Comments on initiative scope and schedule

1. Provide a summary of your organization's comments on the proposed initiative scope and schedule:

The Bonneville Power Administration (Bonneville)[1] appreciates the opportunity to submit comments on CAISO’s Market Enhancements for Summer 2021 Readiness initiative scope and schedule provided on January 6, 2021. The reliability of the CAISO Balancing Authority Area (BAA) is a critical issue for the entire West as seen by the 2020 Summer events, which had broader impacts that extended beyond the CAISO BAA. The reliable operations of the CAISO BAA is also foundational for any other pending market effort contemplated by the CAISO. Notwithstanding the importance of the other market efforts that are being delayed, Bonneville supports the CAISO’s near term focus on market rules and procedural changes necessary to be ready to manage potential heat events this upcoming summer and the particular focus on measures to ensure supply availability during tight system conditions. 

While the condensed timeline for this initiative is not ideal, Bonneville understands the constraints the CAISO is under to ensure FERC approval and implementation by June 2021. Bonneville requests that the final measures implemented as part of this initiative for Summer 2021 be considered in the context of the shortened timeline of this stakeholder process and the urgent need to have them in place for Summer 2021. In other words, there may be measures that require further vetting and consideration of other alternatives that should be deliberated after this initiative is completed.     

[1] Bonneville is a federal power marketing administration within the U.S. Department of Energy that markets electric power from 31 federal hydroelectric projects and some non-federal projects in the Pacific Northwest with a nameplate capacity of 22,500 MW. Bonneville currently supplies around 30 percent of the power consumed in the Northwest. Bonneville also operates 15,000 miles of high voltage transmission that interconnects most of the other transmission systems in the Northwest with Canada and California. Bonneville is obligated by statute to serve Northwest municipalities, public utility districts, cooperatives and then other regional entities prior to selling power out of the region.

2. Provide your organization’s feedback on export and load scheduling priorities:

Bonneville believes this is an important scope item for this initiative and is glad to see that CAISO dedicated a full day’s workshop to this topic. We will reserve our more detailed comments on this initiative for our response to the January 12^th workshop.

3. Provide your organization’s feedback on reliability demand response resource dispatch and real-time price impacts:

No comments.

4. Provide your organization’s feedback on the requirements for storage resources during tight system conditions:

No comments.

5. Provide your organization’s feedback on cost recovery provisions for hourly block imports during tight system conditions:

The risk of the FMM price clearing below the offer price of hourly block resources has had an impact on the willingness of import supply to economically bid into the CAISO real-time market. Bonneville is supportive of CAISO exploring pros and cons of enabling hourly block imports to recover their bid costs. A bid cost recovery provision would provide greater pricing certainty for hourly block imports, which would help incent that supply during tight system conditions.

6. Provide your organization’s feedback on short-term scarcity price enhancements:

Bonneville believes enhancements to scarcity pricing is a critical measure for ensuring supply availability during tight system conditions and is glad to see short-term scarcity pricing enhancements prioritized for Summer 2021 readiness. Bonneville understands the need for a simple solution for this upcoming summer but notes the short-term improvements made to scarcity pricing should not preclude further exploration of a longer-term solution. Bonneville appreciates that CAISO still plans to conduct a more comprehensive stakeholder process on scarcity pricing provisions that may be more complex and require more time to implement. Bonneville anticipates that the longer-term scarcity pricing initiative will include consideration of applying administratively-determined graduated prices to various levels of reserve shortage and additional best practices of other ISOs/RTOs. 

7. Provide your organization’s feedback on EIM coordination during emergency conditions and review of the current resource sufficiency evaluation design:

Bonneville appreciates CAISO’s inclusion of EIM coordination during emergency conditions and review of the resource sufficiency evaluation design into the scope of this initiative and reiterates its importance given the impact emergency conditions in one BAA can have on other EIM Entity BAAs. Again Bonneville is glad to see that CAISO dedicated a full day’s workshop to this topic. While we will reserve our more detailed comments on this initiative for our response to the January 13^th workshop, we note that some enhancements to the resource sufficiency evaluation may require more time to implement than what can be achieved prior to Summer 2021.  Bonneville urges the CAISO to accelerate the enhancements that can be implemented and provide for additional policy development and/or implementation time for those enhancements that the Summer 2021 Readiness timeline cannot support.

8. Please provide suggestions for additional topics to be considered in this stakeholder process that can be implemented by June 1, 2021:

At the January 6^th workshop, CAISO staff shared that System Market Power Mitigation (SMPM) may be considered for implementation prior to Summer 2021.  This is consistent with the CAISO’s November 20, 2020 Market Notice[1], which stated that “The ISO is developing a contingency plan that will allow it to bring the initiative [System Market Power Mitigation] forward in early 2021, in the event further analysis shows a strong need for the proposal prior to next summer, even without scarcity pricing measures.” Bonneville highlights CAISO’s statement that SMPM would only be brought forward “in the event further analysis shows a strong need for the proposal prior to next summer”.

Analyses provided by CAISO staff and DMM to date have shown that CAISO’s revised draft final SMPM proposal[2] would have inappropriately triggered SMPM. In its Report on System Market Issues for August and September[3], DMM stated that it “found no evidence that market results on August 14-15 were the result of market manipulation”. And in its 2019 Annual Report on Market Issues and Performance[4] stated that “overall prices in the ISO energy markets in 2019 were competitive, averaging close to what DMM estimates would result under highly efficient and competitive conditions, with most supply being offered at or near marginal operating cost… DMM estimates an average price-cost markup of $0.71/MWh or just under 2 percent… [which] indicates that prices have been very competitive, overall, for the year.” Yet CAISO’s SMPM revised draft final proposal would have triggered SMPM in around 50% or more of the intervals between HE13 and HE 21 on August 14, 15, 17, 18, and 19, 2020 and in 231 fifteen-minute intervals in 2019[5].

Bonneville does not support CAISO’s revised draft final SMPM proposal and believes further refinements are needed in order to ensure the SMPM framework does not inappropriately trigger SMPM, which could exacerbate reliability challenges and would violate CAISO’s principle of having an SMPM design that maintains strong incentives for suppliers and consumers to economically participate in the CAISO’s market and to enter into long-term forward energy contracts. Bonneville also agrees with CAISO’s conclusion that the System Market Power Mitigation initiative would be best implemented in concert with scarcity pricing measures and believes SMPM should be considered as part of the comprehensive Scarcity Pricing initiative scheduled to begin in Q2 2021.  Bonneville urges the CAISO to ensure SMPM is only brought forward in the event further analysis shows a strong need for the proposal prior to next summer and that if it is brought forward, CAISO provides refinements that address inappropriate triggering of SMPM.

[1] www.caiso.com/documents/systemmarketpowermitigationrevisedinitiativeschedule.html

[2] www.caiso.com/initiativedocuments/reviseddraftfinalproposal-systemmarketpowermitigation.pdf

[3] www.caiso.com/documents/reportonmarketconditionsissuesandperformanceaugustandseptember2020-nov242020.pdf

[4] www.caiso.com/documents/2019annualreportonmarketissuesandperformance.pdf

[5] See CAISO’s presentation to the Market Surveillance Committee on October 9, 2020: www.caiso.com/documents/systemmarketpowermitigation-presentation-oct9_2020.pdf

9. Additional comments:

Bonneville has no additional comments.

1. Provide a summary of your organization's comments on the proposed initiative scope and schedule:

Please see link to comments below:

http://www.caiso.com/Documents/DMMCommentsonMarketEnhancementsSummer2021ReadinessJanuary6StakeholderCall.pdf

2. Provide your organization’s feedback on export and load scheduling priorities:

Please see link to comments in Section 1.

3. Provide your organization’s feedback on reliability demand response resource dispatch and real-time price impacts:

Please see link to comments in Section 1.

4. Provide your organization’s feedback on the requirements for storage resources during tight system conditions:

Please see link to comments in Section 1.

5. Provide your organization’s feedback on cost recovery provisions for hourly block imports during tight system conditions:

Please see link to comments in Section 1.

6. Provide your organization’s feedback on short-term scarcity price enhancements:

Please see link to comments in Section 1.

7. Provide your organization’s feedback on EIM coordination during emergency conditions and review of the current resource sufficiency evaluation design:

Please see link to comments in Section 1.

8. Please provide suggestions for additional topics to be considered in this stakeholder process that can be implemented by June 1, 2021:

Please see link to comments in Section 1.

9. Additional comments:

Please see link to comments in Section 1.

1. Provide a summary of your organization's comments on the proposed initiative scope and schedule:

The California Municipal Utilities Association (CMUA) certainly supports the prioritization of certain issues to possibly remedy known issues in advance of Summer 2021 operations.  With the exception of an additional item set forth below, CMUA defers to the CAISO's knowledge of its markets and technology systems when determining what issues are meet the criteria of critiality and achievability for Summer 2021.

2. Provide your organization’s feedback on export and load scheduling priorities:

The CAISO is part of an interconnected grid and broader Western market.  The CAISO is also dependent on imports to serve load.  The workshops this week reinforced that transparency on export scheduling priorities is needed.  The workshops are a step in that direction.  The CAISO should be able to rely upon firm imports as part of the total procured portfolio to meet reliability requirments.  Similarly, those that chose to purchase from generators in the CAISO that are not otherwise committed and export to support their own reliability needs should expect to be able rely upon that export from the CAISO.  This is a highly complex issue, which made more complicated by the differences between the bid-based CAISO system and its congestion management practices, as compared to the prevailing practices in neighboring BAAs.  But, at a high level there should be consensus that resource supported exports should be given maximum priority.  

3. Provide your organization’s feedback on reliability demand response resource dispatch and real-time price impacts:

CMUA has no position on this issue at this time.

4. Provide your organization’s feedback on the requirements for storage resources during tight system conditions:

CMUA has no position on this issue at this time.

5. Provide your organization’s feedback on cost recovery provisions for hourly block imports during tight system conditions:

CMUA is still considering this issue, which as in a general way been existent from the beginnings of the CAISO market.

6. Provide your organization’s feedback on short-term scarcity price enhancements:

CMUA has no position on this issue at this time.  

7. Provide your organization’s feedback on EIM coordination during emergency conditions and review of the current resource sufficiency evaluation design:

CMUA has no position on this issue at this time.

8. Please provide suggestions for additional topics to be considered in this stakeholder process that can be implemented by June 1, 2021:

CMUA has urged the CAISO to reconsider its Maximum Import Capability (MIC)  framework, and has done so in multiple forums.  Whatever longer term proposals may be considered to fix the current MIC framework, simple immediate fixes which release available MIC to market participants attempting to align RA Imports with MIC allocations should be able to be accomplished prior to Summer 2021.  This fix is not dependent upon a complex systems change, does not require technical study, does not necessitate commerical renegotiations among parties to existing agreements, and is wholely within the CAISO Tariff, as opposed to other RA modifications that require approval from state regulators.  Further, the desireability of additional firm RA imports is supported by the CAISO's own statements regarding high priority incremental actions to be taken for Summer 2021.  Specifically, the CAISO has urged the CPUC to immediately order increased procurement from various types of resources including "imports backed by firm transmission rights and not recallable by the host balancing authority when system conditions are tight throughout the West."  R.20-11-003, CAISO Responses to Ruling Proposals and Question at 1 (December 18, 2020).

CMUA members report that during August and September of 2020, some of them could have secured additional import capacity resources but were unable to match MIC to the desired capacity purchases.  Recognizing that the CAISO’s import capability is not unlimited, nevertheless import RA contracting has fallen short of the MIC threshold that would otherwise be allowed from a technical standpoint, and by a wide margin.  This means that large amounts of MIC are being allocated but not used, and the unused MIC is not finding its way into the hands of LSEs that want to use the MIC to support additional RA imports. 

To be clear, in this suggestion for modificiation to MIC protocols is not to change the techncial study underpinning MIC, but to consider changing tariff provisions and making availabe unused MIC to support LSE import procurement.  One proposal to consider would be to allow in LSE month-ahead showings not only RA imports that are supported by an existing MIC allowance (and that also satisfy other requirements for RA imports), but also  “provisional” RA resources that satisfy import RA criteria other than an existing MIC allowance.  The CAISO could review such “provisional” RA resources for deliverability, including consideration of MIC that has been allocated but is not being used to support any RA showing for the month at issue.  Such unused MIC could then be reassinged to convert the otherwise “provisional” import RA resource to accepted RA status based on the overall availability of MIC. CMUA is not wedded to this approach, but is attempting to present constructive concepts to help further support grid reliability for this coming summer.

Changes to how MIC is made available would seem to be low hanging fruit and provide greater opportnity for LSEs to secure needed MIC within the current limitations, and support the actions the CAISO is urging be taken at the CPUC and elsewhere.

9. Additional comments:

1. Provide a summary of your organization's comments on the proposed initiative scope and schedule:

CPUC staff appreciates that CAISO is examining market enhancements for 2021 readiness.  In its stakeholder call, CAISO explained that it was focusing on “near term efforts on market rules and procedural changes necessary to be ready to manage heat events next summer.” 

In its presentation, CAISO indicated that the following issues would be in scope:

1. Export and load priorities
2. Reliability demand response resource dispatch and real-time price impacts
3. Requirements for storage resources during tight system conditions
4. Cost recovery provisions for hourly block imports during tight system conditions
5. Short term scarcity price enhancements
6. EIM coordination and resource sufficiency test review
7. Other items that can be vetted through stakeholder processes and implemented by June 1

CAISO also explained that this initiative would be on an accelerated schedule, as follows:

• Workshops on export and load scheduling as well as EIM resource sufficiency – January 12 and 13, with comments due on January 20
• CAISO straw proposal posted on January 22, stakeholder call on January 26 or 27, with comments due on February 3
• CAISO draft final proposal to be posted February 8 – 12, stakeholder call February 16 – 18, comments due on February 25
• EIM Governing Body meeting March 10
• CAISO Board of Governors meeting March 24 – 25
• Implementation on June 1
  CPUC staff suggests the following items for consideration in CAISO’s 2021 summer readiness initiative:

Posting of Export and Import Data by Ties

Given the importance of imports and exports to the critical reliability of the CAISO system, CPUC staff requests that CAISO scope into this initiative the CPUC staff’s request that CAISO post information on imports and exports at each tie. This information regarding imports and exports does not appear to be available on OASIS or on CAISO’s website and, thus, participants are only able to view this data based on reports published by DMM and CAISO on an ex poste basis and this information is typically only a snapshot in time. Further, to calculate “net imports,” we assume that both import and export data is available and, thus, it would appear that publishing this data on a regular and contemporaneous basis should not be unduly burdensome.
 

Implementation of System Market Power Mitigation

CPUC staff requests that CAISO include in the scope of this initiative system market power mitigation. CAISO undertook a year-long initiative to address system market power in the real-time market and was scheduled to bring it to the Board in October and then November, only to have it held because of opposition from PowerEx and others and because CAISO found that system market power was not exerted during the August heat wave. However, DMM found, in its report on August and September 2020 events, that conditions were not competitive and, further, has been recommending in numerous annual reports that CAISO undertake this effort because of the “potential” for system market power.  CPUC staff agrees that this issue is of critical importance to Californians and request that CAISO include it within the scope of this initiative or separately approve it and file tariff amendments for Summer 2021 implementation.

Revise RAAIM Penalty Hours

Currently, resource adequacy penalties (RAAIM) apply during the availability assessment hours on weekdays. Given that the heat events and high load conditions occurred on weekends this past summer, CPUC staff believes that it is of critical importance to apply RAIIM to weekends and holidays and request that CAISO scope this into this initiative.

Revise RAAIM Penalty Prices

Currently, RAAIM penalties are set at one-half of the CPM price, which is not sufficiently high to ensure that when resources go on outage they replace their outages (i.e., the RAAIM penalties are likely less than the cost of replacing the outage). The Final Report on the Root Cause Analysis indicates that CAISO’s Summer 2021 initiative will “consider changes that incentivize accurate scheduling in the day-ahead market, appropriate prioritization of export schedules, and evaluate performance incentives and penalties for the RA fleet.”  Accordingly, CPUC staff requests that CAISO include RAAIM penalty amounts in the scope of this initiative and consider increasing the RAAIM penalty to be equal to the CPM price. This would have the benefit of encouraging replacements during outages and discouraging non-performance for any other reason as well.

2. Provide your organization’s feedback on export and load scheduling priorities:

3. Provide your organization’s feedback on reliability demand response resource dispatch and real-time price impacts:

4. Provide your organization’s feedback on the requirements for storage resources during tight system conditions:

5. Provide your organization’s feedback on cost recovery provisions for hourly block imports during tight system conditions:

6. Provide your organization’s feedback on short-term scarcity price enhancements:

7. Provide your organization’s feedback on EIM coordination during emergency conditions and review of the current resource sufficiency evaluation design:

8. Please provide suggestions for additional topics to be considered in this stakeholder process that can be implemented by June 1, 2021:

9. Additional comments:

1. Provide a summary of your organization's comments on the proposed initiative scope and schedule:

EDF-R appreciates the CAISO’s expedited effort to ensure reliability for summer 2021, and we appreciate the continued coordination with the CPUC and CEC.  

It is critically important to implement Ancillary Service (A/S) participation for hybrid resources prior to summer 2021.  This effort was delayed from Fall 2020 with an expected implementation date of Fall 2021.  EDF-R and other hybrid generators limited by ACC constraints are already online and can provide much needed A/S to the market but for this lag in technology implementation.  CAISO experienced A/S scarcity events during the August heat storm as well as in September.  Both months A/S scarcity reached higher than 70% of requirements.   A/S from hybrid resources is ready to go, and we strongly urge CAISO to move implementation to the spring or an independent 2021 software release to be deployed in advance of summer.

EDF-R also urges CAISO, the CPUC, and CEC to consider how they are planning for summer 2022, summer 2023, and beyond.  This current effort is good and needed.  But we will continue to face the same concerns each summer without some comprehensive effort to plan for the future.  For the vast majority of clean energy resources and consistent with California’s statutory emissions goals, a lead time of less than a year for transactions does little to bring on flexible and zero-emissions resources.  We have the ability to engage, plan, and provide incentives right now.  We should do so concurrent to this near-term effort and not subsequent.

EDF-R does not believe additional requirements for energy storage resources are necessary during tight system conditions.  EDF-R believes price signals will drive the desired performance and urges market design in price formation, for example scarcity pricing, as opposed to administrative actions.

EDF-R requests that the CAISO commit to a timeline for a stakeholder process to develop and implement permanent solutions for any measures identified as temporary by including a sunset date for these policies in tariff language. In this instance where the CAISO asks for stakeholder support on serious austerity measures, the CAISO must make an equivalent commitment.

2. Provide your organization’s feedback on export and load scheduling priorities:

None

3. Provide your organization’s feedback on reliability demand response resource dispatch and real-time price impacts:

None

4. Provide your organization’s feedback on the requirements for storage resources during tight system conditions:

EDF-R does not believe there needs to be additional requirements for energy storage resources during tight system conditions but will continue to work with CAISO as this topic becomes clearer.

The CAISO briefly mentioned the idea of updating the AGC signal to preserve the state of charge. EDF-R understands this is a high-level proposal and CAISO is working to flesh these ideas out.  EDF-R does not support the idea of updates to the AGC signal to preserve the state of charge without the proper economic incentives to do so.  This seems like some type of administrative action, an out-of-market action to change dispatch, when system conditions are tight.  This would only be employed when system conditions ‘trigger’ so the use should be discrete and limited.  But we always caution out-of-market actions, especially for a whole set of generators.  

EDF-R supports a reliability-via-markets approach where possible, and CAISO has not demonstrated with empirical evidence that economic signals alone are insufficient to appropriately position storage or hybrid generators.

Should the CAISO choose to proceed with an updated AGC policy, or any policy designed to limit storage generators’ autonomy for reliability’s sake, EDF-R requests CAISO do so temporarily and outline specific sunset provisions in its tariff implementation. 

5. Provide your organization’s feedback on cost recovery provisions for hourly block imports during tight system conditions:

None

6. Provide your organization’s feedback on short-term scarcity price enhancements:

EDF-R supports efforts to improve price formation and to allow the market to reflect proper price signals for conditions in the market.  This is important, especially in tight supply conditions. Tight supply conditions should be reflected in high market prices, and, when appropriate, in scarcity pricing.  EDF-R believes price signals reflective of system conditions will be sufficient to ensure storage or hybrid generators are available to meet system needs. 

7. Provide your organization’s feedback on EIM coordination during emergency conditions and review of the current resource sufficiency evaluation design:

None

8. Please provide suggestions for additional topics to be considered in this stakeholder process that can be implemented by June 1, 2021:

EDF-R reiterates it is critically important for reliability to implement Ancillary Service (A/S) participation for hybrid resources prior to summer 2021.  And it can be done.  Hybrid resource A/S participation is already approved through the stakeholder process last fall, so there is no need for additional policy development.  Thus, hybrid resource A/S participation can be implemented before June 1, 2021.  EDF-R and other hybrid generators limited by ACC constraints are already online and can provide much needed A/S to the market but for a lag in implementation to the market.  CAISO experienced A/S scarcity events during the August heat storm as well as in September.  Both months A/S scarcity reached higher than 70% of requirements.   A/S from hybrid resources is ready to go, and we strongly urge CAISO to move implementation to the spring or an independent 2021 software release to be deployed in advance of summer.

9. Additional comments:

EDF-R asks CAISO to more clearly define the temporary or permeant nature of these market changes.  Are these market changes which are being developed with a discrete focus on the needs for summer 20201 intended to be implemented for summer 2021 only?  CAISO notes this effort is not meant to take the place of long-term initiatives such as Scarcity Pricing Enhancements and Extended Day-Ahead Market.  EDF-R asks CAISO to elaborate on what the permeance of these market design changes is intended to be and for the CAISO to commit to a timeline for stakeholder process to develop and implement a permanent solution by including a sunset date for these policies in tariff language. In this instance where the CAISO asks for stakeholder support on serious austerity measures, the CAISO must make an equivalent commitment. 

EDF-R does not support a proposal (temporary or permanent) that specifically limits energy storage generators, like the Minimum State of Charge (MSOC) proposal in the CAISO’s RA enhancements draft final proposal. Currently, the MSOC proposal would apply restrictions to storage when traditional resources cannot meet demand. If the CAISO insists that some form of generator command measure is needed to prevent future blackouts, then the proposal should be generator attribute driven so that they apply to all resources uniformly (use-limited resources, for example) rather than being specifically and only applicable to energy storage. EDF-R believes that energy storage resources are no less predictable than “traditional generation” nor are energy storage resources specifically responsible for causing or solving supply problems.  Where energy storage resources are uniquely suited to solve supply problems, they should be compensated for doing so, rather than being corralled into forgoing revenue opportunities. 

1. Provide a summary of your organization's comments on the proposed initiative scope and schedule:

LS Power appreciates CAISO opening a formal initiative to evaluate market enhancements for summer 2021 readiness and providing this opportunity for comment. LS Power agrees with CAISO’s statement in the stakeholder meeting that these changes should be for tight system conditions triggered by specific circumstances and not during all hours of the day. In addition, LS Power suggests that any changes implemented in this initiative be considered temporary for summer 2021 only. If CAISO decides to make permanent changes they should be raised in this or another initiative that allows more time for deliberation and refinement of the policy change.

LS Power suggests the following three issue areas be included in Topic 3 on Requirements for Storage to ensure summer 2021 readiness. In each of these areas, LS Power emphasizes that CAISO should seek to implement in-market solutions and use transparent prices to achieve desired goals wherever possible, as opposed to out of market solutions such as Exceptional Dispatch (ED) and Minimum State of Charge Requirements (MSOC) that drive up costs and create unnecessary risk for resource owners. This is good practice, is squarely in line with CAISO’s stated principles, and will minimize risk for any changes that need FERC approval. LS Power was in a unique position as one of the few market participants operating a large-scale battery storage project in the CAISO wholesale energy markets this past summer. Based on this operating experience we recommend a few urgent changes needed to enable storage to maximize its contribution to grid reliability. We summarize the issues here and expand on them in response to question 4 below.

• Issue Area 1: Real Time Dispatch and Multi-Interval Optimization problems. The Real Time market currently creates unnecessary economic and reliability risk due to legacy design decisions that are appropriate for traditional generators but have unintended consequences with storage. Storage-specific changes to the way the multi-interval optimization (MIO) algorithm works in the Real Time market are urgently needed.
  • MIO Recommendation: MIO is unnecessary for battery energy storage resources due to their extremely fast ramp rates. Real Time Dispatch (RTD) instructions for storage should strictly be made based on the Binding interval and not any advisory intervals. This will accomplish a better reliability outcome. Alternatively, MIO should be constrained to a much smaller number of advisory intervals for Non-Generator Resources (NGRs) (maybe 2-3 intervals, i.e. 10-15 minutes, instead of the current 13 intervals, i.e. 65 minutes). The risk with dispatching NGRs based on advisory intervals is that RTD can deplete the storage resource before the evening peak thereby causing unintended reliability risk and exposing the resource to huge imbalance charges if resource is not able to discharge to its Day Ahead evening peak award. The dispatch based on advisory interval pricing (which may or may not materialize) is often not in line with resource’s bid curve and thereby could make it impossible for resource owner to maintain desired SOC to meet its DA discharge awards, which could lead to another unintended consequence – ED issued by CAISO Operations.

• Issue Area 2: Exceptional Dispatch and Infeasible Dispatch. This past summer CAISO leaned heavily on Exceptional Dispatch (ED) with large energy storage projects, frequently taking resources out of market either via phone calls from CAISO Grid Ops to Resource SC or out of market instructions through Automated Dispatch System (ADS). Unfortunately, several ED requests made by CAISO Grid Ops were either impossible to follow (i.e. instruction to charge when the unit is already full), or that would make it impossible for a resource to meet its Day Ahead market schedules LS Power team has been working closely with CAISO Grid Ops team and while we have been able to resolve a few of the infeasible dispatch issues, more work is needed in this area as described below.
  • ED Recommendation 1: To be ready for summer 2021, CAISO operations desk personnel need to have more information about a storage resource’s schedules and their physical characteristics than they had this past summer, and need to be trained on how storage is different from traditional generators. LS Power is always available to collaborate on improving telemetry, documentation, and training for this purpose.
  • ED Recommendation 2: If EDs are being used to remove the storage resource from the Real Time market, as was often done in 2020, then the ED should by default request that the unit exactly follow its Day Ahead schedule. This would eliminate the scenario where EDs are requested by a grid operator and unintended consequences are created hours later if the plant’s operator or scheduling coordinator is not quick to figure out and explain the risks.
  • Infeasible Dispatch Recommendation: LS Power has previously suggested fixes to CAISO to eliminate infeasible dispatch situations. We will continue to work with CAISO team in addressing these issues and will be happy to participate in a stakeholder dialogue on this topic, as needed. We urge CAISO team to implement recommendations provided at the earliest so EDs related to Infeasible Dispatch can be eliminated.

• Issue Area 3: Bid Cost Recovery as currently implemented does not work for energy storage. CAISO must review the current bid cost recovery (BCR) calculation for the real time market as it is applied to non-generator resources. Due to the specifics of that calculation, NGRs are never made whole for losses incurred by resources following CAISO dispatch (i.e. the settlement charge code is always zero at the end of the day), and these losses can and do occur due to the undesirable outcomes mentioned above from both Real Time/MIO dispatch issues and ED.
  • BCR Recommendation: BCR rules should be completely rewritten for NGRs in a way that takes into account the specific economics of energy storage. One plausible option would be for CAISO settlements to compute BCR using a backtest of what a resource would have earned if it was a price taker and its bid curve had been honored exactly in each hour given the resource’s physical characteristics and actual prevailing LMPs in each of the Day Ahead, Fifteen Minute, and Five Minute Market runs for the day (after any adjustment to the bids is made for market power mitigation of course). The BCR payment would make up the difference between actual market revenue and what the resource would have earned had it been dispatched according to its bids and prices only (i.e. it would undo any damage from MIO or ED dispatch that took it out of the market).

2. Provide your organization’s feedback on export and load scheduling priorities:

  LS Power has no feedback at this time.

3. Provide your organization’s feedback on reliability demand response resource dispatch and real-time price impacts:

  LS Power has no feedback at this time.

4. Provide your organization’s feedback on the requirements for storage resources during tight system conditions:

Background: All of the following discussion pertains to large scale storage resources, and is especially focused on stand-alone storage resources. The vast majority of storage projects participate in CAISO markets through the Non-Generator Resource (NGR) model, specifically as Non-REM type NGRs. In general, the Day Ahead Market does a good job of determining energy storage dispatch schedules that support economic outcomes and reliability. However, the Real Time Market is in need of storage specific updates. With appropriate Real Time Market changes in place, CAISO operators should be able to rely on the markets to dispatch storage and reduce on the need for Exceptional Dispatch (ED) and other proposed out-of-market actions for energy storage.

Storage resource owners/operators such as LS Power are completely aligned with CAISO with respect to maintaining reliability of the grid. Storage resource owners have the same operational goal as CAISO during tight system conditions: to have the battery full and ready to discharge when needed (such as during evening peak hours). It is also important that CAISO wholesale market prices both accurately reflect reliability need and guide dispatch the vast majority of the time, so that energy storage resources can effectively contract with load serving entities to mitigate their risks as the natural buyers in the sometimes volatile wholesale energy markets. This concept, plus a functioning resource adequacy market, are what enables the storage investment taking place today that California is relying on to meet both its environmental and reliability goals. As stated above, LS Power emphasizes that CAISO should seek to implement in-market solutions and use transparent prices to achieve desired goals wherever possible. This is good market practice, is squarely in line with CAISO’s stated principles, and will minimize risk for any changes that need FERC approval

Issue Area 1: Real Time Dispatch and Multi-Interval Optimization problems

The Real Time market currently creates unnecessary economic and reliability risk due to legacy design decisions that were appropriate for traditional generators, but have unintended consequences with storage. Specifically, storage-specific changes to the way the Multi Interval Optimization (MIO) algorithm works in the Real Time market are urgently needed.

How MIO works today: Briefly, MIO is a design aspect of the Real Time market that estimates market conditions several intervals in the future, known as the advisory intervals, in order to optimize the dispatch signals given to resources in the immediately following interval, known as the binding interval. This way CAISO could start ramping up slow moving but low-cost traditional generators if CAISO anticipated a need occurring later in the hour, keeping costs low. However, most battery storage resources differ from conventional resources in various key aspects, and the MIO algorithm has unintended consequences as a result. Specifically, the MIO algorithm is extremely sensitive to changes in CAISO’s estimate of future system conditions, and frequently those estimates do not materialize in practice (this is a major reason why just extending the time horizon for MIO would not solve these problems, that “solution” in effect requires perfect knowledge of the future).

Having no inertia, storage resource dispatch signals (DOTs) are thus moved up and down in the binding interval in a way that is beyond the control of resource owners, any time CAISO estimates a very low or high price materializing in the advisory intervals. The algorithm also does not consider Day Ahead schedules in any way when determining Real Time market dispatches. Because MIO in real-time does not consider awards in prior market runs, it is not uncommon for the MIO algorithm to lock in financial losses in storage operation during various intervals of the day.

The result of this takes two forms:

1. When CAISO expects a future high price, it starts charging the resource at prices that may be outside of the resource’s bid curve. The expected future high price may or may not actually occur, leading to potential financial losses and unnecessary battery cycling.
2. When a future low price is anticipated, CAISO starts discharging the resource at prices that may be well below the prices that the resource has stated a desire to charge at in its bid curve. This discharge could occur regardless of potential Day Ahead award schedules and could make it difficult for the resource to stay charged ahead of its DA discharge hours.

Both outcomes make it very difficult for a resource owner to control their resource’s state of charge through the only mechanism available to them: the bid curve. Outcome B also creates reliability risks: it discharges a resource, potentially for low prices, leaving it empty relative to where it should be. To be clear: there are currently no market guardrails against this undesirable outcome happening prior to the evening peak, even if it is a tight supply day where the resource has a Day Ahead schedule and needs to be full an hour later. This at least should be fixed before Summer 2021.

MIO Recommendation: MIO is unnecessary for battery energy storage resources due to their extremely fast ramp rates. Real Time Dispatch (RTD) instructions for storage should strictly be made based on the Binding interval and not any advisory intervals. This works because resource owners have a very clear incentive in the market to have their resources be full to meet their schedules in the Day Ahead market, because failure to do so means risking massive imbalance penalties. Storage resource owners can, should, and do offer to charge at higher prices through their bid curves submitted to CAISO in the hours leading up to a Day Ahead schedule. (This suggestion would not hold for non-battery storage resources with slower ramp rates closer to those of a traditional generator, those will likely benefit from MIO).

Alternatively, MIO could be constrained to a much smaller number of advisory intervals for NGRs (maybe 2-3 intervals, i.e. 10-15 minutes, instead of the current 13 intervals, i.e. 65 minutes).., and an adjustment could be made to specifically avoid “B” above, where the unit’s state of charge is lowered in anticipation of future low prices. The reliability risk to the grid and financial risk to storage operators from that scenario is so great that LS Power and others would surely prefer to forgo any theoretical opportunity to “earn a spread” in those intervals when a low price does subsequently appear after we’ve been discharged for prices less than we have bid into the market.

Issue Area 2: Exceptional Dispatch and Infeasible Dispatch.

In 2020, CAISO relied on the Exceptional Dispatch (ED) tool to control storage resources in tight conditions and LS Power recommends against relying on this tool for 2021. Specifically, this takes the form of the CAISO operations desk making phone calls to the resource’s scheduling coordinator and operators, telling them that the resource is being removed from the market and needs to set its output at a specific level for a certain time period. In some cases, CAISO operators have made ED requests that were impossible to follow (i.e. “charge at X MW for the next 3 hours”, requested at a time when the resource is already full). In other cases, the ED requests would have made it impossible for the resource to subsequently meet its Day Ahead schedule (i.e. “discharge at X MW for the next 4 hours”, where X was a value that would have left the resource completely empty immediately prior to a discharge scheduled in the Day Ahead market). Reliability issues were avoided at the last minute by storage plant operators explaining the physical limitations of the resource to the CAISO operations desk and getting the EDs adjusted; this scenario should be avoided altogether going forward. LS Power team has been working with CAISO Grid Operations and we stands committed to provide any information needed by CAISO so the Operations can understand the physical characteristics and make dispatch decisions accordingly.

This ED practice took storage out of the Real Time market, with grid operators losing the resource’s ability to quickly and flexibly respond to reliability needs, and in some cases creating significant lost opportunity cost for the resources. Excessive use of this tool creates market inefficiencies, which in turn leads to increase in cost to serve load. If CAISO decides to rely on this tool, LS Power also suggests revising the ED settlement rules to make storage resources whole to their bids (which according to our understanding is not happening) and also to potential lost opportunity costs for storage when it is taken out of market. Related to this, there are several “low hanging fruit” type of fixes to the Non-Generator Resource (NGR) model, which can greatly improve the CAISO operations desk’s ability to dispatch storage in line with both its physical capabilities and day ahead schedules.

ED Recommendation 1: To be ready for summer 2021, CAISO operations desk personnel need to have more information about a storage resource’s schedules and their physical characteristics than they had this past summer, and need to be trained on how storage is different from traditional generators. LS Power is always available to collaborate on improving telemetry, documentation, and training for this purpose.

ED Recommendation 2: If EDs are being used to remove the storage resource from the Real Time market, as was often done in 2020, then the ED should by default request that the unit exactly follow its Day Ahead schedule. This would eliminate the scenario where EDs are requested by a grid operator and unintended consequences are created hours later if the plant’s operator or scheduling coordinator is not quick to figure out and explain the risks.

CAISO also regularly sends infeasible dispatches (ID) to NGRs due to limitations of the NGR model, specifically an inability to express the physical limitations that all batteries have with respect to charge rates that change as a function of State of Charge. A straightforward fix for CAISO utilization of existing telemetry points has been proposed privately by LS Power to CAISO, although there are other possible options. This issue should be addressed quickly, infeasible dispatches by definition cannot be followed by the resource receiving them, and the result is increased area control error, financial risk for resource owners, and consternation for CAISO operators and plant operators alike.

ID Recommendation: LS Power has previously suggested fixes to CAISO’s EDAS group and would like CAISO to provide inputs or implement these recommendations such that EDs related to infeasible dispatches can be eliminated.

Issue Area 3: Bid Cost Recovery as currently implemented does not work for energy storage.

CAISO must review the current bid cost recovery (BCR) calculation for the Real Time market as it is applied to NGRs. Due to the specifics of that calculation, NGRs are never made whole for losses incurred by resources following CAISO dispatch (i.e. the settlement charge code is always zero at the end of the day). These financial losses can and do occur due to the undesirable outcomes mentioned above from both Real Time/MIO dispatch issues and ED. These losses in specific periods are not covered by BCR due to an implicit assumption in the BCR math, which works perfectly well for traditional generators that only have positive levels of output and whose operational costs have a different relationship to their bid curve (i.e. operation requires a specific number of dollars for each MWh generated) than energy storage does (which uses a curve formatted the same way to convey a necessary spread between charge and discharge prices, as well as to price in the opportunity cost of being empty at the wrong time).

BCR Recommendation: BCR rules should be completely rewritten for NGRs in a way that takes into account the specific economics of energy storage. One plausible option would be for CAISO settlements to compute BCR using a backtest of what a resource would have earned if it was a price taker and its bid curve had been honored exactly in each hour given the resource’s physical characteristics and actual prevailing LMPs in each of the Day Ahead, Fifteen Minute, and Five Minute Market runs for the day (after any adjustment to the bids is made for market power mitigation of course). The BCR payment would make up the difference between actual market revenue and what the resource would have earned had it been dispatched according to its bids and prices only (i.e. it would undo any damage from MIO or ED dispatch that took it out of the market). This type of a script is relatively simple to develop, and indeed many market participants already run something like this in their own offices each day. This is only one plausible solution and we recognize it is a complicated subject and deserves a dedicated workshop and a place in an appropriate stakeholder process at CAISO. We look forward to collaborating on it.

Storage specific requirements should allow for adequate compensation and be considered temporary for summer 2021. Lastly, LS Power recommends if CAISO makes any specific requirements for storage to hold a specific state of charge that takes the resource out of the real-time market, CAISO should also provide adequate compensation for providing that reliability service. As highlighted by stakeholders in the Resource Adequacy Enhancements initiative, CAISO’s current proposals for minimum state of charge are discriminatory for storage resources and are a product of short comings in the current CAISO market discussed above. Further, because CAISO is already debating how to ensure storage is available for local and system needs and should not duplicate the process to enact changes in this initiative. Any changes that increase out of market activity resulting from this initiative should only be temporary for summer 2021, and longer-term changes should be evaluated in other initiatives.

5. Provide your organization’s feedback on cost recovery provisions for hourly block imports during tight system conditions:

  LS Power has no feedback at this time.

6. Provide your organization’s feedback on short-term scarcity price enhancements:

  LS Power has no feedback at this time.

7. Provide your organization’s feedback on EIM coordination during emergency conditions and review of the current resource sufficiency evaluation design:

  LS Power has no feedback at this time.

8. Please provide suggestions for additional topics to be considered in this stakeholder process that can be implemented by June 1, 2021:

  LS Power has no feedback at this time.

9. Additional comments:

  LS Power has no feedback at this time.

1. Provide a summary of your organization's comments on the proposed initiative scope and schedule:

From the CAISO’s proposed schedule in the January 6 meeting presentation, the CAISO intends to take Summer 2021 readiness topics to its Board of Governors meeting on March 24 or 25, 2021.  While this schedule greatly compresses the time available to consider the potential topics (some of which may not yet be known), MRP generally supports this schedule, as it would obviate the need to seek waiver of the 60-day notice provision when proposed tariff amendments are submitted to the Federal Energy Regulatory Commission (“FERC”).   Given that the topics the CAISO has scoped for initiative are complex (to which the discussion in the January 12 and 13 workshops testify), if topics would benefit from additional time, however, MRP encourages the CAISO to consider pushing the schedule back by a month, if needed.  While this would require seeking waiver of the 60-day notice provision, if the delay provides for better discussion and a more widely-supported proposal, initiative participants could join the CAISO in seeking waiver of the 60-day notice provision at FERC. 

2. Provide your organization’s feedback on export and load scheduling priorities:

MRP appreciates the CAISO’s January 12 workshop on export priorities.  The discussion confirmed the complexity of the current treatment of exports and surfaced some important policy questions regarding how the CAISO’s market treatment of exports could and should align with goals of the RA program.    Given that some entities point to the CAISO markets’ treatment of exports as one of the primary causes of the August 14 and 15 load shedding events (see, e.g., Protect Our Communities Foundation’s November 30, 2020 comments in CPUC proceeding R.20-11-003), this topic is the most import topic for the CAISO to tackle prior to Summer 2021.  MRP looks forward to the CAISO’s straw proposal and the ensuing further discussion on this topic. 

Given the inter-dependency within the Western Interconnection, export and load scheduling priority rules is a topic that, ideally, and like resource adequacy, should not be resolved on a BAA by BAA basis.  As Idaho Power’s Kathy Anderson noted on the January 12 call, Idaho Power does not cut exports in an emergency, because doing so has the potential to propagate energy emergencies to other BAAs and undermines Idaho Power’s reputation and standing as a seller of power.  It is, therefore, too simplistic to say that the key to ensuring adequacy within an individual BAA is to allow, or even require, that BAA to prioritize serving load within that BAA over supporting exports to other BAAs.  Given this topic’s nexus with the CAISO’s proposal on RA imports in the RA Enhancements initiative, and, given the potential dangers of developing one set of rules for CAISO imports and another unrelated set of rules for CAISO exports, it would be ideal for the two topics to be resolved in the same initiative and on the same time frame, though that does not seem possible given the press of time for Summer 2021.  It may be that the CAISO will have to implement some quick fixes to provide clarity for this topic prior to Summer 2020, but MRP respectfully urges the CAISO to remain open to aligning RA import and export rules over a longer time frame as part of the RA Enhancements initiative. 

3. Provide your organization’s feedback on reliability demand response resource dispatch and real-time price impacts:

MRP strongly encourages the CAISO to re-examine how RDRR is dispatched and when it should set price.  Allowing for RDRR to be dispatched outside of the CAISO market without setting price does not comport with the requirement for RDRR to be bid in at price near the price cap specifically so it will set the price when dispatched.   

4. Provide your organization’s feedback on the requirements for storage resources during tight system conditions:

MRP continues to support the CAISO’s proposal to impose a minimum charge requirement that ensures that short-duration (i.e., four-hour) energy storage, which qualifies to provide RA capacity in the same way that duration-unlimited resources provide RA capacity, retains sufficient charge to meet its Day-Ahead schedule.  While this requirement prevents storage resources from responding to real-time price spikes earlier in the day, MRP views this as a reasonable compromise.  Under the current RA structure, or even under the proposed future UCAP structure, all hours do not carry the same importance as far as RA is concerned.   While things can and do happen outside of the most highly stressed hours, it is reasonable to preserve duration-limited resources’ output for the most stressed hours, which, given the repeatable pattern associated with wind and solar resources’ output, can be reasonably predicted, both in the day-ahead market as well as in the modeling analyses supporting the procurement of storage resources. 

While some discussion opposing the minimum charge requirement during the January 6 call centered on extending the CAISO real-time market’s look-ahead as the “right” solution, the ability to look farther ahead is of uncertain value unless the look-ahead forecasts are accurate.   Even if the extended look-ahead is accurate – and, as the discussion noted, the further the look-ahead, the less accurate the forecasts will be - price spikes are often the result of events that the look-ahead does not anticipate and does not factor into its optimal dispatch.

5. Provide your organization’s feedback on cost recovery provisions for hourly block imports during tight system conditions:

MRP appreciates the CAISO acknowledging the issues associated with providing bid cost recovery for block-hour imports.   MRP is sympathetic to the concerns expressed by some market participants about awarding imports based on the HASP price but paying them the FMM price (which may be different than the HASP price).  MRP notes, however, that a common cause of the price disparities is that CAISO operators bias the HASP market to drive higher levels of imports – which may or may not be needed, but which CAISO operators nevertheless do because HASP represents their last market chance to access intertie supply.  Biasing HASP to get additional imports can result in lower FMM prices when the actual load is less than the biased load – an outcome that disadvantages both internal and import suppliers. 

The CAISO has heretofore not adopted block-hour bid cost recovery because of concerns about doing so.  To MRP’s understanding, nothing that would resolve those concerns has changed.  While MRP does not object to the CAISO including this issue in the Summer 2021 readiness initiative, MRP encourages the CAISO to identify, at the leading edge of this discussion, what, if anything, has changed that would address the CAISO’s prior concerns.  

6. Provide your organization’s feedback on short-term scarcity price enhancements:

MRP understands from the January 6 call that, in addition to considering this topic (scarcity price enhancements), the CAISO intends to consider the possible implementation of system market power mitigation (SMPM) measures.  In MRP’s view, these two topics are inextricably linked, and therefore must be considered simultaneously.  The two topics are linked because implementing SMPM provisions to clamp down on prices when the increase in prices is due to scarcity conditions will only drive away supply and exacerbate the underlying scarcity conditions in a vicious cycle. At present, the CAISO has done a significant amount of recent work on SMPM (as evidenced by the fact that this topic had its own separate initiative underway since December 2019), while the CAISO has yet to begin any work on scarcity provisions.  MRP is concerned that this imbalance in effort could lead to the CAISO proposing to implement SMPM provisions without having sufficiently explored and considered scarcity pricing provisions, especially if the goal is to implement something prior to June 1, 2021.   

7. Provide your organization’s feedback on EIM coordination during emergency conditions and review of the current resource sufficiency evaluation design:

MRP has no comments on this topic. 

8. Please provide suggestions for additional topics to be considered in this stakeholder process that can be implemented by June 1, 2021:

MRP has no additional topics to offer.  It will require a Herculean effort for the CAISO, market participants and stakeholders to address the current list of issues prior to Summer 2021. 

9. Additional comments:

MRP has no additional comments. 

1. Provide a summary of your organization's comments on the proposed initiative scope and schedule:

NCPA believes that CAISO should take targeted and easily implementable actions to ensure CAISO is ready to maintain reliability in summer 2021. Market design changes are complex, can have unintended consequences, and require adequate time to implement and test.  Hasty rollout of market design changes that are not adequately vetted by stakeholders creates significant risk of defects that will inevitably surface at the most critical times. NCPA believes the most effective use of CAISO’s time and resources for this initiative would be to review and focus on improvements to operating procedures and practices pertaining to out-of-market actions.

NCPA agrees that (1) export and load scheduling priorities, (2) RDRR dispatch, and (3) requirements for storage resources should be included in the scope of this initiative. 

NCPA urges CASIO not to include scarcity pricing in the scope of this initiative.  NCPA is not convinced that increasing prices will improve CAISO’s ability to maintain reliability in the summer of 2021.  It appears that prices associated with the past summer emergencies may have been highly influenced by out-of-market actions.  Implementing new scarcity pricing rules without fully understanding what impact out-of-market actions may have had on prices this past summer, could ultimately be counterproductive to the goals of this initiative.

Finally, as discussed below, NCPA urges CAISO to include one additional topic in this initiative: evaluation of CAISO’s Emergency Operating Procedures, including CAISO’s use of out-of-market actions, and how such are coordinated with market solutions.

2. Provide your organization’s feedback on export and load scheduling priorities:

NCPA agrees with the following sequence of scheduling priorities: 1) internal load and exports supported by non-RA capacity, and 2) exports not supported by non-RA Capacity. NCPA supports conforming to the rest of WECC so long as WECC practices are aligned with that sequence. CAISO should exercise caution about curtailing exports of non-RA capacity to ensure service to internal load. As discussed by Idaho Power and other entities in the WECC, the routine interruption non-RA exports could have negative long-term impacts on the willingness of other entities to contract with generators inside the CAISO BAA. Fundamentally, decisions by the transmission-provider to interrupt power belonging to other entities to address its internal emergencies is inconsistent with open access principles. NCPA may have additional comments after the separate stakeholder meeting on this topic.

3. Provide your organization’s feedback on reliability demand response resource dispatch and real-time price impacts:

NCPA supports CAISO’s proposal to review how RDRR, once ISO operator enabled, is dispatched through the Real Time Market, and to evaluate what market enhancements may be required to ensure RDRR dispatches create appropriate price signals. NCPA concurs with DMM’s findings that DR should be dispatched in the following sequence prior to shedding firm load: 1) Supply Plan DR, 2) RDRR and, 3) Utility DR.

NCPA is concerned about how DR commitments may have contributed to significant price divergence between the DAM and RTM during the emergencies this past summer. For example, during the emergencies in August 2020, the CAISO took a number of out-of-market actions focused on increasing supply and/or reducing demand in real-time. These actions included issuing “max gen” instructions to generators to increase production, and directing end use customers to dispatch backup onsite generation and demand response to reduce demand. When CAISO implements these types of actions one could assume that RTM prices would increase, but in fact, during many of the emergency events in August 2020 prices ultimately collapsed in real-time.

While NCPA supports CAISO taking necessary actions to prevent manual load shedding in these types of emergency situations, the significant price divergence experienced between the DAM and RTM is of great concern to NCPA (and may be an indicator of a market design flaw or flawed operating practices).  For example, during the period of 8/14/2020 through 8/19/2020, RTD SME prices were on average $387/MWh less than DAM SME prices for the same period. This price divergence problem seemed to worsen during the period of 8/17/2020 through 8/19/2020, when average prices in the RTM were up to $603/MWh less than the DAM. During the Stage 2 emergency declared for 8/17/2020, RTD prices only averaged $70/MWh, while DAM prices for the same period averaged $776/MWh. Aside from the fact that these prices do not support dispatching expensive DR (including on-site backup diesel generation), these significant differences in prices had a catastrophic financial impact on LSEs. When LSEs face this type of risk associated with price divergence, when coupled with out-of-market actions and potential load biasing, LSEs could be inadvertently incentivized to under schedule load simply to protect their portfolios. As part of this initiative, it will be critically important for CAISO to determine the underlying cause of the significant price divergence experienced between the DAM and RTM this past summer. The market will need to understand how DR may have contributed to this price divergence, to ensure that any new rules considered do not result in the same outcome.

NCPA also requests that CAISO, CEC, and CPUC use more restraint when calling on non-market solutions, especially the dispatch of onsite back-up generation that is not registered in any CAISO DR programs. Many of the actions taken this past summer resulted in end use customers incurring significant costs to provide this reliability support, but in most cases, they were never compensated or made whole for providing this service in the time of need.  These actions may have solved the short-term problems experienced during this past summer, but it set up counterproductive incentives that could adversely affect the market by creating conditions for less willingness to respond next time.  As part of this initiative, CAISO should explore what additional mechanisms may be required to ensure market participants are fairly compensated for services provided, including mechanisms for compensating market participants for CAISO’s commitment of onsite back-up generation.

4. Provide your organization’s feedback on the requirements for storage resources during tight system conditions:

NCPA understands that a majority of the battery storage facilities in operation today primarily supply Regulation services to the CAISO. As such, NCPA supports any necessary updates to the AGC signal to preserve the state of charge at appropriate levels.

NCPA also understands that a large volume of storage capacity is expected to come online this summer in the form of co-located resources, and therefore will not be able to opt in to REM due to ITC considerations. NCPA expects CAISO to rigorously test these resources during commissioning to ensure they are fully dispatchable and will be available and sufficiently charged when called upon. 

5. Provide your organization’s feedback on cost recovery provisions for hourly block imports during tight system conditions:

No comment at this time.

6. Provide your organization’s feedback on short-term scarcity price enhancements:

NCPA seeks more evidence to determine if under-scheduling load is widespread, or if this situation was limited to cases when LSEs had experienced financial harm from price divergence as described above. CAISO already recognizes the fact that bid in demand may be above or below CAISO’s Forecast of CAISO Demand (CFCD), and addresses that through the RUC process. CAISO’s concerns with load scheduling imply that there are more issues with RUC than the issues identified and corrected last summer pertaining to Convergence Bidding and Exports. 

CAISO must also recognize that even the best load forecasts developed using sophisticated and advanced forecasting techniques are subject to error for multiple reasons (e.g., changing temperatures and smoke coverage). Therefore, any efforts to develop incentives to improve scheduled load accuracy will likely be futile in tight supply conditions, many of which are due to unforeseen weather events or loss of supply. This is yet another reason NCPA believes CAISO’s time would be better spent reviewing and refining its operating procedures during tight supply conditions.

7. Provide your organization’s feedback on EIM coordination during emergency conditions and review of the current resource sufficiency evaluation design:

No comment at this time.

8. Please provide suggestions for additional topics to be considered in this stakeholder process that can be implemented by June 1, 2021:

NCPA urges CAISO to add the following topic to the scope of this initiative: evaluation of CAISO’s Emergency Operating Procedures, including CAISO’s use of out-of-market actions, and how such are coordinated with market solutions.

NCPA acknowledges that hindsight is 20/20 and NCPA does not question the intent behind the decisions made by the CAISO during the emergencies, but now that the events are over, we now have an opportunity to learn from the experience.  As such, NCPA believes including a review of CAISO’s operating practices during the system emergencies may reveal opportunities for improvement. NCPA requests CAISO to itemize the actions that were taken, their justification, and a comparison of expected versus actual results.

9. Additional comments:

1. Provide a summary of your organization's comments on the proposed initiative scope and schedule:

PG&E supports CAISO’s prioritizing these short-term efforts to enhance market rules and procedures to improve grid reliability for the summer 2021.  

We note, however, that CAISO’s scope in this initiative covers many complicated market rules which CAISO has spent the last decade plus developing.  Given the risk of implementation challenges and the potential for unintended consequences, PG&E requests CAISO focus on discrete changes where there are clear benefits to reliability in the summer of 2021.  For example, specific market design gaps in the RUC market that led to CAISO allowing the exports of  California RA during periods of system emergencies have been identified and specific solutions to address these market flaws could likely be developed to address the reliability challenges.  Other initiatives, such as on scarcity pricing, could likely have unintended consequences (such as incentivizing physical withholding in order to driving up prices) and might exacerbate the reliability problems rather than improve it.

Additionally, PG&E requests that any market rule changes that haven’t been developed though the standard (and complete) stakeholder process, should have sunset provisions at the end of the summer of 2021. The CAISO can examine the effectiveness of these temporary changes in a full stakeholder process before making changes permanent.

PG&E appreciates the opportunity to engage the CAISO and provide initial comments on the Market Enhancements for Summer 2021 Readiness initiative.  Please see our comments by topic listed below.

2. Provide your organization’s feedback on export and load scheduling priorities:

PG&E supports the CAISO’s goals to continue to refine its export and load priorities to better align with internal reliability needs and the rules of neighboring BAs. PG&E has generally supported the CAISO’s previous efforts on this topic and continues to request the following items be considered in this initiative:

• An analysis of potential market inconsistencies created by the Emergency BPM change (PRR 1282) which now uses the prices from the pricing run and schedules from the scheduling run.
• An understanding of the feasibility of creating a process to validate the sourcing of export energy from non-RA resources.
• An evaluation as to whether exports backed by non-RA resources (during system emergencies) could be a result of non-RA resources being dispatched ahead of RA resources over congested paths.

PG&E will provide more specific feedback regarding the CAISO’s current export and load prioritization in our comments on the January 12^th workshop on this topic. Broadly speaking, we encourage the CAISO to seek comparable treatment of exports and imports across the West through this initiative to better ensure reliability in California, especially during emergency events like those in August.

PG&E also believes it is important that the CAISO consider the alignment of import and export rules along with the RA imports proposal in the RA Enhancements initiative. While this initiative is primarily focused on changes to export prioritization, in better aligning the CAISO’s rules with those in the West, considering comparable treatment of exports and imports could necessitate some changes to the current RA imports proposal. Therefore, PG&E encourages the CAISO to look at potential rule changes holistically across this initiative and the RA Enhancements initiative.

PG&E intends to continue to be an active participant on this topic and looks forward to providing additional feedback in future stakeholder comments.

3. Provide your organization’s feedback on reliability demand response resource dispatch and real-time price impacts:

PG&E requests further details as to CAISO’s proposal regarding reliability demand response resource (RDRR) dispatch and real time price impacts.

To support stakeholder education, PG&E requests that CAISO:

• Host a meeting to walk stakeholders through the steps taken during RDRR dispatch in the context of OP4420 to help improve participant expectation around RDRR dispatch triggers.
• Clarify what price is used to trigger RDRRs and if the trigger price is different than the price used in settlements.
• Explain why during the August and September Heat Wave events RDRR was dispatched when market prices were not near the bid cap? As background, while PG&E recognizes that RDRR awards receive bid cost recovery, customers expressed concerns about RDRR dispatches at prices below $950/MWh. 

4. Provide your organization’s feedback on the requirements for storage resources during tight system conditions:

PG&E has several clarifying questions regarding the CAISO’s proposal for updating the automatic generation control (AGC) signal to preserve state-of-charge (SOC):

• Does the CAISO’s proposal only apply to energy storage resources which are operating under AGC?  Would such control be available if an energy storage resource is not providing (or not certified) to provide AGC?
• What testing or confirmation does the CAISO have of its capability to use AGC to manage SOC other than in the REM model?
• Under the REM model, AGC can only be used to manage SOC to 50% of maximum SOC, which is a static value. Is the proposal for AGC to manage state of charge to dynamic values in the NGR model?

Regarding the acceleration of the of minimum state-of-charge (MSOC) requirement, PG&E has the following questions:

• What would the trigger/criteria be for when the minimum SOC is used in the summer 2021 context? If the criteria is the same as stated in the RA Enhancements initiative (on days when non-storage supply fails to meet 110% of net load), the CASIO should make this clear.
• Would the requirement be implemented in the CAISO market business systems (i.e., where it would affect the validation or processing of bids), or only in the real time dispatch market algorithms? 
• Will there be any opportunity to test the MSOC tool or see the results of CAISO testing prior to implementation?
• Will market participants have any way of validating the use of the requirement? Could CAISO, for example, provide data allowing ex-post reviews for the days in question?
• The CAISO suggests that this tool would not require a tariff change. Please confirm this, in particular as it pertains to bid cost recovery (BCR) sections (see next question).
• The requirement would be expected to result in lost opportunities to discharge when in the money, which are not subject to BCR. Could it also result in charging instructions that were out of the money, which would be subject to BCR?

In addition to these questions, PG&E has the following two comments:

• The CAISO should commit to informing scheduling coordinators/resource owners as to when the minimum SOC requirement criteria is met and for which hours it is enforced.
• To support its case for accelerating this proposal, the CAISO should provide historical data which demonstrates how many times the MSOC would have been used over the past three years (i.e. when non-storage supply failed to meet 110% of net load).

5. Provide your organization’s feedback on cost recovery provisions for hourly block imports during tight system conditions:

PG&E appreciates the opportunity to explore the pros and cons of creating a bid cost recovery process for hourly block imports to improve reliability in summer 2021.  PG&E has multiple concerns with the limited reliability value and practical difficulties of implementing BCR changes for hourly block imports as part of the Summer Readiness initiative.  PG&E believes any CAISO’s designed changes should be applied during as few hours as possible and should be designed to minimize the risks of high uplift costs borne by customers. Below are PG&E’s initial thoughts:

1. The incremental reliability benefits may be outweighed by the costs: PG&E is concerned that a BCR process could result in additional payments to resources already participating in CAISO markets without bringing greater reliability or additional resource availability during emergencies.  As a starting point, it would be helpful if CAISO provided more analysis on the HASP-FMM price spread during tight conditions and the magnitude of potential reliability benefits that could result from enabling BCR for hourly block import resources. 

2. BCR payments for hourly block imports may be the wrong price signal to support reliability in emergency conditions – PG&E understands the concern that hourly block import resources face price risk when the FMM price clears lower than their bids.  If an import resource is price sensitive however, the market participant can instead elect to use the Hourly Block with Single Curtailment bid parameter.  This bidding parameter dispatches the import during the advisory HASP market optimization but will curtail the import award if an FMM LMP is below the unit’s bid price.  Rather than implementing a potentially complex new BCR mechanism, other market enhancements such as scarcity pricing measures, together with market power mitigation, may provide a stronger price signal to incent resources into the market during emergency conditions.   

3. Potential for unjust cost recovery – Since Import bids are not currently subject to mitigation, a new BCR process for hourly block imports raises concerns of inappropriate revenue extraction from the market during critical system conditions.

4. Administrative difficulty of introducing a new BCR process in a short timeframe: Designing a BCR process for hourly block imports is a complex undertaking that will be difficult to test and implement before the initiative’s target date of June 1, 2021. We are similarly concerned that defining and testing for the “tight system conditions” that would trigger this BCR process for a specific set of intervals may be difficult to implement in a short timeframe.

Should market rule changes on this topic move forward in this initiative, PG&E believes that any changes should include mechanisms to minimize uplift costs.  For example, using a “Pay as Bid” process for flagged resources during tight system conditions could provide both price certainty to import resources and protection against excessive uplift costs (such as under a BCR design where the importer can capture the upside when the 15 minute market price is above the HASP price but is made whole when the 15 minute price drops below the bid).  

6. Provide your organization’s feedback on short-term scarcity price enhancements:

PG&E reiterates our previous concerns with fast tracking scarcity pricing enhancements which could likely have unintended consequences and might exacerbate the reliability problems.  PG&E also believes that with even minor enhancements to the current scarcity pricing, implementation of additional market power mitigation changes would be required.  As such, CAISO’s scope for any scarcity pricing enhancements should include complementary market protections.

PG&E seeks further clarifications from CAISO related to the following aspects:

• The basic format of the scarcity pricing mechanism: Will the mechanism be formulated as part of the co-optimization process in the day-ahead / real-time markets, or a separate mechanism that prices the out-of-market actions for resource procurement under tight market conditions? While the former will interact with other market decisions, the latter could only impact prices and not schedules.
• Key components and assumptions: PG&E requests that CAISO identify the key components in the mechanism’s design to address reliability in summer 2021. Challenges include: (i) CAISO’s current market process does not have co-optimization in the 5-minute markets, which could lead to undeliverability of operating reserves that supplement energy under tight conditions. (iii) CAISO’s existing demand curves and penalty prices are set arbitrarily high in the real-time markets. A revision is necessary to prevent the violation of power balance before the reduction of reserve goals under tight supply conditions.

           Forming the scarcity pricing mechanism at the level of comprehensiveness of the eastern ISOs requires a longer development cycle. PG&E               requests that CAISO provide the assumptions and simplifications for this mechanism to be implemented by June.  

Impact on capacity markets: PG&E believes that any increase in the frequency or magnitude of scarcity energy prices should be reflected in the resource adequacy market and the CAISO’s CPM soft offer cap value, consistent with the practices in the Eastern ISO markets.  To the degree CAISO is looking to enhance scarcity processes,  consideration of the interplay with the California RA processes would be needed included examining whether paying existing RA resources a higher scarcity price is appropriate.  

7. Provide your organization’s feedback on EIM coordination during emergency conditions and review of the current resource sufficiency evaluation design:

PG&E offers the following feedback on the current design of the EIM resource sufficiency evaluation and EIM coordination during emergency conditions:

1. CAISO should further investigate the incentive structure of the RSE and examine the consequences of failed RSEs during emergency conditions

PG&E supports the goal of the resource sufficiency evaluation (RSE) to ensure that each EIM entity has sufficient resources to serve its load without leaning excessively on other balancing areas such than reliability risks could be created.  Given the events of August 2020, PG&E believes CAISO should explore revisions to the current RSE to ensure that the RSE and consequences of failure do not overly constrain EIM transfers during emergency conditions.  

The CAISO balancing area failed the RSE’s flexible ramping sufficiency test on multiple intervals during the load-shedding days of August 14 and 15, 2020, resulting in the capping of transfer limits for imports to CAISO following the failed tests.  While analysis by DMM has found that the effect of the import limits was minimal because of the lack of economic energy available during the relevant intervals, PG&E welcomes further investigation into the performance of the RSE and the generation and transmission participation in EIM areas during these events.  In particular, PG&E seeks information on:

• Differences between the CAISO BA and EIM BAs in the quality of energy products participating in the market
• Differences in the EIM generation fleet during summer 2020 and other time periods
• Transmission usage in EIM beyond that needed to pass the RSE in EIM areas
• Whether EIM entities contributed all ATC to the EIM during the summer 2020 high load days

PG&E also welcomes discussion of alternatives to the current design that may allow for more flexible solutions to the failure of the RS test during emergencies.  Alternative market rules such as financial penalties or new mechanisms to allow “insufficient” BAs to receive needed transfers during pre-specified conditions may offer better reliability and market outcomes during emergencies while still discouraging inappropriate leaning.

2. CAISO should consider the impact of differing resource adequacy standards for the CAISO BA and EIM BAs on the performance of the RSE

PG&E believes that the differing requirements between California’s Resource Adequacy program and the requirements of the RSE on EIM entities should be explored during this initiative.  For example, PG&E believes it would be helpful to better understand the amount of certain California resources, such as the non-RA portion of RA resources, that may not be accounted for, or any additional capacity in EIM areas that may not be represented in the RSE. PG&E believes that ensuring parallel treatment for resource procurement between CAISO and EIM BAs should be an objective in any RSE re-design that fall within this initiative’s scope of RSE performance during emergency conditions.

8. Please provide suggestions for additional topics to be considered in this stakeholder process that can be implemented by June 1, 2021:

No suggestions for additional topics.

9. Additional comments:

No additional comments  at this time.

1. Provide a summary of your organization's comments on the proposed initiative scope and schedule:

Please see Powerex's comments at https://powerex.com/sites/default/files/2021-01/Powerex_Summer_Readiness_Scoping_Comments.pdf

2. Provide your organization’s feedback on export and load scheduling priorities:

Please see Powerex's comments at https://powerex.com/sites/default/files/2021-01/Powerex_Summer_Readiness_Scoping_Comments.pdf

3. Provide your organization’s feedback on reliability demand response resource dispatch and real-time price impacts:

4. Provide your organization’s feedback on the requirements for storage resources during tight system conditions:

5. Provide your organization’s feedback on cost recovery provisions for hourly block imports during tight system conditions:

6. Provide your organization’s feedback on short-term scarcity price enhancements:

7. Provide your organization’s feedback on EIM coordination during emergency conditions and review of the current resource sufficiency evaluation design:

8. Please provide suggestions for additional topics to be considered in this stakeholder process that can be implemented by June 1, 2021:

Please see Powerex's comments at https://powerex.com/sites/default/files/2021-01/Powerex_Summer_Readiness_Scoping_Comments.pdf

9. Additional comments:

Please see Powerex's comments at https://powerex.com/sites/default/files/2021-01/Powerex_Summer_Readiness_Scoping_Comments.pdf

1. Provide a summary of your organization's comments on the proposed initiative scope and schedule:

The Public Generating Pool (PGP ) appreciates the opportunity to comment on the scope and schedule for the Market Enhancements for Summer 2021 Readiness initiative.  There are PGP members who are EIM participants that were impacted by actions taken by CAISO during the high load conditions of Summer 2020, and we look forward to participating in a collaborative stakeholder process.  

In general, the scope identified at CAISO’s January 6th, 2021 kick-off session appears to be appropriate.  PGP recognizes the need to implement any changes before summer 2021, however, the scope of the initiative in relation to the proposed schedule is aggressive and the feasibility of accomplishing this work is hard to assess until further detail is provided on this initiative.  Given the tight timeline for this work, PGP recommends that CAISO prioritize the elements of this initiative that they believe will have the biggest benefit to Summer 2021 Readiness
 

2. Provide your organization’s feedback on export and load scheduling priorities:

EIM participants have raised questions on whether or not it was appropriate for CAISO to curtail firm exports from its BAA during the Summer 2020 high load conditions. This action had significant impacts on EIM entities, and PGP believes that this is a very important element of this initiative.    PGP also agrees with the need to “level set” these priorities and appreciates CAISO inviting other BAs to participate in the January 12^th, 2021 informational workshop.  Finally, PGP agrees that having comparable scheduling priorities of exports as the rest of WECC is an important outcome.

3. Provide your organization’s feedback on reliability demand response resource dispatch and real-time price impacts:

One of the findings of the Preliminary Root Cause Analysis was the difference between what Reliability Demand Response Resource (RDRR) was credited for resource adequacy purposes and what was actually available, so this is an appropriate piece of this initiative.  PGP believes that any demand response resource that is counted towards resource adequacy and/or resource sufficiency must be visible and responsive to operator and market instructions.

4. Provide your organization’s feedback on the requirements for storage resources during tight system conditions:

It is unclear to PGP if the scope of this element is limited to improvements that do not require tariff changes (such as AGC enhancements) or whether CAISO is also considering market enhancements that would incentivize storage resources to be available to meet local/system needs.  To the extent CAISO pursues exploring incentives for storage resources to be available to meet local/system needs, PGP would like to know whether or not these incentives would be applied to external storage resources such as hydro resources in the Pacific Northwest.

5. Provide your organization’s feedback on cost recovery provisions for hourly block imports during tight system conditions:

PGP appreciates any effort to ensure HASP imports are able to recover their bid costs and believes this is an important element of this initiative.  PGP looks forward to hearing additional details of CAISO’s proposal in this area.

6. Provide your organization’s feedback on short-term scarcity price enhancements:

The Preliminary Root Cause Analysis identified a difference of approximately 3400 MW between actual and bid-in day-ahead demand on the peak hours of August 14th and 15th.  During conditions when there may not be sufficient supply to meet demand, bid-in demand should reflect the expected conditions in order to achieve reliable and efficient market outcomes and eliminate any potential reliability risks that may result from intentional under-scheduling. PGP strongly supports the need for more accurate day-ahead scheduling of loads and resources during tight supply conditions as an element of this initiative.  In addition to short-term scarcity price enhancements PGP encourages CAISO to consider other mechanisms that could better align bid-in demand with expected demand during stressed conditions.  Another mechanism could be requiring loads to submit their demand forecast as their bid during days when a Flex Alert is in place.

7. Provide your organization’s feedback on EIM coordination during emergency conditions and review of the current resource sufficiency evaluation design:

A number of questions have been raised on how the EIM Resource Sufficiency was implemented during the Summer 2020 high load events. PGP believes that the EIM resource sufficiency test must be re-examined to ensure a complete understanding of how the test is designed and applied to all market participants. Specifically, transparency is needed on how the test may be applied differently to EIM Entities and the CAISO BAA, and on whether the penalty for failure is a sufficient consequence for failing to meet the Resource Sufficiency test.  PGP also believes that developing greater understanding and potentially defined rules for how EIM Entities coordinate during emergency conditions will be very helpful.

8. Please provide suggestions for additional topics to be considered in this stakeholder process that can be implemented by June 1, 2021:

PGP has no additional topics to suggest and given the tight schedule for completing this work, we believe there should be a high bar for adding additional topics to the list scoped for this initiative. 

9. Additional comments:

PGP supports the creation of this initiative and shares the sense of urgency that measurable progress needs to be made on these topics prior to Summer 2021. Given the expedited nature of this initiative, PGP believes it would be prudent for CAISO to work with stakeholders to develop a timeline to review the performance of policy changes following the summer 2021 season to determine whether changes should be removed, continued or permanently adopted going into 2022.

1. Provide a summary of your organization's comments on the proposed initiative scope and schedule:

Shell Energy supports this initiative scope and appreciates the ISO’s commitment to an expeditious process to prepare for Summer 2021. 

2. Provide your organization’s feedback on export and load scheduling priorities:

Shell Energy appreciates the robust conversations between the ISO and stakeholders with regard to export and load scheduling priorities.  Shell Energy agrees contracted RA-providing resources and/or RA-imports must continue to support native load before exports. 

In contrast, exports supported by non-RA units and/or non-RA wheel transactions should remain equal in priority to CAISO native load, in the Day Ahead and Real Time markets.  Prioritizing native load above exports supported by non-RA supply is inappropriate as it would usurp non-contracted resources ability to serve load in other BAAs and force these resources into supporting CAISO native load without providing compensation to the resource for this service. 

3. Provide your organization’s feedback on reliability demand response resource dispatch and real-time price impacts:

Shell Energy is concerned by manual dispatch of RDRR resources before any declared system emergencies and the subsequent impacts to price formation.

Dispatching RDRR resources manually outside of declared EEA events undermines RDRR—an emergency action taken to protect the bulk power system.  Fundamentally, exercising RDRR is interrupting the firm obligation of serving native load.  

When RDRR is exercised, it is reasonable for prices associated with this action be at, or near the soft price cap for energy. Electric demand is very price inelastic; not responsive to wholesale market prices.  Therefore, prices should rise as native load is interrupted to accurately communicate supply scarcity vis-a-vis the inability to serve every MW of electric demand. 

Manual dispatch of RDRR before a declared emergency and at a price lower than the soft cap distorts price signals in markets. These inaccuracies in market prices, undermine new resource development and subsequently reliability in the long run.

4. Provide your organization’s feedback on the requirements for storage resources during tight system conditions:

Shell Energy supports the ISO’s proposal to require storage and hybrid resources be sufficiently charged in advance of an energy award.

However, If the resource’s SOC is diminished due to providing ancillary services (e,g, storage is on AGC and discharging to support system frequency) the resource should not be penalized for discharging while on AGC.  Penalties in this case would create disincentives to provide ancillary series and/or energy to the detriment of the other product(s). 

5. Provide your organization’s feedback on cost recovery provisions for hourly block imports during tight system conditions:

Shell Energy supports a bid cost recovery framework for hourly block imports in all intervals where FMM clears below HASP.  Shell Energy maintains that erroneous HASP prices frequently result in the dispatch of resources which are financially settled at a much lower prices observed in the FMM.  Significant price separations between the HASP and FMM markets are especially apparent during tight system conditions.

Importers make supply available to the ISO and/or other regional market hubs based upon market prices and other factors.  HASP dispatches energy imports based upon a non-binding advisory price which obligates the importer to deliver.  When the FMM clears below HASP, the importer receives compensation less than the price which indicated a willingness to sell.

This creates a strong disincentive to make economic energy imports available to the ISO markets; suppliers may sell energy in other markets/regions to avoid the price risk inherent with HASP.

6. Provide your organization’s feedback on short-term scarcity price enhancements:

Shell Energy is supportive of efforts to increase the accuracy of market prices to reflect periods of supply scarcity or oversupply; however, Shell Energy is skeptical that meaningful improvements to scarcity price formation in energy and ancillary service markets can be accomplished before summer 2021.

The reliability failures of August 2020 demonstrated supply scarcity in ancillary service markets did not correspond with RTD prices at or near the soft price cap during periods when CAISO had an active EEA3 and was shedding native load.  Shell Energy looks forward to participating in the scarcity pricing initiative scheduled for later in 2021 to address these issues.  

7. Provide your organization’s feedback on EIM coordination during emergency conditions and review of the current resource sufficiency evaluation design:

Shell Energy supports a revised resource sufficiency evaluation to better coordinate EIM transfers in an increasingly supply-constrained Western Interconnection.  Allowing continued EIM transfers set to the last feasible hour results in continued transfers even if a BAA is wholly resource insufficient.  This allows a resource insufficient BAA to “lean” on other BAAs due to a past hour’s RS test output.  This is inappropriate.

Upon failing an RS test, import transfers should revert to 0 MW or be decreased 1:1 by the amount a BAA failed the RS test evaluation.

Failure to address these challenges will result in EIM BAAs locking available EIM transfers during stressed conditions and “go it alone” to ensure their own BAA remains reliable; this would be a disservice, as an objective of the EIM is to improve coordination between BAAs in the WECC

8. Please provide suggestions for additional topics to be considered in this stakeholder process that can be implemented by June 1, 2021:

No comment.

9. Additional comments:

No comment.

1. Provide a summary of your organization's comments on the proposed initiative scope and schedule:

The Six Cities agree that this initiative should focus on identification of market enhancements that can be implemented before or during the summer of 2021 to support increased reliability during the coming summer.  To that end, the Six Cities also agree generally with the CAISO’s proposed schedule for the initiative.

In response to Item No. 8 below, the Six Cities propose an additional topic – potential modifications to Maximum Import Capability (“MIC”) provisions to expand access to import Resource Adequacy (“RA”) resources – that the Cities believe is consistent with the objectives and timeline for this initiative.  In addition, the Six Cities note in their comments responding to Item No. 8 their continuing support for measures the CAISO considers necessary to mitigate opportunities for the inappropriate exercise of market power within the CAISO markets.

With respect to the durability of market enhancements adopted through this initiative, the Six Cities support suggestions by other stakeholders made during the January 6, 2021 stakeholder meeting that modifications to market rules, policies, or practices adopted through this initiative be implemented initially on an expressly interim basis.  Interim application of market modifications arising out of this initiative will provide the CAISO and stakeholders an express opportunity both to evaluate the effectiveness of such modifications in supporting reliability and to identify unanticipated or undesirable consequences that may outweigh or undercut the benefits expected to result from the modifications. 

2. Provide your organization’s feedback on export and load scheduling priorities:

The Six Cities support the CAISO’s consideration of this topic and whether to implement scheduling priorities that are comparable to the rest of the Western Electricity Coordinating Council (“WECC”) region.  Specifically with respect to scheduling priorities, the Six Cities preliminarily concur that it is appropriate to distinguish between exports that are supported by contracted supply versus those that are not.  The Six Cities anticipate commenting more fully on the issues that are within the scope of this topic in their comments following the January 12^th workshop. 

3. Provide your organization’s feedback on reliability demand response resource dispatch and real-time price impacts:

The Six Cities take no position on the issues within this topic at this time. 

4. Provide your organization’s feedback on the requirements for storage resources during tight system conditions:

The Six Cities concur with the CAISO’s proposal to examine ways to effectively operationalize the emerging storage resource fleet, including mixed fuel resources with storage components, for the summer of 2021.  The Six Cities anticipate commenting more fully on this topic following issuance of the CAISO’s Straw Proposal. 

5. Provide your organization’s feedback on cost recovery provisions for hourly block imports during tight system conditions:

The Six Cities support, at least during periods of tight system conditions and on an interim basis, implementation of provisions to allow Bid Cost Recovery (“BCR”) for bids accepted during the Hour Ahead Scheduling Process (“HASP”).  Some of the Six Cities have experienced directly circumstances in which hourly block bids have cleared at or above the bid price in HASP but have been settled at much lower Fifteen Minute Market (“FFM”) prices.  The lack of certainty with respect to HASP prices creates a significant disincentive for imports that cannot be scheduled on a fifteen minute basis, thereby reducing access to energy imports.  It makes sense to provide for BCR for accepted HASP schedules to encourage greater participation of imports in HASP, at least during periods when system conditions are tight.  Implementing such provisions on an expressly interim basis would inform and encourage evaluation of the benefits versus costs of providing BCR for HASP schedules and provide a basis either for discontinuing BCR for HASP schedules (if, for example, resulting BCR costs appear to outweigh any benefits of increased availability of import energy) or, alternatively, for expanding BCR for HASP schedules to include all system conditions.

6. Provide your organization’s feedback on short-term scarcity price enhancements:

Although the Six Cities do not necessarily oppose consideration of short-term scarcity price enhancements, it is not possible to provide meaningful comments on this concept in the absence of a more detailed proposal. 

7. Provide your organization’s feedback on EIM coordination during emergency conditions and review of the current resource sufficiency evaluation design:

The Six Cities encourage efforts to ensure that adequate emergency coordination among Energy Imbalance Market (“EIM”) participants is taking place, and if there are needed enhancements to existing practices, the Six Cities support consideration of such enhancements within this topic.  With respect to the current resource sufficiency evaluation and related measures, the Six Cities anticipate that they will more fully address the merits of possible proposals within this topic in their comments following the CAISO’s January 13th workshop. 

8. Please provide suggestions for additional topics to be considered in this stakeholder process that can be implemented by June 1, 2021:

The Six Cities urge the CAISO to add to the topics for this initiative exploration of ways to modify MIC provisions so as to mitigate the significant commercial barrier to procuring and selling system RA capacity from resources external to the CAISO imposed by the current MIC framework.  California load-serving entities (“LSEs”) need all available tools they can employ to compete for tightening supply, and MIC requirements as currently implemented create artificial barriers.  During August and September of 2020, some of the Six Cities could have secured additional import capacity resources but were unable to match MIC to the desired capacity purchases.  Recognizing that the CAISO’s import capability is not unlimited, import RA contracting has fallen short of the MIC threshold by a wide margin.  This means that large amounts of MIC are being allocated but not used, and the unused MIC is not finding its way into the hands of LSEs that want to use the MIC to support additional RA imports.  This initiative should include finding ways to fully utilize available MIC that can be implemented by this summer.  Again, interim implementation of revisions to the MC framework would facilitate evaluation of the benefits versus costs of such revisions and potentially facilitate identification of additional revisions to the MIC construct that would be desirable on a long-term basis.

During the January 6^th stakeholder meeting to discuss the scope of this initiative, the CAISO commented that its preliminary assessments so far have not identified instances where market power was exercised during the summer of 2020, but that its evaluation of this issue remains ongoing.    To the extent that the CAISO determines measures to mitigate opportunities for the inappropriate exercise of market power within the CAISO markets are needed, the Six Cities continue to support the consideration and adoption of such measures. 

9. Additional comments:

The Six Cities have no additional comments at this time.

1. Provide a summary of your organization's comments on the proposed initiative scope and schedule:

Please see the attachment.

2. Provide your organization’s feedback on export and load scheduling priorities:

Please see the attachment.

3. Provide your organization’s feedback on reliability demand response resource dispatch and real-time price impacts:

Please see the attachment.

4. Provide your organization’s feedback on the requirements for storage resources during tight system conditions:

Please see the attachment.

5. Provide your organization’s feedback on cost recovery provisions for hourly block imports during tight system conditions:

Please see the attachment.

6. Provide your organization’s feedback on short-term scarcity price enhancements:

Please see the attachment.

7. Provide your organization’s feedback on EIM coordination during emergency conditions and review of the current resource sufficiency evaluation design:

Please see the attachment.

8. Please provide suggestions for additional topics to be considered in this stakeholder process that can be implemented by June 1, 2021:

Please see the attachment.

9. Additional comments:

Please see the attachment.

1. Provide a summary of your organization's comments on the proposed initiative scope and schedule:

The scope of this initiative should include an explanation or consideration of how proposals in this initiative will interact with or be impacted by proposals in other processes focused on summer reliability, such as the California Public Utilities Commission’s (CPUC) emergency reliability proceeding. The Final Root Cause Analysis makes clear that the August 14 and 15 outages were the result of decisions across various institutions, including CAISO, CPUC, and the California Energy Commission (CEC). Despite the joint responsibility for the outages, CAISO and the state regulatory agencies appear to be developing solutions independently in separate stakeholder proceedings. It would be helpful to discuss the interplay of these various policies with stakeholders in this initiative.

CAISO is an active party to the CPUC’s proceeding on summer reliability and has suggested significant changes to energy planning and procurement processes, including an increase in the planning reserve margin from 15% to 17.5%. It would be helpful to discuss how potential changes at the CPUC or CEC may interact with changes being proposed in this stakeholder initiative. Cumulatively, will these proposed changes be enough to avoid reliability problems this summer? To answer that question, future stakeholder calls and staff proposals should include some consideration of changes underway at CPUC and CEC.

2. Provide your organization’s feedback on export and load scheduling priorities:

3. Provide your organization’s feedback on reliability demand response resource dispatch and real-time price impacts:

This initiative should explain how potential changes in price signals will work with possible reliability demand response resource changes in the CPUC’s proceeding, and how changes in both arenas will ultimately affect the availability of reliability demand response resources during emergency situations. For example, will proposed changes to price signals in this initiative affect changes to encourage customer enrollment that are currently under consideration in the CPUC proceeding? Will they complement each other or is there a possibility that changes in one venue will undermine changes in the other?

4. Provide your organization’s feedback on the requirements for storage resources during tight system conditions:

This initiative should explain how changes to storage requirements may impact availability of energy storage resources. As mentioned in the stakeholder call, this topic has a broad scope. It will interact with efforts to increase storage resource availability at the CPUC. One example of the impact that CAISO energy storage decisions can have on activities in other venues is the discussion of minimum charge requirement in the resource adequacy stakeholder initiative: stakeholders expressed concern that the requirement would make energy storage projects less economically feasible. Similarly, proposals in this initiative may impact energy storage resources in ways that influence procurement directed by the CPUC. It would be helpful for CAISO staff to walk through the potential impacts of their proposals here on efforts in other venues.  

In the CPUC’s summer reliability proceeding, load serving entities have been directed to procure incremental capacity from existing power plants, capacity from resources at risk of retirement, or incremental energy storage capacity (CPUC Rulemaking 20-11-003, Proposed Decision Directing Pacific Gas & Electric Company, Southern California Edison Company, and San Diego Gas & Electric Company to Seek Contracts for Additional Power Capacity for Summer 2021 Reliability, pp. 14-15). Given California’s goals and mandates to mitigate climate change and reduce greenhouse gas emissions, energy storage resources should be prioritized during procurement. How will changes adopted in this initiative impact the economics of energy storage projects that LSEs may procure under the CPUC’s directive? How will that affect efforts to make sure storage is available to meet local and system needs?

5. Provide your organization’s feedback on cost recovery provisions for hourly block imports during tight system conditions:

6. Provide your organization’s feedback on short-term scarcity price enhancements:

7. Provide your organization’s feedback on EIM coordination during emergency conditions and review of the current resource sufficiency evaluation design:

8. Please provide suggestions for additional topics to be considered in this stakeholder process that can be implemented by June 1, 2021:

As discussed above, this stakeholder process should include explanations from CAISO staff about how decisions made in this initiative will work with policies adopted in other arenas to address reliability issues.

9. Additional comments:

1. Provide a summary of your organization's comments on the proposed initiative scope and schedule:

Vistra appreciates the CAISO launching the Summer 2021 Readiness stakeholder effort to initiate a public forum to vet and explore emergency solutions to ensure CAISO operations are prepared to manage system through Summer 2021. We respectfully submit these comments on the CAISO’s proposed scope and timeline. Vistra requests the CAISO pursue any measures on a temporary basis with a sunset date no later than end of year 2021. Further, we ask the CAISO to restrict the scope to elements necessary to support reliable grid operations only through Summer 2021.

In its 2020 Summer Loads and Resources Assessment[1], the CAISO identified, “results show that the CAISO has a low probability of experiencing operating conditions that would lead to shedding firm load in summer 2020…if summer conditions are less favorable, resulting in lower levels of imports as assumed…the probability of shedding firm load will increase”. Unfortunately, conditions arose in August due to 1-in-34 weather event across the West that in part brought this risk to life. While, the CAISO identified specific short-comings in its root cause analysis that may have contributed to day-ahead operations making it more difficult for grid operations to manage the system in real-time, there are still many real-time operational tools available to address these concerns in real-time. In the case of the August outages, it appears based on the reports that there was not sufficient resources interconnection wide to simultaneously meet the cumulative WECC need. It is unrealistic that even if the day-ahead market had positioned the fleet with perfect foresight that the real-time load shed event could have been avoided. Consequently, we would like to encourage the CAISO to focus on real-time market rules and operations necessary to provide grid operations the tools it needs to manage in real-time.

Vistra finds the approach adopted by the CAISO in a recent emergency stakeholder process, Aliso Canyon Gas-Electric Coordination, that initially addressed Summer 2016 reliability concerns in Southern California is an appropriate template for this project. In this effort, the CAISO focused on market and operational tools necessary to mitigate the specific risks identified in the Aliso Canyon Risk Assessment Technical Report (April 2016). The temporary measures proposed focused on mitigating the identified risks to better support managing the system. CAISO also agreed to sunset the Tariff provisions, in recognition they were temporary tools that may be unnecessary if the reliability concern is resolved.

In this effort, Vistra asks the CAISO to similarly focus on the market and operational tools necessary to support reliable real-time operations. We support the CAISO efforts to ensure it can effectively manage its system during real-time operations under these tight supply conditions. By focusing on elements needed, this will enable CAISO and stakeholders to focus the expedited process discussions on elements necessary for Summer 2021 grid operations.

Further, Vistra asks the CAISO to file any proposed Tariff changes or Business Practice Manual changes on a temporary basis consistent with the approach used in Aliso Canyon initial phases.  We urge CAISO to clarify early in this process any measures pursued will be temporary to sunset after Summer 2021 (e.g. November 2021, End of Year 2021). The CAISO could then initiate another stakeholder initiative prior to the sunset date to identify which measures should be retired, extended temporarily, or made permanent.

A key driver to today’s emergency condition is the need for reforms in the forward planning and procurement space, which once effective may resolve the need for any of the measures within this scope. Once improvements in the forward procurement space have occurred including successfully increasing levels of demand response or supply resources, the CAISO may no longer identify a critical reliability risk for future summers – negating the need for some measures. Further, with experience with these temporary emergency measures during Summer 2021, stakeholders and the CAISO will be able to evaluate if the measures adopted on a temporary basis are still appropriate considering whether the emergency conditions persist as well as whether they are appropriate on a permanent basis regardless of whether emergency conditions persist.

Vistra appreciates the opportunity to submit these comments and CAISO’s consideration.

[1] 2020 Summer Loads and Resources Assessment, California ISO, May 15, 2020, Page https://www.caiso.com/Documents/2020SummerLoadsandResourcesAssessment.pdf

2. Provide your organization’s feedback on export and load scheduling priorities:

Vistra reserves our comments until CAISO’s straw proposal is released.

3. Provide your organization’s feedback on reliability demand response resource dispatch and real-time price impacts:

 Vistra reserves our comments until CAISO’s straw proposal is released.

4. Provide your organization’s feedback on the requirements for storage resources during tight system conditions:

 Vistra reserves our comments until CAISO’s straw proposal is released.

5. Provide your organization’s feedback on cost recovery provisions for hourly block imports during tight system conditions:

 Vistra reserves our comments until CAISO’s straw proposal is released.

6. Provide your organization’s feedback on short-term scarcity price enhancements:

 Vistra reserves our comments until CAISO’s straw proposal is released.

7. Provide your organization’s feedback on EIM coordination during emergency conditions and review of the current resource sufficiency evaluation design:

 Vistra reserves our comments until CAISO’s straw proposal is released.

8. Please provide suggestions for additional topics to be considered in this stakeholder process that can be implemented by June 1, 2021:

N/A

9. Additional comments: