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Please provide your organization's overall feedback on the FERC Order No. 881 Implementation - Discussions with RC West TOP Stakeholder Meeting that occured on October 26, 2026
The October 26th meeting highlighted the lack of transparency regarding which transmission facilities will be subject to Ambient Adjusted Ratings (AARs) and when. During the meeting, the CAISO indicated that it plans to implement AARs on some, but not all, transmission facilities in Q2 2027. The CAISO has since filed a motion at FERC for a further extension in time, specifying April 1, 2027, for the implementation of its own AAR processing capability. Meanwhile, transmission owners have until October 15, 2027 to provide AAR data to the CAISO. Apparently, certain unnamed transmission owners will likely provide sufficient AAR data to the CAISO well-enough in advance of the April 1, 2027 initial implementation date for their facilities to be subject to ARRs in the actual day-ahead and real-time markets starting that day. According to the CAISO, transmission facilities owned by other, unspecified transmission owners will be subject to AARs on a rolling basis after April 1, 2027, as they submit their necessary AAR data. Also, individual transmission owners may petition FERC for a further extension beyond October 15, 2027.
Currently, it is not only unclear which transmission owners will implement ARRs when, but also to what extent. If the deadline to provide AAR data to the CAISO is not until October 15, 2027, will TOs choose to submit data for only certain facilities, and if so, will the CAISO implement ARRs on just this subset of facilities in its actual markets?
Order No. 881 mandated transparency for all registered market participants with access to password protected data. Managing Transmission Line Ratings, Order No. 881, 177 FERC ¶ 61,179, at P 336 (Dec. 16, 2021). FERC required transparency with CRR auctions in mind, because “without accurate transmission line rating information, market participants may be unable to accurately predict and hedge against transmission congestion.” Id. The Commission further explained that:
"[B]ecause [CRR] payouts are based on congestion costs that change with transmission line ratings, sharing transmission line ratings and methodologies with a wider range of stakeholders will help establish efficient [CRR] market price discovery by improving [CRR] market participants’ understanding of certain drivers of congestion, and allow such market participants to build such understanding into their [CRR] bids and offers. Id. at P 337."
Unfortunately, the CAISO’s 2027 annual CRR auction closed last week amidst unprecedented levels of uncertainty regarding future line ratings. The CAISO must provide greater transparency prior to future CRR auctions, in particular monthly auctions in 2027. First, the CAISO should specify which transmission facilities will be subject to AARs in the actual day-ahead market and on what effective date, with sufficient notice for market participants to incorporate this information into their bids and offers in monthly CRR auctions in 2027. The CAISO only offers prompt month CRR auctions, so a commitment to providing notice prior to the relevant monthly auction would not create a material delay in implementation on any set of additional facilities.
Additionally, AARs should be implemented on the first of the month only, so CRR market participants can better gauge applicable line ratings over the course of an entire settlement period. Mid-month AAR implementation would change the underlying transmission capacity of a CRR path, changing its definition mid-settlement period. As a result, a CRR market participant would likely be under-hedged or over-hedged for a portion of the month, reducing market participant confidence and willingness to pay at auction even in the event that they had notice of a mid-month AAR implementation prior to bidding in the applicable monthly auction.
In addition to identifying which facilities will be subject to AARs and when, the CAISO should collect, and provide all market participants with, each transmission owner’s rating methodology, including temperatures used in each rating calculation, as well as, a lookup table for AARs at each facility and/or type of equipment. PJM, for example, requires its transmission owners to provide this information as a continuation of its long-standing commitment to transparency.[1] Such a requirement would be consistent with the spirit of transparency in Order 881 and would provide very useful information to all classes of market participants seeking to forecast and hedge transmission congestion, as well to the CAISO itself. For instance, seasonal AARs and 10-day line rating data are insufficient for running studies on the effects of unusually hot or cold temperatures.
The CAISO can and should adapt its CRR allocation and auction processes to reflect the new AAR paradigm. For instance, the CAISO should refine its target allocations on the settlement side to more accurately assess shortfalls with AARs. The CAISO should also update its current single line limit approach in the CRR model to better reflect ARRs, perhaps with an expected average line rating. In any case, the CAISO should be transparent regarding the ranges of inputs and outcome, methodologies, and expected timelines for implementing related enhancements to the CRR allocation and auction models and processes.
In general, and in the context of AAR implementation, the CAISO should identify process 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, and improve transparency regarding day-ahead line ratings and their changes. Basic information on which facilities will be subject to AARs when would be very helpful to the CRR market. The actual AARs used in the day-ahead market may not be known at the time of an allocation and auction, but information on methodologies and a table of ranges under certain conditions would be helpful to all market participants and the CAISO.
[1] See “FERC Order 881 Conforming Manual Changes” presentation, at slide 12 (Jan. 9, 2025) available at: https://www.pjm.com/-/media/DotCom/committees-groups/committees/oc/2025/20250109/20250109-item-12---1-ferc-order-881-manual-changes---presentation.pdf
