Pacific Gas & Electric
Submitted 06/12/2024, 02:27 pm
1.
Please provide a summary of your organization’s comments on the May 29, 2024 GHG Coordination Working Group:
PG&E appreciates the opportunity to offer its comments on the GHG Coordination Working Group #1. PG&E’s comments can be summarized as follows:
- PG&E supports transitioning to the policy phase for an emission accounting system, while emphasizing the importance of ensuring the right data reaches the appropriate stakeholders for compliance (see Question 4).
- PG&E recommends delaying the development of a long-term ‘in-market’ solution for non-priced GHG regions (see Question 2) due to the extensive development needed, which would benefit from having an emission accounting system in place (see Question 4).
- PG&E advocates for each balancing area to have its own GHG reference pass, irrespective of whether it is within a GHG or non-GHG zone (see Question 7).
- PG&E urges CAISO, in collaboration with CARB, to conduct a thorough analysis on the cost-benefit of the secondary dispatch constraint and its impact on Cap & Trade affordability (see Question 8).
2.
Please provide your organization’s comments or questions in response to Commissioner Letha Tawney’s (Oregon Public Utility Commission) presentation on Oregon’s Perspective on Emissions tracking and accounting.
PG&E appreciates Commissioner Tawney’s presentation and understands that while there is a long-term need for an in-market solution, it is not an immediate priority.
3.
Please provide your organization’s comments or questions in response to Doug Howe’s (State Climate Action MOU Group) presentation on Mechanics and Examples of the Emission Constrained Dispatch Approach.
PG&E appreciates Dr. Howe’s presentation on the emissions constrained dispatch approach. One concern PG&E has is the formulation’s cost-effectiveness, as the optimization targeting emissions intensity for each interval may overlook the possibility of inter-temporal optimization. According to our understanding of the formulation, the emissions constrained dispatch wouldn’t recognize the benefit of averaging the emissions intensity over multiple hours, potentially leading to missed economic opportunities.
PG&E suggests that any in-market solution, if targeting an annual emissions intensity (or annual emissions budget), should aim to account for inter-temporal trade-offs.
4.
Please provide your organization’s perspectives, as well as any additional comments, to moving the approaches discussed thus far in the working group for a non-price based state to the policy development phase:
PG&E supports transitioning to the policy phase for an emission accounting system, while emphasizing the importance of ensuring the right data reaches the appropriate stakeholders for compliance.
However, PG&E recommends delaying the development of a long-term ‘in-market’ solution for non-priced GHG regions due to the extensive development needed, which would benefit from having an emission accounting system in place.
While acknowledging that an emissions dispatch constraint will benefit from having the emission accounting system in place and would best be addressed in a future initiative. PG&E believes it is too early to move the emissions constrained dispatch approach to the policy phase. Regarding the EDAM GHG counterfactual and the cost-benefit analysis of the secondary dispatch constraint, PG&E supports transitioning these items to the policy phase as approaches “discussed thus far.”
5.
Please provide your organization’s comments or questions in response to the ISO’s GHG Price Formation Presentation.
No comments at this time.
6.
Please provide your organization’s comments or questions in response to the ISO’s EDAM GHG Regulation Model Examples Presentation:
No comments at this time.
7.
Please provide your organization’s comments or questions in response to the ISO’s GHG Counterfactual Presentation:
PG&E appreciates the discussion on the GHG counterfactual. PG&E believes that each balancing area should have their own individual GHG reference pass, regardless of whether that BAA is in a GHG or non-GHG zone. Our position is based on three reasons:
- The approach aligns more closely with the current WEIM counterfactual, where each balancing area has its own base-schedule / counter-factual.
- It provides equal access to residual economic supply.
- It facilitates more accurate compensation and deeming, as highlighted by Vistra.
8.
Please provide your organization’s suggested topics for future working groups or assessment of what is ready to move to the policy development phase:
PG&E urges CAISO, in collaboration with CARB, to conduct a thorough analysis on the cost-benefit of the secondary dispatch constraint and its impact on Cap & Trade affordability.
PacifiCorp
Submitted 06/12/2024, 06:35 pm
1.
Please provide a summary of your organization’s comments on the May 29, 2024 GHG Coordination Working Group:
PacifiCorp greatly appreciates the substantive content the CAISO has put into walking stakeholders through the EDAM GHG design. PacifiCorp thanks Commissioner Letha Tawney for providing her perspective on how HB 2021 compliance might be achieved and Doug Howe for returning to the working group to present his emission constraint once again. In these comments, PacifiCorp discusses the viability of using the average emission rate proposed by CAISO in a previous stakeholder call to show progress towards HB 2021 compliance, as defined by the rules, expresses concerns regarding the proposed emission constraint, and reiterates its support for an approach aligned with the “accounting approach” to enable compliance proposed by WPTF.
2.
Please provide your organization’s comments or questions in response to Commissioner Letha Tawney’s (Oregon Public Utility Commission) presentation on Oregon’s Perspective on Emissions tracking and accounting.
PacifiCorp thanks Commissioner Letha Tawney for presenting her perspective, independent of a formal OPUC recommendation, on how Oregon utilities should meet their compliance obligations via employing an in-market solution that constrains energy assigned to BAAs during periods based on emissions. During the presentation, Commissioner Tawney talked about the security constrained economic dispatch (SCED), noting in her slides that if market participants relied solely on self-scheduling resources as a means to control the assignment of their resources to load, that the value of the SCED would be reduced. This led to an in-market solution being presented as the optimal path forward. PacifiCorp appreciates this perspective and the presentation given.
PacifiCorp believes that an approach similar to the WPTF approach is both already enabled for PacifiCorp in its HB 2021 compliance calculation, and already provides potential for a path to demonstrate compliance with the emissions limits of HB 2021. Refinements to the composition of the unspecified emissions factor, which, when combined with the treatment assignment of resources to Oregon customers, could demonstrate progress towards HB 2021 compliance and provide a path to demonstrate zero emissions annually as required in the law. In past working groups, the CAISO presented one option for treatment of the unspecified rate -- a simple average emission rate calculation which on an annual basis showed emissions associated with EIM that has shown to go below the unspecified rate of 0.428 MT CO2e-/MWh. Recognizing that there are a number of options of what resources to include or exclude from the organized market mix (e.g. the removal of “committed resources” or resources that are assigned to loads) the average emissions rate, or sensitivities, could be applied to forecasted unspecified market purchases in upcoming years to illustrate compliance pathways with HB 2021 (subject to further discussion with air regulators about what elements should or should not be included in an assumed organized market mix, and which entity would have the ability to develop that mix in accordance with those guidelines).
Regardless of the emissions makeup of unspecified market energy, PacifiCorp must preserve the ability inherent in its compliance accounting at OAR 340-215-0120, to incorporate OPUC-approved cost assignment of resources to Oregon retail load. The ability to incorporate cost allocation into is a necessary principle of GHG accounting that is unique to multijurisdictional utilities and is supported by regulation in all states where PacifiCorp has GHG reporting and compliance obligations (CA, OR and WA). This assignment of cost-allocated specific resources to retail load is consistent with the concept of accounting for “committed” resources to load as suggested by WPTF. To the extent a portion of unspecified market purchases are also allocated to Oregon retail customers in a given year (or are forecasted to serve Oregon retail customers in a given year), that allocated amount is also assigned to retail load and treated with the unspecified emissions rate – in addition to specified resources that are also cost-allocated. This treatment, which aligns with WPTF’s proposed approach, is consistent with current CARB, WA Ecology, and OR DEQ regulations and should be preserved.
3.
Please provide your organization’s comments or questions in response to Doug Howe’s (State Climate Action MOU Group) presentation on Mechanics and Examples of the Emission Constrained Dispatch Approach.
PacifiCorp thanks Doug Howe for his presentation on an emission constrained dispatch approach again with stakeholders for non-GHG priced states with a declining cap on emissions. PacifiCorp has concerns about the introduction of an emission constraint that generates a GHG shadow price within the market for a program that is fundamentally not price based. Commissioner Tawney noted during her presentation that OPUC will likely not get approval from FERC to administratively set a price which leaves the CAISO and stakeholders with the challenge of determining what the price should be and what to cap it at. With the proposed approach, the BAA would need to communicate to the market operator the amount of emissions allowed to be dispatched for a given interval. It is highly likely that the emission constraint would bind significantly towards the latter half of the year resulting in higher price formation and inefficient dispatch solutions.
There are other practical questions raised with the necessity for BAAs to quantify and communicate dynamic quantity of emissions within a given interval that would be allowed to be dispatched. These issues stem from the complexities and relationships between the BAAs’ load and resource balancing activities, and their own retail load service. In other words, this proposal would require BAAs that also operate as LSEs within the state, to segregate the portion of that load and generation that is regulated under HB2021. For example, PacifiCorp’s PACW footprint includes loads and LSEs that are subject to emissions reduction requirements, and some LSEs that are not. It is not clear how an emissions-based deeming approach could “deem” resources only to a portion of the BAA’s load that has a compliance obligation.
During the call there was discussion about generators needing to opt in and out to be deemed to a non-priced GHG regulation area and the inclusion of a counterfactual. If stakeholders proceed with an in-market solution, additional stakeholder meetings should be held to discuss the outcomes of both, along with the revenue streams that would result from a generator's willingness to be deemed.
4.
Please provide your organization’s perspectives, as well as any additional comments, to moving the approaches discussed thus far in the working group for a non-price based state to the policy development phase:
PacifiCorp supports the GHG working group moving to a policy development phase for states with non-price based programs. The working group has naturally headed in the direction of trying to find tangible solutions for utilities subject to these programs to participate in the market while meeting their individual clean energy targets.
5.
Please provide your organization’s comments or questions in response to the ISO’s GHG Price Formation Presentation.
No comment.
6.
Please provide your organization’s comments or questions in response to the ISO’s EDAM GHG Regulation Model Examples Presentation:
No comment.
7.
Please provide your organization’s comments or questions in response to the ISO’s GHG Counterfactual Presentation:
No comment.
8.
Please provide your organization’s suggested topics for future working groups or assessment of what is ready to move to the policy development phase:
No comment.
Portland General Electric
Submitted 06/14/2024, 12:24 pm
1.
Please provide a summary of your organization’s comments on the May 29, 2024 GHG Coordination Working Group:
PGE is pleased that the GHG working group has made progress towards solutions that allow compliance with the various emissions goals of different market participants. The WPTF's reporting and accounting proposal provides a near term, implementable framework to reflect GHG emissions. PGE would like to work towards refining and operationalizing this proposal, and will be discussing the proposal with Oregon regulators who would need to approve of its use for compliance.
Beyond the baseline accounting framework, PGE sees a need for the ability to influence or control dispatch for utilities in states subject to non-priced emissions policies. The presentations from the MOU group and the Oregon PUC affirm this need. Due to the complexity inherent in developing such dispatch tools, PGE encourages all working group participants to continue exploring historical precedent, potential FERC obstacles, and other possible challenges to implementing dispatch solutions.
The GHG working group should move forward expeditiously on refining the accounting proposal while continuing to refine a dispatch-integrated approach for future implementation.
2.
Please provide your organization’s comments or questions in response to Commissioner Letha Tawney’s (Oregon Public Utility Commission) presentation on Oregon’s Perspective on Emissions tracking and accounting.
PGE appreciates Commissioner Tawney’s emphasis on the control that utilities in states without carbon pricing, like Oregon, are likely to need as those policies drive deeper reductions later this decade in greenhouse gas emissions associated with serving retail load.
Robust emissions data tracking and reporting will help support near-term compliance, but in-market dispatch constraint solutions will likely be required for PGE in the longer term. PGE supports careful development of these solutions to avoid negative impacts to other entities subject to different GHG regulations.
3.
Please provide your organization’s comments or questions in response to Doug Howe’s (State Climate Action MOU Group) presentation on Mechanics and Examples of the Emission Constrained Dispatch Approach.
PGE believes that some entities in states without carbon pricing will need an in-market solution to provide the utility with choice as it manages compliance with non-priced state policies driving deeper greenhouse gas emissions associated with serving retail load later this decade. We continue to evaluate the details of the emission constraint proposal but are directionally supportive of the emissions constrained dispatch approach, albeit on a secondary development track sequenced behind the WPTF proposal given the complexity of getting an emissions constraint right.
PGE also welcomes further discussion of the implementation hurdles this proposal could run into and is interested in the perspectives of other EDAM participants, especially with regards to (1) implementation costs and (2) potential impacts to EDAM market optimization post go-live. PGE acknowledges participant concerns with this proposal given the uncertain price and market design impacts. The emissions constraint dispatch proposal would require significant conceptual revisions prior to entering the policy development phase.
4.
Please provide your organization’s perspectives, as well as any additional comments, to moving the approaches discussed thus far in the working group for a non-price based state to the policy development phase:
Overall, PGE sees the existing two approaches as complimentary, not mutually exclusive. PGE strongly supports advancing the WPTF tracking and reporting proposal to the policy development phase. PGE encourages further discussion on operationalizing this accounting approach, including (1) technology requirements, (2) delegation of operational responsibilities, (3) design choices, and (4) cost implications.
Separately, PGE appreciates the work of the MOU group in developing the emissions constrained dispatch proposal. Because PGE believes an in-market dispatch solution will be required to comply with state regulatory policy, including HB 2021, PGE supports future exploration of the current proposal as a starting point. PGE believes that the WPTF proposal should be the immediate focus, followed by further policy development towards an in-market solution. The emissions constrained dispatch proposal contains positive foundational elements to shape into a solution suitable for EDAM participants.
5.
Please provide your organization’s comments or questions in response to the ISO’s GHG Price Formation Presentation.
No additional comments at this time.
6.
Please provide your organization’s comments or questions in response to the ISO’s EDAM GHG Regulation Model Examples Presentation:
No additional comments at this time.
7.
Please provide your organization’s comments or questions in response to the ISO’s GHG Counterfactual Presentation:
No additional comments at this time.
8.
Please provide your organization’s suggested topics for future working groups or assessment of what is ready to move to the policy development phase:
Readiness for policy development:
Future working group topics:
Public Generating Pool
Submitted 06/12/2024, 03:35 pm
1.
Please provide a summary of your organization’s comments on the May 29, 2024 GHG Coordination Working Group:
PGP appreciates the opportunity to comment on progress made so far in the GHG working group. In these comments, PGP makes several suggestions with respect to the topics discussed at the May 29, 2024.
2.
Please provide your organization’s comments or questions in response to Commissioner Letha Tawney’s (Oregon Public Utility Commission) presentation on Oregon’s Perspective on Emissions tracking and accounting.
PGP appreciates Commissioner Tawney’s comments and believes it is useful to have regulatory perspectives as part of the GHG working group early on in this process. During the presentation, Commissioner Tawney asserted a perspective that an in-market dispatch solution is needed for utilities subject to Oregon’s regulation to be able to meet with their compliance obligations within the timelines specified. However, Commissioner Tawney did not provide detailed information as to exactly why a tracking and reporting framework, that can still reflect shorter-term forward contracts, is insufficient to comply with Oregon’s clean energy policy approach, which does not explicitly establish a carbon price signal. PGP recommends that the sponsors of the problem statement related to non-pricing programs, which include a utility from Oregon, establish detailed specifications or requirements regarding how the market needs to reflect the Oregon policy and what is or is not accomplished through a dispatch solution that cannot be accomplished through tracking and reporting. Commissioner Tawney’s assertions should be tested in this working group by establishing with a greater level of certainty with respect to what may be accomplished with an in-market versus an out-of-market solution.
Commissioner Tawney also raised a concern that Oregon entities will be disadvantaged relative to neighboring states with pricing programs in terms of their access to non-or low-emitting supply. PGP recommends that the group explore this concern more fully to understand whether and how this may occur.
Commission Tawney further voiced a concern with the proposal to develop a tracking and reporting framework first and then focus on a dispatch solution only if needed. Her concern is that it may be difficult to ‘transition’ to a dispatch regime from a more static reporting and tracking regime. PGP disagrees with this characterization and believes that one of the key elements of the reporting and tracking regime is that it needs to accommodate any attributions or allocations that result from the dispatch (e.g., resources attributed to either California or Washington GHG regulation areas). With respect to the emissions constrained dispatch approach, PGP does not see an incompatibility with the WPTF proposed accounting and tracking framework. Under that framework, any resource-specific attributions resulting from the market dispatch are allocated consistent with that dispatch. PGP does not believe that there will be disruptive transition if the working group determines that a dispatch solution is ultimately needed. In any event, PGP recommends that it would be worthwhile to understand this issue more clearly before concluding that a dispatch solution should be explored in the immediate term.
3.
Please provide your organization’s comments or questions in response to Doug Howe’s (State Climate Action MOU Group) presentation on Mechanics and Examples of the Emission Constrained Dispatch Approach.
PGP appreciates the examples provided and the thought and work that has gone into creating the emission constrained dispatch approach. As already noted, PGP expects that it is possible a dispatch solution may be needed in the future to accommodate state policies and/or enable load-serving entities to manage the emissions content of energy that is delivered/attributed to them. However, given the complexity and legal and operational novelty of this approach, PGP continues to recommend that non-dispatch solutions be fully explored and understood first before proceeding with the policy development of this approach.
4.
Please provide your organization’s perspectives, as well as any additional comments, to moving the approaches discussed thus far in the working group for a non-price based state to the policy development phase:
PGP supports moving the tracking and reporting framework developed by WPTF to the policy development phase. As noted above, PGP does not support proceeding with the emissions constrained dispatch approach until we better understand what can be accomplished through a tracking and reporting framework in terms of compliance with Oregon state policy and market participant needs.
5.
Please provide your organization’s comments or questions in response to the ISO’s GHG Price Formation Presentation.
PGP is interested in further conversation and clarity around GHG price formation, and specifically the issue of the relevance of GHG costs associated with resources internal to California (and, in the future, Washington). PGP understands CAISO’s staff’s perspective that the GHG cost does not need to be separately identified for internal resources because the GHG cost is incorporated regardless of the load served by those resources. However, PGP also supports a better understanding of whether and how internal resource GHG costs may or should impact the calculated marginal cost of emissions. PGP also supports further conversation and clarification with respect to the interaction between GHG pricing and congestion.
With two GHG regulation areas anticipated in the WEIM/EDAM when EDAM goes live, PGP appreciates the CAISO’s direction of making all bid adders positive. This is likely to make GHG prices more transparent and streamlined if and when the regulation areas are linked.
6.
Please provide your organization’s comments or questions in response to the ISO’s EDAM GHG Regulation Model Examples Presentation:
Several stakeholders have requested examples that show a separate GHG cost on all bids, including those in the GHG regulation areas. While CAISO staff suggests that this would not ever be necessary unless the state program accounted for exports differently, PGP is compelled by the comment that there may be implications for future linkage of Washington and California programs and the impact of having two separate GHG regulation areas that may not have common allowance prices. Beyond simply seeing examples of GHG adders being split out in the GHG regulation area, it may be helpful for the working group to consider additional examples that contemplate linkage and associated market design considerations with and without linkage under the approved EDAM design. The states of Washington and California have indicated that they intend to begin a public process to consider linkage and having an early understanding of potential market design issues or efficiency gains could be helpful to this process as well as future market design considerations for both WEIM and EDAM.
7.
Please provide your organization’s comments or questions in response to the ISO’s GHG Counterfactual Presentation:
PGP understands the CAISO’s rationale for conducting the counterfactual optimization for the entire non-GHG areas versus a balancing authority by balancing authority basis in that it results in a more optimized and lower cost counterfactual. PGP further understands the importance of the concept of committed capacity and honoring existing long-term contracts in the GHG market design. However, PGP believes that there are still important questions with respect to the cost impact on GHG regulation areas related to the amount of available non-emitting supply in the non-GHG area. Generally speaking, PGP understands that there is a cost component associated with measures taken to limit secondary dispatch or leakage e.g., the more leakage is strictly limited in the market design, the less non-emitting supply is available to the GHG regulation areas, the market design may restrict supply even where leakage would not actually have occurred, and costs could be expected to go up for the GHG regulation areas. The counterfactual that is optimized for the non-GHG area may limit the amount of available non-emitting supply for the GHG regulation areas because the counterfactual assumes that available surplus (e.g., available non-emitting supply that is NOT committed capacity) is available to the non-GHG area first. However, it also seems plausible an optimized counterfactual may generally result in greater quantities of non-emitting supply because it is optimized versus a non-optimized or BA by BA counterfactual. PGP supports further examples and discussion on this topic to more fully understand these tradeoffs.
8.
Please provide your organization’s suggested topics for future working groups or assessment of what is ready to move to the policy development phase:
PGP recommends moving the tracking and reporting framework development to the policy development phase.
PGP also recommends further issue development on GHG price formation and GHG counterfactual. A path forward may be to ask the relevant problem statement sponsors to work with CAISO staff and/or other interested working group participants to develop additional key questions and specific examples.
Salt River Project
Submitted 06/12/2024, 03:17 pm
1.
Please provide a summary of your organization’s comments on the May 29, 2024 GHG Coordination Working Group:
The Salt River Project Agricultural Improvement & Power District (SRP) appreciates the CAISO seeking stakeholder input in improving GHG coordination through working groups. SRP found the summary of stakeholder comments from the last working group very helpful and recommends that future meetings continue to include these slides. SRP supports feasible, accurate and robust mechanisms for emissions tracking, and equitable treatment for entities with and without state mandates. Understanding if, and to what magnitude, a cost-shift could occur under CAISO’s proposed GHG program should also be included in these discussions.
Additionally, SRP requests more information on pricing impacts and must-offer requirements related to emission constrained dispatch and encourages transparency in GHG price formation and EDAM GHG regulation models. SRP also supports moving the after-the-fact (ATF) report tracking for GHG to the policy development phase to produce a more accurate import emission rate usable by various entities. SRP looks forward to continued engagement and discussions on these topics.
2.
Please provide your organization’s comments or questions in response to Commissioner Letha Tawney’s (Oregon Public Utility Commission) presentation on Oregon’s Perspective on Emissions tracking and accounting.
SRP thanks Commissioner Letha Tawney for presenting Oregon’s Perspective on Emissions tracking and accounting. SRP recognizes that centralized markets will introduce challenges in demonstrating compliance with both state mandates and corporate emission reduction objectives. While Arizona is not subject to GHG regulations as indicated on slide 28, SRP participates in voluntary reporting to meet corporate goals set by its Board of Directors. Accurate tracking and reporting of GHG in organized markets is critical for entities with state mandates and entities with corporate objectives, such as SRP. SRP supports accurate emissions tracking and reporting that can accommodate both regulatory and voluntary commitments.
3.
Please provide your organization’s comments or questions in response to Doug Howe’s (State Climate Action MOU Group) presentation on Mechanics and Examples of the Emission Constrained Dispatch Approach.
SRP appreciates Doug Howe presenting again on the Emission Constrained Dispatch Approach. While this approach is an option for actively managing emission constraints, SRP remains concerned that this approach may not be approved by FERC for use by BAAs in states without mandated emission caps, which was mentioned in the prior presentation on this topic. If this is the case, then AZ utilities like SRP would have great difficulty meeting corporate objectives, as cleaner energy will preferentially be deemed to entities in states with mandates. SRP believes that equitable treatment for entities with and without state mandates is critical.
Additionally, SRP is concerned that this mechanism could lead to cost shifts. SRP requests more information on the pricing impacts to BAAs with no constraint (or minimal constraints) in a case where (1) other BAAs have an emission constraint set and (2) no BAAs have an emission constraint set to better understand potential cost shifts. SRP would also like to understand if there are potential cost shifts if all BAAs have an emission constraint versus being dispatched on price alone.
SRP would also like additional information on the must offer requirement. SRP is interested in how the market would determine if the resources offered met the emissions constraint and simultaneously the requirement for load/other obligations. SRP requests clarification if the must offer requirement would be evaluated through an optimization of resources against BA load and other obligations, plus the emission constraint, prior to the DA market run.
4.
Please provide your organization’s perspectives, as well as any additional comments, to moving the approaches discussed thus far in the working group for a non-price based state to the policy development phase:
SRP is strongly in favor of an ATF report tracking for GHG but believes that there are too many unanswered questions to move forward with an emission constraint dispatch mechanism. SRP recommends that the ATF GHG report be moved to the policy development phase. The report could produce a more accurate import emission rate that could be used by any entity that wishes to use it, including WEIM entities.
5.
Please provide your organization’s comments or questions in response to the ISO’s GHG Price Formation Presentation.
SRP thanks the CAISO for providing an informative presentation on how GHG Prices are formed today in WEIM and in the future with EDAM. SRP suggests that future presentations focus on what alternatives exist to the current paradigm and their associated trade-offs and costs.
6.
Please provide your organization’s comments or questions in response to the ISO’s EDAM GHG Regulation Model Examples Presentation:
SRP also appreciates the detailed examples that the CAISO presented and has no further questions at this time.
7.
Please provide your organization’s comments or questions in response to the ISO’s GHG Counterfactual Presentation:
The CAISO’s presentation on the GHG counterfactual was very informative in understanding potential secondary dispatch. SRP is interested in more information on why the GHG award is not limited to the energy awarded above the base schedule (BS) (WEIM) or counterfactual (EDAM). The current mechanism for GHG attribution could lead to secondary dispatch if a resource is decremented from the BS/counterfactual but still receives a GHG award or if a resource’s attribution is higher than the amount that the resource is incremented above the BS/counterfactual. SRP would like to understand why the eligible attribution is not limited to the quantity incremented from the BS/counterfactual.
SRP would also like to better understand slide 73 (Counterfactual in EDAM & Secondary Dispatch Real Time). The energy that is eligible for attribution is documented as 60MW, but the GHG award is 100MW in the table. SRP questions why the amount awarded is higher than the amount that is eligible.
8.
Please provide your organization’s suggested topics for future working groups or assessment of what is ready to move to the policy development phase:
As stated in question #4, SRP believes the ATF report for GHG tracking is ready to move to the policy development phase. Other topics may need additional consideration before moving forward. SRP continues to be supportive of improvements that benefit entities with corporate objectives and not just entities with state mandated GHG reduction programs.
Six Cities
Submitted 06/13/2024, 02:30 pm
Submitted on behalf of
Cities of Anaheim, Azusa, Banning, Colton, Pasadena, and Riverside, California
1.
Please provide a summary of your organization’s comments on the May 29, 2024 GHG Coordination Working Group:
With respect to the presentations by Commissioner Letha Tawney and Doug Howe regarding potential development of emissions-based dispatch solutions to facilitate compliance with non-priced Greenhouse Gas reduction programs, the Six Cities continue to question whether a market design that encompasses a broad geographic area with multiple states and multiple environmental policies can develop dispatch approaches to implement such policies without unduly interfering with market efficiencies or sacrificing other market-wide benefits. The Six Cities recommend that the CAISO develop and share with stakeholders a high level analysis of the feasibility of incorporating emissions-based dispatch into the Day-Ahead and/or Real-Time Markets, including an overview of the tasks that would be involved in implementing emissions-based dispatch, the potential for overcoming the concerns raised by the Six Cities in response to Item 1 below, challenges to implementation of the emissions-based dispatch approach outlined by Mr. Howe, and an estimate of resources required to undertake an effort to pursue emissions-based dispatch solutions at this time. Such an analysis could help to inform a decision to move forward to a policy development phase for emissions-based dispatch or, alternatively, to defer further consideration of emissions- based dispatch approaches to a later time following more detailed development and evaluation of tracking and reporting approaches, which the Six Cities support advancing to a policy development phase now.
The Six Cities remain concerned that the pooled non-GHG counterfactual design, as opposed to BAA level counterfactuals for each non-GHG BAA, unreasonably discriminates against GHG BAAs (i.e., BAAs in states that have adopted GHG pricing programs, currently California and Washington). The pooled counterfactual approach effectively creates two tiers of market coordination benefits, with the first tier benefits limited to non-GHG BAAs and GHG BAAs receiving a second, more limited tier of benefits. The Six Cities request that the CAISO conduct quantitative analyses to estimate the likely cost impacts on GHG BAAs of the two-tiered assignment of non-committed economic supply through the pooled counterfactual design and present the outcome of those analyses in a future working group session.
2.
Please provide your organization’s comments or questions in response to Commissioner Letha Tawney’s (Oregon Public Utility Commission) presentation on Oregon’s Perspective on Emissions tracking and accounting.
The Six Cities appreciate Commissioner Tawney’s presentation outlining the elements of Oregon’s program to reduce emissions from resources serving load in Oregon. However, the Cities cannot agree with Commissioner Tawney’s argument that the Extended Day-Ahead Market (“EDAM”) must adopt some sort of emission constrained dispatch solution in order to comply with Oregon’s legislation. The GHG adder approach that the CAISO has proposed for the EDAM incorporates state policies that seek to encourage development and use of clean resources through pricing. A price based methodology to incentivize use of clean resources is fundamentally consistent with a market framework, and the approach that the CAISO has implemented for the Western Energy Imbalance Market (“WEIM”) and proposes to adapt for the EDAM can accommodate differences among multiple state policies within a price based rubric. It is much more difficult to understand how non-priced policy differences regarding emissions limitations can be incorporated into dispatch sequencing without undermining basic market objectives, including economically efficient dispatch of resources. Moreover, it is difficult to see how potentially different non-priced policies of different states could be incorporated into a market-wide dispatch algorithm. And if emissions-constrained dispatch algorithms varied by states or by sub-regions, it would appear to undercut anticipated benefits of a broad market footprint. In short, it seems possible that markets can effectively implement price based incentives without eliminating other benefits of market operations or spreading the burdens of one state’s environmental policy decisions to other states. But the Six Cities question whether a market design that encompasses a broad geographic area with multiple states and multiple environmental policies can develop dispatch approaches to implement non-priced policies without unduly interfering with market efficiencies or sacrificing other market-wide benefits.
3.
Please provide your organization’s comments or questions in response to Doug Howe’s (State Climate Action MOU Group) presentation on Mechanics and Examples of the Emission Constrained Dispatch Approach.
The Six Cities also appreciate Doug Howe’s presentation of a potential approach for emissions-constrained dispatch. In response to questions regarding implementation of the approach reflected in the presentation, Mr. Howe indicated that pre- or post-market agreements would be necessary, for example relating to assignment of emissions among Balancing Authority Areas (“BAAs”) with non-priced emissions limitations or among Load-Serving Entities (“LSEs”) within a BAA subject to compliance obligations at the LSE level. As described in Item 4 below, it would assist the Six Cities to evaluate the feasibility and potential costs and benefits of the emissions-based dispatch outlined by Mr. Howe if the CAISO would provide its analysis of the example presented, including consistency of outcomes with market efficiency and potential implementation challenges.
4.
Please provide your organization’s perspectives, as well as any additional comments, to moving the approaches discussed thus far in the working group for a non-price based state to the policy development phase:
As indicated in their March 14, 2024 comments regarding previous working group discussions, the Six Cities support further consideration of suggestions for mechanisms to track and report emissions associated with WEIM and EDAM transfers in order to facilitate compliance with regulatory requirements. Moving forward with policy development for a tracking and reporting program appears to make sense at this time.
With regard to suggestions to develop an emissions-based dispatch approach, the Six Cities recommend that the CAISO develop and share with stakeholders a high level analysis of the feasibility of incorporating emissions-based dispatch into the Day-Ahead and/or Real-Time Markets, including an overview of the tasks that would be involved in implementing emissions-based dispatch, the potential for overcoming the concerns raised by the Six Cities in response to Item 1 above, challenges to implementation of the emissions-based dispatch approach outlined by Mr. Howe, and an estimate of resources required to undertake an effort to pursue emissions-based dispatch solutions at this time. Such an analysis could help to inform a decision to move forward to a policy development phase for emissions-based dispatch or, alternatively, to defer further consideration of emissions- based dispatch approaches to a later time following more detailed development and evaluation of tracking and reporting approaches.
5.
Please provide your organization’s comments or questions in response to the ISO’s GHG Price Formation Presentation.
The Six Cities have no comments on that portion of the May 29th working group presentation.
6.
Please provide your organization’s comments or questions in response to the ISO’s EDAM GHG Regulation Model Examples Presentation:
The Six Cities have no comments on that portion of the May 29th working group presentation.
7.
Please provide your organization’s comments or questions in response to the ISO’s GHG Counterfactual Presentation:
The Six Cities continue to support further evaluation of the likely frequency and magnitude of impacts resulting from attribution of more economical resources first to non-GHG areas as a result of conducting the GHG counterfactual runs based on aggregated non-GHG areas rather than on a BAA by BAA basis. As noted by several stakeholders during the working group discussion and illustrated by the example on Slide 82, the GHG counterfactual design results in attribution of the most economical uncommitted supply (i.e., supply not previously committed to a particular BAA) to the BAAs in the pooled non-GHG area. The Six Cities remain concerned that the pooled non-GHG counterfactual design, as opposed to BAA level counterfactuals for each non-GHG BAA, unreasonably discriminates against GHG BAAs (i.e., BAAs in states that have adopted GHG pricing programs, currently California and Washington). The pooled counterfactual approach effectively creates two tiers of market coordination benefits, with the first tier benefits limited to non-GHG BAAs, while GHG BAAs receive a second, more limited tier of benefits. Conceptually, the consequence of the initial assignment of economic resources to non-GHG BAAs versus GHG BAAs could be expected to result in higher costs for GHG BAAs even prior to their contemplated payment for GHG compliance costs. The Six Cities request that the CAISO conduct quantitative analyses to estimate the likely cost impacts on GHG BAAs of the two-tiered assignment of non-committed economic supply through the pooled counterfactual design and present the outcome of those analyses in a future working group session.
8.
Please provide your organization’s suggested topics for future working groups or assessment of what is ready to move to the policy development phase:
The Six Cities’ suggestions for future working group topics and potential movement of topics to a policy-making phase are incorporated in the comments on particular issues set forth above.
WPTF
Submitted 06/12/2024, 04:27 pm
Submitted on behalf of
Western Power Trading Forum
1.
Please provide a summary of your organization’s comments on the May 29, 2024 GHG Coordination Working Group:
WPTF appreciates the opportunity to provide these comments. This working group has several complex issues under discussion, and it is unclear to WPTF at this time what the CAISO’s anticipated pathway forward entails. We are concerned that bouncing back and forth between topics will amount to simply spinning our wheels rather than gaining momentum. Having a transparent plan on when and how the CAISO plans to address or does not plan to address each topic, with potential implementation goal dates, would help stakeholders to coalesce around issues/potential solutions for consideration.
WPTF is disappointed in the level of follow-through with the CAISO’s commitment made to stakeholders in the EDAM policy phase as it relates to price formation and counterfactual concerns (problem statements 1-4). We all understand that the ultimate EDAM design filed at FERC was a significant step towards a more regional west-wide market and has the potential to realize significant benefits. Thus, while compromises were made on that package those compromises by stakeholders were made under the backdrop of the CAISO’s commitment to continue developing the EDAM design to ensure the design is robust and produces efficient and rationale market outcomes. The CAISO committed to doing just that with GHG price formation and counter-factual concerns held by stakeholders, yet the working group discussions and CAISO have yet to go down the path of truly evaluating potential alternative designs that would resolve stakeholder concerns. We have all spent a significant amount of time understanding the current EDAM framework which is extremely useful as groundwork, but that falls significantly short of following through with the commitment of truly evaluating other approaches. Thus, it is our hope that the CAISO, when it provides a transparent pathway forward, will identify at what point we can expect those conversations to occur on alternatives to the initial EDAM greenhouse gas (GHG) design.
Our comments below reflect the following points that WPTF:
- Supports moving forward with the Reporting and Accounting Mechanism as means to addressing non-priced based policies and provide more transparent GHG data for the market as a whole
- Appreciates the time and effort that went into developing market based solutions for non-priced based policies but has significant concerns with unintended consequences of the emission constrained dispatch approach for non-priced GHG reduction programs in terms of price signals, reduced transparency, and added friction that will all lead to a less efficient market solution
- Appreciates the CAISO providing education on how the current GHG price formation functions but is extremely disappointed in the CAISO’s unwillingness to actually consider alternatives to the current EDAM approach to addressing the GHG pricing programs; we ask that the CAISO follow through with its prior commitment and truly consider alternative formulations
- Price formation (including the components) and price transparency matter in an organized market. WPTF believes and is extremely concerned by the fact that the GHG price formation appears to shift revenues from the EDAM Transfer revenue bucket to GHG revenue bucket and potentially impact the overall LMPs in EDAM BAAs in non-GHG areas
- Question why there is a GHG price signal when there are no transfers occurring from the non-GHG area to the GHG area; this seems to contradict what has been discussed previously
- Limiting transfers in the counter-factual run between the GHG area and non-GHG area rather than between GHG areas and non-GHG BAAs shifts revenues between non-GHG EDAM BAAs and does not allow the GHG areas fair and equitable access to surplus energy in non-GHG areas, potentially increasing prices in the GHG area
2.
Please provide your organization’s comments or questions in response to Commissioner Letha Tawney’s (Oregon Public Utility Commission) presentation on Oregon’s Perspective on Emissions tracking and accounting.
While we appreciate hearing Commissioner Tawney’s opinion, she did not lay out a compelling argument for why an emission constrained dispatch is necessary to facilitate load-serving entities’ compliance with Oregon’s GHG emission reduction targets. Both of the Oregon investor-owned utilities have expressed support for development of WPTF’s accounting proposal; neither have indicated that the WTPF proposal would not provide those entities with sufficient ‘control’ over resources and energy that serve their load.
Further, although Commissioner Tawney’s comments shared information provided by the Oregon Department of Environment Quality (DEQs), the presentation she shared was from an earlier Commission workshop and simply provides an overview of DEQ’s current GHG reporting rules. It is therefore premature to conclude that the presentation of Commissioner Tawney represents the collective view of Oregon regulators.
3.
Please provide your organization’s comments or questions in response to Doug Howe’s (State Climate Action MOU Group) presentation on Mechanics and Examples of the Emission Constrained Dispatch Approach.
WPTF appreciates the time and effort that went into presenting on the Mechanics and Examples of the Emission Constrained Dispatch Approach. Currently, WPTF believes the best path forward is to consider the after-the-fact reporting and accounting mechanism first as means for such states to demonstrate compliance with these types of GHG and clean energy programs. The approach aligns with the fact that the way that load-serving entities control energy within their portfolio is through procurement and forward contracting of resources. Procurement is also the tool that these entities have at their disposal to comply with clean energy and GHG reduction programs. As WPTF noted in our presentation, the framework we proposed can accommodate short-term and spot contracts with clean resources, that would provide LSEs the ability to supplement their longer-term portfolio with shorter term contracts with clean resources if the entity is concerned about meeting its GHG targets. As a reminder, California LSEs also have GHG targets. California addresses its GHG reduction targets through the long-term procurement and planning process that occurs outside the CAISO market (e.g., Integrated Resource Planning (IRP) at the California Public Utility Commission (CPUC) ensures Load Serving Entities (LSEs) are procuring sufficient resources to meet the emission reduction standards as well as the Renewable Portfolio Standard (RPS) and Clean Energy Standards (CES) requirements).
We are extremely concerned with the pricing implications of introducing a new and separate marginal GHG cost, especially given the outstanding questions and concerns with the existing GHG price formation. As with any added complexity, while it may be mathematically correct based on the constraints decided to be added to the optimization, if it does not provide added value in terms of achieving more efficient dispatch of the resources while reflecting actual costs of such resources, it adds friction and uncertainty, and thus leads to a sub-optimal outcome.
Specifically as it relates to the presentation examples, the reporting and accounting mechanism can handle the situations highlighted. The examples seem to assume that none of the resources in Balancing Authority Areas (BAA) B are contracted to BAA A. If G7 were contracted to Utility A then Utility A would also have the ability to control G7’s offer into the market in a way that helps ensure it can meet its emission requirements. To be clear, we are not suggesting they are all self-scheduled but clean resources typically have lower costs than thermal resources due to not having explicit fuel costs as well as having out-of-market production payments either that are credits or acts as credits reducing its fuel-equivalent costs below $0/MWh by that production credit, so offering in at a price lower than the emitting resources will help ensure its dispatched before emitting resources. Similarly, for G2 in BAA A’s portfolio. If BAA A is concerned about meeting its target then it should run G2. Additionally, if there are regulatory emission limitations the CAISO has existing mechanisms to evaluate that use limitation and approve an opportunity cost adder for each unit if the emission-based use limitation is reached. Utilities should be seeking use limit registration and ensuring that any higher emitting resources in their portfolios have opportunity costs that reflect regulatory limitations on emissions.
4.
Please provide your organization’s perspectives, as well as any additional comments, to moving the approaches discussed thus far in the working group for a non-price based state to the policy development phase:
WPTF strongly supports the CAISO moving the reporting and accounting mechanism approach to a policy development phase as means to addressing non-priced based state regulations. Given that this approach has broad support from CAISO stakeholders, we request CAISO staff to provide a presentation at the next workshop about how this approach will be developed.
5.
Please provide your organization’s comments or questions in response to the ISO’s GHG Price Formation Presentation.
We appreciate the CAISO providing examples illustrating the price formation of the current and pending EDAM GHG design as it sheds light on some of the policy questions that we have been raising. Unfortunately, these examples raised more questions than they answered and further exacerbated WPTF’s concerns regarding the current approach. We discuss several examples and the concerns they raise below. We also ask that the examples be presented in a way that reflects the price signing convention that will be implemented with EDAM so we can directly compare with the GHG solver provided.
The example on PDF page 84 (“The Difference in total dost due to GHG area demand…”) demonstrates that the $5 marginal GHG cost component is determined not by GHG cost offers but by differences in energy offers. This again prompts the question of whether the GHG price signal provided by the market should reflect the GHG costs submitted, which it currently does not, or be based on another formulation that more accurately reflects the marginal cost of emissions.
Additionally on the same slide, assuming Unit 1 (internal resource) had an energy cost of $29/MWh and GHG cost of $6/MWh, WPTF wonders whether the more appropriate GHG price signal should be $6/MWh in this case, not $5/MWh. If it remains $5/MWh but the appropriate marginal cost is $6/MWh then the true GHG marginal cost is a combination of the marginal GHG cost as generated by the market and some unknown value of the SMEC which embeds, in this case, the additional $1/MWh of GHG cost.
Moreover, the example on PDF pages 86 and 87 underscores an interaction between the GHG pricing design and congestion that is extremely important, and we believe warrants air-time. This example shows that the current GHG price formulation interacts with how the congestion component (or transfer congestion) is determined, thus impacting any and all market aspects related to transfer revenues (e.g., valuation of transmission rights, revenues received by transmission providers, Transmission Revenue Requirement (TRR) uplift costs, Congestion Revenue Rights (CRRs) if they are eventually offered in all EDAM BAAs, etc).
Specifically, in the scenario on PDF pg 87, the inclusion of GHG leads to identical prices and dispatch compared to the case without GHG (pg 86), yet with a reduction in congestion cost from $20 to $15 and an introduction of a $5 GHG cost. However, it is our understanding based on conversations with CAISO staff that since this is restricting transfers between BAAs the congestion is actually transfer revenues. With that understanding in mind, this shows that the GHG formulation shifts revenues from transfer revenues to GHG. This emphasizes the importance of exploring the interaction between energy, GHG, and congestion/transfer revenue pricing. Will the market result in embedding transfer congestion costs in the GHG thereby minimizing the amount of transfer revenue available for allocating to EDAM BAAs, and if so is this a just and reasonable outcome? It is critical that stakeholders understand how GHG pricing affects the value of ETSRs, as these will have significant impacts on transmission rights valuation, revenue allocation among BAAs, and the TRR cost recovery mechanism proposed by the CAISO. Additionally, potential implications for markets like CRRs in EDAM if they are eventually offered beyond CAISO BAA.
The CAISO made a commitment to stakeholders during the EDAM policy discussions to fully evaluate and consider alternative approaches. In our view, the analysis and discussions to date do not raise to the level of a true evaluation and consideration of alternatives. Price formation and transparency matters in any organized energy market and its imperative that the CAISO upholds the quality of not only the overall LMP but the individual components to meet its charge of ensuring the efficient use and reliable operation of the transmission system. For this reason, WPTF continues to expect the CAISO will engage in discussions with stakeholders that evaluate alternative formulations such that we can consider tradeoffs and make a well-informed decision on whether revision of the EDAM design for GHG pricing will result in more efficient use of the system. We understand if the CAISO would rather address this evaluation of alternatives in the working group later as we near EDAM implementation. WPTF could support deferral of evaluation of alternatives to a later stage, provided that CAISO clarify its plan and commitment to address the concerns we have raised regarding GHG price formation under the current EDAM design and unintended interaction with other pricing components and LMPs in the non-GHG areas.
6.
Please provide your organization’s comments or questions in response to the ISO’s EDAM GHG Regulation Model Examples Presentation:
WPTF appreciates the CAISO's efforts in providing more modeling examples and expanding the GHG solver, we've noted instances where the resulting GHG component, while technically the expected outcome as per the current GHG design, doesn't appropriately represent the marginal GHG cost. WPTF does not agree with the CAISO's statement that GHG costs in the internal GHG region don't exist. These costs do exist; all emitting resources within a GHG area are subject to GHG compliance costs, so it's misleading to say they don’t exist. Further, because these costs are not borne by resources outside the GHG region, unless energy from these resources is deemed delivered, it is disingenuous to liken these to maintenance costs (which all resources face).
Following discussions during the working group meeting, we now better understand that what the CAISO actually means when it states “These costs do not exist!” is that due to the current GHG design, these costs aren't simply and explicitly broken out by the CAISO. However, this lack of transparency in the current GHG design regarding these embedded GHG costs raises substantive concerns. If a resource within the GHG region is marginal, that resource’s GHG costs won't be apparent to the CAISO and cannot be taken into account by the algorithm when generating the GHG price. To be clear, we are not asking that the CAISO publish the actual GHG bids of resources within the GHG area but rather that these resources submit separate GHG and energy offers. This would allow for a more efficient GHG formulation leading to more efficient and appropriate GHG price signals. It would also provide a better basis for evaluating price formation over time.
Example 4, where there are no transfers from the non-GHG area to the GHG area, yet the market somehow generates a $10 GHG cost component, also raises concerns. This example contradicts previous explanations from the CAISO that there would not be a GHG cost component when there are no transfers or attribution to resources in the non-GHG area. This inconsistency prompts questioning of why non-zero GHG prices are observed when they shouldn’t exist based on the current formulation. WPTF could envision a case whereby even if there are no resources outside the GHG area serving load in the GHG area there should be a GHG price because an emitting internal resource is dispatched and is marginal within the GHG area. Again, separation of the GHG offer for resources within the GHG area would enable more rigorous consideration of what the appropriate price formation should be.
The CAISO's current GHG design isn't the only one that achieves an efficient least-cost solution. There are various ways to model and price GHG due to GHG regulation areas. Stakeholders urge the CAISO to fulfill its commitment made during the EDAM process by discussing and evaluating alternative GHG design formulations. This will enable stakeholders to make informed decisions and understand the trade-offs between different approaches. While the current design might ultimately be deemed just and reasonable, stakeholders emphasize the importance of having these conversations, which hasn't been fully realized yet. Therefore, stakeholders request clarity on CAISO’s plan to developing alternative solutions for consideration.
To aid in the trade-off discussions, WPTF respectfully reiterates our request that the CAISO expand the current GHG solver model to include all resources separating out energy and GHG offers, not just those in non-GHG areas. This expansion will also facilitate discussions on price formation and market interaction in anticipation of potential linkage between the CA and WA GHG programs.
7.
Please provide your organization’s comments or questions in response to the ISO’s GHG Counterfactual Presentation:
Limiting the transfers in the counter-factual run only between the GHG and non-GHG areas introduces significant unintended consequences that we believe warrant further discussions. Three primary consequences include:
- Shuffling revenues between BAAs that are grouped together in the non-GHG area
- Shuffling revenues between resources in different BAAs that are all grouped together in the non-GHG area, and
- Inappropriately restricting equitable access for GHG areas to surplus supply in non-GHG areas, compromising achieving the most cost and emission efficient outcome
To illustrate these concerns consider a set up with three BAAs; BAA 0 is a GHG regulated area, BAA 1 and BAA 2 are non-GHG areas and per current design will be grouped together in the non-GHG area for the counter-factual run. BAA 1 has more clean energy necessary to serve load in its BAA. First, the counter-factual run will dispatch resources up in BAA 1 to serve load in BAA 2. Thus, by design this first assumes any surplus supply in the non-GHG areas (BAA 1 in this set up) should be used to serve load in the non-GHG areas (BAA 2) before allowing the resources to serve load in the GHG area (BAA 0). Assume Resource 1 is in BAA 1 – it will be dispatched up in the counterfactual run to serve load in BAA 2 and now be less able to serve load in a GHG area when the binding market run determines attribution, reducing the revenues that Resource 1 could have potentially received. Assume Resource 2 in BAA 2 is awarded and receives the GHG premium because its higher cost resource was not needed for BAA 2 in the counterfactual run because it relied on BAA 1’s lower cost Resource 1. Resource 1 can no longer capture the GHG premium it otherwise could have and instead Resource 2 benefits from not serving its own load in the counterfactual by allowing it to capture the GHG premium instead. By design, this takes revenues from BAA 1 and shuffles it to BAA 2.
Second, by allowing any BAA in the non-GHG area first access to resources in BAA 1 to serve its own load it by design restricts the ability for the GHG area to also have equitable access to those resources as well. To be clear, we are referring to any additional or surplus energy a resource may have where it could be used to serve load in any other BAA. The more cost and emission efficient solution could be using resources in BAA 1 to serve load in the GHG area rather than using it solely to serve load in BAA 2, but by only limiting transfers between the GHG and non-GHG area, the market design will prioritize using resources in the non-GHG area to serve load in another BAA in the non-GHG area. This will likely result in higher cost overall and higher prices in the GHG area than optimal. It also effectively prevents operators of clean resources in the non-GHG area that are not contracted to load in the GHG areas from capturing any GHG premium from serving load in the GHG area. This is discriminatory.
WPTF has previously requested CAISO to evaluate a design whereby the transfers are limited between BAAs or even grouped BAAs (if, for example, PACW and PACE in essence share resources) to (1) provide all BAAs fair and equitable access to all resources with surplus energy, (2) restrict inappropriate revenue shuffling between BAAs in the non-GHG area, and (3) achieve a more cost and emission efficient outcome.
WPTF recommended this approach in earlier discussions because of the CAISO’s attachment to the idea that the GHG cost represents an incremental transfer to the GHG area. CAISO continues to argue that the counterfactual represents a scenario without GHG pricing. WPTF disagrees. Rather we would argue that the counterfactual represents a scenario where the GHG pricing states do not exist. A counterfactual without GHG pricing would be one that ran the market without GHG offers for any resources and would be feasible if resources within the GHG areas submitted separate energy and GHG offers. This type of counterfactual should also be evaluated.
8.
Please provide your organization’s suggested topics for future working groups or assessment of what is ready to move to the policy development phase:
WPTF believes the reporting and accounting mechanism and requested data/metric publication topics are ready to transition to the policy phase and continue developing the approaches.
WPTF believes the price formation and counter-factual issues will be ready to move to the policy phase once the CAISO is able to better evaluate alternative approaches which may require waiting until parallel operations or market simulation such that we can truly evaluate the implications.
We also respectfully request that the CAISO provide a transparent plan to stakeholders on how and when it anticipates considering changes to the GHG design for each of the identified topic areas. For example, if the CAISO is not anticipating making any changes to the EDAM design until after EDAM go-live then maybe we need to refocus the time spent on efforts that could potentially be implemented prior to or along with EDAM. This way we gain momentum on the issues that are likely to result in changes sooner rather than later, such as the reporting and accounting mechanism and data/metric publications. Similarly, while we appreciate the level setting as to how GHG price formation is done today and under the EDAM design, it is our understanding that the CAISO does not anticipate making changes to the GHG counterfactual run, GHG constraint formulation, or price formation until post-EDAM go-live. If that is the case, then we recommend pausing those conversations until the CAISO is ready and willing to discuss and explore alternative formulations. To be clear, we are not saying to wait until after EDAM go-live to continue these discussions, or that they are no longer a prioritized issue as it related to GHG, but wait until we get closer to go-live to explore alternative formulations such that the timing can benefit from having parallel operation data, EDAM results, and alternative formulations developed for consideration. We expect that the CAISO will follow through with the commitment it made during the EDAM policy process, which included consideration of alternative GHG pricing formulation and changes to the counter-factual run or constraint formulation.
Regarding the counter-factual issue; if the CAISO does not anticipate making changes to the already approved EDAM design until after go-live then it may make more sense to focus our time and effort now on the reporting and accounting mechanism, data and metric publication requests, and changes in anticipation of linked GHG programs. Then move forward with price formation and counter-factual issues that have been raised as we get closer to EDAM go-live.
