Comments on Issue Paper, Straw Proposal on Product Definition, Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements and Jan 21st discussion

1. Please provide your organization’s comments on the straw proposal on CRR TOU period changes (slides 10-20 of the CAISO presentation).

The Alliance for Retail Energy Markets (“AReM”) is a group of three of the largest electric service providers (“ESP”) in California. ESPs use CRRs for hedging and applaud CAISO’s initiative to improve CRR markets. As a threshold matter, AReM supports CRR auctions and opposes the CAISO Department of Market Monitoring (“DMM”) recommendation to move to the “willing seller” model.

In regard to the time-of-use ("TOU") period issues, AReM supports updating CRR TOU periods to better reflect current congestion patterns and hedging. We support adding a midday-peak product and including Sundays within solar hours. These changes improve hedging alignment without undermining the CRR fundamentals. We caution against excessive TOU granularity because increased complexity risks reducing liquidity and price discovery, thereby weakening CRR effectiveness.

2. Please provide your organization’s comments on the straw proposal on the treatment of storage resources (slides 22-27 of the CAISO presentation).

AReM supports allowing storage to be an eligible CRR sink to hedge against congestion from battery charging. Clear limits are necessary to ensure these products support physical hedging and do not enable purely financial arbitrage that does not benefit customers who fund the transmission system. 

3. Please provide any other comments your organization has on the Issue Paper and Straw Proposal on Product Definition published December 12 and the accompanying discussion on January 21.

AReM finds the Issue Paper and Straw Proposal effectively summarizes party positions, including some significant disagreement.

Given party disagreement and potential for a large number of changes, AReM supports a measured approach to implementation. Use of piloting would reduce implementation risk, protect ratepayers, and allow market participants to fully understand new mechanics before full implementation and should be considered. 

4. Please provide your organization’s comments on the discussion of potential measures to enhance revenue adequacy (slides 33-45 of the CAISO presentation). Which (if any) of the measures would your organization prioritize for further consideration and why?

AReM agrees that underfunding remains a material issue and supports CAISO efforts to improve revenue adequacy. Priority should be given to measures that reduce day-ahead CRR divergence, including improved loop-flow treatment and outage modeling. Addressing structural underfunding should take precedence over proposals to redesign the auction. 

5. Are there any changes your organization believes could help improve revenue adequacy that are not included in the Issue Paper?

As indicated before, a measured approach using piloting, or a phased roll out of changes should be considered if CAISO decides to implement major reforms. 

6. Please provide your organization’s comments on the discussion of potential measures to enhance auction design and efficiency (slides 47-58 of the CAISO presentation). Which (if any) of the measures discussed would your organization prioritize for further consideration and why?

AReM’s priority is preserving CRRs as tools for physical congestion hedging, consistent with CAISO’s stated CRR market functions. As it has indicated in prior comments, CRR auctions support a competitive marketplace, providing valuable hedging services, ultimately benefiting consumers through more stable energy prices. AReM opposes proposals to restrict or eliminate auctions, such as the “willing seller auction” proposed by CAISO DMM.

7. Are there any changes your organization believes could help improve auction efficiency that are not included in the Issue Paper?

AReM does not have any further comments. 

8. Please provide any other comments your organization has on the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published January 14 and the accompanying discussion on January 21.

AReM thanks CAISO for the ability to provide these comments and looks forward to collaborating with stakeholders on CRR improvements. 

1. Please provide your organization’s comments on the straw proposal on CRR TOU period changes (slides 10-20 of the CAISO presentation).

We appreciate that CAISO staff are balancing the goal of simplicity and the desire of market participants for CRR products that are more granular in terms of splitting out the mid-day solar hours from the peak/ramp hours. Avoiding over-complicating the TOU periods is desireable in terms of liquidity in the CRR auctions and ensuring that CRRs are not too complicated for participants to value. Also, CAISO asked whether the solar hours on Sundays and holidays should be broken and we feel that this is an important distinction for stakeholder feedback. We note that other markets that have reformed CRRs to address solar hours have broken out the weekend peak product separately from the off-peak product and we think it would be a good idea for CAISO as well. Appian Way would support this change if other market participants also think it would have value. 

              Appian Way commends CAISO for its work and framing of this issue as presented in slides 10-20 and looks forward to further discussion in the stakeholder process and to other stakeholder responses to the TOU proposal. 

2. Please provide your organization’s comments on the straw proposal on the treatment of storage resources (slides 22-27 of the CAISO presentation).

Appian Way supports allowing storage as sink nodes and we reiterate our belief that the allowable sink node set should be broadened to allow SOME (not all) additional generation, aggregate or transmission node locations. Adding additional FIXED nodes can offer important hedging opportunities for physical assets. For instance, renewable assets in Southern California (or those hedging on their behalf) may find more efficient hedging opportunities for their commercial needs from CRRs that sink at FIXED locations downsteam of Path 15 to manage the specific basis risk challenges associated with this chronic congestion, rather than having to sink at what may be imperfect hedges at load zones per se. In many cases, the most efficient hedging and CRR purchases for Gencos and other market participants would be paths that sink at fixed locations on the grid, not paths that sink at load zones. Paths that sink at fixed locations also have the advantage of representing the intended physical market flow of the CRR consistently between the auction and IFM models, whereas we believe paths that sink at load zones can distort market flows between the auction and IFM models, and represents a significant source of the very model divergence that CAISO is trying to minimize in this reform effort. As we have mentioned, PJM has an FTR settlement rule that addresses this problem, and consideration of the PJM approach here would be a worthwhile endeavor for the CRR Enhancements group.

                To be clear, we believe that the aggressive Track 1A restrictions on sink nodes has exacerbated model divergence and underfunding by forcing CRRs to predominantly sink at locations whose shift factors change depending on the DA hourly load profile of the relevant load zone. Adding back a sufficient set of FIXED nodes (major gen buses, trading hubs, high kV transmission, or aggregates) as allowed CRR sinks may lessen this problem. We believe CAISO staff’s analysis has not yet sufficiently evaluated this potential source of model divergence/revenue inadequacy.

3. Please provide any other comments your organization has on the Issue Paper and Straw Proposal on Product Definition published December 12 and the accompanying discussion on January 21.

See comments above regarding the value of evaluating adding additional sinks in order to improve model consistency between the CRR and IFM models.

4. Please provide your organization’s comments on the discussion of potential measures to enhance revenue adequacy (slides 33-45 of the CAISO presentation). Which (if any) of the measures would your organization prioritize for further consideration and why?

Key Takeaway: Below, we request additional analysis by CAISO staff on the loop flow problem. Specifically, we would like CAISO to quantify the change over time in CAISO participants’ access to transmission usage on the CAISO grid in terms of both CRR quantities and funding, and whether such usage may be increasingly crowded out by non-CAISO market participants. It is not clear to Appian Way whether reduced access may be occuring due to factors such as the Global Derate Factor (a concern that has been compellingly expressed in comments and proposals from LADWAP) or whether reduction in access, to the extent it has occurred, is from non-CAISO entities using CAISO’s grid without paying for the congestion they cause, or some combination.  

Improving revenue adequacy is critical to improving the performance of the CRR market. There seems to be a misimpression by some stakeholders that the Track 1b reforms have insulated ratepayers from the negative consequences of revenue inadequacy. Nothing could be further from the truth. Ratepayers ultimately pay for revenue inadequacy, regardless of how the revenue inadequacy is balanced out.

             The extreme revenue inadequacy in CAISO harms ratepayers whose responsible LSEs hold CRRs to hedge their customers’ basis risk. Additionally, the extreme and non-transparent degree of revenue inadequacy in CAISO devalues the CRR product and results in lower fair market value for CRRs that are sold in the CRR auction process or that LSEs choose to sell at auction. Ratepayers pay for revenue inadequacy no less with the Track 1B reforms than beforehand when revenue inadequacy was funded by load through the balancing account. In fact, the additional element of significant uncertainty regarding the financial integrity of the CRR product adds an additional risk premium discount to the fair market value of CRRs. CAISO identified that some LSEs have sold CRRs that would otherwise have been profitable, contributing to misnomered “auction inefficiency,” while many physical asset players in this stakeholder process have articulated that they have eschewed use of CRRs because of the consistently poor performance of the CRR market in terms of financial integrity of the product. The upshot is that the CRR product is compromised in performing its congestion hedging function and that the CRR auction process loses participation from physical market participants, undermining its intended purpose.

              In terms of addressing revenue inadequacy, CAISO identified 1) the IFM shift factor cutoff from generators; 2) loop flow and 3) model differences between the CRR and DA markets, particularly with respect to outage scheduling. Appian Way focuses comments below on the critical loop flow issue, after a brief comment on the other sources of revenue inadequacy mentioned in the Issue Paper.

              With respect to the shift factor threshold, Appian Way is concerned that CAISO has prematurely dismissed the possibility of lowering the shift factor threshold in the DA and RT market software, especially as other initiatives at CAISO may require changes to this software and moreover, advances in computer processing and software are available and may be helpful in addressing other important efficiency enhancing initiatives such as price formation, integration of demand bids, and integration of grid enhancing technologies that would improve transmission modelling, among other items. Regardless, the path-based allocation of revenue inadequacy to CRRs does not follow cost causation principles and should be reformed, a topic addressed in greater detail in our comments in response to question 6 below.

              With respect to outages, it is clear that the ISO can do more to ensure compliance with outage reporting requirements and to better model outages in the monthly CRR processes. Appian Way looks forward to CAISO’s specific proposals in this area. Following cost causation principles, CRR shortfalls caused by late outages could be assigned to the entity that caused it, as occurs in NYISO. NYISO has found that the incentives created by this approach have significantly improved outage scheduling and performance in their market. 

LOOP FLOW DISCUSSION – QUANTIFYING AND ADDRESSING THE EROSION OF CAISO PARTICIPANTS’ ACCESS TO THE CAISO GRID

Appian Way was heartened by the presentation by Anna McKenna at the EDAM town hall meeting on February 4, indicating that CAISO has begun discussions with neighboring BAAs (both BAAs considering EDAM and those in Markets+) on Seams Coordination. This effort by CAISO is in response to the needs of the broader regional market and in acknowledgement of the important FERC Staff White Paper issued November 21, 2025, “Seams Coordination in the Western Interconnection.” However, we are concerned that this issue demands greater urgency and prioritization. From the Q&A at the town hall, it seems that other than initial reaching out, very little progress has been made to date.

          The loop flow problem is not about better modelling of loop flow in the CRR processes. Fundamentally, we believe that the problem is that CAISO transmission customers/ratepayers’ right to use the transmission network (that they pay for) has eroded year after year, and this dynamic likely has accelerated since 2019. This is not to say that non-CAISO entities should be allocated zero rights to flow on CAISO’s grid. Rather, the point is that these entities should not be allocated unlimited and ever-increasing share of the transfer capacity on CAISO’s grid, whilst not paying for the congestion they cause and whilst displacing CAISO market participants’ right to use the CAISO grid. Ultimately, it is necessary to have a system in which all parties (whether in EDAM or not) agree to a fair allocation of transmission rights, likely based upon historical usage from an agreed-on baseline (which is Appian Way’s interpretation of the key takeaway from the FERC Seams White Pater).

           Appian Way believes that further analysis would not only be helpful, but is critical, to educate CAISO stakeholders on the materiality of the loop flow problem, and how it has evolved in recent years. Specifically, it would not be difficult to quantify the annual auction transfer capability associated with auctioned and allocated CRRs on the key south to north constraints, consider also the revenue inadequacy caused by loop flows and calculate how this has changed over time. This would provide a metric regarding how much CAISO participants are and have been able to use their own transmission network vs. how much is being used by non-CAISO BAA driven loop flows that crowd out CAISO congestion hedges and are not contributing to the congestion collected by the CAISO needed to fund CRRs.

           Moreover, CAISO’s bullet on slide 40 is deserving of further scrutiny and is overly optimistic and, we believe, fundamentally incorrect regarding the nature of the problem:

“The ISO expects the impact of loop flows to decrease over time as the day ahead market footprint expands, because more power flow in the region will be associated with a market schedule”

              This statement is only true to the extent that the current EDAM Tariff is corrected to ensure entities that join EDAM pay for the congestion they cause above an agreed upon baseline. Under the current Tariff, entities in EDAM, as well as non-EDAM neighboring BAAs, enjoy congestion free access to CAISO’s grid for their self schedules and network dispatch. Furthermore, while it is technically true that expansion of the market footprint should allow for better modelling, such modelling does nothing to ensure that CAISO ratepayers have access to a fair allocation of congestion hedges associated with the transfer capacity of the grid that they funded. Moreover, this issue must be addressed with respect to all non-CAISO market participants, whether joining EDAM or joining Markets+. If CAISO addresses the problem with respect to EDAM members only (and not Markets+ members), this will create a disincentive to join EDAM (why would an entity join EDAM where they have to pay for the congestion they cause if they could instead join Markets+ and maintain unlimited congestion-free access to CAISO’s grid).

              If one looks at this issue from the balcony, over the past number of years, electricity customers throughout CAISO and neighboring Western markets have wanted to develop, contract for and access the significant wind and solar resources located in the Desert Southwest. The development of these resources has helped states throughout the region reduce greenhouse gases, but transmission to deliver power from the southwest has become constrained with the growth of renewable generation in this region.

             CAISO staff have identified loop flow as a major culprit in underfunding many of the south to north constraints identified in CAISO’s analysis. CAISO’s analysis shows that approximately 40% of flow from sources located in the desert SW will flow over CAISO’s grid from south to north. Important constraints identified include the California-Oregon Interface (COI) and many important internal constraints limiting flow from southern CAISO to the North on the CAISO 500 kV backbone network (Path15, Path26, and other flowgates). For instance, Gates-Midway, a constraint identified in the CAISO December EDAM presentation, was one of the most congested constraints in CAISO in 2024 and was underfunded to the tune of 44% ($27 MM) in that year.

             Regarding improved modelling of loop flows, this is obviously a good idea. But to the extent that there is a trend of non-CAISO participants using more and more of CAISO’s grid over time, than a representation of the loop flow in the summer when CRR models are developed for the following year prior to CRR allocation will not capture all of the loop flow in the following year after which external entities’ new desert southwest assets come online. CAISO CRR auction modellers would constantly be playing catchup. And moreover, the fundamental core issue that CAISO market participants care about is their access to congestion hedges, of which revenue inadequacy is an aspect.

              In summary, we believe that CAISO will not be able to get a handle on the problem of access to transmission hedges and the revenue adequacy problem without addressing the loop flow problem head on. We understand that solving this requires Seams Coordination and better defining rights to use coordinated flowgates. While this solution is out of scope for this CRR Enhancements Stakeholder Initiative, we nevertheless feel CAISO should do more to clarify and quantify the problem for CAISO stakeholders in the CRR Enhancements Policy Initiative by completing the analysis described above and communicating it with market participants.

5. Are there any changes your organization believes could help improve revenue adequacy that are not included in the Issue Paper?

In addition to the loop flow/Seams Coordination issue described above, we believe the rules for Congestion Revenue Allocation (CRA) in EDAM need to be non-discrimanatory. Under the current EDAM tariff, non-CAISO EDAM participants' firm OATT rights that are self-scheduled get full congestion revenue allocation on CAISO constraints, but CAISO participants' equivalent firm transmission rights (CRRs) get zero CRA on non-CAISO constraints. While this is believed to be a less material issue with respect to current flows and initial EDAM market participants Pacificorp), it may become an issue with future flows and as additional BAAs join EDAM.  

              Moreover, to the extent that EDAM CRA rules create CRR funding shortfalls, allocating such shortfalls on a path basis according to the Track 1b protocol does not follow cost-causation principles.

6. Please provide your organization’s comments on the discussion of potential measures to enhance auction design and efficiency (slides 47-58 of the CAISO presentation). Which (if any) of the measures discussed would your organization prioritize for further consideration and why?

“Revenue Shortfall Allocation” received brief mention in the January 21 presentation and Issues Paper, relegated to slide 57, and there was no discussion of applying cost causation principles. We believe this issue is straightforward.

             As stated in Problem Statement 4: “Allocation of revenue shortfalls should be guided by cost causation principles.” In principle, this means that shortfalls that are caused by factors related to cost causation (such as transmission outages) can be specifically allocated on a constraint basis according to Track 1B, but shortfalls that are unrelated to cost causation, such as that associated with entities not paying for the congestion they cause (i.e. IFM shift factor cutoff, loop flows, EDAM CRA methodology, etc.), should be allocated broadly to the balancing account. Note that CAISO implicitly recognized the reasonableness of this approach in its June presentation to the EDAM policy initiative when it stated that CRR revenue inadequacy associated with constraints in external BAAs would be allocated to the balancing account, a reasonable approach later unexpectedly reversed in the EDAM policy initiative.

              It is clear from the constraint-based allocation that the current approach does not follow cost causation. When CAISO presents revenue inadequacy in terms of overall percentages across the market, this masks how unprincipled the current allocation methodology is in practice and effect. The data demonstrates:

• In 2024, 44 constraints were over 100% underfunded, with underfunding of $75 million compared with $54 million of notional revenue
• In 2025 through 11/19/25, 31 constraints were over 100% underfunded, with underfunding of $9 million compared with $7 million of notional revenue
• In 2024, 100 constraints were over 50% underfunded, with underfunding of $113 million compared with $112 million of notional revenue
• In 2025 through 11/19/25, 80 constraints were over 50% underfunded, with underfunding of $90 million compared with $141 million of notional revenue

             These extreme levels of underfunding present a stark picture of a broken financial instrument tainted by a flawed allocation process totally devoid of any cost causation-based justification. No one at CAISO staff, among CAISO stakeholders or FERC ever expected constraint-based shortfall allocation to exceed the notional value of the constraint and such clearly unreasonable outcomes should be a sign that the allocation process itself needs to be reformed to bring it in line with cost causation.  

              How might CAISO apply cost causation principles for revenue shortfall allocation? One way would be to place a cap on CRR shortfall allocation according to the Track 1B methodology that is more in line with the intent of the policy. The Tack 1B reforms implicated transmission outages and associated transfer capacity reductions in the IFM compared to the CRR market as the key driver of revenue inadequacy. The logic would be to limit the shortfall allocation to no more than what is accounted for by the difference in transfer capability between the day-ahead market physical system capacity and what was modelled in the CRR auction. Such an approach would have the added benefit of ensuring that constraint-specific shortfall allocation to CRRs would never exceed the notional CRR expected value, regardless of the cause of the shortfall. The remaining shortfalls would be covered by the balancing account, following FERC cost allocation principles to assign costs specifically when specific beneficiaries can be identified and assign costs broadly when this is not possible.

              Certainly, to the extent that other cost-causation-based reasons for shortfall can be specifically established by CAISO, it would be reasonably to allocate these amounts specifically to Track 1B. But to the extent that the shortfall cannot be specifically identified or is tied to non-cost-causation-based factors such as entities not paying for the congestion that they cause, then such shortfalls should be allocated broadly according to FERC precedent.

7. Are there any changes your organization believes could help improve auction efficiency that are not included in the Issue Paper?

“Goal 1: CRRs in the auction should be priced at a reasonable approximation of their costs and the expected payout of congestion rent in the day-ahead market.”

The fundamental problem with the CAISO’s “auction efficiency” metric, is that it is measured based on ex-post market outcomes, not ex-ante market expectations that drive CRR prices in the auction. Electricity markets are notoriously volatile, which is precisely why market participants hedge and need CRRs to serve as a congestion hedge. The expected value of a volatile CRR contains a range of possible outcomes, and unpredictable events may drive CRR profits when actual realized spreads significantly exceed what was expected ex ante. The CAISO presented in February 2025 a case study of the January 2024 storm which concluded (slide 8): “Data from extreme cases shows that the expected value of CRRs bought and sold in the auction is not readily predictable to expect that CRR payouts align with auction revenues.”

            As Appian Way noted in previous comments: each of the past several years have experienced fundamental factors that can explain, at least in part or significantly, why auction revenues determined in November have underpredicted the realized CRR values:

• 2021: unexpected economic recovery from COVID
• 2022: gas prices / war in Europe
• 2023: unexpected solar congestion
• 2024: winter storm/unexpected solar congestion

           It is simply not possible to design a system where CRRs both serve a congestion hedging function and simultaneously the ex-post realized value of CRRs approximately matches what CRR participants paid for the CRRs. This is why goal 1 states that CRRs should be priced based on their “expected payout,” not at an approximation of how they settle in fact. If CRRs were always priced at auction close to their realized value, there would be no need for them as a hedge.

           A better metric for CRR auction efficiency would be to look at CRR auction prices and compare them with electricity market futures basis spreads for load zones and hubs. Both the CRR auction prices and electricity futures for equivalent indexes/locations represent an apples-to-apples comparison of market expectations for future congestion spreads.

8. Please provide any other comments your organization has on the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published January 14 and the accompanying discussion on January 21.

1. Please provide your organization’s comments on the straw proposal on CRR TOU period changes (slides 10-20 of the CAISO presentation).

Boston Energy supports the proposed changes to the CRR time-of-use definitions, including the proposal to split the existing on-peak product into Peak and Midday-Peak products. We agree the increased solar and storage penetration support revisiting CRR product definitions to better align with observed congestion patterns and hedging needs.

As stated on the stakeholder call, CAISO should consider how to transition existing long term CRRs to the new product definitions to avoid keeping the existing product structure and then adding as an option the new proposed definitions.  

2. Please provide your organization’s comments on the straw proposal on the treatment of storage resources (slides 22-27 of the CAISO presentation).

Boston Energy supports allowing storage resources to be eligible sink locations but agree with stakeholder comments that further discussion is warranted regarding whether this should also be extended to the CRR allocation processes.

3. Please provide any other comments your organization has on the Issue Paper and Straw Proposal on Product Definition published December 12 and the accompanying discussion on January 21.

No additional comments at this time. 

4. Please provide your organization’s comments on the discussion of potential measures to enhance revenue adequacy (slides 33-45 of the CAISO presentation). Which (if any) of the measures would your organization prioritize for further consideration and why?

Boston Energy would like the CAISO to reconsider lowering the shift factor threshold, given that missing power flow contributions from locations with small shift factors have been identified as a primary contributor to CRR revenue inadequacy. This seems like a relatively straightforward adjustment to make to help reduce underfunding. If CAISO ultimately chooses not to address the shift factor threshold, then Boston Energy supports WPTF’s comments that the CAISO should modify the revenue inadequacy cost allocation methodology, as the current approach does not align with the cost causation principle.

Boston Energy supports improved loop flow modeling and appreciates CAISO’s efforts to develop and implement enhancements under its existing tariff authority. CAISO should clearly identify which changes it plans to implement under existing authority and distinguish those from potential enhancements that would require tariff modifications.

Boston Energy supports providing additional CRR model releases as new transmission outages and constraints become known, as this improves the accuracy of CRR valuation and hedging outcomes.  That said, the release of this information should be on a consistent time schedule in order to provide stakeholders with sufficient time to review changes and adjust auction/allocation bids accordingly.

5. Are there any changes your organization believes could help improve revenue adequacy that are not included in the Issue Paper?

No comments at this time.

6. Please provide your organization’s comments on the discussion of potential measures to enhance auction design and efficiency (slides 47-58 of the CAISO presentation). Which (if any) of the measures discussed would your organization prioritize for further consideration and why?

Boston Energy continues to oppose changes to the CRR auction that unduly restricts participation and unwind standard market design principles and auction design. Liquidity provides significant benefits in any market, and limiting participation would reduce liquidity, impair price discovery, and ultimately harm hedging outcomes for market participants.

Boston Energy supports a fresh look at the CRR revenue shortfall allocation methodology to ensure alignment with cost causation and to reduce uncertainty and risk associated with holding CRRs. Reduced risk would, ilikely lead to higher auction prices as participants apply a smaller risk discount when valuing CRRs in the auction.

We also support additional discussion around increasing the frequency of the auctions looking at other ISOs balance of period auction structures.

7. Are there any changes your organization believes could help improve auction efficiency that are not included in the Issue Paper?

No additional comments at this time.

8. Please provide any other comments your organization has on the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published January 14 and the accompanying discussion on January 21.

No additional comments at this time.

1. Please provide your organization’s comments on the straw proposal on CRR TOU period changes (slides 10-20 of the CAISO presentation).

The California Independent System Operator (CAISO) should proceed with changing the congestion revenue rights (CRR) time-of-use (TOU) periods for the reasons noted by the CAISO. This includes changes in congestion patterns throughout the day due to shifts in the system's resource mix, which expose load-serving entities (LSE) to different levels of congestion. The three TOU periods are the correct number; however, the CAISO should align their timing with other products in the energy market.  Notably, the Intercontinental Exchange (ICE) offers six energy forward contracts[1] which define the peak period as 0900 – 1600.  

Where possible, alignment of markets, internal and external to the CAISO, should be preferred. This will make transactions simpler and enable hedges to match readily available market contracts. In addition, the data presented by the CAISO demonstrates that the congestion differences between hour ending (HE) 9 and 10 are generally offset by an opposite change in value between HE 16 and 17. The result is that the total congestion value and the hedge offered by a CRR from HE 9 – HE 16 are likely similar to those of a CRR from HE 10 – HE 17. Given that the value is likely consistent, preference should be given to a product definition that matches other available products in the energy market, such as those from ICE.

For these reasons, the CAISO should change the hours of the midday peak to HE 9 – HE 16.

[1]            The six ICE contracts are CIK, CAD, and CNF for NP-15 and CIJ, CAE, and CNG for SP-15.  

2. Please provide your organization’s comments on the straw proposal on the treatment of storage resources (slides 22-27 of the CAISO presentation).

The CAISO should allow CRRs to sink at all storage, regardless of technology, in the allocation process in addition to the auction process.  Presently, the CAISO allows CRRs to sink at pumped-storage hydro (PSH) nodes in the allocation process.[1] This provision was established during the implementation of CRRs when the only storage on the system was PSH. The technological shift to other forms of storage, including battery-based, compressed-air, gravity-based, or other methods, has simply made the current tariff provision outdated. During initial development, the CAISO recognized that the only form of storage at the time (i.e., PSH in 2006 when the Market Redesign and Technology Upgrade (MRTU) tariff was adopted) was a legitimate sink for an LSE to hedge congestion risk. Today, the CAISO should allow all forms of storage to serve as sinks in the allocation, as LSEs are contracting with or own such resources. Whether the technology is PSH or another form of storage, the congestion risk faced is identical.  

During the stakeholder meeting, an issue was raised as to whether storage paid the transmission access charge (TAC). The point was raised of whether LSEs should be allowed to nominate a sink point that does not pay the TAC, on the principle that LSEs are allocated CRRs because their load pays for the transmission system to exist. While storage does not pay the TAC, neither does PSH.[2]  While storage does not pay the TAC, the storage is used by an LSE to hedge the two-legged congestion risk[3] to the load that does pay the TAC. Indeed, this has been the case with PSH from the beginning, as it has been an eligible sink for CRRs and has not paid the TAC.  

For these reasons, the CAISO should treat all forms of storage consistently. The CAISO should allow LSEs to sink to nodes of any storage technology during the allocation process. This will correct the current discrimination occurring by allowing only a subset of LSEs and storage resources of a particular type to obtain CRRs in the allocation process.

[1]            CAISO Tariff Section 36.8.2.

[2]            CAISO Tariff Section 26.1

[3]            Load faces congestion risk when the generation occurs to charge the battery and again when the battery is later discharged to serve load.  These legs involve different nodes, gen to storage and storage to load, as well as different times, typically from gen to storage during the solar irradiation hours and from storage to load in the evening and morning ramp periods.

3. Please provide any other comments your organization has on the Issue Paper and Straw Proposal on Product Definition published December 12 and the accompanying discussion on January 21.

CalCCA has no comments at this time.

4. Please provide your organization’s comments on the discussion of potential measures to enhance revenue adequacy (slides 33-45 of the CAISO presentation). Which (if any) of the measures would your organization prioritize for further consideration and why?

Revenue adequacy is the most important topic to be addressed in this CRR enhancement initiative. The CAISO should prioritize evaluating the causes of revenue inadequacy and the effectiveness of solutions as soon as possible to enable stakeholders input.   

The CAISO should prioritize the exploration of all options to enhance revenue adequacy. Without data on which element is causing more or less revenue adequacy concerns, the CAISO should prioritize all potential solutions. This process should start with an evaluation of which causes have the largest impact on revenue adequacy.

The CAISO should include impacts to revenue adequacy created by auction inefficiency. The CAISO should not silo the auction efficiency and revenue adequacy issues. The two are most definitely related and should be examined together. As the Department of Market Monitoring (DMM) noted in their March 26, 2025, comments, a disproportionate amount of revenue inadequacy is caused by auctioned CRRs when compared to allocated CRRs.[1] This differential is worthy of examination. This should include a determination of whether there is a universal solution applicable to both allocated and auctioned CRRs, or whether a more targeted solution is warranted, given differences in the causes and the fundamental creation and payment of congestion values on the grid.  These fundamental differences include the fact that allocated CRRs are based upon known historical loads, including exports for load outside of the CAISO BAA, which helps to ensure that an LSE will be paying the congestion value between the source – sink pair allocated.  In the auction, there is no similar reasonable assurance that any entity will pay congestion on the source - sink pair while the CAISO will still be obligated to pay the congestion value to the winning CRR bidder. 

[1]            DMM, Comments on Congestion Revenue Rights Enhancements (March 26, 2025), https://stakeholdercenter.caiso.com/Comments/AllComments/bbb949f8-adea-47aa-893d-e55bcdf67c9f#org-862bd0e3-4fa7-4c22-b757-4a8ad8049978.

5. Are there any changes your organization believes could help improve revenue adequacy that are not included in the Issue Paper?

The CAISO should include an analysis of the various options to address revenue adequacy and their relative effectiveness in achieving that goal. The analysis should also include impacts on the amount of CRRs that can be allocated if a solution derates the grid to reduce revenue inadequacy.  

The CAISO should include an analysis of the DMM proposal for a willing seller auction mechanism that would perform a counterfactual analysis of what CRRs offered for auction would have cleared had the willing seller mechanism been employed. This would primarily look at which CRRs were offered for sale by entities that received them in allocation and chose to sell them in the auction. The counterfactual should also examine which CRRs awarded in the auction where the seller was the CAISO would not have been sold if the willing seller method had been implemented.  

Finally, the CAISO should examine the impact on revenue adequacy from counterfactual results relative to the observed revenue adequacy. This would only include the subset of CRRs that would and would not have cleared the auction under the willing seller counterfactual.  

6. Please provide your organization’s comments on the discussion of potential measures to enhance auction design and efficiency (slides 47-58 of the CAISO presentation). Which (if any) of the measures discussed would your organization prioritize for further consideration and why?

The CAISO should pursue all options to improve auction efficiency. Without knowing more about the impact each proposal would have on the market's efficiency, it is difficult to prioritize one element over another. For this reason, the CAISO should pursue each option and attempt to quantify the impacts of each method as soon as possible to enable better prioritization.  

7. Are there any changes your organization believes could help improve auction efficiency that are not included in the Issue Paper?

CalCCA has no changes at this time.

8. Please provide any other comments your organization has on the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published January 14 and the accompanying discussion on January 21.

CalCCA has no other comments at this time.

1. Please provide your organization’s comments on the straw proposal on CRR TOU period changes (slides 10-20 of the CAISO presentation).

CDWR supports CAISO proposal to separate the current on-peak TOU period into three separate time periods: 

Peak: Morning-peak, HE 7 - HE 9; Evening-peak HE 18 - HE 22 

Midday-Peak: high solar production hours HE 10 - HE 17. 

However, CAISO’s straw proposal combines the morning and evening peaks together into one peak period. CDWR does not believe this combined one TOU would mitigate the congestion as congestion may have different direction for a single peak hedging instrument. Therefore, proposed peak TOU periods should be split into three products: Morning peak, Midday peak, and the Evening peak as identified by hour in the proposal.  

A CAISO study on the benefit of having these proposed split TOU periods for last 3 years would provide support whether 3 separate on-peak TOU periods would be more efficient in hedging compared to peak and midday peak, as proposed. 

As proposed, the off-peak TOU period would remain unchanged. However, there was also discussion about whether Sundays and holidays should be included in the TOU period. A CAISO run study may identify the values to CRR holders for hedging of including of Sundays and holidays in the TOU period, and CDWR believes it would be helpful for the CAISO to conduct such a study. 

2. Please provide your organization’s comments on the straw proposal on the treatment of storage resources (slides 22-27 of the CAISO presentation).

CDWR has following comments:

a) CDWR agrees with the proposal to allow standalone storage to be eligible as an auction sink with limitations (such as, it cannot be source / sink to another storage and storage charging remains ineligible for allocation which is allowed only for LSEs); 

b) On the question of whether co-located and hybrid storage resources need to be eligible as sinks for auction, CDWR does not have insight and would support any proposal (vetted by analysis) that will not cause adverse impact on LSEs congestion hedging efficiency; and

c) On the question of whether Non-Generator Resources (NGR) storage demand be included in the CRR allocation, CDWR suggests a CAISO study on whether the inclusion of these resources would provide benefit in hedging congestion while not adversely impacting LSEs hedging capability. 

3. Please provide any other comments your organization has on the Issue Paper and Straw Proposal on Product Definition published December 12 and the accompanying discussion on January 21.

CDWR appreciates CAISO on its proposal to consider splitting into four TOU periods. However, combining morning and evening peak into a peak single TOU may not be efficient in hedging congestion due to reversal in congestion during different periods under the same instrument. In order to validate that the proposed TOU period is optimal, a system-wide CAISO study may be necessary to compare with the CDWR proposed 3 separate peak TOU periods.? 

4. Please provide your organization’s comments on the discussion of potential measures to enhance revenue adequacy (slides 33-45 of the CAISO presentation). Which (if any) of the measures would your organization prioritize for further consideration and why?

CDWR strongly agrees that CAISO should incorporate loop flows into the CRR model. CDWR agrees that the Global Derate Factor (GDF) to some extent accounts for loop flows causing a fraction of transmission capacity being unavailable, which contributes to congestion revenue shortfall. As stated by the CAISO, GDF is a fixed percentage that does not explicitly cover all loop flows since loop flow patterns vary considerably across the CAISO Balancing Authority Area (BAA). Therefore, CDWR believes inclusion of loop flows into the CRR model may reduce CRR underfunding and enhance CRRs values. 

5. Are there any changes your organization believes could help improve revenue adequacy that are not included in the Issue Paper?

?No comment at this time. 

6. Please provide your organization’s comments on the discussion of potential measures to enhance auction design and efficiency (slides 47-58 of the CAISO presentation). Which (if any) of the measures discussed would your organization prioritize for further consideration and why?

On slide 51, the DMM (Department of Market Monitoring) white paper proposal was mentioned. Within this white paper, DMM proposes to change the auction structure to a willing seller market design. The current GDF is at 65%, meaning that with the implementation of the DMM proposal, there will be an increase to higher transmission limits, thus potentially improving the GDF to 75% or greater. CDWR favors these proposed changes, as this will allow LSEs to get a better hedge for their load, more CRRs allocated, and thus reduce the charges to their ratepayers. Furthermore, DMM claims that with this willing seller market, there will be a reduction to deficit offset charges, which as of publishing of the DMM white paper, averages to around $84 million per year. Removing or reducing this deficit charge will further allow LSEs to obtain a better hedge and further reduce charges to their ratepayers. CDWR suggests that CAISO performs studies on the efficacy of the GDF increase to 75% and how the reduction of deficit offset charges will impact LSE Allocation portfolios with the implementation of the DMM-proposed willing seller market paradigm. 

7. Are there any changes your organization believes could help improve auction efficiency that are not included in the Issue Paper?

?No comment at this time. 

8. Please provide any other comments your organization has on the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published January 14 and the accompanying discussion on January 21.

?No comment at this time. 

1. Please provide your organization’s comments on the straw proposal on CRR TOU period changes (slides 10-20 of the CAISO presentation).

The California Energy Storage Alliance (CESA) appreciates the opportunity to comment on the Congestion Revenue Rights (CRR) Enhancements initiative. CESA is supportive of the proposal to split the on-peak CRR product into two periods: Peak and Midday Peak. This will better reflect solar production and the impact on congestion. CESA recommends additional analysis to determine if all hours on Sundays and holidays should be included as off-peak. CAISO’s initial analysis has determined that 4 products are not warranted given the added implementation complexity and the finding that seasonality does not appear significant in the aggregate. Nonetheless, CESA recommends that CAISO perform additional analysis under the assumption that the full EDAM footprint utilizes congestion revenue rights to distribute congestion revenue. The product definitions should consider the broader EDAM footprint versus just the existing CAISO balancing authority area.   

2. Please provide your organization’s comments on the straw proposal on the treatment of storage resources (slides 22-27 of the CAISO presentation).

CESA supports allowing nodes with storage resources that charge from the grid to be eligible CRR sinks. The CAISO proposal limits eligible storage nodes to those of standalone storage only and allows participation in the auction. CESA recommends that the eligible storage nodes to be expanded to all nodes where grid charging can occur. Thus, the node of a co-located solar and storage facility that does not allow grid charging would not be an eligible sink. All other nodes where storage is located would be eligible. Lastly, the CAISO should reconsider limiting participation only in the auctions as there may be instances in which the load serving entity operates a storage resource and may find it beneficial to request an allocated CRR.

3. Please provide any other comments your organization has on the Issue Paper and Straw Proposal on Product Definition published December 12 and the accompanying discussion on January 21.

No additional comments.

4. Please provide your organization’s comments on the discussion of potential measures to enhance revenue adequacy (slides 33-45 of the CAISO presentation). Which (if any) of the measures would your organization prioritize for further consideration and why?

No comments. 

5. Are there any changes your organization believes could help improve revenue adequacy that are not included in the Issue Paper?

No comments. 

6. Please provide your organization’s comments on the discussion of potential measures to enhance auction design and efficiency (slides 47-58 of the CAISO presentation). Which (if any) of the measures discussed would your organization prioritize for further consideration and why?

No comments. 

7. Are there any changes your organization believes could help improve auction efficiency that are not included in the Issue Paper?

No comments. 

8. Please provide any other comments your organization has on the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published January 14 and the accompanying discussion on January 21.

No comments. 

1. Please provide your organization’s comments on the straw proposal on CRR TOU period changes (slides 10-20 of the CAISO presentation).

Comments on Congestion Revenue Rights Enhancements

Issue Papers

Department of Market Monitoring

February 6, 2026

Summary

The Department of Market Monitoring (DMM) appreciates the opportunity to comment on the Congestion Revenue Rights Enhancements Issue Papers.[1] DMM continues to recommend that the ISO develop a congestion revenue rights (CRR) auction design based on willing sellers, and that development of such an approach be the top priority for the current congestion revenue rights enhancements initiative. DMM also provides comments on some of the other aspects from the issue papers.

Comments

Shift factor thresholds

During the stakeholder calls, there was discussion of changing the shift factor thresholds used in the day-ahead market as a means of improving alignment between the CRR model and the day-ahead model. The thresholds remove shift factors, which are linear DC approximations of the change in power flows from injections at a node, when those shift factors fall below the threshold. As explained by ISO staff, the thresholds are in place to ensure that the day-ahead market operates efficiently and that small estimated shift factors do not create problems obtaining a stable day-ahead market solution.

This is not a new issue. DMM does not know what the best threshold levels are, but clearly the overriding priority in setting the thresholds should be what is best for the operation of the day-ahead market. Creating detrimental impacts to the day-ahead market in an attempt to marginally improve a fundamentally flawed CRR auction design would not be appropriate.   

The ISO might also consider putting shift factor thresholds into the CRR model. It would make sense to align the thresholds between the CRR and day-ahead model if there were no other modeling differences. But because there are other modeling differences, it is unclear if this would help or hurt. Removing shift factors in the CRR model that are below the threshold could allow more CRRs to clear. And a shift factor may be below the threshold in the auction but above the threshold in the day-ahead market, creating a profitable modeling difference.

Pumped storage hydro eligibility for allocated CRRs

CalCCA pointed out on the last stakeholder call that pumped storage hydro resources are eligible for allocated CRRs even though the pump loads do not pay transmission access charges (TAC). DMM agrees with this observation, but we note that prior to the ISO’s tariff changes to comply with FERC Order 841, pumped storage hydro resources paid TAC associated with pumping load. The ISO’s Order 841 compliance filing implemented tariff changes to exempt pumped storage hydro resources from TAC on the basis that other storage resources do not pay TAC.[2] However, that filing does not address the topic of allocated CRRs, which applies uniquely among storage types to pumped storage hydro resources. Therefore, it is unclear if the continued eligibility of pumped storage hydro resources to receive allocated CRRs without paying TAC was an intentional market design choice, or simply an oversight. The ISO should clarify the intent of the Order 841 compliance filing was for pumped storage to be eligible for allocated CRRs even after being exempted from TAC.

CalCCA also noted on the stakeholder call that pumped storage hydro resources are currently eligible CRR sinks in the allocation, suggesting that this logic be extended to other storage resource types. We note that making storage nodes eligible sinks in the allocation and counting pumping/charging load as eligible load for allocated CRR nominations are separate questions.  

Minimum prices and bids

DMM continues to believe that it is not appropriate for the ISO to sell products that clearly impose costs on ratepayers with a zero dollar offer price. It is not clear to DMM that it is sound market design for the ISO to intervene to alter or restrict the “buy” bids in an attempt to fix problems created by the ISO  intervening with $0 sell offer prices. Further,  the minimum bid price and minimum CRR price described in the paper both appear to suggest a single value across all CRRs. While technically better than $0 offer prices, such a blunt bid/price floor, seems unlikely to be very effective.  

DMM does not believe the ISO should continue selling financial contracts that are backed by ratepayers – and continually sell for a fraction of the payouts made by the ISO for these contracts. However, should the ISO continue to do so, then it should at least seek to offer these contracts thoughtfully rather than blindly offering contracts at $0. Rather than a simplistic blanket minimum offer price, this would require considering what the cost of selling particular contracts/constraints are, and setting the offer price to those estimated costs. The ISO does not have the expertise and resources to do this. Rather than being a seller of financial contracts, the ISO should limit its role to being a market maker for willing sellers and buyers of such contracts.

DMM continues to recommend a CRR auction based on willing sellers

DMM continues to recommend that the ISO develop a CRR auction design based on willing sellers, and that development of such an approach be the top priority for the current congestion revenue rights enhancements initiative. Such an approach would directly address the underlying flaws in the auction design. Unlike the current CRR auction design, the hedging products in the willing seller approach do not rely on an estimated transmission model, are consistently defined between the auction and day-ahead market settlements, and are inherently fully funded by a willing counterparty. Shift factor thresholds, derate factors, transmission modeling, revenue adequacy deficit offsets, restrictions on allowable source and sink locations, etc. are all irrelevant factors (and cease to pose any design problem) under a willing seller approach.

[1]  Issue Paper and Straw Proposal on Product Definition - Congestion Revenue Rights Enhancements, California ISO, December 12, 2025: https://stakeholdercenter.caiso.com/InitiativeDocuments/Issue-Paper-and-Straw-Proposal-Congestion-Revenue-Rights-Enhancements-Dec-12-25.pdf

Issue paper on Revenue Adequacy and Auction Efficiency Enhancements - Congestion Revenue Rights Enhancements, California ISO, January 14, 2026: https://stakeholdercenter.caiso.com/InitiativeDocuments/Issue-Paper-Revenue-Adequacy-and-Auction-Efficiency-Enhancements-Congestion-Revenue-Rights-Enhancements-Jan-14-2026.pdf

[2] Compliance with Order No. 841, Docket No ER19-468-000, California Independent System Operator Corporation, December 3, 2018, p 27: https://www.caiso.com/documents/dec3-2018-compliance-orderno841-electricstorageparticipation-er19-468.pdf

2. Please provide your organization’s comments on the straw proposal on the treatment of storage resources (slides 22-27 of the CAISO presentation).

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

3. Please provide any other comments your organization has on the Issue Paper and Straw Proposal on Product Definition published December 12 and the accompanying discussion on January 21.

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

4. Please provide your organization’s comments on the discussion of potential measures to enhance revenue adequacy (slides 33-45 of the CAISO presentation). Which (if any) of the measures would your organization prioritize for further consideration and why?

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

5. Are there any changes your organization believes could help improve revenue adequacy that are not included in the Issue Paper?

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

6. Please provide your organization’s comments on the discussion of potential measures to enhance auction design and efficiency (slides 47-58 of the CAISO presentation). Which (if any) of the measures discussed would your organization prioritize for further consideration and why?

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

7. Are there any changes your organization believes could help improve auction efficiency that are not included in the Issue Paper?

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

8. Please provide any other comments your organization has on the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published January 14 and the accompanying discussion on January 21.

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

1. Please provide your organization’s comments on the straw proposal on CRR TOU period changes (slides 10-20 of the CAISO presentation).

Calpine supports the proposed updates to Time-of-Use (TOU) periods, splitting the on-peak product into Peak and Midday Peak. This reflects current solar-driven congestion and improves hedging.

Calpine recommends that Sundays be included in the TOU reform, with similar peak/off-peak distinctions as other days, since solar generation patterns and related congestion occur every day of the week. Treating Sunday this way would better align CRR periods with observed grid conditions and hedging needs.

As other parties noted on the stakeholder call, we also recommend CAISO plan the product transition carefully. Other markets faced issues during similar shifts. A clear mapping from current to new TOU periods will help market participants adjust positions without losing coverage.

2. Please provide your organization’s comments on the straw proposal on the treatment of storage resources (slides 22-27 of the CAISO presentation).

Calpine supports allowing nodes with storage that charges from the grid to serve as CRR sink locations. Storage now represents a large share of the fleet and faces material congestion risk on charging, which should be reflected in available hedging tools.

Classifying storage resources as eligible sinks in the CRR auction will help storage operators hedge charging congestion costs. This supports more efficient storage participation in energy and ancillary markets and places storage on a more level footing with other resources that can hedge congestion today.

We agree that participation rules for co-located and hybrid storage should be designed carefully to avoid creating arbitrage that is not tied to physical congestion risk. One approach is to start with stand-alone storage, then extend eligibility to co-located and hybrid storage that can charge from the grid, subject to clear conditions.

3. Please provide any other comments your organization has on the Issue Paper and Straw Proposal on Product Definition published December 12 and the accompanying discussion on January 21.

Calpine supports modernizing CRR products to reflect current system conditions and changing resource mix. We agree with limiting unnecessary complexity. Too many product variants can dilute liquidity and weaken hedging value. Seasonal adjustments should only be added if they provide clear benefits.

We support further analysis of data to inform decisions on:

• Final hour sets for Peak vs Midday Peak;
• Whether Sunday and holidays merit a similar split; and
• Whether any seasonal refinements would be helpful without adding excessive complexity.

We also note that improvements to product definitions need robust and liquid CRR auctions to deliver full value. As an LSE and generator active in several ISOs, we see that efficient congestion hedging requires:

• Frequent auctions, not only an annual plus prompt-month structure;
• Products with multiple forward tenors, including seasonal and multi-year strips; and
• Feasibility safeguards such as staged capacity release for longer-term products.

Other markets sell multi-year FTRs by releasing only a portion of capacity far in advance, then releasing more as the operating period nears. We believe CAISO can adopt similar best practices to maintain revenue adequacy even as it expands product tenors.

Calpine believes that a robust, liquid CRR auction with broad participation and longer-term products is vital for managing congestion risk cost-effectively. This aligns with FERC’s open-access principles and the empirical experience in markets like PJM and ERCOT. We encourage CAISO to pursue enhancements that increase auction frequency, duration (forward horizon), and participation, rather than restricting the auction, and to combine these with sensible limits that preserve feasibility. This balanced approach will strengthen price discovery, improve hedging opportunities, and ultimately benefit consumers through lower risk premiums and more stable energy costs.

4. Please provide your organization’s comments on the discussion of potential measures to enhance revenue adequacy (slides 33-45 of the CAISO presentation). Which (if any) of the measures would your organization prioritize for further consideration and why?

The revenue adequacy discussion is of key importance. Calpine supports improvements that reduce divergence between CRR model outcomes and day ahead congestion. We support explicit loop flow modeling and the effort CAISO has already started under existing authority. Better representation of loop flows helps align released CRR capacity with the share of transmission that produces congestion revenue.

The stakeholder discussion during the meeting also focused on how shift factor thresholds remain a central driver of underfunding. CAISO expressed reluctance to pursue changes, but we support continued examination and further discissions on this item given its role in missing power-flow contributions. If CAISO decides not to adjust shift factor thresholds, then potential changes to shortfall allocation should be prioritized to align costs with the drivers of model divergence.

During the stakeholder meeting, Calpine also asked CAISO to study the impact of planned outage timing on revenue adequacy. Outage submission flexibility increases the gap between modeled and actual network conditions. Incorporating late outages in the CRR model or tightening timelines can improve convergence. We appreciate CAISO’s statement at the meeting that its CRR modeling team is updating processes and tools to provide more frequent and timely model updates when outages or constraints change, and we encourage CAISO to describe those changes and impacts in future proposals.

5. Are there any changes your organization believes could help improve revenue adequacy that are not included in the Issue Paper?

Calpine believes a key improvement for revenue adequacy would be to revisit the current CRR revenue shortfall allocation method. The current constraint-by-constraint allocation design (scaling down payments pro rata for the CRRs impacting each constrained element) introduces payout uncertainty and pushes hedgers to discount bids on affected paths. Moreover, CAISO is the only FERC-jurisdictional area with a “constraint-by-constraint’ allocation design.

When a particular constraint is short on revenue, the holders of CRRs on that path can see drastically reduced payouts (so-called “short-pay” events), sometimes recovering only a fraction of the congestion cost they sought to hedge. Our experience as a hedger is consistent with this. When a path is expected to be chronically underfunded, a rational response is to avoid or sell out of that position. The current shortfall allocation method introduces significant uncertainty for CRR holders and erodes confidence in CRRs as reliable hedging instruments. A hedge that often covers only a fraction of congestion costs does not meet its purpose. Selling underfunded CRRs increases supply and reduces bidders’ willingness to pay, which depresses auction prices and reduces auction revenues over time. This result undermines the “auction efficiency” metric CAISO utilizes.

We recommend shifting to a broader pro-rata allocation of revenue shortfalls across all CRRs with positive target value, instead of the granular constraint-by-constraint scaling. Several other ISOs allocate shortfalls this way. This approach spreads risk more evenly and helps avoid extreme outcomes for specific paths while retaining a link to cost causation. The goal is not to restore full load uplift, but to reduce the volatility and path-specific payout risk that deters hedgers from holding needed CRRs to term.  In effect, this change would treat the congestion fund more as a pooled risk buffer (an insurance-like approach) – a small residual shortfall spread across load or across all CRR holders is far less harmful than a massive shortfall concentrated on a few CRR paths. Calpine views this reform as aligned with the original purpose of CRRs (to allow hedging of congestion costs) and a means to restore faith that a purchased CRR will deliver a predictable hedge.

Calpine believes a middle ground can be found that does not return to full load uplift but does ensure that hedgers are not deterred by the prospect of extremely uneven payout risks. Combined with improved modeling of loop flows, more realistic outage treatment, and any feasible shift factor reforms, this improved shortfall allocation approach would better support CRR auction revenue adequacy and restore confidence in CRRs as hedging tools. 

6. Please provide your organization’s comments on the discussion of potential measures to enhance auction design and efficiency (slides 47-58 of the CAISO presentation). Which (if any) of the measures discussed would your organization prioritize for further consideration and why?

Calpine supports broad participation and liquidity in CRR auctions. These principles align with open access obligations and our experience in PJM and ERCOT. Limits on participation reduce competition, widen spreads, and weaken hedging outcomes. Physical and financial participants both help tighten prices and lower hedging costs for LSEs and consumers.

We support exploring a Balance of Planning Period (BoPP) auction schedule. More frequent auctions let participants adjust hedges when new information emerges. This cuts risk premiums in bilateral and retail contracts. A BoPP design, where each monthly auction covers the prompt month plus forward months in the season, produces a more continuous forward price curve. It supports better price discovery because forward prices adjust quickly to changes such as fuel shifts, project delays, or new constraints. It also improves hedging because LSEs and generators can refine positions instead of relying on a few annual auctions.

Calpine supports adding longer-tenor CRRs such as multi-year or seasonal products, paired with staged capacity releases. Selling a portion of capacity several years ahead and releasing more capacity closer to real time gives participants forward hedging without overcommitting the system. We recommend offering 2-year and 3-year CRRs or seasonal strips, similar to PJM and ERCOT. LSEs often sign multi-year retail contracts or procurement plans. Locking congestion costs over the contract term reduces risk premiums in customer rates.

Staged capacity release is the proven way to address feasibility concerns. CAISO can release only a portion of expected capacity several years out, for example 50 to 70 percent, and hold the rest for later auctions when forecasts are more accurate. This maintains reliability and still gives participants access to needed forward hedges. Longer-term CRRs with phased releases and updated modeling would be a strong enhancement. This approach aligns with the long-term rights requirements for LSEs under FERC Order 681 and matches practices in other RTOs that offer forward certainty without compromising feasibility.

We support improvements in outage transparency and model updates. Historic outage blackout rules reflect an earlier design. Now that CRR holders absorb more shortfall risk, CAISO should revisit these rules and allow the CRR model to include major outages more dynamically, supported by clear and timely information.

Calpine does not support auction structure changes such as a strict willing seller design or tight participation caps. These changes weaken open access, reduce liquidity, and restrict the ability of new or smaller LSEs to secure needed hedges. If CAISO wants to address concerns about speculation, targeted tools such as credit requirements and monitoring are more effective than broad limits. CAISO should focus first on auction frequency, product horizon, modeling improvements, and shortfall allocation.

7. Are there any changes your organization believes could help improve auction efficiency that are not included in the Issue Paper?

Calpine recommends that CAISO prioritize measures that reduce underfunding risk and modeling divergence, since those changes directly increase participants’ willingness to pay and improve auction “efficiency” metrics without cutting participation.

A clear framework can help participants assess value and adjust portfolios. We request that CAISO outline how a more frequent auction schedule would operate, including:

• Which time periods would clear in each auction;
• How capacity would be phased across annual, seasonal, and monthly auctions; and
• How this schedule would coordinate with allocation processes.

We also recommend preserving and, where practical, broadening the range of eligible CRR source-sink pairs. Previous changes narrowed eligibility to focus on specific “delivery” paths. Given rapid changes in generation locations, storage buildout, and load patterns, it is important not to lock in a narrow set of paths based only on historical experience. A broad path set supports efficient hedging and better price discovery.

8. Please provide any other comments your organization has on the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published January 14 and the accompanying discussion on January 21.

Calpine supports developing revenue adequacy and auction reforms together in an integrated way so that changes to one part of the construct do not undermine another. For example, if CAISO improves revenue adequacy through better modeling but simultaneously restricts auction participation, the net effect on hedging and consumer costs may be negative.

We also support stakeholder feedback that emphasizes continued recognition of the broader benefits of CRR auctions. Analysis and efficiency metrics should also reflect how the auction reduces congestion risk embedded in bilateral and retail prices, and how those risk reductions benefit consumers. These benefits are missing from CAISO’s existing reporting metrics that are focused only on auction revenue relative to payouts.

1. Please provide your organization’s comments on the straw proposal on CRR TOU period changes (slides 10-20 of the CAISO presentation).

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

ED staff appreciates the opportunity to submit comments on the issue paper and straw proposal as published in December 2025, and the issue paper on Revenue Adequacy and Auction Efficiency as published in January 2026. ED staff recommends CAISO prioritize addressing the CRR underfunding that results from the CAISO selling CRRs at $0 or sometimes negative reservation price on behalf of load. ED staff thanks CAISO for the analysis and discussion of CRR time of use (TOU) periods and the addition of new sink locations but recommends addressing these issues in a later phase. ED staff recommends that CAISO prioritize discussing cost causation imbalances stemming from CRRs being sold for low prices on behalf of load, which result in high payouts with no benefit to load serving entities or ratepayers.  

2. Please provide your organization’s comments on the straw proposal on the treatment of storage resources (slides 22-27 of the CAISO presentation).

ED staff thanks CAISO for the analysis and discussion of adding storage as a sink location for auctioned CRRs. However, ED staff believes that this discussion is premature, until the fundamental issue of auction underfunding is resolved. These new products or TOUs periods are not more effective than the current configuration, as long as the auction continues to be severely underfunded.

3. Please provide any other comments your organization has on the Issue Paper and Straw Proposal on Product Definition published December 12 and the accompanying discussion on January 21.

ED staff thanks CAISO for the analysis and discussion as presented in the issue paper and straw proposal. However, adding new products, time of use periods, or sink locations seems counterproductive while the fundamental issue of auction underfunding remains. In particular, ED staff does not support any consideration of auction schedule reforms at this time. These discussions are premature and should be addressed in a later phase.

4. Please provide your organization’s comments on the discussion of potential measures to enhance revenue adequacy (slides 33-45 of the CAISO presentation). Which (if any) of the measures would your organization prioritize for further consideration and why?

ED staff supports solutions that address the cost causation imbalances that result from CAISO selling CRRs at a $0 reservation price on behalf of load. Marginal improvements in modeling, loop flows, or shift factor thresholds will not fix the fundamental issue which is the underfunding caused by the current auction design.

Specifically, the loop flow issue can be addressed in the EDAM Congestion Revenue Allocation Initiative. ED staff reiterates that the fundamental solution to addressing loop flows is not just improved modeling, but rather a durable, permanent solution. CAISO ratepayers should not be required to pay the transmission access charge (TAC) while external entities can freely use up transmission capacity in the CAISO grid and then receive the congestion revenue tied to these external self-schedules. There could be a need for some degree of loop flow modeling tied to transactions from Markets+ or out of markets transactions, but that conversation is premature until a more extensive Seams Coordination Agreement or discussion is opened.  

5. Are there any changes your organization believes could help improve revenue adequacy that are not included in the Issue Paper?

ED staff reiterates that the fundamental mechanism to improve revenue adequacy is addressing the underfunding that emerges from the current design and operation of the CRR auction. The changes proposed in the issue paper would likely only marginally improve revenue adequacy.

6. Please provide your organization’s comments on the discussion of potential measures to enhance auction design and efficiency (slides 47-58 of the CAISO presentation). Which (if any) of the measures discussed would your organization prioritize for further consideration and why?

ED staff notes that the most effective way to enhance auction design, increase auction efficiency, and reduce underfunding is fundamental auction design reform.  A component of the current CRR auction structure is CAISO offering CRRs at a $0 reservation price on behalf of ratepayers. Auction efficiency, per slide 48 of the January 21^st CRR Enhancements meeting, is defined as “how well CRR auctions price[s] discover DA [day ahead] congestion.”  Improvements in modeling, loop flows, or shift factor thresholds could generate additional revenue, which can increase revenue adequacy and reduce shortfall allocation methodology impacts. However, these improvements will not address auction efficiency. If these $0 CRRs are an accurate DA congestion price discovery mechanism, then the amount paid out for these $0 CRRs would be $0. This is not the case. The CRR auction is generating significant underfunding, making it an unreliable predictor of DA congestion.  Auction efficiency will only improve when underfunding is resolved. This is because underfunding increases entities’ risk premiums, making it more desirable to purchase the cheapest CRRs as possible to minimize the underfunding risk and maximize payouts.

ED staff recommends CAISO prioritize reducing underfunding stemming from the auction because it would improve the quality and potentially the quantity of hedging opportunities, (i.e., reducing the global derate factor). ED staff is supportive of changes proposed and ideas discussed in slides 47-58.  However, ED staff does not support modifying the auction schedule at this time because it would increase uncertainty in an already severely underfunded market. ED staff does not support any modifications to the current adopted method in the tariff for addressing revenue shortfall allocation. The current revenue shortfall allocation method protects ratepayer interests to some degree and eliminating the methodology would return the full cost exposure to CAISO ratepayers.

7. Are there any changes your organization believes could help improve auction efficiency that are not included in the Issue Paper?

ED staff reiterates that addressing the underfunding stemming from the current auction design is the fundamental issue that should be addressed in this initiative. DMM, BAMx, the Joint LSEs, and Energy Division have consistently supported addressing this issue directly. CAISO has an obligation to reduce costs to consumers. California Public Utilities Code (Pub. Util. Code) § 345.5(b)(2) directs CAISO to manage the energy markets in a manner consistent with, “[r]educing, to the extent possible, overall economic cost to the state’s consumers.”  Accordingly, the CPUC and CAISO have a shared interest in implementing solutions that reduce ratepayer costs wherever possible. The current CRR auction design results in unnecessary ratepayers losses due to CAISO selling additional CRRs at a $0 offer price on behalf ratepayers. This has resulted in$1 billion dollars in ratepayer losses since 2012, which does not align with Pub. Util. Code § 345.5 (b)(2).

8. Please provide any other comments your organization has on the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published January 14 and the accompanying discussion on January 21.

ED staff commented on the functioning and purpose in the last round of this initiative,[1] concluding that, based on FERC precedent, CRRs are intended to be a hedging mechanism, not a speculative financial product. Therefore, CAISO has no requirement to administer speculative financial auctions. ED staff repeats our prior comments on this in italics below:

Energy Trading Institute (ETI) presented background on the origin and historical precedent for CRRs/FTRs in organized locational marginal price (LMP) markets. ETI highlighted FERC statements, rulings, and orders in 1999, 2006, 2017, and 2022, addressing the critical importance of hedging instruments in a nodal market.[2] Each location on the grid in a nodal market has an LMP and the three components of LMPs are: the marginal cost of energy, congestion, and the marginal cost of losses. Each LMP refers to the network sink where load withdraws power, and the source where generators feed energy into the grid.[3] The ability to hedge in a nodal market provides market participants with the ability to protect themselves from locational differences in pricing between two locations.[4] Congestion is inherent in the composition of each LMP. The CRR market provides market participants with the ability to hedge the congestion component of the LMP. ED staff agrees with ETI that a hedging instrument is important for participants in a nodal market.

CRRs are intended to be the financial equivalent of firm transmission rights and are intended to serve as a hedging tool, not a speculative financial mechanism.[5] This is supported by FERC Order 2000, which indicates that firm transmission rights (FTRs or CRRs) should: “[p]rovide market participants with the opportunity to hedge locational differences in energy prices.”[6]

[1] CPUC Comments on Working Group Session 7 – Aug 08, Goals and Problem Statements P2, available at: https://stakeholdercenter.caiso.com/Comments/AllComments/7daa6493-7f77-4f4c-9fb0-5ddcd02334be#org-61a5f86d-5bd5-43d5-8293-a0f71a67a77b.

[2] Pg. 333 FERC Order 2000, December 20, 1999, available at: Regional Transmission Organizations, RTO Final Rule Part 1.PDF

[3] Slide 4, Energy Trading Institute, “The Legal Foundation for Congestion Revenue Rights.”, May 12^th, 2025, available at: Presentation-Energy-Trading-Institute-Congestion-Revenue-Rights-Enhancements-May-12-202.pdf

[4]Pg. 333 FERC Order 2000, December 20,1999, available at: Regional Transmission Organizations, RTO Final Rule Part 1.PDF

[5] Slide 4, Sidney Austin for Energy Trading Institute, The Legal Foundation for Congestion Revenue Rights, May 12^th, 2025, available at: Presentation-Energy-Trading-Institute-Congestion-Revenue-Rights-Enhancements-May-12-202.pdf

[6] Pg. 333 FERC Order 2000, December 20, 1999, available at: Regional Transmission Organizations, RTO Final Rule Part 1.PDF

1. Please provide your organization’s comments on the straw proposal on CRR TOU period changes (slides 10-20 of the CAISO presentation).

The CAISO’s straw proposal to better align the available times of use (TOUs) for CRRs with the hours in which distinct power flow patterns occur would be a helpful step in the right direction, especially given the increasing share of solar and battery on the grid.  However, the CAISO’s straw proposal would benefit from further refinement. Specifically,

• Sundays and holidays are subject to the same solar and storage-based power flow patterns as other days, so these patterns should be reflected in the available TOUs for Sundays and holidays (See January 21^st discussion);
• The TOUs should be adjusted to account for seasonal variability in solar hours; and
• Four TOUs (i.e., morning peak, mid-day peak, afternoon peak, and off peak) should be implemented. 
  • Although morning peak hours and afternoon peak hours typically have similar levels of systemwide net congestion, individual constraints and CRR paths can and do experience congestion in opposite directions in the morning versus the afternoon. 
  • CRRs are most beneficial and highly valued if they are  able to hedge differential congestion risks as power flow shifts over the hours of the day. 

2. Please provide your organization’s comments on the straw proposal on the treatment of storage resources (slides 22-27 of the CAISO presentation).

The CAISO should allow CRRs to sink at standalone storage locations in the CRR auction.  CRRs that allow storage resources to hedge congestion between their location and potential power sources and hub locations should be available at auction to manage risks associated with withdrawing power for storage.

During the January 21^st discussion, Calpine explained that they are forced to rely on the secondary market to hedge certain paths because they are currently unavailable in the CRR auction.  Although outside the scope of the CAISO’s specific proposal to add sink locations for storage resources, further discussion regarding additional nodes to facilitate market participant risk management is certainly within the scope of the CRR Enhancements Working Group initiative.  DC Energy encourages the CAISO to facilitate further discussions on how additional biddable locations could benefit market participants.

3. Please provide any other comments your organization has on the Issue Paper and Straw Proposal on Product Definition published December 12 and the accompanying discussion on January 21.

TOU enhancements and additional biddable locations for storage resources complement each other and should be pursued in tandem, if possible. After these enhancements, the CAISO should implement Balance of Planning Period style auctions. 

4. Please provide your organization’s comments on the discussion of potential measures to enhance revenue adequacy (slides 33-45 of the CAISO presentation). Which (if any) of the measures would your organization prioritize for further consideration and why?

Shift Factor Threshold

The CAISO’s current shift factor thresholds, and in particular the disparate treatment of certain types of settlement locations, are a root cause of congestion revenue inadequacy in the CAISO.  More significantly, as explained by the CAISO staff at the CRR Enhancements Working Group in February 2025, the shift factor cut-off discrepancy is responsible for the “CRR Settlements Reversal” that occurs chronically on certain constraints.  As a result, CRR auction participants avoid exposure to these constraints and are effectively unable to hedge at these locations.  Reducing and standardizing shift factor thresholds should be a top priority for the CAISO in order to mitigate CRR Settlements Reversal and congestion revenue inadequacy more generally.

Recognizing the CAISO’s concerns of eliminating the shift factor cut-off threshold given the CAISO’s DAM optimization approach, the CAISO could lower the current 2% shift factor threshold on certain settlement point types incrementally over time to test the effect of reductions on market solve time.  This would allow the CAISO to balance its optimization performance concerns with improving congestion revenue inadequacy. Reducing the shift factor threshold in this way would allow the CAISO to more accurately solve for congestion and collect missing congestion revenue in its day-head market.

Loop Flow Modeling

Consistent with the CAISO’s progress in modeling loop flows from all neighboring balancing areas, the CAISO should include element-specific derates for expected loop flows in its CRR model based on historical flow analysis and on EDAM data as it becomes available.  Once the CAISO includes loop flows in its CRR model, it should reduce or eliminate the global derate factor, which indiscriminately limits the capacity available for allocation and auction.  Explicit loop flow modeling highlights the need to expand the current CRR TOUs to better reflect how power flow patterns tend to shift over the course of the day.  For instance, loop flow may account for a significant portion of the capacity on certain network elements, during peak solar hours but not in others.

Explicitly modeling loop flows will allow the CAISO and its market participants to better understand the scope of the loop flow issue.  With better modeling, the CAISO should provide more information regarding unsettled flows in the day-ahead market. In addition to providing interval-level net settled flow data for all binding constraints in the day-ahead market as a part of the CRR Aggregated Revenue Adjustment Data on OASIS,[1] the CAISO also should provide similar data for unsettled flows.

Modeling Differences Between the DAM and CRR Markets

The CAISO should increase the accuracy of its CRR model to better match the day-ahead market on which CRRs settle.  As the CAISO staff has suggested, the CAISO should update the CRR model after initial publication to ensure that it includes up-to-date expectations regarding system configuration.  Adopting a more dynamic approach would allow the CAISO to reflect outages reported closer to auction closing times in auction models, which would better align the CRR model with the day-ahead market.

Outage Reporting and Transparency

The CAISO should continue its efforts to ensure more accurate and timely transmission outage reporting by incentivizing transmission owners to report planned outages consistently prior to CRR auction closing periods.  Enforcing scheduled outage reporting deadlines, and publishing information regarding all scheduled outages reported up until auction close, would ensure that market participants are bidding and offering in the auction with the same information.  The CAISO should consider how to incentivize accurate and timely outage reporting, e.g., by making auction revenue and surplus congestion revenue allocation contingent on compliance with outage reporting requirements. 

In addition, the CAISO should end its practice of not updating its daily scheduled outages posting within a certain number of days (typically 20 days) before a CRR auction (the “freeze period”).[2]  Instead, once an outage is reported, the scheduled outage data should be published for all market participants. The lack of reliable and up-to-date outage information adds to the risk of the unknown for each CRR auction participant, which is ultimately reflected in a higher risk premium (i.e., discount) on the amount they are willing to bid.

Line Rating Consistency and Transparency

The CAISO should implement changes to ensure that line ratings in the CRR model are as consistent as practicable with the line ratings used to settle the day-ahead market.  When line ratings are lower in the day-ahead market than in the CRR model, the CAISO collects congestion on fewer megawatts of flow over the element than allocated or auctioned to CRR holders, resulting in congestion revenue inadequacy and CRR underfunding.  The CAISO should publish all line ratings used to settle the day-ahead market and provide greater transparency on the criteria and reasons for adjusting day-ahead line ratings, so collectively CRR auction participants can form more accurate expectations regarding the value of future congestion and levels of underfunding. 

Monthly CRR Models

If the CAISO stops allocating and auctioning seasonal CRRs in its annual process and instead offers CRRs for each individual month, CRR model accuracy would be improved. Monthly rather than seasonal CRRs would allow the CAISO to take a more granular and nuanced approach to modeling future system conditions, including loop flow.  Auctioning CRRs for each month in a planning year also would facilitate a smooth transition between the models used in the annual CRR process and those used in subsequent monthly auctions.

Although DC Energy supports the continuation of the annual CRR process and would support the development of long-term CRR contracts similar to ERCOT and PJM, prompt-month CRR auctions provide the best opportunity for CRR models to more accurately reflect the likely system configuration in the day-ahead market during the settlement period.  Therefore, more capacity should be made available for allocation and auction in prompt-month auctions, when settlement period system conditions are better known.  Shifting some available capacity  from the annual process to prompt-month auctions would complement other efforts to improve the accuracy of CRR models.

[1] See CRR 1B Post Implementation Issues, CAISO presentation, at slide 5 (Jan. 12, 2019), available at: https://www.caiso.com/documents/crr1bpostimplementationissuesupdate_june122019.pdf.

[2] See the CAISO Transmission Outages webpage, listing roughly 20-day cut off periods for inclusion of scheduled outages in the model of upcoming CRR auctions, at: https://www.caiso.com/market-operations/outages (certificate required for access); see also, https://www.caiso.com/documents/outagemanagementsystemtransmissionoutagereport-faq.pdf  The freeze period was devised to prevent auction participants from targeting lines that would be underfunded due to unmodeled outages back when CRRs were guaranteed to be fully funded.  CRRs are no longer fully funded and there is no longer any incentive to target constraints that may be underfunded due to recently reported outages. 

5. Are there any changes your organization believes could help improve revenue adequacy that are not included in the Issue Paper?

In the near-term, the CAISO should allocate parallel flow congestion revenue arising from transmission constraints in other EDAM balancing areas to support affected congestion revenue rights on the CAISO system.  In the longer-term, EDAM should transition from physical transmission rights in certain BAAs to a combination of firm flow entitlements on seams with non-EDAM BAAs and auctioned, centrally clearing, EDAM-wide CRRs with source and sink locations across and among all EDAM BAAs.

6. Please provide your organization’s comments on the discussion of potential measures to enhance auction design and efficiency (slides 47-58 of the CAISO presentation). Which (if any) of the measures discussed would your organization prioritize for further consideration and why?

Balance of Planning Period

The CAISO should prioritize the adoption of  Balance of Planning Period (“BoPP”) style auctions.  With BoPP style auctions, the CAISO would allocate and auction monthly CRRs for each month in the upcoming planning year in the annual CRR process.  Then, each month, the CAISO would hold auctions for CRRs for each month remaining in the planning year.  A BoPP style auction design would allow market participants to bid with more confidence because they would know that they could rebalance and adjust their positions incrementally as market conditions develop over time.  This would allow market participants to more effectively use CRRs to manage their expectations of future risk.  For example, BoPP style monthly auctions provide market participants the opportunity to hedge and readjust their CRR portfolios in anticipation of critical summer and winter months.

Congestion Revenue Inadequacy Allocation

Before addressing allocation issues, the CAISO first should prioritize enhancements to address the root causes of congestion revenue inadequacy.  If the CAISO explicitly accounts for unscheduled loop flows in its CRR models, improves outage reporting and transparency, and reduces and standardizes its shift factor threshold, it will reduce the total amount of congestion revenue inadequacy that must be allocated as well as the risk of CRR Settlements Reversal. 

“Willing Seller” / Price Swap Construct

CRR auctions are foundational to open access in ISO markets because they provide open access to the financial equivalent of firm transmission service to all potential market participants, including potential new entrants.  The CAISO should focus on the proposed improvements and enhancements to the existing CRR market design and enhance rather than eliminate its CRR auctions.  The proposal to replace the current CRR auction structure with a market dependent on “willing” sellers (“price swap construct”) should not be a priority in the current stakeholder initiative and, ultimately, should not be needed once the existing CRR auctions are improved. 

The price swap construct differs from the proposal the Commission already has rejected only because it would require the CAISO to provide a platform for facilitating a simple nodal auction open to all market participants, which would include a second class of participants, e.g., generation owners, power marketers and financial participants.  The addition of such a platform is inadequate to serve as the financial equivalent of firm transmission service and would not provide a robust congestion hedging function.  Furthermore, it includes no concept of network topology and cannot find the simultaneously feasible solution that maximizes the use of networked transmission capacity. 

In addition, returning all congestion revenue to load would greatly diminish any incentive for load serving entities to respond to the marginal cost  at their settlement locations by seeking more efficient, least cost sources of power, pursuing demand response, siting large load facilities efficiently, or investing in storage technology.  Congestion itself would become a discriminatory charge, applying only to those without an entitlement (i.e., CRR allocation), such as new market entrants, generators subject to interconnection and deliverability charges, and those seeking to schedule higher volumes of exports from the CAISO than their entitlement allows. 

The long-run harm of this discriminatory dynamic cannot be overstated.  Most generation owners and developers are reliant on power purchase agreements (PPAs) with load serving entities in the CAISO.  Under the price swap construct, each time a PPA is negotiated with a generator, that is constrained down because it is located in a constrained generation pocket, the load serving entity would have an advantage, because it would face no day-ahead congestion risk, and could demand to purchase power at the generator’s bus bar price.  Whereas the generator would face the full risk of congestion; unless, it obtains a price swap hedging its exposure.  Obtaining a hedge, however, would be more difficult and more expensive under the price swap construct than in today’s CRR auctions.  A full hedge would only be available in the unlikely scenario that another entity provides sufficient counterflow at the generator’s specific location to cover the total volume of power sales.  Such a scenario would be even less likely for new generation resources interconnecting at new resource nodes.

Thus, the dynamics under a price swap construct would diminish the incentive for generators, including renewable resources, as well as battery resources, to operate and develop new capacity in the CAISO market.   This is exactly the opposite of what is needed in the CAISO in light of expected high demand growth. Transmission, generation, as well as battery and large load developers would lose vital price transparency with the elimination of CRR auctions.  The lack of price transparency would raise risk premiums, increase project costs, jeopardize, or at least harm, the ability of companies to finance new infrastructure developments, and ultimately raise barriers to entry. 

The elimination of CRR auctions in the CAISO would be particularly harmful for companies developing new generation resources.  New generation resources establish a new resource node as part of the generation interconnection process.  Today, a greenfield utility-scale solar project developer in the CAISO can rely on CRR auctions to produce reliable market-based prices for expected future congestion on paths sourcing from a newly added but as yet unenergized resource node.  Under the price swap construct, there would be no simultaneously feasible single-clearing market solution to provide an efficient price on paths sourcing from this new resource node. 

Limiting Market Participants in CRR Auctions

The CAISO should dismiss the proposal to limit auction participation to physical energy market participants because it is unduly discriminatory, does not result in open access, and is counterproductive to the goal of improving auction efficiency.  CRRs “play a key role in ensuring open access to firm transmission service by providing the opportunity to all market participants to acquire congestion hedges.”[1]  Open access for all market participants includes new market entrants, project developers, and financial entities.  Restricting CRR market participation to load serving entities, physical transmission customers, or any other class of market participants would be unduly discriminatory and violate open access. 

Restricting market participation would reduce CRR auction revenue.  The auction awards each CRR to the market participant that values it the most and is the most willing to accept the associated risk. Each additional bid for CRR capacity is an opportunity for increased auction revenue and each incremental cleared bid necessarily benefits the auction clearing optimization, which seeks to maximize auction revenue.  Eliminating whole classes of auction participants willing to bid for CRR capacity will, of course, reduce auction revenue. 

Open access to CRR auctions supports robust participation in the day-ahead market and allows generators and competitive retail providers, as well as project developers and the financial entities that facilitate their transactions, to manage their day-ahead congestion risk more effectively than the secondary market, ultimately reducing the cost of power purchase agreements in the CAISO. 

Minimum Reservation Price

The CAISO should dismiss the proposal to institute an administratively-set, non-market minimum transaction price for CRRs.

In the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published on January 14^th, the CAISO cited PJM as an example of an equivalent auction with a minimum transaction price. However, PJM’s minimum bid price only applies to FTR options, which are not available in the CAISO CRR auction.  There is no minimum bid price on FTR obligations in PJM, which are equivalent to CRRs in the CAISO.  Unlike an obligation, the purchase price of an option is the most its holder can lose.  So, a purchaser of $0 options essentially has no settlement risk and only financial upside.  In contrast, the holder of an obligation always has potential settlement risk.

Because the volume of CRR capacity offered for sale at auction has increased over time, it is clear that at least some transmission customers agree that offering allocated CRRs for sale at auction provides commensurate value compared to their internal valuations of expected future congestion.[2]  Furthermore, the high rates at which offered capacity clears at auction indicate that auction prices are higher than reservation prices.[3]  

In such a paradigm, CAISO would be responsible for forecasting reservation prices for CRRs. Any  inaccuracy in these forecasts  would lead to market inefficiency.  For example, if a CRR was worth less than the CAISO’s reservation price, then the CRR capacity would be effectively held back from the auction, garnering no auction revenue even when market participants were willing to pay some amount for the capacity.  Valuing future congestion takes considerable effort to do properly and establishing a reservation price for all CRRs would be an inefficient use of scarce CAISO resources.

CRRs that cleared for prices at or close to zero do not account for an outsize portion of congestion revenues paid to CRR holders.  According to data presented by Dr. Guillermo Bautista-Alderete at the February 27, 2025 working group meeting, CRRs acquired for prices ranging from $0MWh through $0.2MWh did not experience particularly high or the highest profits among CRRs by clearing price range in any month since 2019.[4]  If a particular CRR clears at or just above zero, it reflects the market’s collective determination that the path is unlikely to experience congestion or could experience congestion in both directions that nets close to zero.  In most cases, this collective determination is correct given the low profitability of CRRs that clear in this price range. 

Furthermore, DC Energy does not know how the CAISO could realistically establish a reservation price on all potential paths within the auction clearing mechanism itself.  The CAISO cannot simultaneously offer all possible combinations of simultaneously feasible CRR obligation awards. That is, the CAISO cannot a priori offer the available capacity in the network as a set of CRR paths offered at reservation prices with volumes that together match the available capacity.  The CAISO should not pre-process market bids, e.g., eliminate CRR bids with prices below the reservation price, because if there is not sufficient volume bid to consume capacity, then the market would clear at zero dollars, defeating the purpose of a reservation price.  The CAISO also cannot post-process market awards, e.g., cancel awards that are priced below the reservation price, because this could lead to infeasible solutions that would exacerbate revenue adequacy.

[1] PJM Interconnection, L.L.C., 178 FERC ¶ 61,170 at P 44 (2022). See also, DC Energy’s Dec. 12, 2024 comments to this Working Group; and ETI’s presentation at the May 12, 2025 Working Group meeting for further supporting precedent.

[2] See Congestion Revenue Enhancements, CAISO presentation, at slide 8 (Feb. 27, 2025), available at: https://stakeholdercenter.caiso.com/InitiativeDocuments/Presentation-Congestion-Revenue-Rights-Enhancements-Feb-27-2025.pdf

[3] Id.

[4] Id., at slide 31.

7. Are there any changes your organization believes could help improve auction efficiency that are not included in the Issue Paper?

Efficiency in a forward market means that market prices reflect available information regarding the future value of the underlying asset.  In order to have a more efficient CRR auction where prices better reflect available information regarding the value of future congestion, the CAISO should provide greater model and data transparency.  As discussed above, the CAISO should end the freeze period regarding planned outages reported prior to CRR auctions and provide greater transparency regarding the line ratings used in the day-ahead market as well as the criteria used to adjust line ratings.  It has not been raised in this working group, but the CAISO should publish shift factors for binding constraints in the day-ahead market, without limitation by the shift factor cut-off threshold.  This data would greatly enhance market transparency for all participants.

8. Please provide any other comments your organization has on the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published January 14 and the accompanying discussion on January 21.

See above responses.

1. Please provide your organization’s comments on the straw proposal on CRR TOU period changes (slides 10-20 of the CAISO presentation).

We understand that CAISO and stakeholders desire to limit complexity, however, reconsidering the four-product structure (off-peak HE23-6, morning HE7-9, solar hours HE10-17, super-peak HE18-22) as suggested by Vistra seems to improve hedge effectiveness.

For the three time of use products, please provide quantitative analysis showing directional correlation of congestion between HE7-9 and HE18-22 compared to HE7-9 and HE10-17. Is the HE7-HE9 congestion more driven by solar ramping up (similar to midday) versus HE18-22 driven by solar ramping down plus load?  An alternative to the proposed time of use definition could be:  HE7-17 as midday hours and HE18-22 as peak hours.

We suggest considering seasonal time-of-use adjustments. As Season 1 and 4 show minimal solar congestion in HE17 (figure 10: Issue Paper & Straw Proposal on Product Definition).

Please provide analysis of Sunday congestion patterns by hours. Stakeholders should evaluate whether Sunday midday hours experience similar congestion to weekday midday hours.

Please discuss the transition mechanisms for existing CRRs holders. How existing on-peak CRRs will be split.

What is expected impact on CRR payouts?

2. Please provide your organization’s comments on the straw proposal on the treatment of storage resources (slides 22-27 of the CAISO presentation).

NCPA supports suggested proposal, however, we request some clarifications. When it is said “a given CRR cannot source from one storage resource and sink at another storage resource”, by storage resource, does it mean individual resource ID, or does it apply to storage farms with multiple units? Does this restriction apply to per-entity or is it system-wide? Please provide some examples of prohibited source-sink pairs.

Please discuss this restriction when the source and sink are not in the same pricing zone.

3. Please provide any other comments your organization has on the Issue Paper and Straw Proposal on Product Definition published December 12 and the accompanying discussion on January 21.

How does this proposal interact with EDAM congestion hedging mechanisms? Is it eventually integrated into EDAM?

4. Please provide your organization’s comments on the discussion of potential measures to enhance revenue adequacy (slides 33-45 of the CAISO presentation). Which (if any) of the measures would your organization prioritize for further consideration and why?

 We appreciate CAISO’s initiative to develop explicit loop flow modeling as this represents an important step toward addressing revenue inadequacy. Please discuss the metrics will CAISO apply to measure the effectiveness of loop flow modeling in reducing revenue inadequacy. We think clear metrics and reporting mechanisms need to be established.

As timely and accurate outage data is critical for an accurate CRR model, we encourage CAISO to strengthen enforcement of transmission outage reporting deadlines established in 2019.

We request clarification on the specific improvements that CAISO will consider to partial month outage methodology. Could CAISO please provide some examples of the effect of different methodologies on CRR outcomes?

5. Are there any changes your organization believes could help improve revenue adequacy that are not included in the Issue Paper?

 Given the growth in renewable generation, integrating renewable generation forecasts into the monthly CRR model can be effective on predicting congestion patterns and hedging outcomes.

6. Please provide your organization’s comments on the discussion of potential measures to enhance auction design and efficiency (slides 47-58 of the CAISO presentation). Which (if any) of the measures discussed would your organization prioritize for further consideration and why?

We believe that improving revenue adequacy should be prioritized before considering fundamental auction structure changes. Any proposal for auction structure change should include clear analysis of impacts on the allocation process.

How would minimum price be determined? As too high minimum price could reduce auction participation and too low minimum price may have minimal impact on efficiency. As the minimum pricing can create a floor cost for LSE hedging, doesn’t it potentially have a negative effect on the allocation process?

7. Are there any changes your organization believes could help improve auction efficiency that are not included in the Issue Paper?

We suggest a change in collateral requirements that reflects participations track record and reduces barriers for reliable participants.

8. Please provide any other comments your organization has on the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published January 14 and the accompanying discussion on January 21.

NCPA suggests restoring transparency on CRR settlements, adding more detailed info on the individual CRR payments, especially for shortfalls.

1. Please provide your organization’s comments on the straw proposal on CRR TOU period changes (slides 10-20 of the CAISO presentation).

NRG supports updating CRR TOU periods to better reflect current congestion patterns and hedging. We support adding a midday-peak product and including Sundays within solar hours. These changes improve hedging alignment without undermining the fundamentals of CRR. We caution against excessive TOU granularity. Increased complexity risks reducing liquidity and price discovery, thereby weakening CRR effectiveness.

2. Please provide your organization’s comments on the straw proposal on the treatment of storage resources (slides 22-27 of the CAISO presentation).

NRG supports allowing storage to be an eligible CRR sink to hedge against charging congestion. Clear limits are necessary to ensure these products support physical hedging and do not enable purely financial arbitrage that does not benefit customers funding the transmission system.

3. Please provide any other comments your organization has on the Issue Paper and Straw Proposal on Product Definition published December 12 and the accompanying discussion on January 21.

NRG supports the overall direction but recommends a pilot or phased rollout given the volume of proposed changes. A pilot phase will reduce implementation risk, protect ratepayers, and allow market participants to fully understand new mechanics before going live.

4. Please provide your organization’s comments on the discussion of potential measures to enhance revenue adequacy (slides 33-45 of the CAISO presentation). Which (if any) of the measures would your organization prioritize for further consideration and why?

NRG agrees that underfunding remains a material issue and supports CAISO efforts to improve revenue adequacy. Priority should be given to measures that reduce day-ahead CRR divergence, including improved loop-flow treatment and outage modeling. Addressing structural underfunding should come before redesigning the auction.

5. Are there any changes your organization believes could help improve revenue adequacy that are not included in the Issue Paper?

NRG emphasizes sequencing. Revenue adequacy fixes should be implemented and evaluated before layering on additional market design changes.

6. Please provide your organization’s comments on the discussion of potential measures to enhance auction design and efficiency (slides 47-58 of the CAISO presentation). Which (if any) of the measures discussed would your organization prioritize for further consideration and why?

NRG is cautious about increasing auction frequency. More frequent auctions risk reduced liquidity, higher transaction costs, and expanded speculative activity. NRG’s priority is preserving CRRs as tools for physical congestion hedging, consistent with CAISO’s stated CRR market functions.

7. Are there any changes your organization believes could help improve auction efficiency that are not included in the Issue Paper?

NRG does not support added complexity absent clear, demonstrated benefits. Incremental, tested changes are preferable to broad structural redesigns.

8. Please provide any other comments your organization has on the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published January 14 and the accompanying discussion on January 21.

NRG continues to oppose the Department of Market Monitoring’s willing buyer and willing seller proposal. Replacing a centralized, auction-based CRR market with a bilateral-style construct would reduce transparency, limit liquidity, and concentrate market participation among a small number of sophisticated firms willing and able to warehouse congestion risk. Such an outcome would disadvantage physical market participants and undermine broad, fair access to CRRs.

NRG supports CAISO’s principles-based approach. A measured, phased implementation focused on underfunding, liquidity, and transparency best protects ratepayers and avoids outcomes that favor only the most sophisticated participants.

1. Please provide your organization’s comments on the straw proposal on CRR TOU period changes (slides 10-20 of the CAISO presentation).

We appreciate the opportunity to comment on CAISO’s CRR Enhancements initiative. We support CAISO’s efforts to improve the performance, transparency, and effectiveness of the CRR market.

PG&E urges CAISO to refocus the CRR Enhancements initiative around the core issue: revenue inadequacy (i.e., underfunding) caused by the auction. Based on the data and analysis provided by CAISO and the Department of Market Monitoring (“DMM”), we believe the initiative must prioritize and focus solely on a single central issue: CRR revenue inadequacy (i.e., underfunding) caused by the auction.

Effective CRR market reform must begin with a transparent, data-driven understanding of how the auction contributes to chronic revenue inadequacy/underfunding.

Once that analysis is complete (see question 4 for more details on the requested analysis), CAISO will be well-positioned to pursue structural improvements—whether through auction redesign, feasibility adjustments, or related measures—that enhance funding levels, hedge effectiveness, transmission revenue recovery, and overall market efficiency.

Addressing other changes/elements of the CRR design, while important and potentially valuable, could also exacerbate CRR revenue inadequacy/underfunding if the auction’s role in underfunding is not addressed. Other enhancements must be sequenced after the root causes of revenue inadequacy or underfunding in the auction are rigorously understood and addressed.

PG&E appreciates CAISO’s continued engagement with stakeholders and looks forward to further collaboration on this important initiative.

2. Please provide your organization’s comments on the straw proposal on the treatment of storage resources (slides 22-27 of the CAISO presentation).

PG&E urges CAISO to refocus the CRR Enhancements initiative around the core issue: revenue inadequacy (i.e., underfunding) caused by the auction. Based on the data and analysis provided by CAISO and the DMM, we believe the initiative must prioritize and focus solely on a single central issue: CRR revenue inadequacy (i.e., underfunding) caused by the auction.

Effective CRR market reform must begin with a transparent, data-driven understanding of how the auction contributes to chronic revenue inadequacy/underfunding.

Once that analysis is complete (see question 4 for more details on the requested analysis), CAISO will be well-positioned to pursue structural improvements—whether through auction redesign, feasibility adjustments, or related measures—that enhance funding levels, hedge effectiveness, transmission revenue recovery, and overall market efficiency.

Addressing other changes/elements of the CRR design, while important and potentially valuable, could also exacerbate CRR revenue inadequacy/underfunding if the auction’s role in underfunding is not addressed. Other enhancements must be sequenced after the root causes of revenue inadequacy or underfunding in the auction are rigorously understood and addressed.

3. Please provide any other comments your organization has on the Issue Paper and Straw Proposal on Product Definition published December 12 and the accompanying discussion on January 21.

PG&E urges CAISO to refocus the CRR Enhancements initiative around the core issue: revenue inadequacy (i.e., underfunding) caused by the auction. Based on the data and analysis provided by CAISO and the DMM, we believe the initiative must prioritize and focus solely on a single central issue: CRR revenue inadequacy (i.e., underfunding) caused by the auction.

Effective CRR market reform must begin with a transparent, data-driven understanding of how the auction contributes to chronic revenue inadequacy/underfunding.

Once that analysis is complete (see question 4 for more details on the requested analysis), CAISO will be well-positioned to pursue structural improvements—whether through auction redesign, feasibility adjustments, or related measures—that enhance funding levels, hedge effectiveness, transmission revenue recovery, and overall market efficiency.

Addressing other changes/elements of the CRR design, while important and potentially valuable, could also exacerbate CRR revenue inadequacy/underfunding if the auction’s role in underfunding is not addressed. Other enhancements must be sequenced after the root causes of revenue inadequacy or underfunding in the auction are rigorously understood and addressed.

4. Please provide your organization’s comments on the discussion of potential measures to enhance revenue adequacy (slides 33-45 of the CAISO presentation). Which (if any) of the measures would your organization prioritize for further consideration and why?

PG&E urges CAISO to refocus the CRR Enhancements initiative around the core issue: revenue inadequacy (i.e., underfunding) caused by the auction. Based on the data and analysis provided by CAISO and the DMM, we believe the initiative must prioritize and focus solely on a single central issue: CRR revenue inadequacy (i.e., underfunding) caused by the auction.

Effective CRR market reform must begin with a transparent, data-driven understanding of how the auction contributes to chronic revenue inadequacy/underfunding.

Once that analysis is complete (see below details on the requested analysis), CAISO will be well-positioned to pursue structural improvements—whether through auction redesign, feasibility adjustments, or related measures—that enhance funding levels, hedge effectiveness, transmission revenue recovery, and overall market efficiency.

Addressing other changes/elements of the CRR design, while important and potentially valuable, could also exacerbate CRR revenue inadequacy/underfunding if the auction’s role in underfunding is not addressed. Other enhancements must be sequenced after the root causes of revenue inadequacy or underfunding in the auction are rigorously understood and addressed.

Action requested:

CAISO analysis that identified modeling and loop flows as contributing factors to revenue inadequacy misses the broader issue: CRR revenue inadequacy/underfunding appears to be driven by the auction CRRs and not allocation CRRs.

1. Data indicates the primary driver of revenue inadequacy/underfunding is the auction.

PG&E’s previous comments noted that CAISO’s current goals and problem statements do not clearly articulate the fundamental issue: revenue inadequacy/underfunding has been persistent and significant, and stakeholders lack a fact-based, transparent view of its drivers.

DMM’s analysis, presented on May 12, 2025 (slide 10 - link) provides critical clarity on this point:

• Allocated CRRs have been fully funded in 16 of 19 quarters from Q3 2020 through Q1 2025. Allocated CRR notional value averaged a surplus of about 17% of congestion rent.
• After the auction, CRR revenue adequacy had shortfalls of about 25% of congestion rent
• This suggests that allocated CRRs are not the source of the sustained underfunding problem.

By contrast, underfunding arises nearly entirely from the incremental auctioned CRRs.

2. Understanding how the auction contributes to revenue inadequacy/underfunding must be the initiative’s top priority

The available data show:

• Pre-CRR 1a/1b, the auctioned set of CRRs was roughly twice as large as the allocated set.
• Post-CRR 1a/1b, auction volumes remain roughly equal to allocated volumes—not reduced below them.
• Track 1b (deficit offsets) is the primary reason for reduced losses since 2019.
• Losses have fallen by about $50 million per year during 2019-2024.

This indicates that:

1. The auction enables significant inflation in the feasible CRR set relative to allocations.
2. The CRR 1a/1b changes reduced—but did not eliminate—this inflation, meaning that the underlying issue persists.

PG&E is not advocating for the elimination of the auction. A properly-functioning auction can support liquidity, as well as facilitate open access and effective hedging for users of the transmission system. But the auction’s current design is clearly not meeting stakeholder objectives—particularly transmission cost recovery, hedge value, and fully funded CRRs.

3. CAISO should prioritize targeted analysis comparing allocated and auctioned CRRs

To identify the specific pathways and mechanisms contributing to underfunding, PG&E recommends that CAISO conduct a structured, data-driven analysis. While not the only way to perform the analysis, PG&E provides an example set of methods:

1. Select the top 10 most underfunded/revenue inadequate paths (based on CAISO analysis of working group session #3, Feb 27, 2025, slides 87-89, link).
2. Evaluate the funding performance of allocated CRRs on these paths.
3. Layer in the incremental auctioned CRRs and assess:
   1. The relative volumes of allocated vs. auctioned CRRs
   2. The underfunding attributable to the incremental auctioned CRRs
   3. Any auction participant behavior or bidding patterns contributing to feasibility inflation or clearing of marginal CRRs

The objective of this analysis is to reveal whether, and how, auction-enabled incremental CRRs are responsible for the observed underfunding and to what extent.

The suggested analysis (above) would be the starting point comparisons of different auction designs or enhancements (e.g., the current version, an enhanced version, the DMM’s “Willing Seller” model, and/or the BAMx proposal to limit auction participation based on parties' usage of the transmission system).

Only after completing this root-cause assessment, CAISO and stakeholders will be positioned to evaluate potential reforms such as the DMM “willing seller” model or other auction design improvements, including their impact on CRR revenue adequacy.  

5. Are there any changes your organization believes could help improve revenue adequacy that are not included in the Issue Paper?

PG&E urges CAISO to refocus the CRR Enhancements initiative around the core issue: revenue inadequacy (i.e., underfunding) caused by the auction. Based on the data and analysis provided by CAISO and the DMM, we believe the initiative must prioritize and focus solely on a single central issue: CRR revenue inadequacy (i.e., underfunding) caused by the auction.

Effective CRR market reform must begin with a transparent, data-driven understanding of how the auction contributes to chronic revenue inadequacy/underfunding.

Once that analysis is complete (see question 4 for more details on the requested analysis), CAISO will be well-positioned to pursue structural improvements—whether through auction redesign, feasibility adjustments, or related measures—that enhance funding levels, hedge effectiveness, transmission revenue recovery, and overall market efficiency.

Addressing other changes/elements of the CRR design, while important and potentially valuable, could also exacerbate CRR revenue inadequacy/underfunding if the auction’s role in underfunding is not addressed. Other enhancements must be sequenced after the root causes of revenue inadequacy or underfunding in the auction are rigorously understood and addressed.

6. Please provide your organization’s comments on the discussion of potential measures to enhance auction design and efficiency (slides 47-58 of the CAISO presentation). Which (if any) of the measures discussed would your organization prioritize for further consideration and why?

PG&E urges CAISO to refocus the CRR Enhancements initiative around the core issue: revenue inadequacy (i.e., underfunding) caused by the auction. Based on the data and analysis provided by CAISO and the DMM, we believe the initiative must prioritize and focus solely on a single central issue: CRR revenue inadequacy (i.e., underfunding) caused by the auction.

Effective CRR market reform must begin with a transparent, data-driven understanding of how the auction contributes to chronic revenue inadequacy/underfunding.

Once that analysis is complete (see question 4 for more details on the requested analysis), CAISO will be well-positioned to pursue structural improvements—whether through auction redesign, feasibility adjustments, or related measures—that enhance funding levels, hedge effectiveness, transmission revenue recovery, and overall market efficiency.

Addressing other changes/elements of the CRR design, while important and potentially valuable, could also exacerbate CRR revenue inadequacy/underfunding if the auction’s role in underfunding is not addressed. Other enhancements must be sequenced after the root causes of revenue inadequacy or underfunding in the auction are rigorously understood and addressed.

7. Are there any changes your organization believes could help improve auction efficiency that are not included in the Issue Paper?

PG&E urges CAISO to refocus the CRR Enhancements initiative around the core issue: revenue inadequacy (i.e., underfunding) caused by the auction. Based on the data and analysis provided by CAISO and the DMM, we believe the initiative must prioritize and focus solely on a single central issue: CRR revenue inadequacy (i.e., underfunding) caused by the auction.

Effective CRR market reform must begin with a transparent, data-driven understanding of how the auction contributes to chronic revenue inadequacy/underfunding.

Once that analysis is complete (see question 4 for more details on the requested analysis), CAISO will be well-positioned to pursue structural improvements—whether through auction redesign, feasibility adjustments, or related measures—that enhance funding levels, hedge effectiveness, transmission revenue recovery, and overall market efficiency.

Addressing other changes/elements of the CRR design, while important and potentially valuable, could also exacerbate CRR revenue inadequacy/underfunding if the auction’s role in underfunding is not addressed. Other enhancements must be sequenced after the root causes of revenue inadequacy or underfunding in the auction are rigorously understood and addressed.

8. Please provide any other comments your organization has on the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published January 14 and the accompanying discussion on January 21.

PG&E urges CAISO to refocus the CRR Enhancements initiative around the core issue: revenue inadequacy (i.e., underfunding) caused by the auction. Based on the data and analysis provided by CAISO and the DMM, we believe the initiative must prioritize and focus solely on a single central issue: CRR revenue inadequacy (i.e., underfunding) caused by the auction.

Effective CRR market reform must begin with a transparent, data-driven understanding of how the auction contributes to chronic revenue inadequacy/underfunding.

Once that analysis is complete (see question 4 for more details on the requested analysis), CAISO will be well-positioned to pursue structural improvements—whether through auction redesign, feasibility adjustments, or related measures—that enhance funding levels, hedge effectiveness, transmission revenue recovery, and overall market efficiency.

Addressing other changes/elements of the CRR design, while important and potentially valuable, could also exacerbate CRR revenue inadequacy/underfunding if the auction’s role in underfunding is not addressed. Other enhancements must be sequenced after the root causes of revenue inadequacy or underfunding in the auction are rigorously understood and addressed.

PG&E appreciates CAISO’s continued engagement with stakeholders and looks forward to further collaboration on this important initiative.

1. Please provide your organization’s comments on the straw proposal on CRR TOU period changes (slides 10-20 of the CAISO presentation).

SMUD supports the proposed TOU period changes outlined in the Straw Proposal and suggests the CAISO also consider seasonality with these options. SMUD supports the midday product and believes it helps hedge true market conditions and better plan for the anticipated load and generation patterns. SMUD supports including Sundays into the analysis of TOU products and definitions, and is also interested in determining if/how this may change the midday product and off-peak days.

SMUD understands the benefits of introducing four products to include a super-peak for more certainty than the three-product option. However, the complexity it would create for the CRR auction and participants may outweigh the purported benefits. Furthermore, considering seasonality for the peak, midday, and off-peak products may also negate the necessity for a fourth option and is worth further discussion and exploration.

2. Please provide your organization’s comments on the straw proposal on the treatment of storage resources (slides 22-27 of the CAISO presentation).

None currently.

3. Please provide any other comments your organization has on the Issue Paper and Straw Proposal on Product Definition published December 12 and the accompanying discussion on January 21.

None currently.

4. Please provide your organization’s comments on the discussion of potential measures to enhance revenue adequacy (slides 33-45 of the CAISO presentation). Which (if any) of the measures would your organization prioritize for further consideration and why?

SMUD is encouraged by the discussion of potential measures to enhance revenue adequacy and pleased the CAISO is developing loop flow modeling under its current tariff authority and improvements to outage submission considerations. SMUD encourages the CAISO to include bi-monthly outage reporting updates to the CRR model to improve accuracy and also encourages participants to report accurate outage information regardless of timing.  

SMUD requests that throughout this policy process, as applicable, the CAISO also provide updates on the results following the loop flow modeling effort and outage updates in addition to outlining how it plans to communicate its progress to stakeholders.  

5. Are there any changes your organization believes could help improve revenue adequacy that are not included in the Issue Paper?

SMUD offers the following discussion topic areas:

• Discuss timing of modeling flows in consideration of generation and transmission outages.
• Consider and discuss potential CRR volume reduction in annual allocation/auction period and increasing volume more closely to the timing of actual flows.
• Adding a new allocation/auction period (i.e. 3 months) or adding more volume (from the annual) to the monthly allocation/auction period to improve liquidity.

6. Please provide your organization’s comments on the discussion of potential measures to enhance auction design and efficiency (slides 47-58 of the CAISO presentation). Which (if any) of the measures discussed would your organization prioritize for further consideration and why?

SMUD would like stakeholders and the CAISO to discuss the underfunding issue in greater detail at a future stakeholder meeting. While the CAISO has slightly improved underfunding since the policy changes were introduced in 2019, significant problems remain.

7. Are there any changes your organization believes could help improve auction efficiency that are not included in the Issue Paper?

Please refer to comments in Section 6.

8. Please provide any other comments your organization has on the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published January 14 and the accompanying discussion on January 21.

The CAISO requested feedback on its OBAALSE program. SMUD has observed the following challenges and concerns as a participant:

SMUD understands the purpose of the model is to provide Load Serving Entities (LSEs) located outside of the CAISO BA a congestion hedge. Consequently, participants are required to pre-pay the Wheeling Access Charge (WAC). However, as SMUD is a participant in WEIM, load and generation are co-optimized and exports from the CAISO system are really imports to the WEIM entity. These exports are not credited back to the WAC pre-payment even though they are serving the WEIM participant’s load. When EDAM is implemented, these complexities will increase in scope and impact as the frequency in which LSEs schedule exports across the intertie will decrease to - or very near - 0, resulting in the removal of the ability for LSEs outside of the CAISO BA to realize the benefit of the WAC prepayment.

1. Please provide your organization’s comments on the straw proposal on CRR TOU period changes (slides 10-20 of the CAISO presentation).

San Diego Gas and Electric (SDG&E) recognizes and thanks CAISO for its effort in developing the Issue Papers and Straw Proposals in the Congestion Revenue Rights (CRR) Enhancements initiative. As the grid continues to evolve, the urgency of implementing reforms that enhance the efficiency and effectiveness of the congestion-hedging mechanism, thereby ensuring entities can meet their load-serving obligations, has only grown. To support this need, SDG&E believes the highest priority in this initiative must be identifying and addressing revenue inadequacy driven by the CRR auction, as this is the critical next step in improving the overall CRR market design.

SDG&E thanks the CAISO team for the analysis and data shared to date. In these comments, however, we emphasize that the initiative’s central focus should remain on understanding and resolving the auction’s contribution to persistent revenue inadequacy. Underfunding is a foundational issue, and improving this element of the design is critical to the broader efficiency and functionality of the CRR market. Other proposed enhancements, such as Time-of-Use period changes and treatment of storage resources, while important, should sequentially follow the completion of this core analysis and any required reforms. Improving revenue adequacy was identified as a priority for policy development, and while addressing loop flows, shift factors, and transmission outages are important, it is imperative to focus first and foremost on the contribution of the CRR auction on underfunding.

We reiterate our appreciation for the CAISO’s continued efforts to improve the CRR market outcomes and look forward to continuing to work with the CAISO and other stakeholders on the CRRE initiative.

2. Please provide your organization’s comments on the straw proposal on the treatment of storage resources (slides 22-27 of the CAISO presentation).

Please see response to Q1.

3. Please provide any other comments your organization has on the Issue Paper and Straw Proposal on Product Definition published December 12 and the accompanying discussion on January 21.

Please see response to Q1.

4. Please provide your organization’s comments on the discussion of potential measures to enhance revenue adequacy (slides 33-45 of the CAISO presentation). Which (if any) of the measures would your organization prioritize for further consideration and why?

Please see response to Q1.

5. Are there any changes your organization believes could help improve revenue adequacy that are not included in the Issue Paper?

Please see response to Q1.

6. Please provide your organization’s comments on the discussion of potential measures to enhance auction design and efficiency (slides 47-58 of the CAISO presentation). Which (if any) of the measures discussed would your organization prioritize for further consideration and why?

Please see response to Q1.

7. Are there any changes your organization believes could help improve auction efficiency that are not included in the Issue Paper?

Please see response to Q1.

8. Please provide any other comments your organization has on the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published January 14 and the accompanying discussion on January 21.

Please see response to Q1.

1. Please provide your organization’s comments on the straw proposal on CRR TOU period changes (slides 10-20 of the CAISO presentation).

Six Cities’ Comments:  As described below, the Six Cities consider improvement of Congestion Revenue Rights (“CRRs”) revenue adequacy the most critical challenge for this initiative, and any consideration of revisions to CRR product definitions must include an assessment of potential impacts on revenue adequacy.  Subject to that prioritization, the Six Cities generally support further consideration of revisions to product definitions for CRRs in order to better align CRR products with needs for hedging congestion risk. 

To that end, the Six Cities support further analysis of the three-product proposal (peak, midday-peak, and off-peak) described in the CAISO’s December 12, 2025 Issue Paper & Straw Proposal on Product Definition (“Product Definition Paper”), including evaluation of potential refinements to the three-product proposal based on additional analysis of congestion patterns as suggested by some commenters during the January 21, 2026 meeting (e.g., further review of Sunday congestion patterns).  In addition, evaluation of possible changes in CRR product definitions should acknowledge the increased complexities in CRR markets that may be associated with such changes and weigh the scope and benefits of enhanced hedging opportunities against the burdens of increased complexities, particularly for load-serving entities (“LSEs”). 

2. Please provide your organization’s comments on the straw proposal on the treatment of storage resources (slides 22-27 of the CAISO presentation).

Six Cities’ Comments:  In light of the critical importance of addressing CRR revenue inadequacy, as discussed below, expanding the definition of eligible sinks to include storage resources and the circumstances under which that should occur must include an evaluation of potential impacts on revenue adequacy.  In particular, the Six Cities are concerned that allowing designation of storage resources as sinks where there is no or minimal exposure to congestion costs may lead to higher levels of revenue inadequacy. 

Subject to evaluation of that concern, the Six Cities generally support further assessment of allowing storage resources to be included as eligible sinks for CRRs to the extent that they actually are exposed to congestion cost risk for charging energy.  Based on discussion at the January 21^st meeting, there is a need for further analysis of the circumstances under which storage resources would be exposed to congestion risk for charging.  The Six Cities agree with the CAISO’s proposal to exclude storage resources with co-located or co-configured charging supply from eligibility as sinks, as such storage facilities have no or extremely limited exposure to congestion costs.  The Six Cities do not agree with the CAISO’s general statement at page 14 of the Product Definition Paper that “[s]torage resources charging from the grid face exposure to congestion risks.”  As noted by at least one commenter at the January 21^st meeting, if a storage resource is using unspecified grid energy for charging, and the delivery point for the charging energy from the grid is the same as the delivery point for discharged energy from the resource, it is difficult to see why the resource would have any exposure to congestion cost risk.  Conversely, if a stand-alone storage resource has contracted with a specific source of charging supply with an injection point elsewhere on the grid, there may be exposure to congestion costs.  Eligibility of storage resources to be designated as sinks should be limited to circumstances where there is a demonstrated need to hedge congestion cost risks for charging energy. 

3. Please provide any other comments your organization has on the Issue Paper and Straw Proposal on Product Definition published December 12 and the accompanying discussion on January 21.

Six Cities’ Response:  The Six Cities have no additional comments on the product definition topic at this time.

4. Please provide your organization’s comments on the discussion of potential measures to enhance revenue adequacy (slides 33-45 of the CAISO presentation). Which (if any) of the measures would your organization prioritize for further consideration and why?

Six Cities’ Comments:  The Six Cities consider improvement of revenue adequacy for CRRs relied upon for hedging physical deliveries the most critical objective for this initiative.  Based on the Department of Market Monitoring (“DMM”) comparison of the levels of revenue inadequacy attributable to auctioned CRRs versus the revenue adequacy generally experienced by allocated CRRs, the first and highest priority for this initiative should be investigation of the reasons for differences in levels of revenue inadequacy/adequacy associated with auctioned CRRs versus allocated CRRs. 

The DMM presentation at the May 12, 2025 meeting illustrated at Slide 10 that allocated CRRs (which are associated with delivery of energy to load) generally experience a high level of revenue adequacy.  According to the DMM analysis, it is predominantly auctioned CRRs that give rise to revenue inadequacy.  The BAMx presentation at the 5/12/25 meeting indicated that approximately 90% of auctioned CRRs are held by entities that do not utilize the transmission network for physical deliveries.  These observations raise the question whether release of CRRs not needed or intended for use to hedge congestion costs associated with physical energy deliveries drives the occurrence of revenue inadequacy.  Answering that question, and if the answer is affirmative identifying what modifications to the auction design could reduce levels of revenue inadequacy, should be the initial focus for this initiative. 

Subsequent evaluation of ways to better align the CRR model and Integrated Forward Market (“IFM”) model, including possible application of IFM shift factors in the CRR model, may prove constructive but should not delay immediate analysis of auctioned CRR contributions to revenue inadequacy.  With respect to loop flow contributions to revenue inadequacy, the Six Cities support further analysis and consideration of measures to recover the costs of congestion arising from loop flow from the transactions or entities that create the loop flow impacts.  However, the impacts of loop flow on CRR revenue adequacy appear to be closely interrelated with broader issues relating to congestion management in the Extended Day-Ahead Market (“EDAM”) and adjacent regions.  Given the scope and complexity of the interrelated regional issues, efforts to find solutions for loop flow impacts in the context of CRR revenue inadequacy should have lower priority and should not distract from the initial focus on contributions of auctioned CRRs to revenue inadequacy.

The Six Cities strongly oppose suggestions by some stakeholders to reverse the methodology for allocating CRR revenue inadequacy on a constraint-specific basis as described at pages 32-33 of the Revenue Adequacy/Auction Efficiency Issue Paper (the “CRR1b methodology”).  Contrary to the claims of these stakeholders, FERC’s open access transmission policy and the cost causation principle do not require or support allocation of all CRR revenue inadequacy to CAISO load.  The most relevant and authoritative FERC precedent expressly supports constraint-specific allocation of revenue inadequacy.

The open access transmission policy generally requires transmission owners and operators to offer “comparable” access to transmission facilities.[1]  Financial transmission rights (“FTRs”), including CRRs, have been described as the “financial equivalent of firm transmission service.”[2]  The CRR 1b methodology treats all CAISO CRRs on a comparable basis, allocating congestion revenue shortfalls for each constraint on a proportional basis to the holders of the CRRs related to that constraint, whether such CRRs were procured through the allocation process or through the auction process.  There is no discrimination, and the holders of allocated CRRs (which are LSEs) share the burden of revenue inadequacy on the same basis as holders of auctioned CRRs.

If, however, the CRR 1b revisions were reversed, and congestion revenue shortfalls were allocated to CAISO measured demand (LSEs and exports), holders of auctioned CRRs that are not LSEs would share no part of the cost of revenue inadequacy.  LSEs, which have primary responsibility for paying the costs of the transmission network, also would be required to backstop all payments to holders of revenue inadequate CRRs.  As a result, CRR holders that are not LSEs effectively would receive preferential access to the CAISO transmission network.  FERC’s open access policy does not support, much less require, such an outcome.

In response to a request during the January 21^st discussion to identify specific FERC precedent relied upon, the commenter associated with the Energy Trading Institute (“ETI”) pointed to a presentation by an attorney from the firm of Sidley Austen LLP during the 5/12/25 working group meeting (“the Sidley Austen presentation”).  The Six Cities included a response to the Sidley Austen presentation in their comments submitted on May 27, 2025, noting that the Energy Policy Act of 2005[3] and related FERC decisions[4] that Sidley Austen highlighted focus on the ability of load serving entities to meet their service obligations to native load and reinforce the nature of equivalent financial rights as relating to hedges for physical deliveries of energy.  Nothing in those decisions supports a proposition that LSEs should be required to guarantee full funding for CRRs held by other entities, particularly ones that are not related to hedging for physical deliveries of energy and appear largely responsible for the occurrence of revenue inadequacy.

The Sidley Austen presentation also fails to address the most relevant and most authoritative FERC precedent for purposes of this initiative, namely, FERC’s order accepting the CRR1b methodology for allocating CRR revenue inadequacy.[5]  In that order, the Commission observed that the CRR1b methodology is similar to FTR payment scaling processes applicable in other ISO/RTO markets,[6] found that the constraint-specific approach to allocating congestion revenue shortfalls appropriately “results in a more targeted allocation of the revenue insufficiency,”[7] and expressly concluded that the CRR1b methodology “is not inconsistent with cost causation principles.”[8]

The Sidley Austen presentation referenced an earlier FERC decision in PJM Docket No. EL16-6-002 accepting a PJM proposal to exclude real-time congestion costs relating to imbalance energy from the definition and settlement of FTRs (which, like the CAISO CRRs, relate to day-ahead congestion).[9]  That order distinguished between day-ahead congestion hedged by FTRs and real-time imbalance congestion costs and concluded that imbalance congestion costs should be allocated to real-time load and exports.[10]  This initiative concerns CRRs intended to hedge day-ahead congestion, as distinguished from imbalance congestion addressed in the PJM order, and the Commission’s order expressly finding the CAISO’s CRR1b methodology consistent with the cost causation principle (and issued subsequent to the PJM order) is controlling.

[1] See e.g., Cal. Indep. Sys. Operator Corp., 193 FERC ¶ 61,117 at P 43 (2025) (“Open access guarantees the opportunity for customers (here, interconnection customers) to access the transmission system; and, having accessed the grid, receive comparable rates, terms, and conditions of transmission service as the owners of the transmission facilities.”)

[2] Cal. Indep. Sys. Operator Corp., 184 FERC ¶ 61,164 at P 4 (2023).

[3]   Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 549 (2005) (“EPAct 2005”).

[4]  Long-Term Firm Transmission Rights in Organized Electricity Markets, Order No. 681, 116 FERC ¶ 61,077 (2006), order on reh'g, Order No. 681-A, 117 FERC ¶ 61,201 (2006), order on reh'g, Order No. 681-B, 126 FERC ¶ 61,254 (2009).

[5]  Cal. Indep. Sys. Operator Corp., 165 FERC ¶ 61,085 (2018).

[6]  Id. at P 49 and n. 78.

[7]  Id. at P 51.

[8]  Id. at P 49.

[9]  PJM Interconnection LLC, 158 FERC ¶ 61,093 (2017).

[10]  Id. at PP 78-80.

5. Are there any changes your organization believes could help improve revenue adequacy that are not included in the Issue Paper?

Six Cities’ Comments:  The Six Cities do not have additional suggestions for potential solutions to the CRR revenue inadequacy problem at this time.  A better understanding of the drivers of revenue inadequacy should help to identify constructive solutions. 

6. Please provide your organization’s comments on the discussion of potential measures to enhance auction design and efficiency (slides 47-58 of the CAISO presentation). Which (if any) of the measures discussed would your organization prioritize for further consideration and why?

Six Cities’ Comments:  As discussed above, the initial focus for this initiative should be investigation of the reasons for differences in levels of revenue inadequacy/adequacy associated with auctioned CRRs versus allocated CRRs.  As a distinct but related issue, the Six Cities remain concerned that auction inefficiency continues to misdirect congestion revenues at the expense of the LSEs that bear the costs of the transmission system, contrary to the recognized purposes for CRRs.

As previously discussed in the Six Cities’ 5/27/25 comments, the fundamental purposes of CRRs are to (1) return congestion revenue to transmission users that pay the costs for the transmission system, and (2) allow users of the transmission system to hedge against congestion.  EPAct 2005 directed the Commission to enable LSEs to secure firm transmission rights or their equivalent.[1]  The Commission carried out this statutory mandate in Order No. 681, stating that it was directed by Congress “to enable load serving entities with long-term power supply arrangements used to meet their service obligations to obtain firm transmission rights on a long-term basis.”[2]  The Commission has described use of CRRs “to hedge the delivery of power to load” as a “core function” of the CRR auction.[3]  Further, as pointed out by the 5/12/25 Sidley Austin presentation, FERC has stated that “FTRs were designed to serve as the financial equivalent of firm transmission service and play a key role in ensuring open access to firm transmission service by providing a congestion hedging function.”  PJM Interconnection, L.L.C., 158 FERC ¶ 61,093 at P 27 (2017) (emphasis added). 

As with the discussion of FERC policy on allocation of revenue inadequacy, the Sidley Austen presentation omitted reference to the FERC precedent most directly relevant and authoritative with respect to auction efficiency, i.e., the orders approving the CRR Track 1a revisions to limit eligible source/sink pairs for the CRR auctions to supply delivery pairs.[4]  Those orders considered and rejected a number of the very same arguments that some of the very same stakeholders (Appian Way, WPTF) continue to press in this initiative based on mischaracterizations of FERC policy that FERC itself expressly repudiated.  The order accepting the CRR 1a source/sink limitations emphasized that “the primary purpose of [CAISO’s] CRR market is to enable market participants to hedge congestion charges associated with supply delivery.”[5]  The Order on rehearing expressly rejected contentions that limiting auction eligible CRRs to delivery pairs would violate the Commission’s open access policy.  Noting that “open access requires non-discriminatory treatment for all eligible users of the transmission system,”[6]  the rehearing order again emphasized the focus of open access policy on physical delivery, reiterating that CRRs play a key role in guaranteeing open access to firm transmission by “permit[ting] hedging of the delivery of power between generation and load.”[7]  Where auction participants “are being offered the same rates, terms, and conditions,” the Commission found that there is open access.[8]  The rehearing order also confirmed that “CRRs . . . being purchased at prices far lower than their value in congestion payments . . . is an indication that the CRR market is not functioning as efficiently as possible because an efficient market would attract participants to bid CRR capacity up to its expected value.”[9]  The Six Cities are unaware of any precedent that would require the CAISO to have CRR auctions that (theoretically) facilitate price discovery, market liquidity, or other supposed benefits to the detriment of performing the core functions of returning congestion revenue to transmission users and allowing users of the transmission system to hedge against congestion.

The CRR auction, as currently designed and implemented, is not meeting the fundamental purpose of CRRs as instructed by Congress and implemented in Order No. 681.  In addition to the indications, discussed above, that auctioned CRRs are driving overall CRR revenue inadequacy, the prices paid for the auctioned CRRs remain insufficient for the amount of payments made to holders of those CRRs. 

The Six Cities believe that the role of the auction design and performance in creating both revenue inadequacy and auction inefficiency must be definitively understood.  The continued back and forth between the factions seeking to revise the auction design and those seeking either to retain the current auction design or to rescind the CRR 1a and 1b revisions will not produce improved auction results.  A comprehensive understanding of the causes of both CRR revenue inadequacy and auction inefficiency should guide this initiative toward improved revenue adequacy and a better, more efficient auction design and must be prioritized.   

Pending the results of the aforementioned studies into the causes of revenue inadequacy and auction inefficiency, the Six Cities continue to support consideration of the willing seller market design proposed by the DMM.  The DMM’s previous analyses have demonstrated a clear problem where revenue shortfalls are introduced by the auction while auction participants simultaneously can purchase auction CRRs at low cost and extract disproportionate payments .  While those favoring the current model largely point to price formation as a reason to keep the current flawed system, as previously stated in the Six Cities’ 5/27/25 comments, no stakeholder has offered any evidence based on CAISO market data that there are market benefits sufficient to justify the magnitude of congestion revenue transfers from load to financial participants that the CRR auctions routinely have produced.  The willing seller paradigm will allow both the buyer and the seller to contribute to price formation and result in CRRs being sold at prices far closer to the efficient price, because the seller will not likely sell an undervalued CRR, nor would a buyer likely buy an overvalued CRR.  In addition, a willing seller/willing buyer auction design would eliminate revenue inadequacy for any auctioned CRRs, thereby addressing both revenue inadequacy and auction inefficiency, and would enable the elimination of any restrictions on eligible source/sink pairs for auctioned CRRs.

[1]   See 16 U.S.C. § 824q(b)(4). 

[2] Order No. 681, 116 FERC ¶ 61,077 at P 79(emphasis added).

[3] Cal. Indep. Sys. Operator Corp., 163 FERC ¶ 61,237 at P 64 (2018); order on reh’g, 168 FERC ¶ 61,105.

[4]  163 FERC ¶ 61,237 (2018); order on reh’g, 168 FERC ¶ 61,105.

[5]  Id. at PP 62 and 74.

[6]  168 FERC ¶ 61,105 at P 13.

[7]  Id.

[8]  Id.

[9]  Id. at P28.

7. Are there any changes your organization believes could help improve auction efficiency that are not included in the Issue Paper?

Six Cities’ Comments:  The Six Cities do not have additional suggestions for potential solutions to auction inefficiency at this time.  A better understanding of the drivers of both CRR revenue inadequacy and auction inefficiency should help to identify constructive solutions. 

8. Please provide any other comments your organization has on the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published January 14 and the accompanying discussion on January 21.

Six Cities’ Response:  The Six Cities have no additional comments at this time.

1. Please provide your organization’s comments on the straw proposal on CRR TOU period changes (slides 10-20 of the CAISO presentation).

SCE appreciates the opportunity to comment on the CAISO’s CRR Enhancements Initiative. We strongly support the CAISO’s efforts to improve the performance, transparency, and effectiveness of the CRR market.

SCE offers specific comments on the CAISO’s CRR TOU period changes in this answer, but before discussing those specifics, SCE urges the CAISO to initially refocus this CRR Enhancement initiative around what we see as the most important and core issue: revenue inadequacy (i.e., underfunding) caused by the auction.  Based on the data and analysis provided by CAISO and the DMM, SCE strongly believes solutions to the revenue insufficiency caused by the current auction structure must be the main focus of this initiative at this point. Effective CRR market reform must begin with a transparent, data-driven understanding of how the auction contributes to chronic revenue inadequacy of CRRs and underfunding in the CRR auction. Once that analysis is complete (see question 4 for more details on the requested analysis), CAISO will be well-positioned to pursue structural improvements—whether through auction redesign, feasibility adjustments, or related measures—that enhance funding levels, hedge effectiveness, transmission revenue recovery, and overall market efficiency.

Addressing other changes/elements of the CRR design, while important and potentially valuable, could also exacerbate CRR revenue inadequacy/underfunding if the auction’s role in underfunding is not addressed. Other enhancements must be sequenced after the root causes of revenue inadequacy and underfunding in the auction are rigorously understood and addressed.

Below is a summary of SCE’s response to CAISO’s straw proposal.

Number of Periods

SCE supports CAISO’s proposal to adopt a three-period TOU structure. SCE does not find sufficient incremental benefit from introducing a fourth TOU period to justify the increase in implementation burden. A three-period framework appropriately balances improved hedging precision with operational simplicity.

Seasonal TOUs

SCE supports CAISO’s proposal for a consistent year-round TOU structure. While congestion patterns during Q3 differ from the rest of the year, SCE believes that these differences can be effectively captured within a three-period TOU applied year-round.

Sunday TOU

SCE believes that Sunday and holidays should follow the same TOU periods as Monday through Saturday. SCE performed a statistical analysis to evaluate the hourly congestion patterns on each day of the week using the KS Test d-value for historical MCC data at the DLAP_SCE node from January 2024 through November 2025. Conceptually, the KS Test compares the overall shape of two distributions, including how values are spread across low, medium, and high outcomes. The d-value ranges from 0 to 1, where values closer to 0 indicate that the two distributions behave very similarly, and values closer to 1 indicate that they differ meaningfully. SCE performed the KS Test on the distributions of MCC values for each of the 24 hours of the day, compared to each of the remaining 23 hours of the day. The values are plotted in a heat map to visually identify congestion patterns, and then repeated across all days of the week to visually compare the days.

The results are presented in the heatmaps below. A red box indicates two hours that are different from each other, while a blue box indicates two hours that are similar.

The heatmaps show that Sunday and holiday patterns do not fit appropriately into a single all-day period. Furthermore, Sunday and holidays are similar to other days of the week and can be grouped into the same TOU periods. For additional visualization, the boxplots below compare the trimmed distributions of Monday-Saturday vs Sunday-Holiday and show that they are fairly similar. Applying consistent TOU treatment across all days of the week may better align CRR products with observed congestion patterns and improve hedging effectiveness.

Morning Peak

SCE believes that HE 7 should be grouped with On-peak, while HE 8 and 9 should be grouped with the Midday-peak. Historical MCC patterns suggest that HE?7 aligns more closely with early morning hours, while HE?9 better aligns with midday behavior. HE?8 appears to function as a transition hour between these regimes. As solar penetration continues to increase, HE?8 may trend toward midday characteristics over time.

SCE performed a statistical analysis using the same data as above with the KS Test to compare the distributions of the morning hours in question (HE 7, 8, 9) to their neighboring groups of hours, and thus determine which peak they would best fit in. The results are summarized in the table below and support a reclassification of HE 8 and 9 to Midday-peak.

2. Please provide your organization’s comments on the straw proposal on the treatment of storage resources (slides 22-27 of the CAISO presentation).

SCE urges the CAISO to initially refocus this CRR Enhancement initiative around what we see as the most important and core issue: revenue inadequacy (i.e., underfunding) caused by the auction.  Based on the data and analysis provided by CAISO and the DMM, SCE strongly believes that dealing with the revenue insufficiency and the current auction structure’s impact on that must be the main focus of this initiative at this point. Effective CRR market reform must begin with a transparent, data-driven understanding of how the auction contributes to chronic revenue inadequacy of CRRs and underfunding in the CRR auction. Once that analysis is complete (see question 4 for more details on the requested analysis), CAISO will be well-positioned to pursue structural improvements—whether through auction redesign, feasibility adjustments, or related measures—that enhance funding levels, hedge effectiveness, transmission revenue recovery, and overall market efficiency.

Addressing other changes/elements of the CRR design, while important and potentially valuable, could also exacerbate CRR revenue inadequacy/underfunding if the auction’s role in underfunding is not addressed. Other enhancements must be sequenced after the root causes of revenue inadequacy and underfunding in the auction are rigorously understood and addressed.

SCE believes that there may be benefits to allowing storage resources to serve as sink for CRRs. However, as outlined above, any such discussion should be delayed until after the stakeholder process has dealt with the revenue inadequacy caused by the auction mechanism. Allowing additional sinks may exacerbate the current revenue inadequacy and must wait until the auction reform is accomplished. Further, since the revenue inadequacy seems worse for auction CRRs (see question 4) the CAISO’s proposal to only allow for storage to serve as a sink for auction CRRs is a problem. SCE believes while it may be appropriate that storage demand should not count towards any CRR allocation, it does not follow that LSEs seeking to use their allocation should be prohibited from requesting an allocation of CRRs at storage sinks. This brief discussion obviously suggests the need for further analysis and discussion before allowing CRRs to use storage as sinks, but SCE again reiterates that any such discussion should wait until the revenue inadequacy caused by the auction has been dealt with. 

3. Please provide any other comments your organization has on the Issue Paper and Straw Proposal on Product Definition published December 12 and the accompanying discussion on January 21.

See answer to question 2

4. Please provide your organization’s comments on the discussion of potential measures to enhance revenue adequacy (slides 33-45 of the CAISO presentation). Which (if any) of the measures would your organization prioritize for further consideration and why?

See answer to question 2 plus the requests that follow.

Action requested:

CAISO analysis that identified modeling, ignoring small shift factors and loop flows as contributing factors to revenue inadequacy misses the broader issue: CRR revenue inadequacy/underfunding appears to be driven by the auction CRRs and not allocation CRRs.

1. Data indicates the primary driver of revenue inadequacy/underfunding is the auction.

Previous comments from other stakeholders noted that CAISO’s current goals and problem statements do not clearly articulate the fundamental issue: revenue inadequacy/underfunding has been persistent and significant, and stakeholders lack a fact-based, transparent view of its drivers.

DMM’s analysis, presented on May 12, 2025 (slide 10 - link) provides critical clarity on this point:

• Allocated CRRs have been fully funded in 16 of 19 quarters from Q3 2020 through Q1 2025. Allocated CRR notional value averaged a surplus of about 17% of congestion rent.
• After the auction, CRR revenue adequacy had shortfalls of about 25% of congestion rent
• This suggests that allocated CRRs are not the source of the sustained underfunding problem.

By contrast, underfunding arises nearly entirely from the incremental auctioned CRRs.

2. Understanding how the auction contributes to revenue inadequacy/underfunding must be the initiative’s top priority

The available data show:

• Pre-CRR 1a/1b, the auctioned set of CRRs was roughly twice as large as the allocated set.
• Post-CRR 1a/1b, auction volumes remain roughly equal to allocated volumes—not reduced below them.
• Track 1b (deficit offsets) is the primary reason for reduced losses since 2019.
  • Losses have fallen by about $50 million per year during 2019-2024.

This indicates that:

1. The auction enables significant inflation in the feasible CRR set relative to allocations.
2. The CRR 1a/1b changes reduced—but did not eliminate—this inflation, meaning that the underlying issue persists.

SCE is not advocating for the elimination of an auction in any form. A properly-functioning auction can support liquidity, as well as facilitate open access and effective hedging for users of the transmission system. But the auction’s current design is clearly not meeting stakeholder objectives—particularly transmission cost recovery, hedge value, and fully funded CRRs.

3. CAISO should prioritize targeted analysis comparing allocated and auctioned CRRs

To identify the specific pathways and mechanisms contributing to underfunding, SCE recommends that CAISO conduct a structured, data-driven analysis. While not the only way to perform the analysis, SCE provides an example set of methods:

1. Select the top 10 most underfunded/revenue inadequate paths (based on CAISO analysis of working group session #3, Feb 27, 2025, slides 87-89, link).
2. Evaluate the funding performance of allocated CRRs on these paths.
3. Layer in the incremental auctioned CRRs and assess:
   1. The relative volumes of allocated vs. auctioned CRRs
   2. The underfunding attributable to the incremental auctioned CRRs
   3. Any auction participant behavior or bidding patterns contributing to feasibility inflation or clearing of marginal CRRs

The objective of this analysis is to reveal whether, and how, auction-enabled incremental CRRs are responsible for the observed underfunding and to what extent.

The suggested analysis (above) would provide information to allow knowledgeable  comparisons of different auction designs or enhancements (e.g., the current version, an enhanced or modified version, the DMM’s “Willing Seller” model, and/or the BAMx proposal to limit auction participation based on parties' usage of the transmission system).

Only after completing this root-cause assessment, will CAISO and stakeholders be positioned to evaluate potential reforms such as the DMM “willing seller” model or other auction design improvements, including their impact on CRR revenue adequacy.

5. Are there any changes your organization believes could help improve revenue adequacy that are not included in the Issue Paper?

See answer to question 2

6. Please provide your organization’s comments on the discussion of potential measures to enhance auction design and efficiency (slides 47-58 of the CAISO presentation). Which (if any) of the measures discussed would your organization prioritize for further consideration and why?

See answer to question 2

7. Are there any changes your organization believes could help improve auction efficiency that are not included in the Issue Paper?

See answer to question 2

8. Please provide any other comments your organization has on the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published January 14 and the accompanying discussion on January 21.

See answer to question 2

1. Please provide your organization’s comments on the straw proposal on CRR TOU period changes (slides 10-20 of the CAISO presentation).

BAMx[1] appreciates the opportunity to comment on CAISO’s CRR Enhancements initiative and thank the CAISO for the proposal to add a single TOU period during solar hours. We feel that revenue inadequacy caused by the CRR auction is the fundamental issue that needs to be investigated and addressed in this initiative. We request that any proposed TOU changes be evaluated according to their potential impact on revenue adequacy.

[1] The Bay Area Municipal Transmission group (BAMx) consists of the City of Santa Clara dba Silicon Valley Power and the City of Palo Alto Utilities

2. Please provide your organization’s comments on the straw proposal on the treatment of storage resources (slides 22-27 of the CAISO presentation).

BAMx thanks CAISO for the analysis and discussion of adding storage as a sink location for auctioned CRRs. However, BAMx believes that this discussion is premature, until the fundamental issue of revenue inadequacy caused by the CRR auction is resolved. These enhancements may have value but they are not as important as addressing how the auction continues to contribute to revenue inadequacy. When considering the storage resources proposal, the impact on revenue inadequacy must be assessed.

3. Please provide any other comments your organization has on the Issue Paper and Straw Proposal on Product Definition published December 12 and the accompanying discussion on January 21.

BAMx urges CAISO to refocus the CRR Enhancements initiative around the core issue: revenue inadequacy (i.e., underfunding) caused by the auction. As discussed in question 4, below, the data and our analysis indicate the initiative must prioritize and focus solely on a single central issue: CRR revenue inadequacy (i.e., underfunding) caused by the auction.

Effective CRR market reform must begin with a transparent, data-driven understanding of how the auction contributes to chronic revenue inadequacy/underfunding.

Once that analysis is complete (see question 4 for more details on the requested analysis), CAISO will be well-positioned to pursue structural improvements—whether through auction redesign, feasibility adjustments, or related measures—that enhance funding levels, hedge effectiveness, transmission revenue recovery, and overall market efficiency.

4. Please provide your organization’s comments on the discussion of potential measures to enhance revenue adequacy (slides 33-45 of the CAISO presentation). Which (if any) of the measures would your organization prioritize for further consideration and why?

Addressing other changes/elements of the CRR design, while important and potentially valuable, could also exacerbate CRR revenue inadequacy/underfunding if the auction’s role in underfunding is not addressed. Other enhancements must be sequenced after the root causes of revenue inadequacy or underfunding in the auction are rigorously understood and addressed.

Action requested:

CAISO analysis that identified modeling and loop flows as contributing factors to revenue inadequacy misses the broader issue: CRR revenue inadequacy/underfunding appears to be driven by the auction CRRs and not allocation CRRs.

1. Data indicates the primary driver of revenue inadequacy/underfunding is the auction.

Our analysis[1] presented at the May 12, 2025, working group also demonstrated that entities with no physical participation in CAISO transmission (i.e. no need to hedge) collect significant congestion rents from CAISO ratepayers through their participation in the CRR auction.

PG&E’s previous comments[2] noted that CAISO’s current goals and problem statements do not clearly articulate the fundamental issue: revenue inadequacy/underfunding has been persistent and significant, and stakeholders lack a fact-based, transparent view of its drivers.

DMM’s comments[3] on March 25, 2025, and analysis[4] presented on May 12, 2025 (slide 10) provides critical clarity on this point:

• Allocated CRRs have been fully funded in 16 of 19 quarters from Q3 2020 through Q1 2025. Allocated CRR notional value averaged a surplus of about 17% of congestion rent.
• After the auction, CRR revenue adequacy had shortfalls of about 25% of congestion rent
• This suggests that allocated CRRs are not the source of the sustained underfunding problem.

By contrast, underfunding arises nearly entirely from the incremental auctioned CRRs.

2. Understanding how the auction contributes to revenue inadequacy/underfunding must be the initiative’s top priority

The available data show:

• Pre-CRR 1a/1b, the auctioned set of CRRs was roughly twice as large as the allocated set.
• Post-CRR 1a/1b, auction volumes were roughly equal to allocated volumes—not reduced below them.
• Track 1b (deficit offsets) is the primary reason for reduced congestion losses since 2019.
• Congestion losses have fallen by about $50 million per year during 2019-2024.

This indicates that:

1. The auction enables significant inflation in the feasible CRR set relative to allocations.
2. The CRR 1a/1b changes reduced—but did not eliminate—this inflation, meaning that the underlying issue persists.

BAMx is not advocating for the elimination of the auction. A properly-functioning auction can support liquidity, as well as facilitate open access and effective hedging for users of the transmission system. But the auction’s current design is clearly not meeting stakeholder objectives—particularly transmission cost recovery, hedge value, and fully funded CRRs.

3. CAISO should prioritize targeted analysis comparing allocated and auctioned CRRs

To identify the specific pathways and mechanisms contributing to underfunding, BAMx recommends that CAISO conduct a structured, data-driven analysis. While not the only way to perform the analysis, BAMx provides an example set of methods:

1. Select the top 10 most underfunded/revenue inadequate paths (based on CAISO analysis of working group session #3, Feb 27, 2025, slides 87-89, link).
2. Evaluate the funding performance of allocated CRRs on these paths.
3. Layer in the incremental auctioned CRRs and assess:
   1. The relative volumes of allocated vs. auctioned CRRs
   2. The underfunding attributable to the incremental auctioned CRRs
   3. Any auction participant behavior or bidding patterns contributing to feasibility inflation or clearing of marginal CRRs

The objective of this analysis is to reveal whether, and how, auction-enabled incremental CRRs are responsible for the observed underfunding and to what extent.

The suggested analysis (above) would be the starting point comparisons of different auction designs or enhancements (e.g., the current version, an enhanced version, the DMM’s “Willing Seller” model, and/or the BAMx proposal to limit auction participation based on parties' usage of the transmission system).

Only after completing this root-cause assessment will the CAISO and stakeholders be positioned to evaluate potential reforms such as the DMM “willing seller” model or other auction design improvements, including their impact on CRR revenue adequacy.  

[1] Bay Area Municipal Transmission Group (BAMx), “Analysis of CRR Auction Participation,” May 12, 2025. https://stakeholdercenter.caiso.com/InitiativeDocuments/Presentation-BAMX-Congestion-Revenue-Rights-Enhancements-May-12-2025.pdf

[2] Pacific Gas and Electric Co. (PG&E) Comments on Working Group Session 7 – Aug 08, Goals and Problem Statements P2, September 22, 2025, https://stakeholdercenter.caiso.com/Comments/AllComments/7daa6493-7f77-4f4c-9fb0-5ddcd02334be#org-69441761-a0f9-40bc-bafe-539ef12dd819

[3] CAISO Department of Market Monitoring, “Comments on Congestion Revenue Rights Enhancements Working Group Meeting #3 – February 27, 2025,” March 26, 2025. https://www.caiso.com/documents/dmm-comments-on-crr-enhancements-feb-27-2025-working-group-meeting-no-3-mar-26-2025.pdf

[4] Roger Avalos, CAISO Department of Market Monitoring, “Congestion revenue rights auction is fundamentally flawed – and continues to lose millions of dollars a year,” May 12, 2025. https://stakeholdercenter.caiso.com/InitiativeDocuments/Presentation-CRR-Enhancements-May-12-2025.pdf

5. Are there any changes your organization believes could help improve revenue adequacy that are not included in the Issue Paper?

BAMx reiterates that addressing revenue inadequacy stemming from the current auction design is the fundamental issue that should be addressed in this initiative. We note that the auction was not noted as a contributing factor to revenue inadequacy, despite the data suggesting otherwise, in the issue paper.

6. Please provide your organization’s comments on the discussion of potential measures to enhance auction design and efficiency (slides 47-58 of the CAISO presentation). Which (if any) of the measures discussed would your organization prioritize for further consideration and why?

See answer to question 4, where BAMx reiterates that addressing the revenue inadequacy stemming from the current auction design is the fundamental issue that should be addressed in this initiative. Any proposed solutions must be evaluated against their ability to address revenue inadequacy.

7. Are there any changes your organization believes could help improve auction efficiency that are not included in the Issue Paper?

See answer to question 4, where BAMx reiterates that addressing the revenue inadequacy stemming from the current auction design is the fundamental issue that should be addressed in this initiative. Any proposed solutions must be evaluated against their ability to address revenue inadequacy.

8. Please provide any other comments your organization has on the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published January 14 and the accompanying discussion on January 21.

No comments at this time.

1. Please provide your organization’s comments on the straw proposal on CRR TOU period changes (slides 10-20 of the CAISO presentation).

The Energy Authority [1] (TEA) continues to support CAISO transitioning the granularity of its CRR products to match the timing and needs of its day-ahead markets. Between the implementation of EDAM and the continued build-out of storage resources, the separation of products into simple on-/off-peak designations is no longer appropriate. TEA therefore supports moving to the four-periods per day breakout CAISO suggested but recommends this structure be used for every day of the week, rather than treating Sundays and Holidays as being entirely “off-peak”.

[1] TEA is a nationwide public power-owned, not-for-profit provider of wholesale energy market services. Within a broader suite of client services, TEA optimizes CRR portfolios, and their equivalent in the non-CAISO markets, to hedge supply and demand positions for LSEs.

2. Please provide your organization’s comments on the straw proposal on the treatment of storage resources (slides 22-27 of the CAISO presentation).

TEA supports the proposal to allow stand-alone storage as an auction sink with the noted limitations.

3. Please provide any other comments your organization has on the Issue Paper and Straw Proposal on Product Definition published December 12 and the accompanying discussion on January 21.

N/A

4. Please provide your organization’s comments on the discussion of potential measures to enhance revenue adequacy (slides 33-45 of the CAISO presentation). Which (if any) of the measures would your organization prioritize for further consideration and why?

TEA supports further assessment of the feasibility of reducing the shift-factor threshold and believes this will grow in importance as the day-ahead market expands to include the non-CAISO EDAM areas.

5. Are there any changes your organization believes could help improve revenue adequacy that are not included in the Issue Paper?

TEA has identified multiple operational inefficiencies and disconnects that are making engaging with the CRR market difficult. Changes to CAISO’s operational structure need to be made near-term to encourage market participation and mitigate undue risk resulting from delayed postings, insufficient communication, and slow response times. Without making these changes, the enhancements proposed will not provide their full potential benefit to the market and by extension to LSEs and their customers. TEA is raising these issues here to inform stakeholders participating in this initiative that may not be as close to day-to-day market operations.

TEA has attached a more complete description of these solvable operational issues but summarizes the requested changes as follows: 

• Extend monthly market deadlines from one day to two days; 
• Publish any mapping changes at least one day before the market window opens;
• Implement faster and more reliable response procedures for CIDI tickets and email inquiries during market windows; and
• Provide clear, timely communication for any significant rule, collateral, or process changes.

TEA requests CAISO identify if and how each of these are being addressed or could be addressed, and suggests CAISO consider the impact of these inefficiencies when presenting data on auction efficiency and revenue adequacy. 

6. Please provide your organization’s comments on the discussion of potential measures to enhance auction design and efficiency (slides 47-58 of the CAISO presentation). Which (if any) of the measures discussed would your organization prioritize for further consideration and why?

TEA supports the suggestions made by DC Energy, Calpine, and others regarding adjusting and increasing the auction efficiency, including considering a Balance of Planning Period (BoPP) auction schedule similar to what is used by MISO and PJM.

As stated below, TEA does not support CAISO making broad changes to the structure of the CRR market, such as moving to the “willing seller” framework CAISO’s DMM has been advocating for going back to the late 2010s. Further, TEA does not support the suggestion made by BAMx to move to a CRR market that only includes entities serving physical load as this would cause market liquidity problems that would further degrade auction efficiency, rather than increasing it.

7. Are there any changes your organization believes could help improve auction efficiency that are not included in the Issue Paper?

TEA supports the comments made by Appian Way, the Western Power Trading Forum, and others regarding how it is inappropriate for CAISO to asymmetrically assign the impact of modeling discrepancies or EDAM congestion revenue allocation policy on revenue adequacy to non-LSE CRR rightsholders. As was noted, increasing the risk and decreasing the reward of holding a CRR for one set of market participants undermines the efficiency of the market and makes it more difficult for it to achieve its intended outcomes.

8. Please provide any other comments your organization has on the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published January 14 and the accompanying discussion on January 21.

TEA appreciates the opportunity to provide feedback on the January 21 meeting and Issue Paper and looks forward to continuing to engage with CAISO and fellow stakeholders to enhance the existing CRR model and its performance.

Attached: TEA Discussion of CAISO CRR Market Operational Issues.

1. Please provide your organization’s comments on the straw proposal on CRR TOU period changes (slides 10-20 of the CAISO presentation).

Overall, TEMUS supports the addition of a new peak product that reflects the operating patterns of the CAISO’s current supply mix but agrees that further analysis and refinement is needed to determine how many new products, impact of seasonality, and which hours and days to include. TEMUS also recommends that new products align with other related market offerings: for example, the HE10-17 solar product proposed on slide #14 of the January 21 presentation would not align with the HE9-16 product currently available on ICE.

2. Please provide your organization’s comments on the straw proposal on the treatment of storage resources (slides 22-27 of the CAISO presentation).

TEMUS supports allowing storage resources to be an eligible sink location as a general concept but recommends that the proposal is further refined. TEMUS agrees that the definition of storage would need to be tightly defined, consistent across storage types and limited to stand-alone storage with a separate Point of Interconnection (POI) given the number of grey areas and potential for gaming that could exist for hybrid, collocated, or behind-the fence resources.

TEMUS suggests that further analysis is needed regarding the possibility of CRR allocation for storage (if it is a sink is it not a load?), and specifically the impact (if any) on CRR underfunding. Further stakeholder discussion is warranted to determine when storage charging is defined as “load” (stand-alone) and when it is “negative generation” (paired).

3. Please provide any other comments your organization has on the Issue Paper and Straw Proposal on Product Definition published December 12 and the accompanying discussion on January 21.

TEMUS suggests that the CAISO consider establishing guidelines for when it would be appropriate to relaunch a policy initiative to revisit the usefulness of CRR Time-of-Use (TOU) products in the future.

4. Please provide your organization’s comments on the discussion of potential measures to enhance revenue adequacy (slides 33-45 of the CAISO presentation). Which (if any) of the measures would your organization prioritize for further consideration and why?

On slide #36 of the January 21 presentation, the CAISO list three main root causes identified leading to revenue inadequacy: (1) missing power flows related to shift factors below the 2% cutoff; (2) power flow contributions from loop flows that consume capacity from transmission constraints, and; (3) model differences between the CRR and day-ahead DA markets. TEMUS supports efforts by the CAISO to improve all three of these root causes.

Like other stakeholders, TEMUS strongly supports the lowering of the shift factor threshold to improve auction efficiency and reduce underfunding. Because CAISO staff have argued that “there are likely other measures that could reduce revenue inadequacy sooner and more easily” (slide #38), TEMUS recommends that the CAISO undertake additional analysis of the impact of lowering the threshold and then, using that information, an estimated cost-benefit of implementation.

TEMUS also supports the proposal to improve loop flow modeling and provide updates and impact analysis to stakeholders. The CAISO commented on slide #40 that it expects the impact of loop flows to decrease as more flows within EDAM are associated with a market schedule, and TEMUS cautions that a clear boundary should be established around the CRR Enhancements Initiative and broader changes to the EDAM design given the inclination of the CAISO to address loop flows by further restricting the ability of transmission rights holders to self-schedule. Although it is out-of-scope for this initiative and perhaps best left to the new EDAM governance process, TEMUS suggests that the impact of loop flows within the ISO could be greatly reduced by allowing economic bidding at all EDAM interfaces.

TEMUS also supports process improvements to transmission outage reporting and the distribution of that information to stakeholders in a timely manner, which would improve both auction adequacy and efficiency.

5. Are there any changes your organization believes could help improve revenue adequacy that are not included in the Issue Paper?

6. Please provide your organization’s comments on the discussion of potential measures to enhance auction design and efficiency (slides 47-58 of the CAISO presentation). Which (if any) of the measures discussed would your organization prioritize for further consideration and why?

Among the potential measures proposed to enhance auction efficiency, TEMUS recommends that the CAISO prioritize revenue shortfall allocation.

Auction Structure

Like other stakeholders, TEMUS continues to strongly oppose replacing the CRR auction with a “willing market of buyers and sellers” as suggested by the Department of Market Monitoring (DMM). There has not been a fulsome analysis (i.e., a counterfactual) presented stakeholders to demonstrate that this alternative provides greater benefit and justifies the transition cost.

Auction Participation

TEMUS strongly opposes limits on auction participation, including the Bay Area Municipal Transmission Group’s (BAMx). proposal to restrict the auction to physical energy market participants. TEMUS agrees that such a limitation would reduce liquidity and therefore auction efficiency and would be discriminatory.

Auction Pricing

TEMUS strongly opposes the setting of a minimum auction transaction price because it would reduce liquidity and therefore auction efficiency.

Auction Schedule

TEMUS suggests that the benefit of adjusting the auction frequency depends on the outcome of other elements of the CRR initiative, such as TOU definition.

Revenue Shortfall Allocation

TEMUS supports Western Power Trading Forum’s (WPTF) proposal to align allocation with cost-causation as outlined in their September 8, 2025 presentation. At minimum, the CAISO should provide analysis of the impact of a different allocation methodology on underfunding.

7. Are there any changes your organization believes could help improve auction efficiency that are not included in the Issue Paper?

8. Please provide any other comments your organization has on the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published January 14 and the accompanying discussion on January 21.

Since the auction efficiency metric is relied upon as the primary measure of the success of the CRR auction it would be worthwhile to revisit the metric and how well it is achieving this goal. Underfunding is an issue in all Financial Transmission Rights (FTR) markets, and because of the asymmetric risk some underfunding is inevitable – the real question is whether the degree of underfunding swamps the benefit of the liquidity and efficiency of the (much larger) energy market.

1. Please provide your organization’s comments on the straw proposal on CRR TOU period changes (slides 10-20 of the CAISO presentation).

Vitol supports retaining the existing CRR on-peak time-of-use period and introducing a solar time-of-use period. The existing on-peak time-of-use period is needed so market participants can hedge basis risk from trading hubs without having to execute two separate CRR transactions. We believe this is feasible because other organized markets have overlapping CRR time-of-use periods (e.g., ERCOT’s monthly CRR auctions offer a 24-hour CRR that overlaps with the on-peak and off-peak time-of-use periods).

2. Please provide your organization’s comments on the straw proposal on the treatment of storage resources (slides 22-27 of the CAISO presentation).

3. Please provide any other comments your organization has on the Issue Paper and Straw Proposal on Product Definition published December 12 and the accompanying discussion on January 21.

4. Please provide your organization’s comments on the discussion of potential measures to enhance revenue adequacy (slides 33-45 of the CAISO presentation). Which (if any) of the measures would your organization prioritize for further consideration and why?

Vitol supports further review of modeling differences between the CRR and day-ahead markets, including improvements to loop flow modeling and transmission outage modeling. Currently, planned transmission outages submitted after the CRR auction model-build process can cause the overselling of CRRs and contribute to revenue inadequacy. To address this issue, Vitol believes CAISO should strengthen its ability to enforce transmission outage submission rules (i.e., the 30-day rule in CAISO Tariff Section 36.4.3).

CAISO should also review its criteria for including known outages in CRR auction models. If the outage-screening criteria are too narrow, significant outages may be excluded from the auction models, which can result in overselling of CRRs. The converse is true if the criteria are set too loosely. We request that CAISO ensure it is striking the right balance.

5. Are there any changes your organization believes could help improve revenue adequacy that are not included in the Issue Paper?

There are two general ways to reduce shortfall assignments to CRR positions. One is to resolve the modeling differences highlighted above; another is to revise the allocation of CRR shortfalls. Currently, revenue inadequacy allocated at the transmission-constraint level can be so severe that it exceeds the notional value of a CRR. The Discussion Paper refers to this as a “settlement reversal.” In such instances, a CRR is not risk-reducing and instead settles as a net charge. This outcome is especially problematic given the cost paid to acquire a CRR. Accordingly, the current allocation methodology should be enhanced to ensure CRRs can fulfill their intended purpose as a market risk-management tool.

Our proposed solution, outlined below, would reduce shortfall charges to CRR holders while continuing to protect load-serving entities from revenue inadequacy. We believe our proposal strikes a fair balance and aligns with practices in other organized markets, namely PJM, MISO, and SPP.

Vitol’s proposal for assigning CRR revenue inadequacy

Today, CAISO’s constraint-level allocation assigns all CRR shortfalls to CRR holders. As a result, at the end of any given period there can only be surplus congestion funding. Our proposal is to apply this surplus funding to CRR holders who were short-paid.

This change would apply surplus congestion funding across all transmission constraints during an annual planning period. In essence, our proposal corrects the “by constraint” methodology by adjusting two design elements that contribute to high levels of revenue inadequacy:

• Adjust the “by constraint” approach for monthly and annual CRR settlement by permitting surplus from one constraint to offset the deficiency of another.
• Permit one month’s congestion funding surplus to fund another month’s deficiency. At the final closeout of the CRR balancing account, any remaining surplus would be allocated to load-serving entities.

Our proposal preserves CAISO’s “by constraint” methodology for hourly and daily settlement; however, it would be adjusted for end-of-month and annual closeout settlement. This feature aligns with long-standing practices in PJM, MISO, and SPP, where surplus from one constraint can be used to address revenue deficiencies across binding transmission constraints and time. The proposal would smooth the distribution and reduce the magnitude of short-pays. This, in turn, would improve the expected value of CRR positions by reducing the risk premium needed to cover short-pays, which would help improve CAISO’s CRR Auction efficiency metric.

It is worth noting that our proposed solution continues to protect load-serving entities from bearing the cost of CRR revenue inadequacy. That is, CRR holders would continue to bear short-pay risk when the system is revenue inadequate overall.

6. Please provide your organization’s comments on the discussion of potential measures to enhance auction design and efficiency (slides 47-58 of the CAISO presentation). Which (if any) of the measures discussed would your organization prioritize for further consideration and why?

Vitol believes CAISO should continue to identify and address the underlying causes of underfunding in its market models. Improving the accuracy of these models is beneficial for all participants, as it improves the effectiveness of CRRs as a hedge and promotes market efficiency by reducing distortions caused by shortfall uplift. These efforts should not be delayed while stakeholders continue to consider structural reforms to the CRR market.

7. Are there any changes your organization believes could help improve auction efficiency that are not included in the Issue Paper?

8. Please provide any other comments your organization has on the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published January 14 and the accompanying discussion on January 21.

1. Please provide your organization’s comments on the straw proposal on CRR TOU period changes (slides 10-20 of the CAISO presentation).

The FMC generally supports the CRR Time of Use proposal, along with the proposal to add Balance of Planning Period (“BOPP”) auctions, as these will yield greater granularity in pricing, hedging and price discovery.  BOPP auctions in particular are best practices in other ISO/RTO markets, and should be incorporated in CAISO’s CRR market. On the potential incorporation of TOU periods, the reformed TOU periods should account for the solar patterns on Sundays and weekends.  This proposal is an opportunity to fine-tune CRR patterns for longer-term benefits.  As such, the proposal could benefit from some more nuance regarding seasons and potential differences between congestion in morning shoulder hours and afternoon shoulder hours.

2. Please provide your organization’s comments on the straw proposal on the treatment of storage resources (slides 22-27 of the CAISO presentation).

The FMC does not take a position on this issue beyond being generally supportive. We note that several commenters brought up an important point that co-located and hybrid storage resources should be included in this issue.  We agree.

3. Please provide any other comments your organization has on the Issue Paper and Straw Proposal on Product Definition published December 12 and the accompanying discussion on January 21.

The FMC strongly supports updating CAISO’s shift factor threshold.  We were disappointed to see the suggestion that reforming the shift factor cut off threshold is too difficult because it would require changes to Day-Ahead Market and Real-Time Market structures. The stakeholder process and CAISO’s papers have made clear that the current shift factor cuff off threshold structure is the primary cause of certain constraints being more than 100% underfunded for CRR holders.  Failing to address this primary cause of underfunding defeats the purpose of seeking to address underfunding in the first instance.

The FMC strongly supports the proposal to revisit the auction schedule (slides 28-29), potentially increasing auction frequency. As CAISO recognizes, this increased frequency could bring benefits. While we acknowledge CAISO’s concerns that this proposal could also yield more work for CAISO and would require modifications to the CRR system, more frequent auctions are a best practice implemented in other ISOs.

4. Please provide your organization’s comments on the discussion of potential measures to enhance revenue adequacy (slides 33-45 of the CAISO presentation). Which (if any) of the measures would your organization prioritize for further consideration and why?

As noted above, resolving issues related to the CAISO shift factor threshold and loop flow issues is a critical part of resolving recurring underfunding issues. As noted in our previous comments, addressing outage timing and reducing divergence between the Day-Ahead and CRR models as much as possible, are also both critical elements.

5. Are there any changes your organization believes could help improve revenue adequacy that are not included in the Issue Paper?

The FMC generally supports potential limits on minimum bids, as long as such limits are reasonable and leave market participants with a sufficient quantity of bids to build a vibrant and liquid portfolio.  This is a best practice which exists in in multiple other ISO/RTOs.

6. Please provide your organization’s comments on the discussion of potential measures to enhance auction design and efficiency (slides 47-58 of the CAISO presentation). Which (if any) of the measures discussed would your organization prioritize for further consideration and why?

The FMC believes that two proposals raised regarding auction design and efficiency –specifically the DMM’s “market of willing buyers and sellers” and BAMX’s proposal to restrict the CRR market to only physical market participants – will cause irrevocable harm, in addition to being contrary to FERC policy.

In prior meetings and papers, CAISO asked about the impacts of potential CRR market design changes on ICE and bilateral markets.  The biggest impact would be the reduction of price discovery and the commensurate loss of ability for outside instruments to settle based on CRR prices, since such prices would no longer be liquid and robust.

Market of Willing Buyers and Sellers.

The DMM’s proposal to redesign the CAISO CRR market into a market of willing buyers and sellers is destructive and counterproductive.  The following is an outline of our concerns with this proposal.  At bottom, this proposal is a rejection of FERC’s pro-market and open access policies, and a reversion to the old days of vertically integrated utilities entering bilateral transactions.  Another word for this would be liquidity collapse.

• Nothing prevents current ARR holders from participating in the CRR market and buying the same positions that they originally held in the ARR market.  If the ARR holders wanted to hold those positions, they could.  Under the DMM’s proposal, if ARR holders are not engaged and do not act as a “willing seller” there will be no liquidity in the markets at all.  Given the critical importance of liquidity, the best way to achieve it is to force all the products to be in the market.
• The DMM’s proposal also risks an adverse selection process, where only elss valuable contracts are offered, thereby reducing price discovery on valuable paths.  Pricing becomes a surprise with little to no advance planning, because prices are not available.  This then impacts other markets – including ICE and bilateral markets – since they can no longer settle on CRR prices because those prices are no longer liquid and robust.
• Market participants that need hedging will also be negatively impacted.  If there isn’t enough liquidity in the market, these market participants cannot hedge.  If only LSEs hold long-term transmission rights contracts and they don’t offer those contracts in the “willing buyers and sellers” market, then generators lose the ability to hedge.
• Revenue adequacy problems will also increase. Without the injection of cash in the right places that comes from CRR auctions, the market will be uneven and may not have funds in the right places.  Market makers are important and must be permitted to inject liquid capital.

Limit Market to Physical Sellers.

BAMx’s proposal to limit the CRR market to only physical market participants is similarly flawed and raises a number of problems.  It would eviscerate the market aspects of the CAISO CRR market, and would radically reduce the amount of liquidity and price discovery available in the markets. It would also sharply decrease the number of counterparties available in the market. As the slide deck implies, this proposal is rife with the potential for undue discrimination.

The basics of a market are physical participants hedging their exposure to financial risks.  If you remove all the financial hedging options, people will not stop hedging.  The need will continue to exist but the counterparties will be gone.  Rather, physical sellers will just form financial desks that trade on their behalf.  The same financial sellers will exist, but they will be tied to physical market participants.  This creates risk as well as the potential for market manipulation in a far more concentrated market.  At bottom, this proposal turns physical market participants into reluctant speculators.

A key role that financials market participants play is to add value by segregating risk and providing counterparties who are capable of assuming the risk of hedging.  Winter Storm Uri in Texas in 2021 demonstrates why hedging and liquidity are important: when prices spiked, a number of physical market participants could not meet their obligations and became bankrupt.  This created significant problems for the market, as well as the state as a whole.

Eliminating sophisticated financial market participants has the potential to create at least three specific problems.  First, as noted above, fewer market participants means less liquidity.  Less liquidity leads to less price discovery and impacts on other markets – such as ICE and bilateral markets – that settle based on CRR and day-ahead prices.  These markets have now lost their link to longer-term pricing.  Finally, the markets will lose rigor when the sophistication and modeling brought by financial players is no longer available.

7. Are there any changes your organization believes could help improve auction efficiency that are not included in the Issue Paper?

As noted above, the addition of BOPP planning periods would greatly improve CAISO CRR auction efficiency.  Also, addressing the true underlying issues affecting underfunding would significantly improve auction efficiency – including improving the shift factor threshold, addressing loop flow and improving outage notifications.  Also, there was some discussion of a broader allocation of CRR underfunding shortfalls (slide 57).  Currently shortfalls are allocated to CRR holders on a pro rata basis.  This shortfall should be allocated broadly and this issue merits more fulsome discussion.

CAISO also mentions the potential use of a minimum bid price or minimum bid requirement as a potentially less radical approach to solve the same concerns that the “market of willing buyers and sellers” putatively addresses.  CAISO notes that PJM already has incorporated a minimum bid price into its FTR markets.  CAISO also notes that this change would be simpler to implement than the willing buyer/seller construct, while having a similar positive impact.  It would seem logical to explore a surgical and less harmful approach prior to implementing the sledgehammer approach of redesigning the entire CAISO CRR market construct.

8. Please provide any other comments your organization has on the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published January 14 and the accompanying discussion on January 21.

All of our comments have been captured above.

1. Please provide your organization’s comments on the straw proposal on CRR TOU period changes (slides 10-20 of the CAISO presentation).

WPTF generally supports the proposed changes to the CRR time-of-use definitions, including the proposal to split the existing on-peak product into Peak and Midday-Peak products. WPTF agrees with CAISO that evolving system conditions, particularly increased solar and storage penetration, justify revisiting CRR product definitions to better align with observed congestion patterns and hedging needs.

However, WPTF also agrees that additional analysis would be beneficial before finalizing certain elements of the proposal. Further analysis would help determine whether Sunday should be included in the Peak and Midday-Peak CRR products rather than remaining entirely off-peak and would help solidify which specific hours should be included in the Midday-Peak and Peak products. Additionally, we think it’s worthwhile continuing discussions around seasonality with a forward-looking perspective. In other words, do we anticipate the load shape changing significantly enough in the future to where definitions by season may be useful? Given the importance of TOU definitions to CRR valuation and hedging effectiveness, additional analytical support would increase stakeholder confidence that the final design appropriately reflects system and expected system conditions.

2. Please provide your organization’s comments on the straw proposal on the treatment of storage resources (slides 22-27 of the CAISO presentation).

WPTF supports allowing storage resources to be eligible sink locations but believes further discussion is warranted regarding whether this should also be extended to the CRR allocation processes. During the meeting it was noted that pumped storage resources today are eligible sink locations in the allocation process. It would be helpful to have more background on why they are included and assess if a similar use case exists for battery storage. WPTF also recommends further discussion on whether similar treatment should be extended to hybrid and co-located resources. For example, it may make sense that if a co-located resource is able to charge from the grid, it should be eligible for inclusion as that may create the business case for allowing the resource to be a sink location.

3. Please provide any other comments your organization has on the Issue Paper and Straw Proposal on Product Definition published December 12 and the accompanying discussion on January 21.

4. Please provide your organization’s comments on the discussion of potential measures to enhance revenue adequacy (slides 33-45 of the CAISO presentation). Which (if any) of the measures would your organization prioritize for further consideration and why?

WPTF is extremely disappointed that CAISO does not seem to be considering lowering the shift factor threshold at this point, given that missing power flow contributions from locations with small shift factors have been identified as a primary contributor to CRR revenue inadequacy. CAISO previously conducted a stakeholder process to lower the shift factor threshold at DLAPs and Trading Hubs, which already outlines the relevant market and policy questions that should be considered when evaluating such changes. This seems like a relatively straightforward adjustment to make, recognizing that eliminating the cutoff all together may not be practical but there is likely a reasonable balance between benefits and practicality.

WPTF supports improved loop flow modeling and appreciates CAISO’s efforts to develop and implement enhancements under its existing tariff authority. Explicitly accounting for loop flows is an important step toward reducing divergence between CRR modeling outcomes and day-ahead market results and toward improving CRR revenue adequacy.  WPTF also encourages CAISO to continue exploring additional improvements that may require tariff changes. To support transparency and meaningful stakeholder engagement, WPTF requests that CAISO clearly identify which changes it plans to implement under existing authority and distinguish those from potential enhancements that would require tariff modifications. Ongoing updates to stakeholders on both categories of changes will be important as this work progresses.

Lastly, WPTF supports providing additional CRR model releases as new transmission outages and constraints become known, as this improves the accuracy of CRR valuation and hedging outcomes. Although, we defer to CRR participants if updated model releases would introduce other complexities to their standard business practices that should be taken into consideration. Lastly, WPTF asks CAISO to clarify whether there would be a defined point at which no additional model releases would be provided due to the need to proceed with running the CRR market.

5. Are there any changes your organization believes could help improve revenue adequacy that are not included in the Issue Paper?

6. Please provide your organization’s comments on the discussion of potential measures to enhance auction design and efficiency (slides 47-58 of the CAISO presentation). Which (if any) of the measures discussed would your organization prioritize for further consideration and why?

WPTF does not support changes to the CRR auction that unduly restricts participation. Liquidity provides significant benefits in any market, and limiting participation would reduce liquidity, impair price discovery, and ultimately harm hedging outcomes for market participants.

WPTF continues to note that the commonly cited auction efficiency metric is a misnomer. To fully understand the value the auction provides to ratepayers, it is necessary to consider broader market impacts, including reduced congestion risk embedded in bilateral and forward contract prices. These risk-reduction benefits likely far outweigh what some stakeholders characterize as losses to ratepayers based solely on auction prices being below CRR notional values.

WPTF supports exploring changes to the CRR revenue shortfall allocation methodology to ensure alignment with cost causation, which will help reduce risk of holding CRRs. Reduced risk would, in turn, likely lead to higher auction prices as participants apply a smaller risk discount when valuing CRRs in the auction. Additionally, this is a change that can be done absent any major changes to the auction structure itself and provide the added benefit to both CRR participants and ratepayers of reduced risk and liability from holding CRRs. As noted in previous comments there are some changes, like allowing surplus to offset deficits more broadly, that may provide significant benefit for a minor change. 

Lastly, we are generally supportive of exploring a Balance of Planning Period auction schedule that would provide more opportunities for participants to adjust hedges with updated information. To further those discussions, we think it would be useful to provide stakeholders with a high level overview of how more frequent CRR market runs would work (e.g., both the allocation and auction or just the auction? How frequently? Are changes needed to the amount of capacity released in prior allocation/auction processes?) and the added benefits it would provide. Having this foundational knowledge will be important to enable more stakeholder engagement on this topic. 

7. Are there any changes your organization believes could help improve auction efficiency that are not included in the Issue Paper?

8. Please provide any other comments your organization has on the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published January 14 and the accompanying discussion on January 21.

1. Please provide your organization’s comments on the straw proposal on CRR TOU period changes (slides 10-20 of the CAISO presentation).

2. Please provide your organization’s comments on the straw proposal on the treatment of storage resources (slides 22-27 of the CAISO presentation).

3. Please provide any other comments your organization has on the Issue Paper and Straw Proposal on Product Definition published December 12 and the accompanying discussion on January 21.

4. Please provide your organization’s comments on the discussion of potential measures to enhance revenue adequacy (slides 33-45 of the CAISO presentation). Which (if any) of the measures would your organization prioritize for further consideration and why?

5. Are there any changes your organization believes could help improve revenue adequacy that are not included in the Issue Paper?

6. Please provide your organization’s comments on the discussion of potential measures to enhance auction design and efficiency (slides 47-58 of the CAISO presentation). Which (if any) of the measures discussed would your organization prioritize for further consideration and why?

7. Are there any changes your organization believes could help improve auction efficiency that are not included in the Issue Paper?

8. Please provide any other comments your organization has on the Issue Paper on Revenue Adequacy and Auction Efficiency Enhancements published January 14 and the accompanying discussion on January 21.