change made several years ago where HASP became advisory has been a contributing factor to a drop in economic participation and liquidity on the interties.

5. Provide your organization’s comments on the real-time scarcity price enhancements topic as described in slides 26-30:

MSCG supports the CAISO’s real-time scarcity price enhancements as described in the presentation. Market participants follow price signals and it is important that those price signals are an accurate reflection of market conditions.

6. Provide your organization’s comments on the reliability demand response dispatch and real-time price impacts topic as described in slides 31-33:

7. Provide your organization’s comments on the management of storage resources during tight system conditions topic as described in slides 34-36:

8. Provide your organization’s comments on the system market power mitigation topic as described in slides 37-38:

9. Provide your organization’s comments on the other items considered in this initiative based on stakeholder feedback as described in slides 39-42:

10. Provide your organization’s comments on the proposed EIM Governing Body role as described in slide 45:

11. Additional comments on the Market Enhancements for Summer 2021 Readiness straw proposal:

12. Provide your organization's suggestions for how to prioritize the topics included in the proposal:

1. Provide a summary of your organization’s comments on the straw proposal:

NV Energy appreciates the opportunity to comment on the outline of potential market design changes to be implemented prior to the summer of 2021. Given the challenges of last summer, NV Energy understands the CAISO’s desire to make targeted revisions to improve market performance during the upcoming peak season. Nevertheless, with the complex nature of the CAISO’s markets and the extremely tight timeframe for this initiative; any expedited changes should be of limited scope and directly related to the issues identified in the Final Root Cause Analysis. While is it difficult to offer specific recommendations given the extremely limited information and time available, NV Energy offers three general recommendations:

1. Any proposed revisions must consider not only the impact on the CAISO BAA, but also the effects on the EIM and the broader Western market. The continued integration of the western market is a vital component of achieving decarbonization goals at reasonable cost. Improvements should foster that integration.
2. As described by CAISO management during the most recent EIM Governing Body meeting, any changes should be foundational to the EDAM and other future market enhancements. The Summer 2021 initiative should not proceed with changes that will need to be reconsidered or worse undone as part of an EDAM, as that would likely delay broader market improvements.
3. The CAISO should not make major market design changes through modifications to procedures or BPMs without a tariff change reviewed by FERC. Under the Commission’s “rule of reason” actions that “significantly affect rates and services” fall within the directive of section 205 of the Federal Power Act. Any significant and possibly controversial rule changes should be vetted by FERC.