Provide detailed comments including examples on Issue 1: The Delegation of Authority for Market Rules to the Governing Body, the Decisional Classification Process, and Durability:
Scope of Joint Authority: PIOs continue to support the joint authority model, express a slight preference for Option 2 in terms of defining the scope of joint authority, encourage both boards to meet jointly whenever possible, and support the GRC’s future consideration to potentially expand the scope of joint authority to include aspects of the day-ahead market (at a time when EDAM’s market design is near final).
When the EIM Transitional Committee developed its EIM governance proposal, a key issue it faced was how best to give “non-California parties necessary comfort about the market’s ability to act in the interest of the regional EIM, and not just the interest of one state.” Ultimately, through delegated authority, the Transitional Committee was able to accomplish this, by providing the EIM Governing Body “primary” authority over certain market rules and “advisory” authority over other market rules. However, the Transitional Committee realized that the delegated authority model was not a permanent “fix,” and rather, would need to be readdressed and potentially adapted in the future to reflect changing market conditions.
The current stakeholder process, which was triggered by the EIM Governing Body’s Charter, reflects this reality: “No later than September 2020, the EIM Governing Body will initiate a review of EIM governance in light of accumulated experience and changed circumstances.” The circumstances surrounding the EIM have indeed changed since it began market operations in November 2014. According to the latest EIM Benefits Report, gross benefits stemming from EIM participation total $1.18 billion and the EIM footprint now includes portions of Arizona, California, Idaho, Nevada, Oregon, Utah, Washington, Wyoming, and extends to the border with Canada. By 2022, the EIM will include approximately 80% of the load in the Western Interconnection.
Recognizing the rapid growth of the EIM and the increasing interdependence of CAISO’s real-time market and the EIM, at the outset of the present governance-focused stakeholder process, the CAISO proposed to amend the rules of decisional classification so that the primary authority of the EIM Governing Body would be expanded incrementally. With this incremental expansion, the EIM Governing Body would have primary authority over market rules that apply uniquely or differently to EIM balancing authorities, as well as authority over proposed changes to generally applicable rules of the real-time market if the primary driver is the EIM. That change was approved by the CAISO Board of Governors at their March 2019 meeting.
While this incremental expansion of the EIM Governing Body’s authority was an important first step, we believe it to still be inadequate for a number of reasons. First, as previously noted, the EIM has experienced rapid growth in recent years. Second, the EIM Entities and CAISO (along with stakeholders) are actively engaged in market design discussions that, once completed, would add day-ahead market services to the EIM (via the EDAM stakeholder initiative), significantly increasing the amount of energy transacted in the market. As a result, PIOs continue to strongly support the additional expansion of authority for the EIM Governing Body and believe the joint authority model is the correct approach. As stated in our previous comments, the joint authority model not only simplifies board-level decision making, but also serves to expand the oversight role of the EIM Governing Body, more accurately reflecting the reality of today’s markets where market services are becoming increasingly interdependent. Indeed, as noted by the GRC, the close integration between the EIM and the broader real-time market warrants having both boards actively involved in decision making on proposals to change real-time market rules.
Under joint authority, any proposal to amend the tariff in an area covered by joint authority would go to both the CAISO Board of Governors and the EIM Governing Body for discussion and approval before CAISO staff could move forward with a Section 205 filing at FERC. Approval would require a majority vote of both bodies. In concurrence with the GRC’s recommendations, PIOs continue to support both boards meeting whenever possible in a single joint session to consider matters that are within their joint authority. We believe that enhanced communications and cooperation enabled by the joint authority model will resolve most issues.
As a starting point, the GRC proposes that all market rules that apply either to all real-time market participants (including EIM) or that apply only to EIM BAAs should be within the scope of joint authority. This leaves open for further consideration the “CAISO-only” real-time market rules that do not apply to the other BAAs within the EIM. In the Revised Straw Proposal, the GRC has asked stakeholders to indicate support for one of two options for defining joint authority and addressing these “CAISO-only” real-time market rules.
- Option 1: Joint authority would extend over all proposed changes to the market design or market rules that apply to the EIM or the real-time market, except for any such rules that apply either: (1) only to the CAISO-controlled grid or (2) only to the CAISO BAA.
- Option 2: Joint authority would extend over all proposed changes to the market design or market rules that apply to the EIM or the real-time market, except for any such rules that apply either: (1) only to the CAISO-controlled grid or (2) only to the CAISO BAA that are related to reliable operations (e.g., rules related to Resource Adequacy, reliability must-run contracts, the capacity procurement mechanism, or ancillary services).
Both Option 1 and Option 2 would extend joint authority to the rules that apply to all real-time market participants and to the rules that apply only to the EIM BAs. Both would also exclude certain CAISO-specific rules (including transmission planning and generator interconnection), but the exclusion is somewhat broader for Option 1 than Option 2. In contrast to Option 1, Option 2 would give the EIM Governing Body a shared approval role over market-oriented initiatives that would change real-time market rules that apply only to the CAISO BAA but that are unrelated to reliable operations because these types of initiatives could potentially impact the EIM. Stated another way, Option 2 would apply a broader definition of joint authority to future tariff changes than Option 1.
As a threshold issue, PIOs seek clarification from the GRC regarding how the following terms will be defined: “rules applying only to the CAISO-controlled grid, “rules applying only to the CAISO BAA,” and “rules applying only to the CAISO BAA that are related to reliable operations.” Although the GRC has provided examples of what would qualify as “being related to reliable operations” (i.e., rules related to Resource Adequacy, reliability must-run contracts, the capacity procurement mechanism, and ancillary services), a precise definition for this term was not included in the Revised Straw Proposal. Without more information, PIOs are concerned that the exceptions in both Option 1 and Option 2 risk swallowing the rules (by potentially placing more tariff changes within the exceptions than under the rule itself). In its next version of the Straw Proposal, PIOs request that the GRC provide definitions for these terms and additionally, provide concrete examples of how Option 1 and Option 2 would each work in practice, using recently enacted tariff changes as examples.
While still unclear regarding precisely how Option1 and Option 2 would work in practice, PIOs express a slight preference for Option 2 as it offers a more expansive definition of joint authority. As previously noted, PIOs strongly believe that the EIM Governing Body’s authority should be expanded as much as possible to reflect not only changing market conditions, but also, to offer assurance to regional stakeholders about the market’s independence. Despite our preference for Option 2, PIOs do have concerns with its implementation. In contrast to Option 1’s “bright line” test, Option 2 necessarily requires a subjective determination to clarify what market rules apply “only to the CAISO BAA that are related to reliable operations.” As previously noted by the GRC, to be workable, any definition for joint authority “should be sufficiently definite and precise to avoid frequent debates about how it should apply.” Even the GRC acknowledges that implementing Option 2 could be problematic (and require frequent debates): “We do have some concern […] that delineating CAISO reliability functions from CAISO market operations may be challenging.”
Finally, in addition to our preference for Option 2’s proposed definition for joint authority, PIOs support the future consideration by the GRC of further expansion of the scope of joint authority to include aspects of the day-ahead market, at a time when EDAM’s market design is near final.
Process for Resolving Potential Deadlocks: PIOs appreciate the clarifications and additional guardrails provided by the GRC regarding dual Section 205 filings and support the revised process for resolving deadlocks.
Previously, PIOs generally supported the iterative stakeholder process for resolving deadlocks under the joint authority model but raised concerns regarding the uncertainty created by “dual” or “jump ball” filings. As a preliminary matter, PIOs continue to believe that a dual Section 205 filing is far from ideal and truly represents a breakdown in CAISO’s otherwise consensus-building stakeholder process. However, PIOs are also sensitive to the fact that there must be a process in place for resolving potential deadlocks under the joint authority model and at this time, cannot identify a preferred alternative. As a result, we continue to believe that dual filings should truly be an option of last resort and used only in the following circumstances:
- When multiple rounds of the stakeholder process fail to produce an outcome that both boards can support;
- Where there is broad consensus that some change in rules is needed; and
- Where both boards have agreed to move forward with a dual filing.
In the Revised Straw Proposal, the GRC also clarified that in those very rare circumstances where dual filings might be necessary, appropriate guardrails will be included to address stakeholder concerns regarding how FERC might handle these types of filings. Specifically, in preparing a dual Section 205 filing under joint authority, CAISO’s attorneys would include language suggested by PIOs in our prior comments – i.e., “that each [Section 205] alternative stands alone and that FERC should therefore approve one alternative or the other in their entirety but should not approve a hybrid of the two proposals. This language is important, as it serves to clarify FERC’s limited role in approving (or rejecting) these types of filings by recognizing existing legal precedent on this issue.
Our concerns with dual filings notwithstanding, PIOs appreciate the clarifications and guardrails that the GRC included in the Revised Straw Proposal and with these modifications, are comfortable supporting the proposed process for resolving deadlocks under the joint authority model.
Short-Term Emergency Filings: PIOs support the GRC’s recommendation to remove the EIM’s existing exigent circumstances provision.
PIOs support the GRC’s decision to recommend removing the exigent circumstances provision. Today, for matters under the Board and Governing Body’s shared authority, this provision in the Governing Body’s Charter allows CAISO staff to secure the approval of only one of the two bodies when a temporary amendment to the tariff is urgently needed either to prevent market manipulation or to address an imminent threat to grid reliability.
As noted by the GRC, to date, the CAISO has never invoked the current provision. Further, a similar provision does not exist for the CAISO Board of Governors. Meetings held via teleconference or webinar have now become routine and the CAISO’s open meeting rules currently contemplate potential needs for emergency meetings and not only permit such meetings to occur, but also relax traditional notice requirements (which would allow for expeditious approval of a FERC filing). In other words, the open meeting rules appear to adequately address those unlikely scenarios currently contemplated by the exigent circumstances provision.
Decisional Classification Process: PIOs support the GRC’s recommendation to retain the current decisional classification process under the joint authority model.
Today, the decisional classification process for EIM is used to determine policy initiatives that are subject to the Governing Body’s approval and, if necessary, to resolve any disputes regarding those decisional classification determinations (i.e., primary, advisory or hybrid). Where disputes arise in the decisional classification process, the CAISO Board of Governors’ Chair is permitted to break a tie to determine the proper classification. In its Draft Straw Proposal, the GRC proposed four options for stakeholders to consider when addressing decisional classification disputes under the joint authority model:
- Allow the decisional classification proposed by CAISO staff to stand if there is an even division between both boards.
- Continue allowing tiebreaker authority to rest with the Board of Governors’ Chair.
- Allow tiebreaker authority to alternate between the chairs of both boards over time.
- Randomly select an odd-numbered subset of the members of both boards, who would then decide the proper classification by a majority vote.
In our prior comments, PIOs expressed concern with having the initial decisional classification proposed by CAISO stand if there is an even division between both boards. Rather, we felt that some type of board-level determination must be made. Specifically, we supported the tiebreaker authority alternating between the chairs of both boards over time as we felt it was most aligned with the joint authority model and further, avoided the administrative burden of randomly selecting an odd-numbered subset of both boards to determine the appropriate classification by majority vote.
In its Revised Straw Proposal, the GRC recommends keeping the process as currently designed (i.e., continuing to allow tiebreaker authority to rest with the Board of Governors’ Chair). As noted by the GRC, in the five years this process has been in place, there has never been a classification decision that has made it to the step where the two boards must be convened to resolve a decisional classification dispute. PIOs appreciate the GRC’s reasoning for maintaining a process that has worked well, even as other changes are made to EIM governance, and support the GRC’s proposed approach to addressing disputes within the decisional classification process.
Timing and Process for Implementing Proposed Changes to the Scope and Type of Authority: PIOs agree that the Board and Governing Body should consider implementing the proposed changes under the joint authority model before EDAM is approved and implemented.
PIOs continue to agree with the GRC that the Board and Governing Body should consider implementing proposed changes to the delegation of authority contemplated for the current market structure (i.e., the “EIM-only” scenario) before EDAM is approved and implemented. The proposed changes will enhance the EIM as it exists today and should be adopted irrespective of EDAM. Also, making these changes now (as opposed to waiting on EDAM) will permit CAISO and stakeholders to gain experience with this new governance model and identify any potential issues before a future EDAM market is implemented.
Additionally, PIOs continue to recommend that the Board formalize the process that CAISO management has proposed for approving the final market design for EDAM, which would involve bringing the proposed market design to both the Board and the Governing Body for their joint review and approval.
Durability of the Delegation of Authority: PIOs generally support the GRC’s proposed process for enhancing the durability of the delegation of authority, but have concerns with the new provision that would enable the CAISO Board to bypass this process entirely (should a large number of EIM Entities exit the market) and rescind its delegation of authority to the EIM Governing Body.
Enhancing the durability of the delegation of authority essentially means making it more difficult to change provisions in the CAISO’s governing documents that establish both the scope and type of delegation the Board has made to the Governing Body.
PIOs continue to support the GRC’s proposal to enhance the durability of the delegation of authority to the Governing Body – specifically:
- A unanimous vote of the Board will be required for any changes to governance that would change the scope or type of the Governing Body’s delegated authority.
- No authority-specific changes could be adopted without first seeking stakeholder input and specifically considering any advisory input from the Governing Body, RIF and the BOSR.
- A mandatory notice period will be required for implementing any such change. The notice period will be equal in length to any notice period that EIM Entities have for withdrawing from the market (currently set at 180 days).
PIOs also support the GRC’s recommendation in the Revised Straw Proposal to add an additional period for the Board and the Governing Body to attempt to work out their differences:
- If the Board is considering a change to authority and the Governing Body provides advisory input opposing that change, a 45-day period would begin during which the two bodies would further discuss the matter (assuming the Board does not choose to reject the proposal based on the Governing Body’s advisory input).
- During this period, the bodies would hold at least one public meeting to discuss the proposal.
- If this effort proves unsuccessful, the Board could then vote on the proposal and if it is supported unanimously, the 180-day notice period for implementing the change would begin to run.
However, PIOs do have questions and concerns regarding the proposed revision, included for the first time in the Revised Straw Proposal, that would enable the Board to bypass this process entirely and, by unanimous vote, rescind its delegation of authority to the Governing Body where a large number of EIM Entities give notice of their intent to withdraw from the market. The GRC defines “a large number of EIM Entities” as EIM Entities representing 85% of the highest annual net energy for load (“NEL”) in the participating BAAs outside of the CAISO BAA.
PIOs seek clarification from the GRC regarding the decision to use “85% of the highest annual NEL in the participating BAAs outside of the CAISO BAA” as the trigger for this provision. Is the presumption that the EIM could no longer exist if this amount of NEL exited the market? If that is in fact the case, PIOs can support such a provision. However, if the EIM could continue to successfully operate, even on a smaller scale, PIOs cannot identify a valid reason for the CAISO Board of Governors to be able to so easily rescind the EIM Governing Body’s authority over that market.
 EIM Transitional Committee, Straw Proposal, March 19, 2015, p. 2, available at: StrawProposal-LongTermGovernance_EnergyImbalanceMarket.pdf (caiso.com) (“Transitional Committee Straw Proposal”).
 California ISO, Charter for Energy Imbalance Market Governance, March 27, 2019 (version 1.3), p. 20, available at: CharterforEnergyImbalanceMarketGovernance.pdf (westerneim.com) (“EIM Governing Body Charter”).
 California ISO, Western EIM Benefits Report: Fourth Quarter 2020, Jan. 29, 2021, pp. 3-4, available at: ISO-EIM-Benefits-Report-Q4-2020.pdf (westerneim.com).
 Alice K. Jackson, President, Public Service Company of Colorado, “CIM: Western Regional Developments,” presentation to the Colorado Public Utilities Commission, January 28, 2021, available at: Commissioner Information Meetings | Public Utilities Commission (colorado.gov).
 California ISO, EIM Governance Review: Issue Paper & Straw Proposal, Dec. 14, 2018, pp. 3-4, available at: IssuePaperandStrawProposal-EIMGovernanceReview.pdf (caiso.com).
 California ISO, Board of Governors Meeting Minutes, March 27, 2019, available at: Memo (caiso.com).
 Generally speaking, the real-time market (including the EIM) facilitates around 5-10% of market-related transactions, while the day-ahead market facilitates the vast majority (i.e., 90-95%) of market-related transactions. See Letter from EIM Entities to Carl Linvill, Chair of the EIM Governing Body, and David Olsen, Chair of the California ISO Board of Governors (Sep. 16, 2019), available at: PublicCommentLetter-EIMEntites-EDAM-Sep16-2019.pdf (caiso.com).
 Governance Review Committee, EIM Governance Review: Revised Straw Proposal, Dec. 14, 2020, p. 11, available at: Revised_Straw Proposal_Western_EIM_Governance_Review.pdf (caiso.com) (“GRC Revised Straw Proposal”).
 Stated another way, and as noted by the EIM’s Transitional Committee, regional stakeholders (from utilities to regulators) must have confidence “about the market’s ability to act in the interest of the regional EIM, and not just the interest of one state.” See Transitional Committee Straw Proposal, p. 2.
 GRC Revised Straw Proposal, p. 10.
 Id. at 13.
 See Comments of Public Interest Organizations, Aug. 28, 2020, available at: California ISO - All comments (caiso.com).
 The boards may alternatively decide, by majority vote, that the proposal should be abandoned. See GRC Revised Straw Proposal, p. 16.
 The D.C. Circuit has previously held that under Section 205, where a utility or market operator submits a proposed rate for FERC approval, FERC is in a reactive role, authorizing FERC to either accept or reject the applicant’s submission. In contrast, Section 206 permits FERC to be more proactive in finding an existing rate unjust and unreasonable and to set an appropriate rate. NRG Power Marketing, LLC et al. v. FERC, (D.C. Cir. 2017), www.ferc.gov.
 EIM Governing Body Charter, p. 5.
 California ISO, Open Meeting Policy, Dec. 9, 2019 (version 3.8), p. 6, available at: CaliforniaISOOpenMeetingPolicy.pdf (caiso.com).
 California ISO, Guidance for Handling Policy Initiatives within the Decisional Authority or Advisory Role of the EIM Governing Body, March 27, 2019 (version 1.1), pp. 6-8, available at: GuidanceforHandlingPolicyInitiatives-EIMGoverningBody.pdf (westerneim.com).
 GRC Revised Straw Proposal, p. 20.
 “Bypass” means that the CAISO Board would have the discretion, by unanimous vote, to rescind the delegation of authority without waiting for the 180-day notice period or the 45-day negotiation period to lapse. See GRC Revised Straw Proposal, p. 23.