The WEIM Governance Review Committee appreciates the stakeholder engagement and comments received on its Phase Three (EDAM) straw proposal (July 15, 2022). In response to the GRC’s Phase Three (EDAM) revised proposal (October 31, 2022), and in preparation for the GRCs final proposal, do you have any additional comments on the following items?
1. Delegation of authority;
2. Size and composition of the Governing Body;
3. Stakeholder engagement and policy development;
4. CAISO’s responsibility to consider regional stakeholders;
5. Timing for approval and implementation of GRC proposals.
Vistra provides our comments on the GRC Revised Straw Proposal below.
Section III.B - Type of Shared Authority
Vistra supports the Governance Review Committee (GRC) maintaining a joint authority model. Vistra hopes that all stakeholders interested in this topic understand the context for the “shared authority”. Section III.1 Powers of the Corporate Bylaws allows the Board of Governors to delegate authority but “at its ultimate direction”. In Section IV.1 Establishment and Powers of the Energy Imbalance Market Governing Body state, “Pursuant to Article III, Section 1 of these bylaws, the Governing Board shall delegate to the EIM Governing Body joint authority over certain market rules, as defined in the charter established by the Governing Board.” Vistra hopes all stakeholders understand the meaning of this is that any delegation whether called primary or joint will always be at the Board of Governor’s ultimate direction pursuant to the Corporate Bylaws.
In practice, one can see this play out in the development of the dispute resolution process because if resolution is not achieved the Board of Governor’s alone may authorize a FERC filing if certain conditions are met. In the Charter there is more deference given the EIM Governing Body for dispute process for classification, although in practice it will result in limited impact because even if the Chair of the Governing Body has the authority to break any tie and designate an initiative Joint Authority, under Joint Authority if the Governing Body disagrees with a Board of Governors vote to approve it and even after the dispute process there is still an impasse, the Governing Body does not have the authority to file alone at FERC under Section 205 to stop the CAISO’s 205 filing. Pointedly, the WEIM Governing Body are a party to the FERC filing that can protest or comment the same as any other stakeholder.
We do not believe the GRC has the authority to cure this because of Section III.1 of the Corporate Bylaws, which dictates that any delegated authority is at the ultimate direction of the Board of Governors. Thus it is Vistra’s understanding that, under the Corporate Bylaws, there is no ability to create a “primary authority” or extend a 205 filing right to the Governing Body, since it’s not the public utility.
However, we do believe there is flexibility to increase the Governing Body’s authority when it disagrees with the Board of Governors. Vistra requests the GRC propose a jump ball provision be added to the Charter. Jump ball provision would allow the WEIM Governing Body the right to have its alternative proposal included in the Section 205 filing with the CAISO’s proposal, so that FERC can, decide which proposal (or portion of a proposal) is “just and reasonable and preferable.” In New England, a jump ball provision is included in their governing documents to allow the New England Pool (NEPOOL) to include an alternative proposal in the filing. This allows FERC to perform a more flexible review where FERC will not be required to consider whether the then-existing filed rate is unlawful, and may adopt any or all the ISO’s proposal or the alternate proposal as it finds, in its discretion, to be just and reasonable and preferable. A jump ball provision in the Charter would allow the FERC to evaluate the Board of Governor approved proposal and Governing Body approved alternate proposal at the time of filing and apply the just and reasonable and preferable standard to its review. This would provide the Governing Body with sufficient authority under EDAM.
Section III.C – Joint Authority Scope
Vistra appreciates the GRC providing the illustrative mapping of Tariff sections under Joint Authority or Advisory Authority in Appendix B. Vistra is in the process of reviewing these illustrative designations and will provide feedback on them in the next iteration. Stakeholder discussion conceptually on the illustrative designations can serve to aid CAISO Staff in its classification process under implementation.
Vistra supports the GRC proposal to revise the Joint Authority scope to include with a minor revision in underline:
“The WEIM/EDAM Governing Body will also have joint authority with the Board of Governors to approve or reject a proposal to change or establish any tariff rule for the day-ahead or real-time markets that
directly establishes or changes the formation of any locational marginal price(s) for a product that is common to the overall WEIM or EDAM market.”
Vistra recommends the GRC propose that the threshold used for the above proposed language should be consistent with that used to evaluate which rules or policies must be codified in the CAISO Open Access Transmission Tariff based on FERC’s policy that if it meaningfully impacts price formation the rule or policy must be included in the Tariff.
Vistra opposes the discussion in the Revised Straw Proposal that implies that the Transmission Service and Market Scheduling Priorities initiative is not under Joint Authority.
- First, this discussion prejudges the classification process and appears to provide GRC guidance on an open question in the stakeholder process. This is inappropriate and we request the GRC remove this discussion from the next iteration so as not to interfere with the classification discussion ongoing in the stakeholder process.
- Second, to the extent the GRC seeks to make a determination now, GRC errs in arriving to the conclusion that TSMSP initiative does not directly impact WEIM Entities. The Market Scheduling Priority elements would directly impact scheduling and curtailment priorities in the real-time market that impacts EIM participation. These priorities drive different scheduling run results, which directly impacts prices set in the subsequent pricing run. Under EDAM, this direct impact to prices will be extended to the day-ahead market via the priorities used in the market.
- Third, the Capacity Benefit Margin or Transmission Reliability Margin that the CAISO proposes to include in its daily Available Transmission Calculation or hourly Available Transmission Calculations will also directly impact the amount of transmission modeled to support EIM or EDAM transfers, and if it does not respect FERC open access principles then it will directly harm the ability of WEIM/EDAM entities and the market participants within them to participate.
It is not in the best interest of a well-functioning stakeholder process for this proposal to be used to prejudge an on-going authority debate under existing authority, which Vistra believes without changes makes this initiative Joint Authority.
Section III.C – Advisory Authority Scope
The GRC proposal advances necessary changes to governance, but not sufficient. Vistra strongly agrees that when the Governing Body disagrees with the Board of Governor’s approval of a proposed Tariff amendment that it must have the ability to hire outside counsel to allow it to intervene and comment at FERC. We do not think it goes far enough and there should be a jump ball provision to include an alternate proposal that it supports in the CAISO filing.
Section III.D – Procedural Issues Related to the Delegation of Authority
No specific comments other than procedural issues raised on other sections.
Section IV - Size and Composition of the Governing Body
Section V.A – Stakeholder Engagement
Vistra respectfully reiterates that we disagree with the conclusions the GRC has reached that the CAISO stakeholder model is “inclusive and provides for equal access”. We have this perspective because Vistra brings its products and services to market in 20 states and the District of Columbia, including six of the seven competitive wholesale two-settlement markets in the U.S. and the Western Energy Imbalance Market. Vistra’s experience across the other five ISO/RTOs is that the CAISO model results in asymmetrical access to CAISO Staff and Leadership. While this does not appear to meet the independence characteristics envisioned for an ISO/RTO, the GRC has indicated its unwillingness to address the fundamental flaws in the CAISO’s stakeholder model.
The proposals to support more working groups fails to address the fundamental concerns with the CAISO stakeholder engagement model. Vistra believes an indicative sector-weighted stakeholder vote is necessary to create the incentive for CAISO and stakeholders to constructively strive towards compromise. It is unclear to us what value the working groups bring to motivate CAISO or other stakeholders to engage in meaningful efforts to seek common ground. For example, Vistra’s experience in the EDAM working groups was that the working groups did not provide a meaningful incentive for CAISO or stakeholders to strive towards a compromised solution.
Section V.A - Role of the RIF
The GRC should require the CAISO stakeholder process to recognize and integrate the sector concept. Without this, the RIF lacks context for CAISO and its staff. In the future, RIF sector liaisons should share with the RIF their sectors perspectives and concerns on key topics, such as transmission access and market development and design considerations. While the RIF knowledge-sharing presentations have been informative, the true value of the RIF may be in its ability to facilitate difficult conversations between stakeholders with different perspectives, which the standard CAISO stakeholder process is not effective at allowing. The RIF should consider evolving to a forum that engages not only with the Governing Body but also with the CAISO Board of Governors, given the evolution of the joint authority model, as both bodies could benefit from direct interaction with the RIF sectors and their liaisons in a less formal, more open format than is provided at either bodies’ general meetings.
Section V.B – Process for Developing the Policy Roadmap
Vistra supports the RIF holding a policy catalogue and subsequent policy roadmap roundtable(s) to discuss the two deliverables within the annual policy roadmap process – the catalogue update and the roadmap. We question what accountability mechanism is available to ensure CAISO Staff meaningfully weighs the RIF roundtable discussion(s) in its updates to the policy catalogue and the development of the policy roadmap. GRC should propose a mechanism to impose accountability to do so. There must be a procedural proposal to ensure there is accountability or else the roundtable(s) will be largely performative. For example, should CAISO Staff in its briefing to the Governing Body and Board of Governors be required to address whether and how they decided to address RIF sectors’ perspectives or not respectively?
Section V.C – RIF Liaisons
We support the GRC revising its proposal to no longer propose “sub-sectors” in the Public Interest and Consumer Advocates sector. However, we oppose the GRC revising its proposal to introduce a new sector – EDAM Entity BAA sector. EDAM market participants will be represented in all of the current sectors. Any change to the sectors is premature and based on hypothesizing the interest of BAAs to participate in various ways in WEIM or EDAM, rather than waiting for the BAAs to commit to that participation. Vistra expects most if not all WEIM/EDAM BAAs, including CAISO, will opt to participate in both EDAM and EIM markets, rendering this proposal moot and unnecesary.
Section VI – CAISO’s Responsibility to Consider Interests of Regional Stakeholders
Vistra supports the revised proposal inclusion of Public Generating Pool’s suggestion to replace “consider” with “weigh”.
Vistra wants to clarify that regardless of what is included in the corporate governance documents there are FERC rules established in Order 2000 that require the CAISO to operate as an independent entity. In Order 2000 FERC reaffirmed:
"[P]rinciple of independence is the bedrock upon which the ISO must be built "and emphasized that this principle must apply to all RTOs, whether they are ISOs, transcos or variants of the two. We also stated that "[a]n RTO needs to be independent in both reality and perception."
The CAISO holds the obligation to be independent as an administrator of an Energy Imbalance Market or Extended Day Ahead Market as one of its Independent System Operator functions. We are concerned with the concern raised because it appears to indicate a lack of confidence in CAISO’s independence. This should be an unnecessary change because under FERC rules CAISO is not to be partial to any group or select stakeholder.
Section VII - Timing
Vistra supports stakeholders who requested GRC to revise its proposal to bring the GRC proposal for approvals prior to the EDAM and its associated efforts of Transmission Service and Market Scheduling Priorities and Day-Ahead Market Enhancements scheduled for the Jan-Feb meetings.
We believe there is a compromise path forward that addresses all the concerns the GRC weighed. The GRC should revise its proposal on timing to:
- Bring the GRC proposal to the Board’s December meeting, or if necessary to allow GRC to produce a Final Proposal a special meeting in early January 2023, for approval.
- GRC should recommend an effective date as soon as it receives approval from the Governing Body and Board of Governors, contingent on a sunset date set at the date of a Federal Energy Regulatory Commission’s decision issuance if the FERC denies the Extended Day-Ahead Market Tariff Amendment.
- Alternatively, if the FERC approves the EDAM make permanently effective on that date.
GRC should revise its proposal accordingly to better address the diverse views of stakeholders.
 See Corporate Bylaws last amended by the Board of Governors on November 3, 2021, Section III.1, Page 1, http://www.caiso.com/Documents/ISO-Corporate-Bylaws-amended-and-restated.pdf.
 Id, Section IV.1, Page 8.
 See Charter for Energy Imbalance Market Governance last amended by the Board of Governors on September 23, 2021, Section 2.2.2, Page 4.
 Authority under Section 2.2.3, Page 5.
 See Section 11.1.5 Alternative Committee Market Rule Proposal for additional context, available at https://www.iso-ne.com/static-assets/documents/2015/10/parts_agree.pdf.
 FERC review of section 205 filings only require it to find the filing just and reasonable where protests must defend and support that it is unjust and unreasonable, which is a much higher bar to meet than the J&R standard. FERC does not reject 205 filing rights just because there is a “preferred” proposal that was not filed.
 The jump ball provision allows FERC to introduce preference to its review but only between the proposal and alternate proposal filed in a single Tariff Amendment by the ISO.
 Revised Straw Proposal at Page 17.
 The Commission has stated that “[d]ecisions as to whether an item should be included in a tariff or in a business practice manual are guided by the Commission’s rule of reason policy, under which provisions that ‘significantly affect rates, terms, and conditions’ of service, are readily susceptible of specification, and are not generally understood in a contractual agreement must be included in a tariff.” N.Y. Indep. Sys. Operator, Inc., 170 FERC ¶ 61,054, at P 35 (2020) (citing Energy Storage Assoc. v. PJM Interconnection, L.L.C., 162 FERC ¶ 61,296, at P 103 (2018); City of Cleveland v. FERC, 773 F.2d 1368 at 1376; Pub. Serv. Comm’n of N.Y. v. FERC, 813 F.2d 448, 454 (D.C. Cir. 1987)).
 Vistra acknowledges that whether CAISO adopts a forward reservation process is under Advisory Authority, but the calculation of CBM, TRM, and enforcement of scheduling and reservation priorities in the markets are joint authority even today.
 Vistra does not participate in the Southwest Power Pool market and such cannot speak for the relative effectiveness of SPP versus the CAISO.
 Docket No. RM99-2-000; Order No. 2000, 89 FERC ¶ 61,285, Regional Transmission Organizations, December 20, 1999. See minimum requirements of a RTO – Independence at https://www.ferc.gov/sites/default/files/2020-06/RM99-2-00K_1.pdf.
 Id at 193.