Please provide any redline changes and embedded comments your organization may have on the Day-Ahead Market Enhancements revised draft tariff language as an attachment to this comment template, and provide any additional comments in the text box below:
CDWR appreciates the opportunity to submit comments on the DAME Revised Draft Tariff Language CAISO published on July 11, 2023.
CDWR has the following comments about the impact of DAME tariff language on the Congestion Revenue Rights (CRR) management.
- CDWR strongly recommends CAISO provide Imbalance Reserve Up/Imbalance Reserve Down/Reliability Capacity Up/Reliability Capacity Down (IRU/IRD/RCU/RCD) locational Marginal Cost of Congestion (MCC) price forecasts to the market participants prior to the Market Simulation on the DAME and the DAME “go live” for a market participant to be confident in the CRR strategy and to be compliant to the current Officer Certificate Form (OCF).
The facts supporting the CDWR recommendation above are listed below:
i. Prior to the implementation of the MRTU in April 2009 and posting of its MRTU Tariff, CAISO had hosted at least six years of stakeholder processes that involved Day Ahead Market (DAM) LMP price studies and CRR design developments. As a result, the market participants were well informed of the LMP and MCC prices, CRR Allocation and Auction processes which provided confidence in the expected outcome from participating in the CRR processes when the CRR market started. However, in the DAME initiative, as it stands now, market participants are not well informed and have no confidence in the expected outcome because forecasts of IRU/IRD/RCU/RCD MCCs are not available. CAISO should provide the forecasted MCCs for these new products, before “go live”, to the transmission rate payers so they can establish sound CRR strategy from the beginning of the DAME version of CRR settlement.
ii. On October 2011, CAISO included the Market Participant Credit Requirement and a legally binding form known as the OCF, in the CAISO tariff. As stated in the CAISO Tariff, to participate in the DAM scheduling and CRR markets, a market participant is required to sign the OCF. With regards to the CRR part of the OCF (section 3), a market participant signing an OCF attests to having performed adequate CRR Training as provided by the CAISO, having sound CRR strategy, and having methods to limit exposure in the CRRs. However, in the DAME initiative, as it stands now, because of lack of the forecast of IR and RC MCCs, such existing tools will not be effective as required by the OCF.
iii. On its DAME Tariff, CAISO proposes to add an IRU and IRD MCC settlement to the current DA MCC settlement of the DA CRR Notional Value. With the addition of the IRU and IRD MCC settlements to the DA CRR Notional Value and inclusion of the RCU and RCD MCCs in the calculation of the congestion rents, CDWR believes that, regarding the CRR Strategy, market participants will not be able to make sound decisions in estimating congestion rents and CRR revenues because of the lack of forecasted IRU/IRD/RCU/RCD MCC values. As a result, until the CAISO performs sound IRU/IRD/RCU/RCD MCC studies and makes the forecast available to market participants at least prior to the “go live”, a market participant will face the conflict in signing the OCF.
CDWR believes the addition of the IR MCC settlement to the day ahead CRR Notional value would exacerbate the CRR Auction Efficiency shortfall. CDWR recommends that, prior to the addition of the IR MCC settlement to the day ahead CRR Notional value, CAISO runs studies to determine the root cause of CRR Auction Efficiency shortfall.
The CAISO’s Division of Market Monitoring (DMM) generates quarterly reports to monitor the market issues and performance. The graph presented on Figure 1.32 Auction revenues and payments to non-load-serving entities presented on the page 40 of the CAISO Q4 2022 Report on Market Issues and Performance released on March 16, 2023, shows that, in 2022, the total annual CRR Auction Efficiency shortfall reached levels seen in 2018 – the last year prior to the implementation of the Track 1B in January 2019.?
CAISO had adopted Track 1B to curb the CRR Auction Efficiency shortfall by capping the payments to the CRR holders to the day ahead congestion rents.? As shown in the above-mentioned graph, The Track 1B was effective only for the first three quarters of 2019.? DMM identified the combined settlement account of the CRR Allocation and Auction processes as one of the reasons for the auction efficiency problem and recommends separation of the CRR Allocation and Auction processes.
CDWR supports DMM’ recommendation and suggests that CAISO runs a study as to why the Track 1B is not as effective as it was in the first 3 quarters of 2019 after the CRR Track 1B reform was enforced.? With the addition of the IR MCC settlement, absent any effective mechanism to curb the CRR Auction Efficiency problem, the DAME version of CRR Settlement as proposed will only exacerbate the CRR Auction Efficiency shortfall.? Therefore, it is prudent for CAISO to run studies to determine the root cause of CRR Auction Efficiency shortfall, and potentially establish separate settlement accounts for the CRR allocation and auction processes prior to implementing the DAME version of CRR.
 CAISO Q4 2022 Report on Market Issues and Performance released March 16, 2023: 2022-Fourth-Quarter-Report-on-Market-Issues-and-Performance-Mar-16-2023.pdf (caiso.com)
 CAISO Congestion Revenue Rights Auction Efficiency Track 1B Draft Final Proposal Second Addendum June 11, 2018, page 16, 5.3 Auction Efficiency: DraftFinalProposalSecondAddendum-CongestionRevenueRightsAuctionEfficiencyTrack1B.pdf (caiso.com)