Provide your organization’s comments on the EIM coordination and resource sufficiency test review topic as described in slides 16-20:
- 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
- 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.
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.
- 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:
- 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.
- 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:
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. 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.
- 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 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.
- The EIM RS failure consequence does not support reliability
- 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, 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.
- 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.”
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 that showed the following estimated capacity shortfalls at 7 p.m.:
The CAISO submitted a filing 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 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.
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.
 Reference: Page 38 of CAISO’s Energy Imbalance Market Draft Final Proposal dated September 23, 2013
 Reference: Page 3 of CAISO’s EIM Resource Sufficiency Evaluation White Paper dated September 19, 2018
 See NERC Attachment 1-EOP-011-1
 Reference: Slide 17 of CAISO’s January 13 Resource Sufficiency Workshop presentation
 “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.
 Reference: Slide 31 of CAISO’s January 13 Resource Sufficiency Workshop presentation
 Reference: Slide 4 of Powerex’s January 13 Resource Sufficiency Workshop presentation
 Reference: Slide 31 of CAISO’s Resource Sufficiency Evaluation presentation from January 13, 2021
 Reference: CAISO Board of Governors August 17, 2020 meeting Audio Recording
 Reference: Slide 6 of CAISO’s Post 2020 Grid Operational Outlook briefing; September 18, 2019
 Reference: Rulemaking 16-02-007. Reply Comments of the California Independent System Operator filed August 12, 2019
 Reference: D.19-11-06; November 7, 2019
 Reference: Slide 6 of CAISO’s Briefing on System Operations; August 17, 2020
Provide your organization’s comments on the system market power mitigation topic as described in slides 37-38:
- 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. 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, 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 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.”
- 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. 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.
- 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.
 Reference: System Market Power Mitigation, Revised Initiative Schedule Market Notice
 See CAISO’s presentation to the Market Surveillance Committee on October 9, 2020: www.caiso.com/documents/systemmarketpowermitigation-presentation-oct9_2020.pdf