Comments on Workshop

1. Please provide a summary of your organization’s general comments on the workshop presentations.

ACP-California appreciates the opportunity to provide comments on the Storage Bid Cost Recovery and Default Energy Bids Enhancements. While we appreciate the CAISO providing a few extra days for stakeholders to comment on the July 8^th workshop, ACP-California is concerned that the pace of the initiative, in particular, for Track 1 is not conducive to effective stakeholder engagement and input. We recognize there are real concerns to address, and they require expeditious resolution. But it is also critical to acknowledge that the fast pace of the initiative and lack of concrete examples provided to stakeholders could lead to implementation of a rushed solution which may have other unintended, negative consequences. As CESA commented, these types of fast-tracked, phased initiatives “have proven to create more new issues by addressing narrow storage issues with new constraints versus addressing holistically the significant modeling enhancements and market design changes needed.”  ACP-California echoes CESA’s request for an issue paper and straw proposal in this initiative, which should include numerical examples and a review of CAISO proposed solutions.

2. Please provide your organization’s comments regarding the scope of Track 1 – Addressing Unwarranted Storage BCR.

As outlined above, ACP-California urges CAISO to take a more comprehensive approach to evaluating storage BCR and DEB issues which may necessitate adjusting the scope of Track 1.

3. Please provide your organization’s comments regarding the concept of reclassifying energy associated with binding state of charge constraints as non-optimal due to physical limitations, thus excluding it from BCR settlement. You may upload examples or data using the “Attachments” field below.

Rather than fast tracking the elimination of BCR for storage resources when the State of Charge constraint is binding, ACP-California recommends a more comprehensive review of the issue at hand and the potential solution set. It is important to thoroughly consider the implications of this change and to evaluate other potential solutions, which requires stakeholders to have additional information regarding the issues at hand. We strongly encourage CAISO to take the time to provide additional information on the concerns observed and to consider a full suite of solutions in conjunction with stakeholders, including ways to isolate the proposed solution to the unwarranted BCR issue to the instances that are driven by market participant behavior.

4. Please provide your organization’s comments regarding the topics scoped as part of Track 2 – Co-located BCR and Storage DEB Enhancements, as well as their prioritization.

As noted in prior questions, ACP-California recommends a more comprehensive review of storage BCR and DEB issues and suggests that the Tracks be modified based on the solution set ultimately adopted in Track 1.

5. Please provide any additional comments on the workshop presentations.

 No additional comments at this time.

1. Please provide a summary of your organization’s general comments on the workshop presentations.

AES appreciates the opportunity to comment on the Storage Bid Cost Recovery (BCR) and Default Energy Bids (DEB) Enhancements. We are concerned that the brief notice for the meeting, the late posting of materials, and the limited window for written feedback do not align with CAISO's goals for stakeholder engagement. The proposed Track 1 timeline needs to provide adequate time to incorporate stakeholder feedback effectively, with only a few business days between receiving comments and releasing the next revision. AES is aligned with CAISO and DMM's concern that the increase in BCR payments should be analyzed promptly. BCR is a complex market design element, and as demonstrated by CAISO's emergency filing on the state of charge constraint for ancillary services, implementing any proposal without fully considering the interaction between market rules and restrictions with BCR can lead to unintended outcomes. As seen in previous initiative phases, addressing narrow storage issues with new constraints has often introduced more problems than solving them. CAISO should focus on broader modeling enhancements and market design changes necessary to leverage energy storage as a primary balancing resource to integrate variable energy resources and meet state policy goals. Therefore, CAISO must prioritize the Energy Storage Enhancements initiative on the approved roadmap.

AES recommends that CAISO release an issue paper with numerical examples illustrating how day-ahead and real-time BCR are calculated. The paper should highlight specific concerns from CAISO and DMM about how market participants can create unwarranted storage BCR and present CAISO's proposed solutions to address these issues. By identifying the issues CAISO aims to address, market participants can offer meaningful feedback to resolve critical problems. If CAISO and stakeholders focus on the incorrect issue, there's a risk that the proposed solutions could generate new challenges.

2. Please provide your organization’s comments regarding the scope of Track 1 – Addressing Unwarranted Storage BCR.

 Track 1 should identify and mitigate market participant behaviors that lead to unwarranted storage BCR.

3. Please provide your organization’s comments regarding the concept of reclassifying energy associated with binding state of charge constraints as non-optimal due to physical limitations, thus excluding it from BCR settlement. You may upload examples or data using the “Attachments” field below.

It's important to note that AES holds a different perspective on CAISO's approach to this issue. We believe that providing context is crucial before we present our recommendation.

CAISO introduced the NGR model around 2014, and one of the salient features of the CAISO's NGR model was its ability to manage the state of charge for storage assets instead of relying on market participants to explicitly manage the state of charge. The NGR model enabled the CAISO's markets to optimize the SOC better than individual owners; as long as the CAISO's system could model the physical attributes of storage, it could optimize the SOC better because its systems has access to all the information needed to manage grid needs. So far, the model has done a commendable job, as witnessed by most resources choosing to use the NGR model instead of opting for the hybrid model, in which resource owners are tasked with managing their own SOC.

The NGR model relies on managing the SOC using various constraints, and SOC is an integral part of various market constraints. The implementation of the NGR model is like a giant Jenga, and if you pull the wrong brick from the puzzle, the outcome could be unexpected. So, we don't believe simply identifying those instances in which SOC constraint is binding and classifying those instances as not eligible for SOC will solve the issue. The CAISO's question in these comments implies that when SOC constraint is binding during the multi-interval optimization real-time scenarios, and storage is dispatched uneconomically, storage would not receive BCR. On the other hand, these are the very scenarios in which we expect storage to receive BCR. For these reasons, we want CAISO to explain what issue we are trying to solve and let stakeholders provide feedback on possible solutions rather than starting the discussion that storage should not receive BCR when the state of charge constraint is binding.

We recommend that CAISO adopt a comprehensive approach to determining when storage should qualify for BCR. By revisiting discussions around BCR for thermal assets and applying those principles, CAISO can better identify appropriate scenarios for BCR eligibility. Additionally, AES believes that CAISO operators should have access to all necessary tools for grid management. However, when operators use manual interventions, assets should be compensated for their bid-in costs.

4. Please provide your organization’s comments regarding the topics scoped as part of Track 2 – Co-located BCR and Storage DEB Enhancements, as well as their prioritization.

No comments.

5. Please provide any additional comments on the workshop presentations.

 AES requests that the DMM update the chart on slide 6 of its presentation to display BCR per MW of installed storage capacity. Given the rapid expansion of the storage fleet, an increase in gross BCR data is anticipated due to the growing number of eligible storage resources.

1. Please provide a summary of your organization’s general comments on the workshop presentations.

The CAISO needs to take a step back and better explain the problem they're trying to address.  CAISO should come back with specific numerical examples of the scenarios that it deems result in unwarranted BCR for storage,  It was very difficult to understand the situations that lead to the unwarranted BCR from the stakeholder call.  

Boston Energy does not support the ISO rushing through a stakeholder process without thoroughly explaining to all stakeholders the issue(s) the CAISO is observing.  Boston Energy is not saying we don't support the CAISO in addressing unwarranted BCR payments, but we need to better understand the situation before formulating a position. 

2. Please provide your organization’s comments regarding the scope of Track 1 – Addressing Unwarranted Storage BCR.

As stated above, Boston Energy requests the ISO present specific numerical examples describing the issue(s) the ISO is trying to address.  Without such example, Boston Energy is unable to provide substantive comments other than to say we don't support CAISO rushing sweeping changes to BCR without a through and complete stakeholder process. 

3. Please provide your organization’s comments regarding the concept of reclassifying energy associated with binding state of charge constraints as non-optimal due to physical limitations, thus excluding it from BCR settlement. You may upload examples or data using the “Attachments” field below.

As stated above, Boston Energy requests the ISO present specific numerical examples describing the issue(s) the ISO is trying to address.  Without such example, Boston Energy is unable to provide substantive comments other than to say we don't support CAISO rushing sweeping changes to BCR without a through and complete stakeholder process. 

4. Please provide your organization’s comments regarding the topics scoped as part of Track 2 – Co-located BCR and Storage DEB Enhancements, as well as their prioritization.

As stated above, Boston Energy requests the ISO present specific numerical examples describing the issue(s) the ISO is trying to address.  Without such example, Boston Energy is unable to provide substantive comments other than to say we don't support CAISO rushing sweeping changes to BCR without a through and complete stakeholder process. 

5. Please provide any additional comments on the workshop presentations.

As stated above, Boston Energy requests the ISO present specific numerical examples describing the issue(s) the ISO is trying to address.  Without such example, Boston Energy is unable to provide substantive comments other than to say we don't support CAISO rushing sweeping changes to BCR without a through and complete stakeholder process. 

1. Please provide a summary of your organization’s general comments on the workshop presentations.

The California Community Choice Association (CalCCA) appreciates the opportunity to comment on the California Independent System Operator’s (CAISO) storage bid cost recovery (BCR) and default energy bids (DEB) enhancements workshop. As a general matter, CalCCA agrees with the sentiment of the CAISO and the Department of Market Monitoring (DMM) that the market should not provide incentives for resources to bid or operate in a manner that allows them to capture outsized BCR payments that are not aligned with the intent of BCR. The pace the CAISO intends to conduct this initiative, however, does not allow the time necessary to develop a robust solution to the complex problem of accurately determining when BCR is warranted for storage. As a prerequisite for the CAISO taking action to limit storage resource BCR, the CAISO must quantify the problem of storage operators bidding and operating in bad faith.

Storage resources can currently receive BCR payments related to the buy-back and sell-back of day-ahead schedules when their real-time state-of-charge (SOC) does not support them. Insufficient real-time SOC can occur, for example, to meet SOC targets needed to respond to real-time market dispatches, provide ancillary services, and support grid reliability. These are important and positive behaviors by storage operators that should not be discouraged.

This dynamic may also create potential incentives for some portion of resources to bid or operate in a manner intended to capture outsized BCR payments resulting from buy-backs or sell-backs of day-ahead schedules. A blunt mechanism to address these incentives, like excluding storage from BCR, does not account for the fact that legitimate cost-based bids into the real-time market may dispatch storage in a manner that results in a SOC that cannot support day-ahead schedules.

Unlike operator actions to take advantage of outsized BCR payments, the inability to support day-ahead schedules due to legitimate market actions in the CAISO real-time market dispatch does not run counter to the intent of BCR. In these instances, if the CAISO considers the potential for BCR payments in its dispatch of storage and the storage resources are still found economic, then BCR is likely warranted. If the CAISO ignores potential BCR payments from storage in market dispatch and storage would not have been economic considering potential BCR payments, then the CAISO needs enhancements to its storage market models to prevent these outcomes.

Excluding storage from BCR in most instances is too blunt of a mechanism to be the solution but the pace of this initiative may be too quick to develop something more robust. If the CAISO eliminates BCR for storage in most instances, it must be a temporary solution only. The CAISO must commit to beginning an initiative immediately following Track 1 to develop a more comprehensive solution to storage BCR payments that considers (1) the drivers of BCR payments (e.g., operator action to trigger BCR payments or CAISO market dispatch), and (2) necessary enhancements to the storage market model more broadly.

2. Please provide your organization’s comments regarding the scope of Track 1 – Addressing Unwarranted Storage BCR.

See response in Section 1. Again, the timing for Track 1 is likely untenable to come to an effective resolution that addresses unwarranted storage BCR. The CAISO should view any measures adopted in Track 1 as temporary until the CAISO and stakeholders can develop a more robust solution promptly following the conclusion of Track 1.

3. Please provide your organization’s comments regarding the concept of reclassifying energy associated with binding state of charge constraints as non-optimal due to physical limitations, thus excluding it from BCR settlement. You may upload examples or data using the “Attachments” field below.

See response in Section 1.

4. Please provide your organization’s comments regarding the topics scoped as part of Track 2 – Co-located BCR and Storage DEB Enhancements, as well as their prioritization.

CalCCA has no comments at this time.

5. Please provide any additional comments on the workshop presentations.

CalCCA has no comments at this time.

1. Please provide a summary of your organization’s general comments on the workshop presentations.

Please see the attached Comments from the Department of Market Monitoring.

2. Please provide your organization’s comments regarding the scope of Track 1 – Addressing Unwarranted Storage BCR.

Please see the attached Comments from the Department of Market Monitoring.

3. Please provide your organization’s comments regarding the concept of reclassifying energy associated with binding state of charge constraints as non-optimal due to physical limitations, thus excluding it from BCR settlement. You may upload examples or data using the “Attachments” field below.

Please see the attached Comments from the Department of Market Monitoring.

4. Please provide your organization’s comments regarding the topics scoped as part of Track 2 – Co-located BCR and Storage DEB Enhancements, as well as their prioritization.

Please see the attached Comments from the Department of Market Monitoring.

5. Please provide any additional comments on the workshop presentations.

Please see the attached Comments from the Department of Market Monitoring.

1. Please provide a summary of your organization’s general comments on the workshop presentations.

The Public Advocates Office at the California Public Utilities Commission (Cal Advocates) is the state-appointed independent ratepayer advocate at the California Public Utilities Commission (CPUC).  Our goal is to ensure that California ratepayers have affordable, safe, and reliable utility services while advancing the state’s environmental goals.  Our efforts to protect ratepayers include energy, water, and communications regulation advocacy. 

Cal Advocates supports the proposed scope and schedule for Track 1 of the Storage Bid Cost Recovery (BCR) and Default Energy Bids (DEB) Enhancements initiative (Initiative) presented in the July 8, 2024 workshop.  The California Independent System Operator (CAISO) appropriately prioritizes the Initiative due to the policy changes effectuated under the Price Formation Enhancements initiative (PFE) that eliminated the soft-offer energy bid cap for storage resources in the real-time market.[1]  The CAISO should give the same priority to protecting ratepayers from large and unwarranted BCR payments to storage resources that the CAISO gave the PFE to allow storage resources to bid up to $2,000/MWh in the real-time market.[2]

[1] CAISO, Tariff Amendment to Enhance Cost-Verified Bidding Above the Soft Energy Bid Cap, letter to the Federal Energy Regulatory Commission, May 31, 2024 (Tariff Amendment Letter) at 1.  Available at: https://www.caiso.com/documents/may-31-2024-tariff-amendment-price-formation-enhancments-er24-2168.pdf.

[2] Tariff Amendment Letter at 10.

2. Please provide your organization’s comments regarding the scope of Track 1 – Addressing Unwarranted Storage BCR.

The CAISO proposes an expedited stakeholder initiative to address concerns about unwarranted Bid Cost Recovery (BCR) for storage resources.[1]  The CAISO identified these concerns in prior initiatives and committed to address BCR design for storage resources.[2]  The CAISO Department of Market Monitoring (DMM) and the CAISO Market Surveillance Committee (MSC) identified the same issues in the expedited PFE CAISO policy change initiative in the spring of 2024.[3]  The PFE initiative eliminated the soft-offer bid cap for storage resources.[4]  The CAISO policy change was enabled by Federal Energy Regulatory Commission (FERC) Order No. 831, which authorizes cost-verified bids up to $2,000/MWh.[5]  Stakeholders who supported[6] the policy change argued that there was an urgent need to remove the soft offer cap by summer 2024, and consequently the CAISO conducted a two-month expedited process to eliminate the soft-offer cap.[7]  In comments on the PFE, DMM and the MSC indicated that the elimination of the soft-offer cap could increase the magnitude of inappropriate BCR payments to storage resources.[8]  As such, the same urgency given to the PFE initiative should be dedicated to Track 1 of the extant Initiative.

The DMM stated that there are several situations where batteries may receive inappropriate and inefficient BCR payments.[9]  Additionally, the DMM indicated that eliminating the soft-offer cap could further increase unwarranted BCR payments to storage resources during times that storage can bid up to $2,000/MWh.[10]

The CAISO proposes to implement policy changes resulting from the Initiative no earlier than October 2024.[11]  The soft-offer cap for storage resources will be eliminated on August 1, 2024 pending FERC approval.[12]  The time gap between the elimination of the soft-offer cap in August and the implementation of BCR protections in October potentially exposes ratepayers to unwarranted and potentially high BCR payments during critical summer months.  This unreasonable exposure to high and unwarranted costs underscores the urgency to resolve the issues identified in Track 1.

The proposed Track 1 scope appropriately focuses on BCR payments that occur because of physical limitations of storage resources due to state-of-charge (SOC) and other constraints in the real-time market resulting from the operation of the assets by storage resource owners.  It is appropriate to differentiate these situations from those in which the CAISO market optimization supersedes resource bidding, resulting in appropriate BCR payments to storage resources to recover economic losses over a 24-hour period.

[1] CAISO, Storage Bid Cost Recovery and Default Energy Bid Enhancements, Initial Workshop Presentation, July 8, 2024 (Initial Workshop Presentation) at slide 10.  Available at: https://stakeholdercenter.caiso.com/InitiativeDocuments/Presentation-Storage-Bid-Cost-Recovery-and-Default-Energy-Bids-Enhancements-Jul-8-2024.pdf.

[2] Initial Workshop Presentation at slide 8. 

[3] Initial Workshop Presentation at slide 8.

[4] Tariff Amendment Letter at 1.

[5] Tariff Amendment Letter at 1.

[6] Comments on March 12, 2024 Working group session 15 – Storage/FERC 831, Price Formation Enhancements initiative: Bonneville Power Administration Comments at 1; CESA Comments at 3; PacificCorp Comments at 1; Vistra Corp. Comments at 1; Western Power Trading Forum Comments at 1.  Available at: https://stakeholdercenter.caiso.com/Comments/AllComments/85588b88-39b0-488a-9a74-e29598d8b3dd.

[7] Tariff Amendment Letter at 5.

[8] Initial Workshop Presentation at slide 7.

[9] DMM, Comments on Price Formations Initiatives, Rules for Bidding above the Soft Offer Cap Draft Final Proposal, May 8, 2024 (DMM PFE Comments) at 3.

[10] DMM PFE Comments at 3.

[11] Initial Workshop Presentation at slides 17-18.

[12] Tariff Amendment Letter at 2.

3. Please provide your organization’s comments regarding the concept of reclassifying energy associated with binding state of charge constraints as non-optimal due to physical limitations, thus excluding it from BCR settlement. You may upload examples or data using the “Attachments” field below.

See Cal Advocates’ response to Question 2.  Cal Advocates agrees with DMM’s thorough data and analysis of the drivers of BCR payments to storage resources, in particular DMM’s analysis and assessment that these BCR payments are unwarranted because they are due to the operator imposed physical constraint of insufficient SOC to support DA schedules.[1]  Cal Advocates agrees that the roughly $15 million in real-time BCR payments to storage resources from July 2023 – May 2024 due to insufficient SOC[2] should not be eligible for reimbursement by the CAISO.

[1] DMM, Battery BCR Issues and Recommendations, Storage BCR and DEB Enhancements Initial Workshop, July 8, 2024 (DMM Workshop Presentation) at slide 6.  Available at: https://stakeholdercenter.caiso.com/InitiativeDocuments/Presentation-Battery-Bid-Cost-Recovery-and-Recommendations-DMM-Jul-8-2024.pdf.

[2] DMM Workshop Presentation at slide 6.

4. Please provide your organization’s comments regarding the topics scoped as part of Track 2 – Co-located BCR and Storage DEB Enhancements, as well as their prioritization.

Cal Advocates does not have comments on Track 2 at this time. 

5. Please provide any additional comments on the workshop presentations.

 Cal Advocates does not have any additional comments at this time. 

1. Please provide a summary of your organization’s general comments on the workshop presentations.

The California Energy Storage Alliance (CESA) appreciates the opportunity to provide comments on the Storage Bid Cost Recovery and Default Energy Bids Enhancements.  The short notice for the meeting, posting of material just prior to the conference call, and limited time to provide written comments is inconsistent with CAISO’s stated stakeholder process objectives.  The CAISO’s Track 1 schedule is incapable of incorporating stakeholder comments into updated proposals given two business days between receiving stakeholder comments and posting of the next revision of the proposal.  Bid cost recovery (BCR) is a complex market design feature.  As demonstrated by CAISO’s emergency filing on the ancillary services state of charge constraint, there can be unintended consequences introduced by not considering the interaction between market rules and constraints with BCR.  The Energy Storage and Distributed Energy Resource initiative phases have proven to create more new issues by addressing narrow storage issues with new constraints versus addressing holistically the significant modeling enhancements and market design changes needed to use energy storage as the primary balancing resources to integrate variable energy resources to meet state policy goals. The CAISO must prioritize the Energy Storage Enhancements initiative on the approved roadmap which has not yet been scheduled.

CESA recommends that CAISO publish an issue paper/straw proposal and a final proposal versus the current planned approach for a paper roughly every week.  The issue paper/straw proposal should include numerical examples of how day-ahead and real-time bid cost recovery is calculated, a numerical example highlighting the CAISO and DMM concern of how a market participant can create unwarranted storage BCR, and CAISO’s proposed solution to address unwarranted BCR. From the discussions at the workshop, it is clear there is confusion on what state of charge (SOC) constraints exist that are driven by market SOC constraints versus resource-specific constraints that are registered or bid-in parameters. CAISO should specify which market constraint or resource-specific bid parameters it proposes to make ineligible for BCR when either the constraint binds or the bid parameter is utilized.  The CAISO could hold additional workshops prior to posting the final proposal to solicit stakeholder input to refine the final proposal.    

2. Please provide your organization’s comments regarding the scope of Track 1 – Addressing Unwarranted Storage BCR.

Track 1 should focus on identifying and addressing market participant behavior that creates unwarranted storage BCR.  It is premature to eliminate BCR for storage resources whenever the SOC constraint is binding.

3. Please provide your organization’s comments regarding the concept of reclassifying energy associated with binding state of charge constraints as non-optimal due to physical limitations, thus excluding it from BCR settlement. You may upload examples or data using the “Attachments” field below.

The approach does not assess if the BCR is unwarranted or not but assumes any time the SOC constraint is binding that BCR is inappropriate.  The CAISO must seek to identify if the state of charge limitation was caused by the CAISO market dispatch and market design shortcomings or by market participant behavior.

The following are examples where CAISO limitations result in the state of charge binding, but BCR is warranted:

• Storage resources are unable to reflect intraday opportunity costs in their energy offers which leads to dispatch inconsistent with day-ahead schedules.  The bidding rules pending at FERC address the energy bidding (except for hybrid storage configurations), but the issue still exists since default energy bids have not been improved.
• The real-time multi-interval optimization dispatches the resource out-of-merit based on advisory prices that don’t materialize because of changes in CAISO’s forecast.  
• Ancillary services are not reoptimized in the real-time market.  If ancillary services were reoptimized, the market could determine if it is more cost effective to buy back an ancillary service versus forcing a charge or discharge schedule through command-and-control constraints allowing better management of the state of charge by the resource.
• Prior market run could not see the future market conditions and determined the optimal solution was to utilize the storage differently than the day-ahead market solution and the state of charge remaining at the end of that horizon positioned the storage to be insufficient in a future horizon however its insufficiency was due to optimally solving in the prior run(s).
• Storage resources are limited to updating energy bids at 75 minutes prior to the operating hour.  This results in a 135-minute window where the SOC can change significantly, but the storage resource’s energy bids remain stagnant.  A similar issue existed for variable energy resources prior to using the 5-minute forecast to automatically adjust the upper economic limit of the wind or solar resource’s energy bid.  The energy storage enhancements initiative is planned to discuss how to address the need for more bidding flexibility or improved resource modeling.  For example, using the SOC to adjust the upper and lower economic limit of storage resources’ energy bids within the operating hour.

4. Please provide your organization’s comments regarding the topics scoped as part of Track 2 – Co-located BCR and Storage DEB Enhancements, as well as their prioritization.

The CAISO committed to the Board and Governing Body, that it would commence an initiative to develop a durable solution for storage bidding during high price conditions for Summer 2025.  All elements in Track 2 are required for the durable solution. 

5. Please provide any additional comments on the workshop presentations.

CESA requests the DMM provide an update to the chart on slide 6 of its presentation to show BCR per MW of installed storage capacity.  The storage fleet has expanded rapidly, and it would be expected that gross BCR data would increase because the number of eligible storage resources has increased.

CESA requests the CAISO include in scope of the BCR discussions following through on CAISO’s commitment to initiate a stakeholder process to discuss the circumstances justifying its ER22-2881 tariff amendment making storage ineligible for BCR when the Ancillary Service (AS) SOC constraint binds and explore possible additional market rule enhancements to address these issues. In its FERC filing, CAISO stated it was immediately initiating a stakeholder process to explore durable, more refined solutions it has yet to schedule.[1] This initiative should assess BCR rules in Track 2 holistically including in instances when the SOC constraint(s) bind to ensure that the ineligibility rules are not being applied overly punitively and only excluding intervals that would not constitute ISO commitments.

[1] CAISO Tariff Amendment under ER22-2881, https://www.caiso.com/documents/sep19-2022-tariffamendment-energystoragebidcostrecovery-er22-2881.pdf.

1. Please provide a summary of your organization’s general comments on the workshop presentations.

PG&E thanks the CAISO for transparently discussing storage bid cost recovery (BCR) issues and potential enhancements with stakeholders.

In summary:

1. PG&E recognizes the concerns raised by the Department of Market Monitoring (DMM) over the potential for unwarranted BCR payments made to market participants based on storage bids and state of charge (SOC) considerations.
2. PG&E requests additional supporting data and market analysis be provided to stakeholders to demonstrate storage BCR payments are unwarranted.
3. PG&E requests the CAISO consider alternative market enhancements proposed by stakeholders in response to the workshop.
   • For consideration, PG&E proposes an alternate enhancement that incorporates storage default energy bids (DEBs) into the BCR settlements calculation. PG&E's approach meets the dual objectives of (1) preventing strategic storage bids from unwarranted BCR payments and (2) protecting storage bid costs at a reasonable level in accordance with the intent of BCR.

2. Please provide your organization’s comments regarding the scope of Track 1 – Addressing Unwarranted Storage BCR.

PG&E is sympathetic to the concerns of CAISO and DMM that batteries bidding opportunity costs (which have been somewhat vaguely defined in arriving at the present DEB calculation) could recover costs that aren’t true costs, but rather expectations based on forecasts, which in general represent risks that market participants should manage internally. However, PG&E contends batteries incur operating costs (e.g., wholesale costs of charging energy), known to the market ahead of the market run, which should be recoverable for any battery bidding its flexible operating range into the markets.

PG&E believes the evidence that bid cost recovery is “unwarranted” presented to stakeholders in the 7/8/2024 workshop is inconclusive. The DMM provided useful data indicating that significant bid cost recovery was awarded due to battery SOC making day ahead awards infeasible. PG&E requests additional data be provided to stakeholders that demonstrate: (1) how significant the BCR revenues were relative to battery revenues overall (noting that the period depicted was one of large increases in the size of the CAISO’s battery portfolio), (2) the dispersion of bid cost recovery among batteries, and (3) how, as DMM describes, batteries having limited SOC prior to the day ahead award hours drove their SOC to constrained levels. Although the CAISO concludes that the BCR is unwarranted, an equally reasonable interpretation, depending on the frequency of the BCR, would be that the real time market has the capability and potentially the need to buy back charging awards, leaving batteries with insufficient SOC to meet all of their day ahead awards.

Both the CAISO and DMM have characterized BCR fundamentally as payments to thermal resources to compensate for commitment and minimum load costs to disincentivize these costs being embedded in the resources’ variable energy bid curves. An alternative, and seemingly more basic, interpretation would be that the incentive-compatibility of the CAISO markets requires that a bid cost-minimizing market solution be reflected in compensation based on these bid costs, as well as on the incentive effects of LMP pricing based on marginal cleared energy and services. When bid costs are not compensated, there is an incentive for resources to embed their potential shortfalls in their bids, which drive prices away from marginal costs and weaken the efficiency benefits of the market. BCR should thus be disallowed only in cases where it can be shown that the market participant has clearly “opted out” of the market process by some form of self-scheduling. This was the argument the CAISO made for disallowing BCR for dispatches to satisfy battery ASSOC constraints, but that argument has not been made in the current CAISO proposal.

The CAISO’s proposal to add more periods of BCR ineligibility is an overly broad measure to address the CAISO’s concern of excess BCR and will likely introduce unintended market risks. A similar approach was adopted in the emergency tariff filing on the Ancillary Service SOC (ASSOC) constraint in September 2022 (https://stakeholdercenter.caiso.com/StakeholderInitiatives/Ancillary-service-state-of-charge-constraint) and the PRR1547 change made to the Market Operations BPM in early 2024 (https://bpmcm.caiso.com/Pages/ViewPRR.aspx?PRRID=1547&IsDlg=0). PG&E is concerned that continuing along this path is inefficient from a market perspective and unjust to storage resources. Two examples of the risks of implementing the CAISO’s proposal are: (1) storage resources not recovering their charging costs, and (2) energy (in the form of SOC) being withheld from the day-ahead market:

1. By disallowing BCR payments, the CAISO is effectively causing storage bids to become unhedged between the DA and RT market. This may lead to storage operators to use manual tools, such as the end-of-hour (EOH) SOC parameter, in some hours of the RT market to avoid hitting upper or lower SOC limits later in the day. Since using the EOH SOC parameter makes certain hours ineligible for BCR, market participants may forgo BCR in less impactful hours to avoid losing BCR in more impactful hours. Such manual interventions would not be required if storage resources were assured by the CAISO market rules to recover their charging costs.
2. Another risk is that storage resources may withhold some portion of the battery’s SOC range in their DA bids in order to protect against not receiving BCR. Since the real-time (RT) market horizon only looks ahead between one and two hours, the CAISO’s RT market optimization has a limited view of DA market awards. This makes it challenging for the CAISO systems to manage storage SOC for a full twenty-four hour period, given the operational de-rates and regulation energy take (for storage resources providing regulation) that frequently occur in RT. PG&E suspects that the SOC-related imbalances between the DA and RT will lessen or go away by expanding the RT market horizon, but agrees with the CAISO that doing so is a significant and complex undertaking.

3. Please provide your organization’s comments regarding the concept of reclassifying energy associated with binding state of charge constraints as non-optimal due to physical limitations, thus excluding it from BCR settlement. You may upload examples or data using the “Attachments” field below.

PG&E requests more information as to which CAISO system (or set of systems) is contributing to the DA/RT SOC discrepancies. The DMM mentioned both Outage Management System (OMS) and energy bid parameters (e.g. Initial SOC, Lower Economic Limit and Upper Economic Limit) but did not provide information on their relative impacts.

If the problem DMM and CAISO are highlighting relates primarily to OMS, PG&E asks which outage information is not being reflected in the market optimization and questions whether it might be more appropriate to make improvements to OMS than to disallow more intervals of post-market BCR Settlements. To this point, several storage owners/operators have repeatedly recommended enhancements to OMS that have yet to be implemented by the CAISO. In addition, several parties have proposed storage modelling enhancements in the CAISO annual policy roadmap such as accounting for “foldback” at high/low states of charge and improving OMS (https://stakeholdercenter.caiso.com/RecurringStakeholderProcesses/Annual-policy-initiatives-roadmap-process-2024).

If the primary problem DMM and CAISO are highlighting relates to energy bid parameters, PG&E questions whether the root cause of this problem is the ability of a storage resource to set an initial state of charge in the day ahead market and then fail to adhere to that value as a form of commitment in real time. If this is the case, it can be argued that initial SOC is a form of “self-schedule” closely related to the ability of batteries to set an end of hour target SOC in real time, which already causes rescission of BCR for two hours preceding the end of hour target. If this is the source of the bought back DA awards, the CAISO could explore the following options:

• Monitor the use of the Initial SOC parameter in order to identify and report any strategic behavior: The DMM has access to all the market data it needs to define what is acceptable use of the Initial SOC parameter and what is causing unacceptable strategic buybacks. The CAISO could work with stakeholders to develop the criteria for monitoring this market behavior and take disciplinary actions on those who violate it.
• Forecast an Initial SOC parameter based on market awards: Rather than allow market participants to enter any level of Initial SOC they desire, the CAISO could modify the energy bid parameters to include an Initial SOC forecast (or SOC range) generated by the CAISO based on current SOC, existing DA market awards and existing RT bids. Market participants could still enter an Initial SOC value, but it would be accepted only within a certain tolerance band of the CAISO’s initial SOC forecast.
• Treat the day ahead initial SOC as a form of target SOC in the RT markets: Reaching the bid-in Initial SOC should make it feasible for the battery to satisfy its day ahead awards without uneconomic buyback. In this construct, any dispatches required to reach the initial SOC level (i.e. any uneconomic dispatches in hours set to achieve the initial SOC) would be ineligible for BCR. This approach is consistent with the current rationale for loss of BCR in the market design, and SOC-related losses won’t entirely be allocated to the battery.

During the ASSOC constraint emergency filing in 2022, it was discovered that the root cause of the excessive BCR payments was that the BCR settlements calculation was using very high RT energy bid costs during intervals with no local market power mitigation (LMPM). In lieu of modifying the BCR settlements calculation, the CAISO opted for excluding certain intervals from receiving BCR entirely. To date, the BCR calculation has not changed, and now the CAISO has identified another potential instance of unwarranted payments.

While high RT energy bid costs are an appropriate way for a storage resource to manage its SOC in RT, they may be inappropriate from a cost recovery perspective. For this reason, PG&E’s recommendation is to modify the BCR calculation to use mitigated RT bid costs (e.g. to the storage DEB) in all intervals eligible for BCR. This approach is consistent with how BCR is designed for thermal and other resources since it more closely reflects the true costs of the resource participating in the market.

4. Please provide your organization’s comments regarding the topics scoped as part of Track 2 – Co-located BCR and Storage DEB Enhancements, as well as their prioritization.

PG&E recommends prioritizing enhancements to the Storage DEB over any Co-located or Hybrid improvements. As demonstrated by the Price Formation Enhancements soft-offer cap initiative, the Storage DEB already needs enhancements to estimate intra-day opportunity costs as it relates to FERC order 831. The DMM offered some suggestions on this topic which deserve discussion in a formal stakeholder effort, and these ideas should be bundled with any modifications to the opportunity cost approximation described in Track 2.

5. Please provide any additional comments on the workshop presentations.

PG&E appreciates the CAISO presenting data on the amount of RT battery BCR. One clarifying question on the data, which was raised on the stakeholder call, is why does ASSOC continue to be a driver of RT BCR one year after the recission made in September 2022? PG&E also requests the CAISO to provide the amount of DA battery BCR in a similar chart, given the CAISO’s recommendation to eliminate day-ahead BCR for storage resources.

PG&E also suggests that if CAISO or DMM can make the case that batteries are either bidding strategically in the outcomes presented, or that batteries have prima facie market power, the most appropriate means of addressing either of these possibilities has been laid out previously by FERC: such resources should not receive market based rates (i.e., their unconstrained bids), but should receive cost based rates (i.e., default energy bid levels). Hence in cases where such arguments can be made convincingly, battery bids should be mitigated to default levels, but the batteries should be able to receive BCR based on the possibility of negative revenues for a day in total (e.g., net negative daily revenue due to high charging costs or high discharge buyback costs).

1. Please provide a summary of your organization’s general comments on the workshop presentations.

While PacifiCorp generally understands the issue the CAISO and CAISO DMM are aiming to solve in Track 1, PacifiCorp requests that the CAISO provide ample opportunity for stakeholders to discuss the issue more holistically. PacifiCorp believes that the CAISO should provide numerical examples for how the recommended solution of reclassifying energy as non-optimal would work in practice when a storage resource’s state of charge (SOC) constraint is binding. Furthermore, PacifiCorp believes that more discussion is needed for stakeholders to fully understand the causes of storage resources SOC constraints binding in the real-time market. At this point, it’s difficult to determine what the consequences may be for storage resources and if there are situations where a storage resource would be ineligible to receive bid cost recovery (BCR) payments when it should.  

PacifiCorp is also surprised by the timeline for Track 1 based on the discussions that happened in the first workshop. It is not clear to PacifiCorp whether a solution could be implemented before the end of this summer, when the issue is likely most impactful to overall BCR payments. As such, PacifiCorp questions why the CAISO is pushing for an aggressive schedule for this initiative.  

2. Please provide your organization’s comments regarding the scope of Track 1 – Addressing Unwarranted Storage BCR.

PacifiCorp agrees with the scope of Track 1. Refining BCR provisions for stand-alone storage resources will already be challenging on the CAISO’s expedited schedule, and so no other items should be added to the scope.  

In PacifiCorp’s view, this is a complex topic that will potentially have significant implications for storage resources. From discussions in the first workshop, it seems that other storage resource owners have concerns with the CAISO’s proposed solution. PacifiCorp acknowledges that the issue is exacerbated by the recent changes to bidding rules over the soft offer cap. However, storage resources are an important part of the CAISO markets and are only becoming more impactful as more storage resources are brought online. It is therefore necessary that any changes to BCR payment rules for storage resources are fully discussed, understood, and agreed upon by market participants. PacifiCorp is skeptical that this can occur within the timeframe proposed by the CAISO for this initiative.  

3. Please provide your organization’s comments regarding the concept of reclassifying energy associated with binding state of charge constraints as non-optimal due to physical limitations, thus excluding it from BCR settlement. You may upload examples or data using the “Attachments” field below.

PacifiCorp does not have enough understanding of the implications for storage resources to endorse or not endorse the CAISO’s proposed solution. PacifiCorp believes it may be an easily implementable solution because it is a change to the settlements process only. However, PacifiCorp does not know if the proposed solution will lead to the BCR recovery rules that are equitable for storage resources. PacifiCorp would prefer a solution that is more time-intensive but that has support from a wide-range of stakeholders over a solution that is easily implementable because it is important to create the right incentives for storage resource participation in the market. To help aid stakeholders understand the CAISO’s proposal, PacifiCorp believes the CAISO should provide numerical examples that explain the scenarios the CAISO is concerned, how the proposed solution will mitigate those concerns, and if there are any risks of storage resources not receiving BCR payments when they should be.  

For PacifiCorp to endorse any solution, more understanding of the causes of the problem is needed. PacifiCorp understands that there is the potential for storage resources to bid in a way that leads to receiving BCR payments that may not align with the original intentions for BCR payments. PacifiCorp generally agrees that storage resources gaming the BCR rules through bids should not be receiving BCR payments. However, it is not clear to PacifiCorp if there are other drivers, besides bidding strategies, that lead to storage resources’ SOC constraint binding. PacifiCorp finds it necessary to discuss BCR payments to storage resources more holistically so that the rules for storage resources are equitable when compared to BCR payment rules for other resources.  

4. Please provide your organization’s comments regarding the topics scoped as part of Track 2 – Co-located BCR and Storage DEB Enhancements, as well as their prioritization.

The topics scoped for Track 2 are reasonable in PacifiCorp’s opinion. PacifiCorp prefers to prioritize developing a DEB applicable to hybrid resources.  

5. Please provide any additional comments on the workshop presentations.

1. Please provide a summary of your organization’s general comments on the workshop presentations.

PGE supports this working group discussion. As PGE prepares to bring BESS resources online in the near future, PGE appreciates the CAISO’s efforts to better align bid cost recovery and default energy bids with the attributes of participating storage resources.

2. Please provide your organization’s comments regarding the scope of Track 1 – Addressing Unwarranted Storage BCR.

No additional comment at this time.

3. Please provide your organization’s comments regarding the concept of reclassifying energy associated with binding state of charge constraints as non-optimal due to physical limitations, thus excluding it from BCR settlement. You may upload examples or data using the “Attachments” field below.

PGE directionally support reclassifying energy associated with binding state of charge constraints as non-optimal due to physical limitations, as this designation may fit BESS resources more appropriately than the current status quo.

However, PGE would prefer to first address the DEB enhancements (Track 2) prior to resolving storage bid cost recovery (Track 1). Likewise, PGE is interested in any additional data the CAISO can provide on the market impacts of making these changeas.

4. Please provide your organization’s comments regarding the topics scoped as part of Track 2 – Co-located BCR and Storage DEB Enhancements, as well as their prioritization.

PGE prefers the storage default energy bid enhancements to be the immediate priority for the working group. Within Track 2, PGE is particularly interested in (1) enhancements to the estimations of opportunity costs within the applicable DEBs for energy storage and (2) in developing DEBs for hybrid resources.

5. Please provide any additional comments on the workshop presentations.

PGE appreciates the CAISO’s commitment to addressing this aspect of price formation. Because of the working group’s tight timeline, PGE requests that the CAISO continue to provide meeting materials and other relevant communications as promptly as possible.

1. Please provide a summary of your organization’s general comments on the workshop presentations.

The Salt River Project Agricultural Improvement and Power District (SRP) appreciates the CAISO’s efforts in addressing the complexities of Bid Cost Recovery (BCR) and Default Energy Bid (DEB) enhancements for storage resources. The workshop presentation provided a detailed overview of the current issues. However, SRP believes that more detailed examples and data may be necessary to fully understand the impacts of the proposed changes. Further, SRP believes a balanced approach is important that aligns market efficiency with fair compensation for storage resources.

2. Please provide your organization’s comments regarding the scope of Track 1 – Addressing Unwarranted Storage BCR.

SRP request the CAISO provide a detailed explanation and examples as to what constitutes BCR payments that do not align with the intended purpose and how the proposed changes will impact real-time operations.

3. Please provide your organization’s comments regarding the concept of reclassifying energy associated with binding state of charge constraints as non-optimal due to physical limitations, thus excluding it from BCR settlement. You may upload examples or data using the “Attachments” field below.

SRP would like more detail and clarification on the definition of “binding state of charge constraints” and any other resource constraints in relation to physical limitations. SRP would also like clarification how the BCR issue is unique to any binding constraints related to storage resources in comparison to non-storage resources with binding constraints. Further, SRP requests further clarification and examples on how reclassifying energy associated with SOC constraints will work and what the impacts will be on operations and settlements.

4. Please provide your organization’s comments regarding the topics scoped as part of Track 2 – Co-located BCR and Storage DEB Enhancements, as well as their prioritization.

SRP requests additional details and examples from CAISO on the specific changes proposed in Track 2, specifically in regards to co-located resources and DEB enhancements.

5. Please provide any additional comments on the workshop presentations.

No additional comments at this time.

1. Please provide a summary of your organization’s general comments on the workshop presentations.

SDG&E appreciates the opportunity to provide comments on the Storage Bid Cost Recovery (BCR) and Default Energy Bid Enhancements initiative. While SDG&E is supportive of the objectives of the initiative, before moving forward with any proposed solutions the CAISO must first determine (1) whether there are existing market mechanisms that can more accurately incent storage resources to meet an initial state of charge (SOC) needed to meet day-ahead schedules thereby avoiding the scenarios that commonly result in real-time BCR for storage resources, and (2) whether the option presented at the workshop for consideration would achieve the desired outcomes of increased reliability and market efficiency.

CAISO has stated that the initiative motivation is to minimize the risk of unwarranted BCR payments for storage resources. The focus for Track 1 is to address BCR payments associated with storage resource SOC constraints. At this point, SDG&E believes there is insufficient justification to consider eliminating BCR for storage resources when an SOC is binding, and encourages CAISO to identify (with numerical examples) the specific behaviors that result in unwarranted BCRs and what quantity of BCR payments are a result of those actions in their Straw Proposal.

2. Please provide your organization’s comments regarding the scope of Track 1 – Addressing Unwarranted Storage BCR.

SDG&E supports the Track 1 objective to refine the BCR provisions for storage resources in standalone configurations. As mentioned during the July 8th workshop, BCR was initially designed around conventional assets and SDG&E believes it is appropriate to consider modifications to the existing rules to better account for storage resources. However, near-term modifications to address SOC constraints in BCR rules are not a replacement for the significant CAISO modeling enhancements needed to better and more efficiently account for storage resources in the market dispatch.

Further, CAISO indicated that they are pursuing an accelerated policy process for these modifications due to concerns with potential market inefficiency and adverse reliability impacts from SOC limitations leading to buy- and sell-backs of day-ahead schedules. While SDG&E supports examining this issue with urgency, the extremely short timeline outlined for Track 1 does not accommodate critical evaluation of the modifications that are under consideration, especially given the potential for unintended consequences from changing BCR. SDG&E submits that it would be preferable to take additional time to develop a more thoroughly vetted approach to storage BCR, rather than pushing for a September final proposal, especially if substantial risk is identified over the course of the stakeholder process.

3. Please provide your organization’s comments regarding the concept of reclassifying energy associated with binding state of charge constraints as non-optimal due to physical limitations, thus excluding it from BCR settlement. You may upload examples or data using the “Attachments” field below.

A blanket reclassification of energy associated with binding SOC constraints as non-optimal and ineligible for BCR assumes that a storage resource has full control over its SOC. In fact, CAISO optimizes these resources and may actually cause misalignment between a resource’s actual and bid SOC. It is important for CAISO to ensure that any revised rules do not penalize storage resources for SOC issues caused by CAISO operations. Rather, any rule changes should be able to differentiate between unit response limitations caused by CAISO operations, and those caused by other factors within the resource’s control. The need for examples was brought up by stakeholders at the workshop, and SDG&E reiterates that these examples are necessary to better understand the issue that CAISO is seeking to address. These examples would be helpful in identifying the root causes of the SOC issues that CAISO has observed, which can then be used to inform any proposed changes to BCR rules.   

4. Please provide your organization’s comments regarding the topics scoped as part of Track 2 – Co-located BCR and Storage DEB Enhancements, as well as their prioritization.

No comment. 

5. Please provide any additional comments on the workshop presentations.

SDG&E thanks CAISO for its careful consideration of the stakeholder comments from this workshop and has no additional feedback at this time.

1. Please provide a summary of your organization’s general comments on the workshop presentations.

As outlined below, the Six Cities support this initiative, but observe that more information appears to be needed to evaluate potential solutions.  An interim approach for this summer may appropriate, with a permanent solution proceeding on a longer-term track. 

2. Please provide your organization’s comments regarding the scope of Track 1 – Addressing Unwarranted Storage BCR.

The Six Cities support a thorough review of the circumstances identified in the Department of Market Monitoring Special Report on Battery Storage (Jul. 7, 2023), related to the incurrence of bid cost recovery (“BCR”) by storage resources.  See Special Report at 19-20.  If and to the extent that any class of resources is recovering BCR in circumstances that are inappropriate and/or engaging in bidding or operational behavior with objectives of receiving BCR payments by triggering uneconomic dispatches, then the Six Cities support development of revisions to market rules to address such practices.  The Six Cities also support a review of the purpose and intent of the BCR framework as applied to storage and development of new rules as needed to reflect the growth in the storage fleet. 

At the same time, discussion during the July 11^th stakeholder meeting made clear that there is not stakeholder consensus regarding the nature and scope of this issue and how to solve it.  The Six Cities encourage the CAISO to provide more information and examples of circumstances in which storage resources may appear to be engaging in inappropriate market behavior designed to elicit BCR payments so that stakeholders can engage in informed discussion of issues and possible solutions.  To address the CAISO’s reasonable concern about sharing information that may, in turn, be used by market participants to improperly inform bidding strategy and operational behavior, the Six Cities encourage the CAISO to work with DMM to ensure that DMM has the information necessary to and will investigate and report to FERC any instances of conduct that presents these concerns.  While the Six Cities support addressing this issue expeditiously, it is less clear that there is an obvious and non-controversial solution that can be developed and implemented quickly, particularly for a solution that is intended to be permanent, rather than interim.  For this reason, if a solution is necessary for this summer, it may be appropriate to consider the recommendation to eliminate Day-Ahead BCR for battery storage resources, albeit on a temporary basis, pending development of a more refined solutions that can be adopted for the long-term.

3. Please provide your organization’s comments regarding the concept of reclassifying energy associated with binding state of charge constraints as non-optimal due to physical limitations, thus excluding it from BCR settlement. You may upload examples or data using the “Attachments” field below.

The Six Cities do not have comments on this topic at this time. 

4. Please provide your organization’s comments regarding the topics scoped as part of Track 2 – Co-located BCR and Storage DEB Enhancements, as well as their prioritization.

The Six Cities do not oppose the scoping of the Track 2 topics, but observe that Track 2 could benefit from one or more working group meetings to better define the issues and problem statements that the track is intended to address. 

5. Please provide any additional comments on the workshop presentations.

The Six Cities support engagement with the Market Surveillance Committee as solutions to the issues scoped for this initiative are developed.

1. Please provide a summary of your organization’s general comments on the workshop presentations.

SCE supports the CAISO and DMM ability to prevent markets from the potential for abuse. As noted by DMM, the DA optimization should negate the need for BCR. Additionally, the RT behavior of storage regarding the buyback and sellback of DA awards, is concerning. SCE agrees that BCR should only be for limited instances, such as exceptional dispatch. Consequently, SCE supports the DMM proposal.

2. Please provide your organization’s comments regarding the scope of Track 1 – Addressing Unwarranted Storage BCR.

3. Please provide your organization’s comments regarding the concept of reclassifying energy associated with binding state of charge constraints as non-optimal due to physical limitations, thus excluding it from BCR settlement. You may upload examples or data using the “Attachments” field below.

4. Please provide your organization’s comments regarding the topics scoped as part of Track 2 – Co-located BCR and Storage DEB Enhancements, as well as their prioritization.

5. Please provide any additional comments on the workshop presentations.

1. Please provide a summary of your organization’s general comments on the workshop presentations.

Terra-Gen appreciates the opportunity to provide comments but raises concerns about the short notice for the meeting and limited time for stakeholder input.

First and foremost, Terra-Gen is concerned with the proposed schedule for this effort and recommends CAISO seriously reconsider its planned timeline and scope for this effort.  CAISO has proposed a rushed timeline that makes it difficult for stakeholders to thoroughly understand the issues and propose effective solutions.  Bid Cost Recovery (BCR) is a complex topic, and a more comprehensive stakeholder process is needed to ensure a durable solution for storage.  Furthermore, CAISO has recently emphasized its success regarding several working group efforts that have provided ample time and opportunity for stakeholder education and engagement. In contrast, this newly announced initiative includes a severely compressed schedule for Track 1 that must be reconsidered to provide a more appropriate timeline for considering proposed changes and allow for adequate discussion of stakeholder interests.

Terra-Gen Recommendations:

• Extend the stakeholder process timeline to allow for a more thorough discussion of the issues.
• Provide clear explanations and numerical examples to improve stakeholder understanding of BCR for storage.
• Conduct a holistic evaluation of BCR for storage, including the principles behind BCR and the various drivers of real-time BCR.
• Prioritize Storage DEB Enhancements alongside storage BCR discussions.

2. Please provide your organization’s comments regarding the scope of Track 1 – Addressing Unwarranted Storage BCR.

Terra-Gen recommends that the focus of this initiative should be on identifying and addressing market participant behavior that creates unwarranted storage BCR, not eliminating BCR altogether when the state-of-charge (SOC) constraint binds. Terra-Gen emphasizes the need for CAISO to provide clear explanations and numerical examples to illustrate how the current BCR system works for storage and the specific concerns with real-time storage BCR. Terra-Gen recommends CAISO provide a holistic evaluation of BCR for storage, including a review of the principles behind BCR and the various factors that can lead to real-time BCR.  

CAISO and the CAISO's Department of Market Monitoring (DMM) provided some initial proposal options that would essentially remove storage BCR eligibility almost in its entirety. Terra-Gen is very concerned that such a broadly applied proposal coupled with a narrow discussion of the issues in a compressed timeframe will result in unintended consequences for storage resource owners that deserve more nuanced proposals that would allow for appropriate uplift to be provided when uneconomic outcomes are driven by CAISO market optimization outcomes that are not driven by decisions that are under the control of the storage Scheduling Coordinator (SC).

3. Please provide your organization’s comments regarding the concept of reclassifying energy associated with binding state of charge constraints as non-optimal due to physical limitations, thus excluding it from BCR settlement. You may upload examples or data using the “Attachments” field below.

Terra-Gen concurs with the California Energy Storage Alliance’s (CESA) comments submitting several instances that uplift for uneconomic storage dispatch is warranted in response to this question.[1] Terra-Gen reiterates our verbal feedback that CAISO must seek to identify if the state of charge limitation was caused by the CAISO market dispatch and market design shortcomings or by market participant behavior. The examples provided by CESA demonstrate several outcomes that happen under the current market design that result in uneconomic outcomes for storage resources that should be considered eligible for some form of uplift.

[1] See CESA response to question #3. https://stakeholdercenter.caiso.com/Comments/AllComments/f7f6fb35-66cd-4279-821d-8711799e4468#org-69b41d47-8686-4a73-8aa6-b9856043d317

4. Please provide your organization’s comments regarding the topics scoped as part of Track 2 – Co-located BCR and Storage DEB Enhancements, as well as their prioritization.

Terra-Gen expresses concern that Storage DEB Enhancements received lower priority than the stand-alone BCR topic. Terra-Gen believes both issues deserve equal focus, especially considering CAISO's prior commitment to develop a solution for Bidding Above Soft Offer Cap. 

5. Please provide any additional comments on the workshop presentations.

Terra-Gen requests that CAISO follow through on its commitment to initiate a stakeholder process on the circumstances justifying ineligibility for BCR when the ancillary service SOC constraint binds and expand this initiative scope to holistically consider BCR eligibility and the need for uplift for storage more generally.  Terra-Gen recommends CAISO dedicate sufficient time to explaining and discussing instances where storage SOC constraints bind to ensure that the ineligibility rules are appropriate and recognize that CAISO market design limitations can play a key role in the cause and need for uplift of uneconomic storage dispatch. 

1. Please provide a summary of your organization’s general comments on the workshop presentations.

See below.

2. Please provide your organization’s comments regarding the scope of Track 1 – Addressing Unwarranted Storage BCR.

BCR is a necessary mechanism to make market participants whole for receiving CAISO driven commitments or energy awards that result in net revenue shortfalls across the operating day, which is necessary to allow CAISO to issue “uneconomic” commitments or awards respecting physical market or resource-specific constraints to manage grid reliability without causing financial harm to market participants. While Vistra appreciates CAISO’s efforts to address unwarranted storage BCR and potential gaming, and believes such efforts are critical, Vistra urges CAISO to take a thoughtful and targeted approach to ensure any reforms do not undermine the core and necessary purpose of BCR. 

CAISO and its Department of Market Monitoring (DMM) presentations and discussion at the workshop on July 8^th indicated a  concern held by both that select storage Scheduling Coordinators (SC) are suspected of strategically bidding to inappropriately increase their share of real-time Bid Cost Recovery (BCR) payments. BCR gaming harms all market participants, and steps should be taken to prevent any potential actions such as those indicated by CAISO and its DMM. To do so, it is paramount that the CAISO publicly and explicitly identify the specific behavior of concern that it is observing in the real-time market to put the market on notice that such behavior will be monitored and investigated.  We have seen communication like this to be effective in the past to stop problematic behavior quickly, and curb harm in a timely fashion. This will allow the CAISO to mitigate this risk prior to storage bidding rule changes going into effect on August 1^st.

We believe this will be more helpful than an expedited stakeholder initiative that proposes an unnecessarily blunt solution that penalizes the entire storage sector by increasing its cost risks even in instances that it is the ISO’s market solutions that lead to binding energy State of Charge constraint (SOC), which should be considered equivalent to an “ISO Commitment” – “ISO schedule” - eligible for uplift. As previously stated, BCR is a necessary mechanism to hold market participants financially harmless for ISO market decisions and any solution should be narrowly targeted to making BCR ineligible when a SC takes actions to force the market outcome. Deterring the concerning behavior, by identifying the specific problematic behavior for market participants, with specificity, should  allow CAISO to focus on a more holistic discussion on BCR in Track 2

If the CAISO does not feel the proactive market communication is sufficient to allay its concerns with on-going potential BCR gaming concerns, then in Track 1 Vistra urges CAISO to take an expedited approach that is narrowly targeted to the specific concerns, rather than a more blunt approach that would unnecessarily penalize the entire storage sector.

Vistra requests that the Track 1 scope should include refinements to the Default Energy Bid (DEB) for stand-alone storage to improve the opportunity cost estimate and to establish a hybrid DEB as these are needed for summer 2025.

3. Please provide your organization’s comments regarding the concept of reclassifying energy associated with binding state of charge constraints as non-optimal due to physical limitations, thus excluding it from BCR settlement. You may upload examples or data using the “Attachments” field below.

See response to #2. Vistra does not support reclassifying all Instructed Imbalance Energy awards due to binding energy SOC constraints as ineligible to be classified as optimal energy in the BCR calculation (“hammer approach”). While we share CAISO’s concern that IIE resulting from strategic bidding to trigger that award and payment should be excluded, it is important to keep the gaming concerns separate and consider it rationally. In many instances, the energy SOC constraint may be binding because the market solution in prior market runs found it optimal to use the storage differently than was anticipated in the day-ahead market and as such may exhaust or build up the SOC differently leading to insufficient SOC upward or downward range triggering the constraint to bind. This is a CAISO market decision and as such should be considered an “ISO Commitment”. Instances in which SC proactively bids or submits outage cards in a manner that limits the SOC range instead of the market decisions doing so appear to be the subset of scenarios that the CAISO should be proposing to eliminate from optimal energy eligible for BCR. Vistra is sympathetic to a desire to identify what constitutes a “self-schedule” for storage that should be considered “non-ISO commitment” to exclude from BCR and urges the CAISO to refine its proposal to ensure it is only excluding awards that fit this non-ISO commitment and continuing to compensate for BCR when it is market driven. Ideally, CAISO will combine this scope into a longer-term track and allow for that holistic conversation to delve into what is an ISO versus non-ISO commitment as well as what uplift framework would be ideal for storage. If it does not, it is essential the expedited solution does not eliminate BCR eligibility when the outcomes are market driven. 

4. Please provide your organization’s comments regarding the topics scoped as part of Track 2 – Co-located BCR and Storage DEB Enhancements, as well as their prioritization.

Vistra supports the scope but suggests the CAISO prioritize the DEB refinements for stand-alone storage and establishing the DEB for hybrids over the more complex BCR scope. We recommend DEB items in Track 1 and BCR discussions in Track 2. For clarity, this suggestion presumes CAISO manages the concerns with BCR gaming through publicly communicating the behavior that is raising concerns and monitoring and investigating as appropriate to arrest the potential gaming as soon as possible well in advance of the September date proposed, hopefully by end of July prior to any storage bidding changes going into effect on August 1st. 

5. Please provide any additional comments on the workshop presentations.

Vistra requests the CAISO release a fulsome Issue Paper and timeline for the tracked initiative as recommended with DEB issues prioritized followed by holistic uplift discussions once complete.

1. Please provide a summary of your organization’s general comments on the workshop presentations.

WPTF appreciates the opportunity to provide comments. Bid Cost Recovery (BCR) is a crucial yet highly intricate topic. We understand that BCR was originally designed with traditional generators in mind and may not seamlessly apply to storage systems. However, it’s important to keep in mind that BCR was designed to make traditional generators whole when market decisions respecting resource-specific constraints resulted in them not having costs fully covered; this is analogous to storage. Without further discussion on how the impact of various constraints in the market contribute to storage BCR, especially issues highlighted by CAISO, stakeholders cannot effectively collaborate on a viable solution that ensures storage is treated on an equal playing field with traditional generators receiving BCR due to binding resource-specific constraints. It's essential for all parties to grasp the current framework and identified concerns to meaningfully engage in the stakeholder process, ensuring it's inclusive and productive.

Our comments below respectfully urge CAISO to:

1. Take the necessary time through the stakeholder process to achieve a long-term durable and justified approach that addresses well understood issues
2. Provide numerical examples of how the current BCR formulation applies to storage that demonstrates the issue and concern at hand
3. Evaluate BCR for storage holistically which would include clearly articulating the principles of bid cost recovery to ensure that the same principles hold true to the storage BCR formulation, including any proposed changes discussed herein, identifying drivers of current BCR, and consideration of larger reforms to storage BCR if needed
4. To the extent the CAISO believes there is a gaming concern with the current formulation, clearly and publicly explain the issue and continue to monitor for such behavior as the CAISO and stakeholders take the necessary time in this policy process to reach a long term durable solution
5. Prioritize Storage DEB Enhancements, at a minimum, alongside storage BCR

It is CAISO's responsibility to facilitate an environment where all stakeholders fully understand the issues before proposing solutions, particularly given the current accelerated timeline. Previous BCR policy discussions have never been rushed to this extent. WPTF is deeply concerned about the compressed timeline, which allows only a 3-day window for comments. This timeline severely limits meaningful stakeholder engagement, as entities typically require internal review processes to formulate substantive comments. More importantly, especially on such a complex topic like BCR, there is time required for stakeholders to digest, discuss, and disseminate meaningful comments; 3 days is insufficient and comes at the cost of productive and useful stakeholder engagement. Posting a presentation and/or paper ahead of a call does not necessarily provide more time for stakeholders to digest the information. More often than not, significant clarification and details are provided during the stakeholder call that is necessary prior to forming comments.

While we understand that the CAISO has previously committed in various FERC filings to a stakeholder process focusing on storage BCR to achieve a long-term durable solution, there was no commitment in terms of a deadline. This current approach represents an unprecedented urgency and by no means fulfills the CAISO’s commitment; a 2 month policy process on a complex topic like BCR cannot in any meaningful way generate a robust discussion with stakeholders that will lead to a long-term durable solution. If the sense of urgency is driven by concerns about gaming under the current BCR rules, CAISO should openly explain these concerns, actively monitor such behaviors, and allow sufficient time for a comprehensive policy discussion that can lead to a robust solution. Rushing through a stakeholder process risks unintended consequences and suboptimal outcomes.

2. Please provide your organization’s comments regarding the scope of Track 1 – Addressing Unwarranted Storage BCR.

WPTF respectfully urges CAISO to allocate adequate time for discussing the issue with stakeholders and developing a durable, long-term solution. While we appreciate CAISO's careful evaluation of how BCR applies to storage, urgency should not compromise thoroughness. We acknowledge that the current BCR framework may not always align with the unique attributes of storage, necessitating adjustments. It will be important to ensure that while its unique attributes are considered that the adjustments treat it fairly relative to thermal generators receiving BCR payments for their uneconomic energy awards also triggered by resource-specific constraints. Given that storage is increasingly present in the CAISO market, rushing through this discussion without ensuring stakeholder understanding of current issues and formulations could hinder the development of a sustainable solution. Furthermore, the proposed timeline falls significantly short of fulfilling its commitment to stakeholders and FERC of facilitating a robust stakeholder process to develop a long-term solution. Nowhere in CAISO history has a long-term durable solution been developed in a 2 month period.

CAISO should provide numerical examples to enhance understanding of how BCR applies to storage, particularly highlighting the concerns they seek to address. Presentations on July 8 lacked sufficient detail and numerical examples to illustrate, for instance, how day-ahead awards bought back in real-time affect BCR calculations. This understanding is crucial before delving into proposal discussions. At present, CAISO has vaguely identified the issues with BCR related to real-time operations and bidding, thus proposing a broad sledgehammer like solution (e.g., eliminate storage BCR in day-ahead and most in RT) may not be the most equitable approach to addressing concerns. CAISO should provide an issue paper that details the existing State of Charge (SOC) constraints and the existing Master File registered values and associated bidding parameters that can impact SOC, and whether each are currently ineligible for BCR or not. Further, CAISO should specify which it is contemplating making ineligible and why.

WPTF respectfully requests that CAISO and stakeholders evaluate BCR for storage holistically. This would include clearly defining the principles/purpose of BCR and have a robust discussion around what conditions justify storage BCR. Additionally, the CAISO should identify all drivers leading to the conditions of RT BCR that is of concern. Understanding these principles and drivers will guide discussions on potential solutions and ensure they align with the overarching goals of BCR. Different scenarios may warrant different approaches to real-time BCR for storage, and establishing consensus on these principles will facilitate more productive and sustainable discussions. Within this, WPTF respectfully requests that the CAISO discuss the various drivers that lead to the resources receiving what the CAISO currently characterizes as inappropriate real-time BCR. It could be the case that not all drivers should be treated the same way as it relates to BCR application. Additionally, this discussion should aim to achieve the commitment made by the CAISO, which is a robust stakeholder process, thus also consider if larger BCR reform is preferred for storage resources and not be narrowly scoped to only consider incremental changes to the current formulation (e.g., deeming certain intervals ineligible for BCR).

WPTF believes the prudent path forward is for the CAISO to publicly discuss any potential gaming concerns and allow for a more robust stakeholder process to ensure the end result is a well vetted BCR formulation for storage. By discussing publicly and notifying all participants that the CAISO and DMM is monitoring for this type of behavior in itself will mitigate the concern. This will then afford the CAISO and stakeholders more time to properly address the issue (once its well understood) and develop a robust and justified approach for storage BCR.

3. Please provide your organization’s comments regarding the concept of reclassifying energy associated with binding state of charge constraints as non-optimal due to physical limitations, thus excluding it from BCR settlement. You may upload examples or data using the “Attachments” field below.

Before offering any meaningful comments on this issue, CAISO must first clearly explain the problem and provide examples illustrating how a binding State of Charge (SOC) leads to Real-Time (RT) Bid Cost Recovery (BCR) concerns. This explanation should include numerical examples not only of the conditions causing a binding SOC but also of the RT BCR calculations that result in uplift payments. Additionally, CAISO should identify whether there are multiple factors contributing to a binding SOC constraint in real-time that raise concerns about RT BCR. It's possible that certain factors and conditions may justify RT BCR while others may not.

4. Please provide your organization’s comments regarding the topics scoped as part of Track 2 – Co-located BCR and Storage DEB Enhancements, as well as their prioritization.

WPTF is disappointed to see the Storage DEB Enhancements topic included in Track 2 and given lower priority compared to stand-alone BCR topic. In the recent discussions on Bidding Above Soft Offer Cap, CAISO committed to further developing a robust solution. It appears these discussions are now being paused to focus on another topic that also requires additional time. Therefore, WPTF believes the Storage DEB Enhancements topic should be prioritized, at least to the same level of the storage BCR issue.

5. Please provide any additional comments on the workshop presentations.