Comments on 3/24 hybrid meeting

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

ACP-California greatly appreciates the CAISO opening this initiative, publishing the Issue Paper, and putting forward an alternative solution on the sharing of congestion revenues between EDAM Entities as a transitional measure. These steps demonstrate that CAISO is being responsive to its community of stakeholders as we all seek to move EDAM forward in a successful manner.

As CAISO is aware, the appropriate allocation of congestion revenues is critical to a well-functioning EDAM. And it is imperative that, as EDAM begins operations, it can work in coordination with the CAISO’s existing market structure and the transmission paradigms that currently exist in EDAM Entity areas: their Open Access Transmission Tariffs (OATTs). To this end, two of the key principles/objectives of EDAM that were published in 2021[1], and on which the EDAM market design and tariff were based, were to:

• Hold transmission customers harmless without creating new uplifts; and
• Maximize the amount of transmission made available to EDAM, while respecting the existing OATT framework and contractual commitments

We recognize achieving these objectives is no small feat and will require continued efforts from CAISO, EDAM Entities, and other stakeholders. Despite the difficulty, achieving these objectives is imperative to EDAM’s ultimate success. In putting forward this Issue Paper, CAISO appropriately acknowledges that targeted revisions to the market before go-live may be necessary to help ensure EDAM meets these objectives and provides value to all participants. Thus, ACP-California appreciates CAISO recognizing the need to consider modifications in order to better support the ability of EDAM Entities to provide a congestion hedge to OATT customers seeking to utilize their firm rights. ACP-California also appreciates CAISO putting forward an alternative approach, which appears to help address the underlying concern, at least as a transitional solution as EDAM evolves.

While we are generally supportive of the proposed alternative approach, ACP-California asks that CAISO not put this issue “on the shelf” at the conclusion of this abbreviated stakeholder process. Instead, CAISO should commit to ongoing work with stakeholders to explore the potential unintended consequences of this change and to look for ways to continue to improve EDAM’s transmission structure and congestion revenue allocation approach. Continued attention to these  areas will be necessary in order to ensure EDAM offers the maximum value to all participants. We look forward to working with CAISO to continue to consider the impacts of this change and to explore additional modifications and enhancements to EDAM in the future.

[1] See EDAM Common Design Principles & Concepts here: https://www.caiso.com/Documents/EDAM-Common-Design-Principles-Concepts.pdf

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

The CAISO’s current approach to congestion revenue allocation between EDAM Entities allocates all congestion revenues to the EDAM BAA in which the internal constraint occurred. The rationale for implementing this approach, at the time the CAISO filed its EDAM tariff with FERC, was that the BAA where the constraint arises bears the costs of managing the effects of that transmission constraint. The current approach is also the methodology used in the WEIM.

While ACP-California appreciates the rationale for the current approach, we also note that as EDAM moves closer to operation, more is becoming clear about its functionality than was known when this initial approach to congestion revenue allocation between EDAM Entities was developed and incorporated into the tariff. And many stakeholders had understood, based on discussions throughout the EDAM stakeholder process, that EDAM would be implemented in a manner that fully protected OATT rights that were scheduled on in the day-ahead timeframe through the use of the “balanced self-schedules” of those rights. Because CAISO itself did not opt to provide those protections to firm OATT rights, it will fall to the individual EDAM Entities to do so. And, as EDAM has moved close to operation, it has become clear that the individual EDAM Entities may not have sufficient revenues to protect all self-scheduled transmission on firm OATT rights under the congestion revenue allocation approach currently contained in the CAISO EDAM tariff. Given what we know today about EDAM’s functionality and the need to respect the OATT framework, it is appropriate to consider the effects of the current design and whether they continue to appropriately meet the EDAM design objectives and offer benefits to EDAM entities and their transmission customers.

ACP-California has been concerned that the current approach to congestion revenue allocation between EDAM Entities may not permit EDAM to respect OATT rights and allow existing contractual commitments to continue. Thus, we greatly appreciate CAISO looking at targeted methods to revise the current approach and believe revisions to the current approach are warranted.

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

Based on an initial review of the examples and impacts, ACP-California generally supports the alternative approach, which would allocate congestion revenues to the EDAM Entity where the congestion revenues accrued. This approach will provide a much more appropriate foundation for EDAM Entities seeking to continue to operate under their OATTs and will provide a better structure for contractual commitments that are based on OATT rights to be able to continue under EDAM. ACP-California is also generally supportive of only implementing this change to the day-ahead market (and not the real-time market), at least for the time being. Implementing this modification to the real-time market would change the congestion revenue allocation that WEIM Entities are seeing today and, should such a change be proposed, it would require additional time and exploration than will be available in this abbreviated stakeholder initiative. Thus, ACP-California generally agrees that implementing the alternative approach in only the day-ahead market is appropriate for now.

The alternative approach to day-ahead congestion revenue allocation to EDAM Entities that CAISO has proposed offers a “bridge” solution. It should enable parties that are using OATT rights to deliver on existing commitments (including clean energy resources that are delivering to CAISO LSEs) to do so with financial certainty when they use balanced self-schedules and are compensated for their day-ahead schedules by the EDAM Entity/transmission provider. However, we note that there are likely to be far more efficient methods for addressing transmission and congestion revenues in EDAM. And ACP-California hopes that CAISO will continue to explore the impacts of this transitional approach and other potential changes that could improve EDAM’s efficiency on an ongoing basis. For instance, this alternative approach should provide a more complete congestion hedge to entities that choose to self-schedule their transmission rights in EDAM. But it would be more efficient to allow these entities to economically participate in the market (rather than self-schedule). And we hope to be able to explore those types of enhancements with CAISO going forward.

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

ACP-California appreciates CAISO’s significant efforts to address stakeholder concerns related to the integration of EDAM and its interactions with the OATT framework. We urge CAISO to continue to explore the impacts of this targeted change and to keep discussions moving forward with stakeholders regarding congestion revenue allocation (and transmission provision) in EDAM as the market moves into operation and as operational experience is gained. We ask that CAISO not implement this targeted change and consider EDAM’s congestion revenue allocation and transmission provisions rules complete. Rather, we ask that CAISO keep this initiative open and allow stakeholders to work with CAISO to explore the impacts of the alternative design and to recommend improvements to EDAM’s congestion revenue allocation and transmission provisions rules in the future. ACP-California believes this is imperative because of the complex nature of the issue and the novel way EDAM will be implemented “on top of” the OATTs. This area will require significant attention and time from all interested parties to help ensure EDAM’s success. And we urge CAISO to create a stakeholder venue that allows for this ongoing exploration as EDAM moves into operation.

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

AWEC has no comment on the Issue Paper at this time.

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

AWEC has no comment on the current EDAM design to congestion revenue allocation at this time.

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

AWEC appreciates CAISO’s proposed alternative EDAM congestion revenue allocation methodology and is generally supportive of the alternative methodology. AWEC believes that the alternative methodology is a good compromise for congestion revenue allocation to provide PacifiCorp retail customers with some protections for congestion costs and revenue incurred by PacifiCorp while participating in the EDAM. However, AWEC reserves the right for additional commentary or judgment on the matter in future filings should more information be provided or the methodology were to change.

AWEC has no comment on the transitional nature of the alternative approach at this time.  If CAISO proposes to modify the alternative approach in the future, AWEC’s position will depend on the likely impact of any such modification on retail customers.

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

N/A

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

Appian Way appreciates and supports CAISO and other EDAM members’ efforts to make progress toward a broader regional market, the promise of which will bring greater market efficiency and cost savings for consumers. The concerns raised in the Pacificorp OATT proceeding touch on the challenge of moving to a system with optimal transmission usage based on economics and coordinated dispatch while simultaneously overlaying the existing OATT system of physical rights.

Appian Way has several concerns we would like CAISO to address during this expedited process:

1. That this expedited stakeholder process may result in unintended consequences with firm flow entitlement rights of non-CAISO BAAs receiving preferential allocations of congestion rents in certain circumstances, particularly in outage scenarios when not all rights holders can be made whole without uplifts.
2. That Pacificorp’s proposed tariff – which purports to provide a congestion pass-through to firm network and point-to-point transmission customers – may lead to improper incentives and gaming of the rules which would result in an inequitable shift of congestion allocations away from the CAISO market, and potentially worsening CAISO CRR revenue inadequacy, harming CAISO ratepayers. Specifically:
   1. With OATT transmission rights being physical use-or-lose, generators that are exposed to congestion will have the incentive to arrange bi-lateral OATT contracts rather than respond to EDAM redispatch economic incentives. If entities can self-schedule bilaterally and be held harmless for congestion, they will follow the prices and go off dispatch. In circumstances where such bi-laterals result in loop flows onto the CAISO system, the existing EDAM design would ensure that external entities pay for the congestion they cause and decrease the incentive for gaming, whereas the proposed alternative approach would, we believe, increase such incentives.
   2. Once locational prices become transparent after EDAM start-up, non-CAISO entities will have incentives to schedule firm transmission to capture economic price spreads, capturing congestion rents away from the CAISO market under the new alternative proposal. As notes above, when the loop flows associated with these new schedules flow on CAISO’s system, the existing EDAM design would allocate congestion to CAISO lessening the incentive. Entities that schedule transmission according to the incentives in the existing EDAM design would have the opportunity to buy CRRs to hedge the loop flow portion of their schedules, but such congestion hedges would be unnecessary in the alternative approach and would represent a harm to CAISO market participants and LSEs.
3. That the alternative proposal does not specify a clear timeframe for negotiating a longer-term and permanent solution. Ultimately, what is required is for EDAM members to work together to agree to a business solution and approach that balances honoring firm transmission rights and allocating congestion rents fairly and efficiently to all market participants. Other RTOs have faced this problem and come up with fair and mutually agreed approaches for allocating firm-flow entitlement rights on specific flowgates/constraints amongst neighboring BAAs, while also facilitating market participants having access to the congestion rights they need to hedge energy delivery on the transmission network. EDAM policy has pushed this issue to “Day 2,” but it is important to be specific about committing to a time frame for achieving an end-state business solution least the “interim” approach become entrenched. This is especially important given the incentives embedded in the new alternative proposed approach.

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

Appian Way does not view either the existing EDAM design (allocates congestion to the market location of specific constraints) or the alternative approach (allocate congestion to the market where the congestion is paid) as ideal. Either approach can be the basis for an interim approach, but attention needs to be paid to the concerns noted above with the alternative proposed approach.

With respect to the current EDAM approach, it allocates congestion based on where it occurs but ignores that some firm transmission may have a legitimate claim to flow rights on specific constraints in neighboring markets based on historical usage and practice. Nor is it clear that such an allocation approach follows cost causation. For instance, TSPs that invest in more transmission will tend to have less congestion but could be assigned fewer rights/congestion revenues, all else equal. And a TSP that invests in transmission to fix congestion could be disincentivized to do so because eliminating the congestion might shift the value to a different TSP.

LEI’s work in the PJM and MISO markets found that the point-to-point nature of transmission rights is extremely valuable for load. This is obviously true in the OATT context where both network and point-to-point service use specific sources and sinks. But it is also true for LMP markets with financial rights, such as CAISO. Having specific sources and sinks that correspond to how LSEs serve their load with specific resources has commercial value for LSEs. This system produces transmission rights that are transparent and easily priced – each “right” has a specific source node and sinks at the LSE load zone. These paths have more transparent forward value (especially in markets with long-term auctions). For hybrid LMP markets with vertically integrated IOUs, it’s very helpful to have rights that correspond with their network resources or historical contracts which is how the ARR/CRR system does work in CAISO.

When congestion allocation is based on constraints rather than paths, this has the potential to devalue the congestion hedging value by eliminating the point-to-point nature of the right and making the product less useful to load. Constraint-based rights cannot be monetized easily, are not easily tradeable, and are not easily priced. Their value is only known after the fact and is therefore less useful from the standpoint of managing risk on a going forward basis. And the process of determining the value of the congestion allocation is uncertain and difficult to model, especially as compared to simple point-to-point rights. While CAISO is not suggesting a shift toward constraint-based rights, it is important that CAISO preserve the point-to-point nature of transmission rights in both its existing system and any future EDAM design.

The above discussion suggests that the ideal congestion allocation approach involves a business solution among market participants that allocates specific source to sink rights that balances honoring firm transmission rights and existing network usage patterns and historical contracts. We believe that even in this interim process, it is essential that EDAM allocate flow entitlement rights on specific constraints to avoid cost shifts that will invariably accompany loop flows in the proposed system.

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

Appian Way is concerned about equitable congestion allocation on constraints where there is loop flow under outage circumstances. Suppose a chronic constraint within CAISO with 1000 MW of capacity has usage from both CAISO market participants via ARRs (75% or 750 MW) and external entities via long-term firm flow entitlement rights of which 250 MW, or 25% is assumed to flow over the constraint. How will EDAM allocate rights between CAISO participants and the external entities in circumstances where the transmission is derated? Suppose the line is derated by half. The equitable way to allocate rights would be for CAISO participants and the external entities to share the derate of transmission pro-rata, so that CAISO entities would still receive 75% of the flow entitlement on the constraint. It would be helpful to hear from CAISO how such a circumstance would be handled – there does not seem to be a mechanism in the proposal to derate external BAA firm flow entitlements. Instead, we are concerned that CAISO will assume external BAA rights and CAISO participants would bear the entire burden of the derated transfer capacity. The fundamental question is whether CAISO participant transmission rights are given equal priority to legacy OATT transmission rights. We are unclear as to how to do this without allocating and preserving shares of firm flow entitlement rights assigned to specific BAAs on constraints and/or flowgates.

Appian Way is also concerned about whether the alternative approach may worsen incentives for gaming of use-or-lose rights with the overlay of the OATT physical rights system on top of the EDAM congestion pricing/LMP model. At issue is whether generators will be properly incentivized to follow EDAM dispatch. This is critical for the success of EDAM because the way RTO’s coordinate and optimize transmission usage is by re-dispatching generation. Under the current market design, BAA operators in an OATT market likely re-dispatch their own network generation to manage congestion on their own system. In addition, the underutilization of the transmission system embedded in the OATT framework reduces the saliency of congestion management. Under EDAM, transparent pricing will reveal the implied economic value of transmission whilst simultaneously dispatch authority in the DAM will be transferred from the BAA level to the regional day-ahead market framework operated by CAISO. A network resource with a high impact causing congestion on a specific flowgate would see low LMPs under EDAM. But the resource owner would have the incentive to self-schedule the resource rather than make it available for EDAM redispatch because doing so with firm rights allows the unit to bypass congestion. [The issue of units being incentivized to not follow dispatch is touched on in Scott Harvey’s EDAM presentation at the 3/28 MSC. Moreover, the problem with “use-or-lose” rights has been faced by other markets transitioning from the OATT framework to a more efficient process with congestion pricing. For instance, PJM had to call a minimum generation emergency in the West during an extreme weather event in August 1997. There is an instructive discussion of these events attached at footnote 30 of a 2022 paper by Scott Harvey and William Hogan (see link): https://scholar.harvard.edu/files/whogan/files/locational_marginal_prices_and_electricity_markets_hogan_and_harvey_paper_101722.pdf].

Of course, the problem noted above is endemic to the Pacificorp promise to provide firm rights holders with a congestion pass though, and only tangentially related to the question of assignment of congestion allocation to BAAs associated with loop flow. However, Appian Way believes that the existing approach both lessens the incentive for uneconomic self-scheduling (because loop flow congestion costs would be assigned to the market where the congestion occurs) and would limit the extent that such behavior results in inappropriate or inequitable cost shifts of congestion allocation away from CAISO. CAISO already struggles with the problem of not being able to fully fund CRR congestion hedges and has initiated a stakeholder process to address this. It would be counterproductive to have the EDAM market design exacerbate this problem. Moreover, it is inequitable for some EDAM members to promise their customers perfect congestion hedges whilst CAISO’s congestion hedging tools are unreliable and possibly subsidizing the firm transmission of neighboring BAAs.

Evolution to transparent congestion pricing will also incentivize market participants to capture valuable congestion paths by scheduling new firm transmission or designating network resources from the lowest cost units exposed to congestion. When this occurs, it may have also the consequence of shifting congestion allocation away from the CAISO market. To ameliorate this concern, it is important that BAAs negotiate allocation of firm flow entitlement rights to protect each entity’s equitable allocation.

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

Appian Way appreciates the good faith effort toward EDAM implementation with upcoming deadlines. We are concerned about the rushed nature of this proceeding and the whipsaw shift in the congestion allocation proposal. If CAISO implements the proposed change, we believe it would make sense for CAISO to simultaneously commit to specific deadlines for moving to a superior congestion allocation approach.

We believe it is possible to have a business solution amongst EDAM members that is based on 1) congestion rights that are point to point; 2) congestion allocations based on fair division of firm flow entitlement rights that market participants agree to and 3) elimination of incentives for EDAM generation resources to not follow economic dispatch. 

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

APS appreciates the opportunity to comment on the EDAM Congestion Revenue Allocation Initiative. Outlined below are the following:

1. EDAM congestion allocation changes are premature without more information about the implementation of the CAISO EDAM section 33.18.3.3 “Transmission Not Available in the Day-Ahead Market”
2. It is unclear why CAISO believes the proposal is a good transitional proposal but not a reasonable consideration as a long-term solution
3. The transitional nature of the proposal does not resolve the long-term risk associated with congestion revenue allocation
4. Proposal divorces market optimization results from financial settlement on all day-ahead schedules
5. Proposal introduces uncertainty around potential cost shift
6. Proposal creates incentive to self-schedule, thereby reducing transmission available to market optimization
7. Proposal is simply a different step down the same wrong path of congestion allocation based on usage rather than long-term firm rights

EDAM congestion allocation changes are premature without more information about the implementation of the CAISO EDAM section 33.18.3.3 “Transmission Not Available in the Day-Ahead Market”

APS respectfully requests CAISO to discuss the range of rights and obligations of an EDAM Entity pursuant to the EDAM tariff to make transmission available or unavailable to the EDAM market. APS recognizes the EDAM Entity would need to enable those rights in their respective OATT; however, as CAISO indicated a misunderstanding in its intent to implement congestion revenue allocation, it is important to clarify all mechanisms available for shielding firm transmission rights from congestion that exist in the EDAM tariff and can be implemented by EDAM Entities today.

It is unclear why CAISO believes the proposal is a good transitional proposal but not a reasonable consideration as a long-term solution.

APS requests CAISO to share what it believes are shortcomings in the proposal that preclude it from being a long-term solution. APS maintains specific concerns but would benefit from CAISO’s understanding of the trade-offs with this proposal.

The transitional nature of the proposal does not resolve the long-term risk associated with congestion revenue allocation

APS has concerns with the transitional nature of the proposal and the fact that it does not resolve long-term risk associated with congestion revenue allocation. In fact, CAISO has defended the existing methodology as reasonable and intentional, which raises concerns about what a future proposal may look like, including potentially reverting back to the existing methodology. APS understands that markets evolve; however, principles should remain consistent. APS respectfully requests CAISO to adopt principles for what a future proposal could look like that more closely mirrors the protections afforded to firm transmission rights holders provided in other markets, including:

• Scheduling and curtailment priority
• Autonomy in use of firm rights, including dynamic use in different energy markets
• Protection against Day-Ahead congestion charges, including exposure to congestion created by parallel flows

Proposal divorces market optimization results from financial settlement on all day-ahead schedules

APS understands the proposal to be that all EDAM congestion charges will be reversed at each generation and load node. While concerns raised in the PAC OATT filing were specific to congestion exposure for holder of firm transmission rights, this proposal would reverse EDAM congestion charges on all schedules cleared in the EDAM market. Effectively, this means the EDAM scheduling run results will be based on LMPs, inclusive of congestion, while the financial settlement of those market awards will be at the Marginal Energy Cost (MEC), thereby divorcing the market solution from the financial settlement of those awards. This could have significant consequences. For example, a generator offering in the EDAM market could get awarded based on being economic relative to the LMP. However, assuming the LMP at that generator node had a positive congestion component of the LMP, the reversal of that congestion through allocations after the market run could create a net settlement for that generator that is below its day-ahead offer. A similar uneconomic settlement could be true of loads economically bid and awarded in EDAM. This creates uncertainty for both the generation owner, who may or may not be affiliated with the EDAM entity, as well as the EDAM entity itself. To mitigate that congestion exposure risk, the EDAM entity may take actions such as reducing the transfer capability to zero, which is not the ideal outcome.  

APS believes this is something that needs to be more clearly analyzed, and therefore requests that CAISO provide additional examples, inclusive of bids, to provide a more comprehensive view of the impact of this proposal.

Proposal introduces uncertainty around potential cost shift depending on how EDAM entities suballocate congestion received from the market operator

It is unclear from the proposal what the amount of cost shift this complete undoing of the DA congestion will introduce, and who will ultimately fund these cost shifts. Because EDAM leaves the suballocation of the congestion revenue up to each individual EDAM entity, and entities will be joining EDAM and updating their OATTs incrementally, there is significant uncertainty on how this proposal will impact transmission customers in the years to come. APS requests that within this proposal, CAISO share best practices for EDAM entities to suballocate the congestion revenue under the proposed design change, to give participants a clearer picture of the range of potential outcomes.

Proposal creates incentive to self-schedule, thereby reducing transmission available to market optimization

This proposal, which allocates congestion revenue based on usage rather than rights, incentives market participants to self-schedule to ensure they receive the maximum amount of congestion revenue allocation. Self-schedules effectively lock in the market to a fixed schedule, which degrades the benefits of an optimized solution in organized markets. This leads to the same overall transmission capacity available for EDAM to optimize as it would if transmission customers were to opt-out their transmission rights from EDAM. Further, the economic outcome of self-schedules within EDAM is inferior to the alternative of allowing transmission customers to offer their rights to other markets for economic optimization. APS requests CAISO to consider alternates that better protect firm transmission rights and their holders as well as the ability for transmission rights holders to use their rights dynamically in other markets.

Proposal is simply a different step down the same wrong path of congestion allocation based on usage rather than long-term firm rights

Unfortunately, the proposal applies the same flawed approach to congestion revenue allocation that the current design applies. Congestion revenue allocation based on usage creates a use-it-or-lose-it incentive for all market participants, which has the potential to significantly degrade the available benefits of a market-wide optimization. APS encourages CAISO to take the approach that other ISOs/RTOs have implemented and explore a proposal that utilizes transmission rights as the basis for allocating internal congestion revenue, as opposed to usage.  

Conclusion

APS appreciates CAISO’s efforts in attempting to address stakeholder concerns raised in the PAC OATT docket through this expedited initiative. Respectfully, APS needs the additional information requested above to develop a better-informed understanding of the proposal. As it stands today, APS is not supportive of the proposal as presented in the paper and the stakeholder meeting and requests CAISO consider an appropriate amount of time to thoughtfully review alternatives.

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

No comment.

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

Please see above.

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

No comment.

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

BAMx[1] appreciates the opportunity to comment on the March 17, 2025 EDAM Congestion Revenue Allocation Issue Paper and the March 28 presentation to the Market Surveillance Committee (MSC). Parties have argued that the FERC-approved EDAM congestion allocation method could result in EDAM participants that have made OATT commitments being unable to fully fund those commitments. CAISO also has commitments to transmission rights holders and CRR rights holders that could be negatively impacted if CAISO does not collect sufficient congestion revenues when constraints within CAISO are binding. The FERC-approved EDAM congestion allocation method is most likely to protect EDAM Balancing Authority Areas (BAA) with binding constraints from shortfalls, but could result in EDAM OATT participants having congestion shortfalls. BAMx believes a permanent solution to address these concerns will need to involve allocating simultaneously feasible CRRs across the EDAM footprint, so that the market dispatch will be delinked from scheduling and bidding incentives, and all EDAM entities will not have an incentive to oversell/over-allocate transmission on their systems. Such an approach cannot be designed, evaluated and implemented prior to the planned EDAM go-live in 2026, so an initial transitional approach needs to be implemented.

[1] BAMx consists of City of Palo Alto Utilities and City of Santa Clara, Silicon Valley Power.

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

The FERC-approved EDAM congestion allocation method allocates congestion revenues overall EDAM BAAs due to parallel flows over a constraint within a BAA to the BAA responsible for managing the constraint. This method was adopted in the Western Energy Imbalance Market (WEIM or WEM) to discourage parties from submitting infeasible base schedules while being held harmless from the congestion those schedules caused. It appears that in some EDAM dispatch scenarios, the FERC-approved EDAM congestion allocation approach could result in the BAA with the constraint being allocated more congestion revenues than the BAA needs to meet its commitments to load, generation, and transmission rights holders.

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

The CAISO alternative approach to EDAM congestion allocation (CAISO Alternative) goes too far in addressing the concerns of the OATT BAAs, because it fails to adequately account for congestion exposure driven by parallel flows for the BAA with the binding constraint.

The table below builds off of the CAISO March 28 presentation to the MSC. In the prevailing flow example[1], CAISO shows that the FERC-approved approach results in BAA-A being allocated more congestion revenues than the congestion exposure created by the loads and resources within BAA-A. The prevailing flow example suggests that the binding constraint in BAA-A has a 4,000 MW limit, while BAA-A only collects congestion revenues from 3,800 MW of flows across the binding constraint. BAA-A has unrecovered congestion exposure created by 200 MW of parallel flows from other BAAs on the binding constraint(s) within BAA-A of $6,200 [=200 MW x ($21/MW+$10/MW)]. The FERC-Approved approach would result in BAA-A being allocated $2,400 from BAA-B, $4,000 from BAA-C and $4,000 from BAA-D, for a total of $10,400. This amount exceeds the $6,200 of parallel flow-related costs imposed on BAA-A by the market dispatch of the resources and loads in the other BAAs. BAA-C would not have the $2,000 in congestion revenues needed to fund the 100 MW of OATT transmission affected by congestion. Similarly, BAA-B would not have the $600 needed to fund the 100 MW of OATT transmission affected by the congestion.

In contrast, the CAISO Alternative EDAM congestion allocation approach would not allocate congestion revenues to the BAA with the binding constraint (BAA-A), instead, the BAAs with loads and resources impacting the constraint would retain all of the associated congested revenues. This would leave BAA-A with a $6,200 shortfall, while providing BAA-B with a $1,800 surplus relative to its OATT transmission commitments ($2,400 - $600), BAA-C with a $2,000 surplus relative to its OATT transmission commitments ($4,000 - $2,000) and BAA-D with a $4,000 surplus relative to its OATT transmission commitments ($4,000 - $0).

BAMx believes that a more equitable approach would be to allocate any unrecovered congestion exposure created by parallel flows over the binding constraints in proportion to each BAA’s contribution to the parallel flows. Thus, BAA-B would be responsible for $2,400/($2,400+$4,000+$4,000) x $6,200 = $1,431, BAA-C would be responsible for ($4,000/$10,400) x $6,200 = $2,385 and BAA-D would be responsible for ($4,000/$10,400) x $6,200  = $2,385.  Note that BAA-B would have sufficient revenues to fund their OATT congestion exposure of $600, while BAA-C would have a shortfall of $385 (=$4,000 - $2,385 - $2,000). Table 1 illustrates our proposed approach to calculating a revenue offset using the MSC prevailing flow example shown in Figure 1.

Figure 1: March 28 MSC Prevailing Flow Market Award Example[2]

Table 1: BAMx Alternative Offset Calculation for MSC Prevailing Flow Example to address $6,200 in unrecovered parallel flow impacts on BAA-A[3]

In the MSC Counterflow example shown in Figure 2, BAA-A does not have any unrecovered congestion exposure created by the parallel flows over the binding constraint. So, no reallocation of congestion revenues would take place. Therefore, in this scenario, the CAISO and BAMx Alternative approaches would result in identical congestion allocation.  

Figure 2: March 28 MSC Counterflow Market Award Example[4]

BAMx believes that its alternative proposal (BAMx Alternative) should be able to be implemented prior to go-live, since all of the elements needed to calculate and distribute the congestion revenues are being calculated by the market model and the allocation determinants are readily identifiable.

[1] California Independent System Operator, Market Surveillance Committee, “Extended Day-Ahead Market (EDAM)

Congestion Revenue Allocation Discussion,” March 28, 2025, pp.15-16.

[2] California Independent System Operator, Market Surveillance Committee, “Extended Day-Ahead Market (EDAM)

Congestion Revenue Allocation Discussion,” March 28, 2025, pp.15-16.

[3] Individual values may not sum up to column totals due to rounding. 

[4] California Independent System Operator, Market Surveillance Committee, “Extended Day-Ahead Market (EDAM)

Congestion Revenue Allocation Discussion,” March 28, 2025, pp.17-18.

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

If the BAMx Alternative can’t be implemented prior to EDAM go-live, BAMx suggests that half of the congestion revenues could be allocated using the FERC-Approved approach and the remaining half could be allocated using the CAISO Alternative approach during the transition to the BAMx Alternative that would be implemented within the first year of EDAM go-live. On a parallel track, Market Participants could begin work on a viable long-term CRR-based approach in 2025 and 2026.

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

Bonneville appreciates the opportunity to provide comments and offers the following thoughts and feedback on the EDAM Congestion Rent Allocation Issue Paper.

Bonneville sees the merits in re-evaluating the congestion revenue allocation methodology, especially given the significant level of stakeholder concern raised over the topic. Bonneville believes that changes to the current design could help resolve the issues of congestion revenue allocation from parallel flows but have concerns over the aggressive timelines presented by CAISO. While Bonneville understands the desire to find an expeditious resolution, there are legitimate concerns about a hasty solution. Stakeholders and CAISO staff must have sufficient time to work through this complex issue and a hurried process may result in unintended consequences that could be undesirable.

Bonneville agrees that the issue paper appropriately framed the problem, explained the current allocation methodology, and provided a potential solution. Bonneville found the paper helpful in educating stakeholders to critically evaluate both the current and alternative congestion rent allocation methodologies.  Bonneville is appreciative of the examples provided in the paper.  The examples described both the concepts behind the need for a modification and demonstrated the associated differences in settlement allocations for EDAM BAs. This allows stakeholders to see where the example congestion occurred and how the congestion revenue is allocated under each methodology.

Bonneville has both loads and generation located in BAAs that have signed EDAM implementation agreements or signaled strong leanings toward EDAM.  These loads are primarily served via firm network (NT), point to point (PTP) transmission reservations, legacy rights, or some combination of all three.  Because of the exposure of these resources and loads to EDAM design, Bonneville expressed concern over the issue of allocating congestion rent resulting from parallel flows. Bonneville is particularly concerned about equitable treatment between both NT and PTP customers.  On first review, the proposed revision to the congestion rent allocation methodology appears to afford stakeholders an improved financial hedge for firm transmission rights. However, we remain concerned that it would be subject to variation depending on how the EDAM BAAs ultimately proposes to distribute congestion rents.  Beyond the issue of EDAM BAA sub-allocation, it appears that the newly proposed design may result in unintended consequences or cost-shifts between BAAs that may not align with the initial intent of the proposal. In particular, the stakeholder group should further discuss the example regarding counterflow in the appendix and continue to discuss more complex examples to better understand the impact of the proposed design change.  Bonneville requests additional time for stakeholders to consider what issues may arise from both the EDAM allocation design and how BAAs allocating congestion revenue differently will impact firm rights holders.

Bonneville noted CAISO’s characterization of the proposed resolution in the issue paper as “transitional.”   Bonneville understands CAISO’s desire to address this issue expediently and commends the desire to achieve a resolution with an equitable structure.  However, we have concerns regarding the longer-term evolution of the design.  Specifically, the current proposal is very limited in scope and the expedited process has not allowed for developing principles or metrics that would provide stakeholders clarity on what level of issue would flag further refinement of methodologies arising from this transitional approach. Bonneville would like CAISO to develop a long-term solution based on a collaborative stakeholder effort focused on long-term changes to the design. Specifically, considerations of 1) how the BAA suballocation methodology can or should align incentives across the footprint, 2) if this proposal should be considered to apply in WEIM, 3) what potentially new incentives are created by this methodology, 4) a longer-term solution that would balance the needs of existing OATT frameworks in the west, and 5) what potential impacts the design may have on the value of firm rights. Bonneville understands that much of this will be predicated on additional data and experience. Bonneville advocates for as much transparency and collaboration with stakeholders as possible throughout the evolution of this design.

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

Bonneville has concerns regarding the current allocation of congestion rent for parallel flow in neighboring BAAs as described in section IV.   Bonneville agrees that the impacts of the EDAM congestion rent allocation methodology may have been inadvertently overlooked by stakeholders during the EDAM design process.  If left unchanged, the settlements resulting from parallel flows in EDAM neighboring BAA’s can result in firm transmission rights exposed to congestion charges without the ability of the rights holders in these neighboring BAAs to recover the associated revenue. 

Bonneville appreciates CAISO’s explanation of the current design with detailed examples in section IV of the issue paper.  Section IV of the issue paper clearly outlines this issue with simplified examples that illustrate how parallel flow congestion occurs and the associated calculations for settlements. It was useful to see the examples in section IV utilize Power Transfer Distribution Factors (PTDF) to calculate the congestion values. The table allowed stakeholders to understand the congestion calculation and see the dollars for congestion rent allocation at each generator, load, and transfer point.  

Based on the examples presented and the issues raised throughout the PacifiCorp protests, Bonneville has significant concerns that if the congestion rent allocation design detailed in section IV is maintained, it will continue to expose firm transmission rights holders to circumstances where they must pay congestion but cannot sufficiently hedge congestion risk. 

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

Bonneville offers the following feedback to CAISO regarding section V and the proposed modification to EDAM congestion rent allocation.   

On first review, the proposed design appears to have merits in attempting to resolve the parallel flow congestion allocation issue. However, Bonneville is concerned that this solution may result in unintended consequences or inappropriate cost shifts across the EDAM and CAISO footprint. Without further time to evaluate the issue, it’s difficult to state a position with a high-degree confidence.

Bonneville is a firm transmission rights holder in several BAAs that have signed implementation agreements or indicated a strong preference for EDAM.  Bonneville is seeking a solution that insulates transmission rights holders from congestion rent exposure.  This proposed modification appears to improve the financial hedge for the load or transmission contract holder in the BAA where the congestion revenue accrues. But it also appears possible that the design may result in unintended consequences or cost-shifts between BAAs that may not align with the initial intent of the proposal.  

CAISO proposes limiting this modification to the day-ahead market and has termed these modifications as transitional.  Bonneville recognizes that the EDAM design is novel and understands that future modifications to the congestion revenue allocation may be necessary. As part of this evolution, Bonneville requests that CAISO consider what future evolutions may mean for participants in the West. Particularly, there are unique aspects of the West regarding OATT rights and the needs of TSP that would need to be considered, particularly as the CAISO may consider the future use of FTR and CRR constructs, which may implicate Section 1235 of the Energy Policy Act of 2005, for EDAM at a future date. 

Bonneville believes that additional transparency is needed around the designation of the solution as transitional.  For example, Bonneville would like CAISO to clearly lay out how this transitional measure will be monitored.  CAISO needs to state the frequency at which stakeholders will be informed regarding the performance of this measure.  Bonneville also requests that CAISO identify any triggers around the performance of this transitional solution that would cause the reopening of this stakeholder process following implementation and go-live for EDAM. 

CAISO further indicates that the proposed EDAM congestion rent allocation modifications will apply solely to day-ahead and not to real-time markets.   Bonneville believes that at this point in time, this is an appropriate approach. Bonneville would be interested in CAISO considering if it would be appropriate to extend whatever changes may be ultimately adopted to WEIM, as part of future stakeholder efforts. In particular, it’s traditionally believed that alignment in market design from the day-ahead through to real-time is ideal to ensure consistent incentives across time, therefore this could be an appropriate change to WEIM.   

Bonneville does request that CAISO clarify if there is an intention to consider applying this congestion rent allocation to WEIM should it perform effectively in the day-ahead market and if the market design is appropriate. 

The proposed congestion rent allocation modifications are being made in a highly expedited fashion and without data, given that EDAM is not yet live. Bonneville understands the desire to move quickly, given EDAM implementation timelines and workloads. But Bonneville strongly requests at least one additional stakeholder meeting and/or comment period to unpack these complex issues and understand what additional issues could arise from implementing the proposed alternative.

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

Bonneville would like to offer the following feedback on the issue paper and stakeholder materials. 

Bonneville appreciates CAISO’s launching an expedited stakeholder process to address parallel flow congestion rent allocation.   Bonneville has noted that this process is on an aggressive timeline and is intended to conclude with a Board action near the end of May.   This stakeholder process would start and finish in approximately 60 days.  Bonneville is concerned that this proposed timeline affords stakeholders only one opportunity to comment on this initiative.  Bonneville suggests that CAISO offer further stakeholder engagement and comment windows if there is divided stakeholder support for the solution or if there are further proposed modifications to the congestion rent allocation method. Bonneville highly recommends the use of a comment period for the draft proposal and would encourage the use of indicative voting for stakeholders at that point.

Bonneville found the examples utilized throughout the paper and the stakeholder call to be valuable. In particular, the examples shown in the appendix, with detailed transactions and settlements impacts for allocation under prevailing and counter flows were very illustrative. Bonneville suggests that CAISO consider augmenting the issue paper or providing additional examples, in the same style as those presented in the appendix, at the next stakeholder session.  Examples that explore the following scenarios would be quite illustrative:

• A wheel-through with prevailing and counter flow.
• Transfer Revenue and congestion revenue impacts in one example, potentially highlighting any complexities this may present
• A transaction across the EDAM BAA with a non-EDAM BAA separating the other BAs (for example if BAA C in the appendix were a non-EDAM entity.

Lastly, Bonneville would like to ensure that CAISO does not view the issue paper on congestion rent allocation in a silo.   Consideration and awareness should be given to the proposed EDAM entities’ transmission tariffs.  For example, during the stakeholder call, there was a question as to whether these proposed modifications to the congestion rent allocation incent self-scheduling behavior in place of economic bidding.  While CAISO responded that the changes do not incentivize self-scheduling, that response failed to encompass PacifiCorp’s proposed congestion rent allocation methodology.  In PacifiCorp’s tariff a two-step allocation process is described for allocating congestion rent. For a stakeholder’s schedule to be included in the primary allocation called step one, PacifiCorp requires the stakeholder to have self-scheduled the transaction(s).

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

The Public Advocates Office at the California Public Utilities Commission (Cal Advocates) provides these comments on the California Independent System Operator Corporation’s (CAISO) Issue Paper: [Extended Day-Ahead Market (EDAM)] Congestion Revenue Allocation, published March 17, 2025 (Issue Paper).[1]  Cal Advocates is an independent ratepayer advocate with a mandate to obtain the lowest possible rates for utility services, consistent with reliable and safe service levels and the state’s environmental goals.^[2]

Cal Advocates recommends the CAISO maintain the current EDAM congestion revenue allocation methodology.  The Federal Energy Regulatory Commission (FERC) has already determined the current congestion revenue allocation methodology to be just and reasonable, and the Issue Paper presents no new facts or analysis that would call the FERC’s approval into question.

Moreover, the CAISO’s stated motivation for the Issue Paper is to address concerns that certain parties have raised in FERC Docket ER25-951.[3]  However, the CAISO has already fully addressed those parties’ arguments in that docket.  Specifically, the CAISO took the following positions:

• FERC found the EDAM congestion revenue allocation methodology just and reasonable;[4]
• FERC found that cost causation principles support the adopted congestion revenue allocation methodology;[5]
• No party filed a request for rehearing of the FERC Order that approved the current EDAM congestion revenue methodology or made a showing of significant changes in circumstances since that FERC Order;[6]
• Parties’ arguments in FERC Docket ER25-951 that PacifiCorp’s transmission customers’ firm transmission purchases insulate them from congestion charges have no basis in FERC precedent;[7]
• Parties’ objections in FERC Docket ER25-951 rely on the premise that the purchase of firm transmission rights on a non-CAISO system grants firm transmission rights across the CAISO’s system, but FERC has already rejected this premise;[8]
• Certain parties’ objections in FERC Docket ER25-951 serve to advance an alternative option that would: (1) be incompatible with EDAM, (2) “front-run” the eventual seams agreement between EDAM and the Southwest Power Pool’s Markets Plus day-ahead market, and (3) accrue to the detriment of EDAM end-use customers;[9]
• To the extent that parties’ objections in FERC Docket ER25-951 reflect those parties’ desires to hedge their congestion risks on the CAISO system, those parties can hedge via the procurement of congestion revenue rights;[10] and
• Any alternative congestion revenue allocation methodology that assigns additional congestion hedges against congestion occurring on the CAISO system without the allocation or procurement of congestion revenue rights would accord hedge recipients “preferential treatment.”[11]

Cal Advocates supports these positions.  The adopted congestion revenue allocation methodology remains just and reasonable, because it reflects cost causation principles.  Meanwhile, the Issue Paper offers no new facts or arguments that undermine the preceding CAISO arguments from the CAISO Answer.  If the CAISO pursues an alternative congestion revenue allocation methodology, the CAISO risks a result that may shift costs to native load;[12] that may front-run the EDAM-Markets Plus seams agreement; and that will require the CAISO to somehow refute its own extensive CAISO Answer in Docket ER25-951 – including all the preceding bulleted arguments – when the CAISO presents the new methodology to FERC for FERC’s approval.  Accordingly, Cal Advocates recommends the CAISO retain the adopted EDAM congestion revenue allocation methodology. 

[1] Available at https://stakeholdercenter.caiso.com/StakeholderInitiatives/Extended-day-ahead-market.

[2] Cal. Pub. Util. Code, § 309.5.

[3] Issue Paper at 2, with reference to PacifiCorp Proposed OATT Amendment, FERC Docket No. ER25-951, in which PacifiCorp seeks FERC approval of PacifiCorp’s conforming tariff changes for PacifiCorp’s EDAM participation.

[4] Motion for Leave to File Answer and Answer of the California Independent System Operator Corporation to Comments, Protests, and Answer (CAISO Answer), FERC Docket No. ER25-951, at 26, 39, and 48.

[5] CAISO Answer, FERC Docket ER25-951, at 27 and 75.  The CAISO Answer further explains that when non-CAISO schedules contribute to CAISO congestion, it is still the CAISO that must address the congestion using CAISO resources, and “it is the CAISO load that bears the burden of the congestion costs” (CAISO Answer, FERC Docket ER25-951, at 7).  Furthermore, Cal Advocates notes that each balancing authority area faces the long-term costs for transmission planning and development associated with the relief of its internal congestion, regardless of contributions to that congestion.  The CAISO further faces any transmission planning and development costs for the long-term feasibility of congestion revenue rights.

[6] CAISO Answer, FERC Docket ER25-951, at 27, 39, and 76.

[7] CAISO Answer, FERC Docket ER25-951, at 28 and 37.

[8] CAISO Answer, FERC Docket ER25-951, at 78-80.

[9] CAISO Answer, FERC Docket ER25-951, at 9-10 and 69.  While the CAISO Answer does not define the phrase, “front-run,” the phrase colloquially refers to a party’s inappropriate use of advance information or leverage to exploit or pre-determine future results.  For example, any FERC resolution in Docket ER25-951 of issues that the eventual seams agreement will address would reduce the CAISO’s ability to negotiate on those same issues.

[10] CAISO Answer, FERC Docket ER25-951, at 54.

[11] CAISO Answer, FERC Docket ER25-951, at 54.

[12] Cal Advocates is concerned that the approval of an alternative methodology results in the free or subsidized allocation of congestion hedges to non-CAISO entities and may increase the revenue shortfall for congestion revenue rights. Such results may be at odds with the CAISO’s obligation to conduct its operations in a manner that is “consistent with the interests of the people of the state” of California (Pub. Util. Code § 345.5, subd. (a)). 

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

See response to Question 1.

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

See response to Question 1.

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

If the proposal is adopted, Cal Advocates requests that CAISO monitor and report on the impact to California ratepayers.

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

Comments on Extended Day-Ahead Market Congestion Revenue Allocation

Issue Paper - March 17, 2025

Department of Market Monitoring

April 7, 2025

Summary

The Department of Market Monitoring (DMM) appreciates the opportunity to comment on the Extended Day-Ahead Market Congestion Revenue Allocation Issue Paper.[1] The current FERC approved EDAM design would allocate congestion revenue to the balancing authority area (BAA) where the transmission constraint creating the congestion is located. The issue paper presents a potential alternative congestion rent allocation method to use on a transitional basis. The alternative would allocate the rent back to the BAAs where schedules creating flows (or counterflows) over the constraint are located.

Based on the EDAM stakeholder process, DMM understood that the rent allocation in the approved EDAM design was intended to be transitional in nature as well. Developing an allocation that is efficient and equitable is very complex. EDAM was meant to begin with a workable allocation while stakeholders would continue to develop an allocation for the long-term.

The currently approved EDAM congestion rent allocation is a reasonable design based on consensus in the stakeholder process. DMM agrees with the key points made in the PacifiCorp and CAISO answer to protests. The approved EDAM allocation is not a design flaw, and the issues raised in recent protests and discussions were known during the policy development. Under this approach, EDAM BAAs would not have sufficient revenue to provide transmission customers a hedge against congestion charges that their schedules create in other BAAs. 

Under the alternative allocation approach being considered in this stakeholder process, a BAA will not pay for congestion caused by EDAM schedules in its BAA, nor will it receive congestion rents from EDAM schedules in other BAAs that create flows over the BAA’s transmission. Under this approach, EDAM BAAs would receive congestion revenues that can be allocated to their transmission customers to provide a hedge against congestion charges that their schedules create in other BAAs.   

The alternative allocation is also a reasonable transitional measure. While it is possible the alternative allocation could reduce the benefits from managing congestion over an expanded EDAM footprint, there will still be significant benefits from an expanded market relative to the current pre-EDAM market.

Currently, in the CAISO day-ahead market, modeled flows on CAISO transmission coming from non-CAISO BAA schedules face no congestion charges and no rent is collected. Therefore, the alternative allocation is in principle no different than how all non-CAISO market schedules are settled in the current pre-EDAM market. This alternative is also the same as how non-EDAM flows will be settled under EDAM.   

The differences from using the alternative allocation rather than the currently approved allocation in terms of settlements and market performance can only be accurately assessed once EDAM is implemented. Regardless of what approach is adopted initially, the ISO should closely assess the differences, keep stakeholders informed, and be prepared to develop other transitional and longer-term options. As noted in numerous filings on this issue, the most efficient longer-term approach would be one that is decoupled from scheduling. Long-term options may include, for example, flow entitlements and/or financial approaches.

Comments

There is now a voluminous record of background information and opinions on the issues involved in this stakeholder process. In these comments, we discuss and compare three market design scenarios: (1) the current pre-EDAM market, (2) the approved EDAM design, and (3) the alternative allocation. We compare these market designs in terms of (A) modeling and management of congestion across BAAs, (B) the charging/collection of congestion rent, and (C) the allocation of rent. Table 1 below summarizes these comparisons.

Modeling and management of transmission flows from outside BAAs

Current pre-EDAM market

Currently, the CAISO day-ahead market model estimates transmission flows from non-CAISO BAAs. The ISO creates estimated load and generation schedules for non-CAISO BAAs, generally at an aggregated load and an aggregate generation node for each BAA.[2]  The ISO then uses a full network model to calculate flows from the estimated schedules over the transmission system, including within the CAISO BAA. Under this current design, the estimated schedules outside the CAISO cannot be re-dispatched to manage congestion over CAISO transmission. The flows created by these estimated schedules outside the CAISO footprint reduce the available transmission in the day-ahead market in the direction in which flows are projected to occur.

Approved EDAM design

Under the approved EDAM design, flows from schedules in non-EDAM BAAs over EDAM BAA transmission will continue to be estimated in the same manner as they currently are for BAAs outside the CAISO day-ahead market over CAISO transmission. Under EDAM, however, flows from one EDAM BAA on another BAA’s transmission will be calculated from the actual nodal market schedules – rather than the more aggregated estimates currently used in the full network model. This improved information should enable the ISO to more accurately model the impact of schedules within one EDAM BAA on all other EDAM BAAs.

Under EDAM, the day-ahead market software will also be able to dispatch schedules in all EDAM BAAs to manage congestion. By increasing the economically dispatchable resources in the market, EDAM will allow for a more efficient congestion management and use of the transmission system.

Alternative allocation approach

The alternative allocation approach under discussion would not change the potential improvement in modeling of flows, or the ability of the EDAM software to dispatch across BAAs to manage congestion relative to the approved EDAM design. As noted above, these features are expected to provide significant improvements in modeling and management of congestion throughout EDAM. To the extent that the alternative allocation facilitates open access transmission tariff (OATT) provisions in EDAM BAAs that incentivize self-scheduling instead of market bids, as described later in these comments, the congestion management and market benefits of EDAM could be reduced. But there are still likely to be benefits from moving to EDAM compared to the pre-EDAM day-ahead market. 

Congestion charges and rent collection

Current pre-EDAM market

All non-CAISO schedules, including schedules from the long-term rights holders, are currently not charged for flows over CAISO transmission. That is, the non-CAISO schedules are completely hedged from congestion costs on the CAISO transmission system. Similarly, CAISO schedules are not charged for day-ahead flows they create on non-CAISO BAA transmission.

Currently, the modeled flows on CAISO constraints from other BAAs are not settled, and no congestion rent is collected from the schedules in other BAAs creating these modeled flows. The transmission capacity taken up by these non-settled modeled flows reduces the amount of transmission revenues collected – and therefore the congestion rents paid out to load serving entities that pay for this transmission through the transmission access charge and other CRR holders.

The impact of this loss in congestion revenue depends on how much they affect the transmission prices. If the non-CAISO BAA modeled flows reduce the settled market flows below the implied CRR flows, they would increase offset charges to CRRs reducing the payments to CRR holders (holding prices constant).[3]

Approved EDAM design

Under the approved EDAM design, flows from one EDAM BAA over another EDAM BAA’s transmission will be settled, and congestion rent will be collected from them. The rent would be allocated to the BAA where the transmission generating the rent is located.

For CAISO, flows from schedules in other EDAM BAAs on CAISO constraints would increase congestion rent that could be used to pay CRRs, or enter the CRR balancing account (which is refunded to load serving entities). For modeled flows from non-EDAM BAAs on EDAM BAA transmission, the current reduction in available transmission without rent collection would continue as it does in the current pre-EDAM market.

All non-CAISO EDAM BAA schedules would pay for congestion they create in other EDAM BAAs. Under BAA OATT provisions, parties who hold long-term firm rights may not be subject to transmission charges in their BAA, but subject to transmission charges in CAISO or other EDAM BAAs. Therefore, these rights holders may receive a partial congestion hedge.  

CAISO schedules creating flows on non-CAISO EDAM BAA transmission would be charged and any rent would be allocated to the non-CAISO EDAM BAA. This rent would be allocated per the BAAs OATT. 

Alternative allocation

Under the alternative allocation, flows from one EDAM BAA over another EDAM BAA’s transmission would still be settled and congestion rent collected. The rent would be allocated to the BAA where the schedules creating the flows that generate the rent are located.

For CAISO, rent from other EDAM BAA schedules over CAISO transmission will be allocated to that BAA and will not be available to pay CRRs or enter the CRR balancing account. This is the same as not collecting rent from modeled flows from non-CAISO BAAs, as is currently done in the pre-EDAM market. However, rent from CAISO schedules flowing over non-CAISO EDAM BAAs will be allocated to the CAISO CRR balancing account.

All non-CAISO EDAM BAA schedules would pay for flows over CAISO transmission. We assume any rent allocated to the BAA would be allocated to load pro-rata after long-term rights holders are paid, but this is subject to the BAA’s OATT. Long-term rights holders would not be subject to congestion charges from transmission in any BAA and would receive a full congestion hedge, as they do in the current pre-EDAM market. 

Table 1. Comparison of pre-EDAM market, approved EDAM design, and alternative allocation approach

Other Comments

Self-scheduling requirements

Under the current (pre-EDAM) market design, schedules in non-CAISO BAAs submitted in the day-ahead timeframe are not subject to congestion charges from constraints within their BAA, or any other BAA. Under the approved EDAM design and the alternative being considered, the OATT provisions of different EDAM BAAs may require transmission holders in EDAM to be self-scheduled or meet other requirements in order to avoid being subjected to congestion charges under EDAM. However, there is no part of the approved EDAM design other than existing transmission contract/transmission ownership rights (ETC/TORs) for pre-OATT legacy rights that requires self-scheduling of transmission rights to receive a congestion hedge. Any congestion hedge from self-scheduling under the approved EDAM design comes from the OATTs of the transmission providers. The EDAM design only establishes different scheduling priorities for self-scheduled firm OATT rights, which would stay the same under the alternative proposal.

To the extent that the OATTs of EDAM BAAs link hedging of EDAM congestion costs for transmission rights holders to self-scheduling, the potential inefficiencies from self-scheduling may be higher under the alternative than the approved EDAM design. This is because under the alternative approach under consideration, EDAM BAAs may offer a greater hedge against congestion charges that may be offered under the currently approved EDAM design. 

However, as described above, this potential inefficiency exists under the ISO’s current market design which has no option for these schedules to participate economically in the day-ahead market. This potential inefficiency has been raised in prior discussions and is the type of issue that a long-term allocation design would seek to address.

Counterflow effects

As the ISO makes clear in their paper and examples of the alternative allocation, if schedules in one EDAM BAA on net create counterflow over another EDAM BAAs transmission, the payments for providing that counterflow will be taken back and paid to the other BAA. That is, the EDAM BAA with the schedules creating the counterflow will be charged rather than allocated rent.

This creates the possibility that an EDAM BAA could be charged if on net schedules were counterflow, but may have to pay long-term rights holders who had schedules creating flows. We do not know how likely such a scenario might be.

Effect of slack bus on alternative allocation

The alternative allocation depends on the congestion costs as calculated from the reference slack bus. Changing the slack bus does not change the LMPs but can change the portion of the locational marginal price (LMP) considered congestion. The difference in LMPs, and therefore the difference in congestion components, is always the same.

To the extent generation and load offset in a BAA, the slack bus will not affect the alternative allocation. To the extent there are EDAM transfers, and generation and load do not fully offset, the choice of slack bus does affect the alternative allocation.

The market uses a load distributed slack, so each load node is part of the reference. This seems to be a reasonable choice for the alternative allocation, and it is unclear what criteria would lead to choosing a different slack bus.

[1] Extended Day Ahead Market Congestion Revenue Allocation Issue Paper, California ISO, March 17, 2025:  https://stakeholdercenter.caiso.com/InitiativeDocuments/Issue-Paper-Extended-Day-Ahead-Market-Congestion-Revenue-Allocation-Mar-17-2025.pdf

[2] It appears that for the PacifiCorp BAAs, the ISO might be using a more granular schedule estimated below the ELAP/DGAP aggregate node level.

[3] The modeling could also show counterflows. In general, when flows are discussed in these comments, keep in mind that there are also cases where they could be counterflow.

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

Please see the PDF attached below the final question for DMM's fully formatted complete set of comments. For the reader's convenience, the complete text of the comments is pasted in response to #1, but there may be some formatting errors.

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

Please see the PDF attached below the final question for DMM's fully formatted complete set of comments. For the reader's convenience, the complete text of the comments is pasted in response to #1, but there may be some formatting errors.

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

Please see the PDF attached below the final question for DMM's fully formatted complete set of comments. For the reader's convenience, the complete text of the comments is pasted in response to #1, but there may be some formatting errors.

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

Calpine appreciates the CAISO’s efforts to quickly consider the important matter of reasonably allocating congestion rents within the EDAM market.  Calpine has long understood the challenges of overlaying a market construct on the existing OATT point-to-point (PTP) framework.  We appreciate the CAISO’s candor in discussing the cross-BAA allocation of congestion rents and offering a transitional alternative. 

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

As a holder of substantial firm, long-term, point-to-point rights in western markets, Calpine has a vested interest in preserving the value of those rights, which includes both scheduling priority and hedge value.  For many years, Calpine has had the ability to reliably move power across the west to serve wholesale and retail end-users because the firm rights it has procured provide delivery confidence and financial assurance. 

Certain provisions of EDAM have limited the value of those scheduling rights and as highlighted recently, eroded the hedge value of those rights.  Specifically, the EDAM design allocates congestion rents to the BAA where the constraint binds, which is not necessarily the BAA where the rents are collected.  This cross-BAA allocation could result in firm, PTP rights holders – even when restrictively self-scheduled – being exposed to congestion costs that are not hedgeable and certainly not routine in today’s OATT world. This exposure could diminish the value of, and hence, the demand for firm rights. 

Though stakeholders can debate the precise extent of harm that this cross-BAA allocation will create, there can be no debate that the change will impact markets.  The nature of the harm will depend on the location of rights on the system; it could be very large during edge – meaning, uncommon but possible – circumstances. 

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

Calpine is encouraged by the CAISO’s proposal to change the EDAM congestion allocation on a transitional basis.  This proposal, which leaves congestion rents in the BAA where they are assessed, gives firm, PTP holders a better chance at a reasonable hedge for the new EDAM congestion exposure. With this support however, in the near term, we encourage the CAISO to continue to explore the potential intended and unintended consequences of this approach. 

Calpine supports this change during a transition period while data can be gathered and experience gained.  While the duration of the transition period might necessarily be undetermined in advance, we encourage the CAISO to review the results of EDAM congestion allocation shortly after go-live and regularly during operation. Calpine recognizes that it could take many months, perhaps years of data to illuminate benefits and costs of the proposal and consider alternatives.  As each EDAM entity goes-live, congestion exposure may change, seams issues between the CAISO, EDAM, M+ and non-participating entities will be resolved, scheduling practices modified and firm transmission service obligations changed. At the outside, one could envision a transition that lasts until simultaneous feasibility tests support the availability of tradable financial rights.

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

The meeting materials were very helpful in explaining the real risks of cross-BAA allocations.  Calpine supports the issuance of an accelerated Issue Paper that critically evaluates the tradeoffs of this alternative. 

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

The current, FERC-approved allocation of day-ahead congestion revenue among EDAM balancing authority areas (BAAs) follows cost causation. This allocation methodology acknowledges that parallel flows are an unavoidable feature of an interconnected transmission network and directs the congestion revenue arising from power flows scheduled within or through one BAA to the BAA where their flows exacerbated power flows and caused congestion.  The alternative approach to EDAM congestion revenue allocation breaks this causation linkage, simply returning congestion revenue back to the BAA where power was scheduled, instead of where the congestion occurred.

If the CAISO implements its proposed alternative, it should explicitly require that it be on a temporary basis while it transitions to a permanent allocation of congestion revenue based on financial transmission rights throughout EDAM.  The CAISO should not rush to a resolution on this important topic.  The CAISO and stakeholders should take the time necessary to consider other temporary alternatives and better understand the potential issues with the alternative proposal. 

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

The current, FERC-approved EDAM design allocates congestion revenues to the EDAM balancing authority area (BAA) in which a constraint binds and congestion occurs.  The Issue Paper accurately explains, “[t]his design follows cost-causation principles under which congestion revenues flow to the area where the constraint is binding,” because this “balancing area bears the costs and actions to manage the effects of that transmission constraint.”  More fundamentally, because all power flows follow the natural path of least resistance, in an interconnected transmission network, power scheduled to flow within or through a particular balancing area will in fact flow in part along parallel paths in neighboring balancing areas.  These parallel flows in a neighboring balancing area consume transmission capacity, contributing to congestion in that balancing area.  The current EDAM congestion revenue allocation acknowledges this fact and allocates congestion costs to all EDAM flows for the congestion they cause, including in neighboring EDAM balancing areas. 

Right now, prior to the implementation of EDAM, parallel flows on the CAISO transmission system arising from power flows scheduled outside of the CAISO BAA are essentially unmodeled and do not pay for the congestion they cause within the CAISO.  Unscheduled parallel flows consume transmission capacity and contribute to congestion within the CAISO BAA without paying for their use of the system and their resulting contribution to congestion.  These unscheduled parallel flows (often referred to as “loop flows”) are a major source of congestion revenue inadequacy in the CAISO and have been for years.  Meanwhile, CAISO market participants effectively subsidize transmission customers in neighboring systems by absorbing this congestion revenue inadequacy.  

The current, FERC-approved congestion revenue allocation among EDAM BAAs will end this subsidy, at least for power flows scheduled within other EDAM BAAs.  Similarly, power flows scheduled within the CAISO BAA will need to pay for the congestion caused by any resulting parallel flows in other EDAM BAAs.  So, the current EDAM design is not a one-sided transfer of congestion revenues to the CAISO, as some stakeholders have portrayed it.      

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

In contrast, the alternative approach is inconsistent with cost causation.  Congestion revenue collected in one balancing authority area (BAA) would not be allocated to the BAA in which the constraints resulting in the congestion actually bound.  Instead, congestion revenue would remain in the BAA where the power flow was scheduled.  This is true for all EDAM BAAs, including the CAISO BAA. The CAISO, however, has chronic congestion revenue inadequacy due in part to unscheduled parallel flows resulting from power flows scheduled outside its BAA.  Under the proposed alternative allocation, EDAM BAAs outside the CAISO BAA will retain congestion revenues that they collect even when the congestion was in fact caused by parallel power flows on binding constraints in the CAISO BAA, at the expense of CAISO market participants.  In this regard, the alternative approach is similar to the status quo where parallel flows on the CAISO system do not pay for their use of the system and the congestion that they cause. 

In addition, the alternative revenue allocation proposal is inconsistent with how real-time WEIM congestion revenues are allocated today across WEIM balancing authority areas. This inconsistent treatment of congestion revenue allocation between day-ahead and real-time markets could have negative consequences that should be adequately discussed and explored by stakeholders.

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

The Transitional Nature of the Alternative Allocation Should be Explicit 

The CAISO consistently refers to its proposed alternative allocation as transitional and makes it clear when communicating with stakeholders that it is meant to be a temporary measure while the CAISO and EDAM stakeholders develop a long-term solution.  The temporary, transitional nature of the CAISO’s initial EDAM congestion revenue allocation method should be explicitly stated in any EDAM OATT amendment that results from the current stakeholder process.  The OATT should provide a concrete, unambiguous sunset provision defining when the transitional measure must end or at least when the CAISO and EDAM stakeholders must take specified practical steps toward a longer-term solution, if they have not done so already.  For example, a date certain, a specified period of time after the initial implementation of EDAM in the first balancing authority area (BAA) outside of the CAISO, or the implementation of EDAM by a certain number of BAAs. 

An explicit commitment to reevaluate congestion allocation and develop a long-term solution is necessary, because EDAM BAAs outside the CAISO may have little or no incentive to return to the issue once the CAISO implements its proposed alternative.  The alternative congestion revenue allocation would shelter other EDAM BAAs from the congestion costs parallel flows on their systems cause in the CAISO BAA, essentially giving them the right to continue to flow power and cause congestion on the CAISO BAA free of charge. 

Furthermore, as Dr. Scott Harvey recently suggested at a Market Surveillance Committee meeting: “EDAM unit commitment resulting from self-schedules incented by congestion rent allocation rules may be inefficient.”[1] According to Dr. Harvey, “[i]f low cost resources are not committed in EDAM because they are displaced by self-scheduling of higher cost resources, the high resources self-scheduled in EDAM may have to be dispatched in real-time.”[2]  Physical firm transmission customers appear to have a use-it-or-lose-it incentive to flow power from their own self-scheduled resources under the alternative congestion revenue proposal, even when their resource is uneconomic, which may contribute to congestion across the EDAM footprint.  The CAISO and stakeholders should better understand this potential dynamic before changing the allocation of congestion revenue among EDAM BAAs.    

Also, there is a concern that not all firm transmission rights may be simultaneously feasible under various scenarios of system topology.  If firm transmission rights are not simultaneously feasible, inefficient self-schedules would create revenue inadequacies, the cost of which would likely be shifted to others via uplift, and there is reason to believe not all flows will be simultaneously feasible in EDAM BAAs outside the CAISO.  As a representative from Idaho Power explained during the CAISO meeting on March 24, 2025, transmission owners outside of the CAISO sell firm transmission capacity rights without regard to feasibility on neighboring systems.  Furthermore, it may not be possible for all physical firm transmission rights holders on a single transmission owner’s system to utilize their maximum contractual volume at the same time.  In order to mitigate shortfalls, the CAISO should prevent EDAM BAAs from selling further physical firm transmission rights during the interim period before it can implement a long-term solution based on EDAM-wide simultaneously feasible financial transmission rights.

EDAM-Wide Financial Transmission Rights Are the Best Long-Term Solution

Simultaneously feasible financial transmission rights that span the entire EDAM footprint are the best long-term solution for allocating congestion revenue.  EDAM should build on the experience of every other day-ahead market in the US and provide its market participants with financial transmission rights that are tradeable via centrally clearing auctions.  The availability of financial transmission rights as a source to sink hedge of day-ahead congestion in EDAM would encourage participation in the day-ahead market and address the concerns of those potential EDAM transmission customers seeking to opt-out from the participation in the market.  Currently, in the PacifiCorp EDAM implementation proceeding before FERC, potential EDAM transmission customers are advocating for reliable congestion hedges that account for the contribution of all constraints on power flows between a defined source and defined sink, as well as for the preservation of their firm transmission rights. 

Auction-based markets for financial transmission rights are designed to maximize the simultaneously feasible use of the transmission network while providing a hedge for day-ahead congestion between a defined source and defined sink and with it the financial equivalent of firm transmission service.  Following an allocation of rights to existing transmission customers, ISO/RTOs hold open auctions for residual transmission capacity that cannot be allocated and is otherwise an underutilized and unpriced asset.  Some ISO/RTO market participants are willing to accept counterflow constraint exposure in return for payment of a risk premium, allowing the auction to clear the residual transmission capacity that the allocation process was unable to award.  Open financial transmission rights auctions solve for the combination of paths that maximizes auction revenue while satisfying simultaneous feasibility, reconfiguring the network to its maximum use. Financial transmission rights auctions maximize the efficient, non-discriminatory use of, and open access to, the transmission system.

Unfortunately, at present, while other ISO/RTOs provide an excellent example of auction-based markets for financial transmission rights providing hedges to day-ahead congestion costs, CRRs in the CAISO do not provide a sufficiently reliable hedge to day-ahead congestion costs to act as a ready to use model for an EDAM-wide financial transmission rights product.  Efforts are underway, however, in the CAISO’s CRR Enhancements Working Group initiative to address key shortcomings of the current CRR market.  The CAISO’s CRRs are subject to potentially severe and often unpredictable underfunding due to congestion revenue inadequacy and the manner in which congestion revenue inadequacy is allocated to CRR holders.  As described above, the implementation of EDAM with the current, FERC approved congestion revenue allocation would require EDAM transmission customers to pay for the congestion their parallel flows cause in the CAISO BAA, alleviating, but not eliminating, congestion revenue inadequacy.  The CRR Enhancements Working Group is working to address the sources of congestion revenue inadequacy and its allocation, as well as, developing further enhancements to make CRRs a more useful hedging product for all CAISO market participants.  The congestion revenue allocation issue among EDAM BAAs and the need to implement a long-term solution provides greater urgency to these efforts, so that CAISO CRRs can be adapted to the rest of EDAM in due course. 

The CAISO Should Allow More Time to Consider Transitional Alternatives and the Long-Term Solution

The CAISO is expediting a change to the allocation of day-ahead congestion revenue that will affect transmission customers in the CAISO balancing authority area (BAA) and throughout the West.  The CAISO’s expedited timeline is premised on the need to settle the question of congestion allocation between EDAM BAAs quickly, in order to facilitate FERC approval of PacifiCorp’s currently pending EDAM implementation tariff on a similarly rapid timeline.  FERC, however, recently issued a Deficiency Letter to PacifiCorp focused on other topics.  The CAISO should use this delay in PacfiCorp’s FERC proceeding to more carefully consider the allocation of day-ahead congestion revenue among EDAM BAAs and ensure that stakeholders understand the ramifications of what it and others may propose.

Other transitional alternatives could include limited firm flow entitlements between EDAM BAAs with a requirement to pay for congestion that exceeds certain volumes, similar to the MISO/PJM seam, or a dollar value cap on the amount of congestion impact one BAA can have on another before it must pay for congestion on another BAA, rather than exempting all congestion flows in one BAA caused by flows scheduled in another BAA. 

The CAISO should also use the pause afforded by the PacifiCorp Deficiency Letter to begin to plan for financial transmission rights as the long-term solution for congestion revenue allocation in  EDAM.  The CAISO should engage in stakeholder education, modeling, and most importantly enhancing the CAISO’s CRRs so that they provide a ready to use model for allocating congestion revenues in EDAM. 

[1] See, EDAM Congestion Revenue Allocation, presentation by Scott Harvey, slide 12 (Mar. 28, 2025) available at: https://www.caiso.com/documents/extended-day-ahead-market-congestion-revenue-allocation-harvey-presentation-mar-28-2025.pdf

[2] Id.

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

Idaho Power appreciates CAISO’s responsiveness to concerns that have been raised regarding congestion allocation in EDAM. Idaho Power supports further evaluation of improvements which can be made to the EDAM congestion allocation to provide a better overall congestion “hedge” for transmission customers of EDAM entities utilizing their longer-term firm rights. Idaho Power also recognizes that overlaying a day-ahead market over the traditional OATT framework is something that has not been done and expects that EDAM design elements will evolve as experience in EDAM is gained. Idaho Power cautions CAISO on moving too quickly to create a solution for the parallel flow congestion concern and inadvertently creating a design that could be a worse than the current design.  Idaho Power has concerns with the alternative approach specifically related to the counterflow example that was presented in the issue paper. These concerns prevent Idaho Power from fully supporting the alternative approach reflected in the issue paper.

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

The current EDAM design is the same design Idaho Power has experienced in EIM. It is difficult to know the magnitude the impact of parallel flow congestion in EDAM until EDAM goes live and how significant the issue is to solve without actual performance data. We recognize that parallel flow exists today, it is in fact a function of an interconnected grid. Idaho Power appreciates CAISO’s willingness to see if there is a better congestion allocation method which could be implemented without actual EDAM operational data to address the parallel flow congestion allocation concern expressed in the PacifiCorp OATT FERC docket. 

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

At first, the alternative approach appears to have merit. The concept of allocating the congestion revenues to the balancing authority where the congestion revenue was collected appears make sense assuming that there is always revenue to distribute in all BAA’s. However, when reviewing CAISO’s examples, Idaho Power believes an issue exists that CAISO should look to resolve in this stakeholder process. The issue would be who bears the COST of congestion. Specifically, in Appendix Example 2 in the issue paper, CAISO reflects a case where a generator inside a Balancing Authority is providing generation in a counter-flow solution. That generation inside BAA-C is providing 700MW of generation to other BAAs to assist in relieving the constraint in BAA-A and serve load other BAAs. Under CAISO’s proposal, each BAA is allocated the revenue or cost accrued in their BAA. As the generator in BAA-C was getting paid for 700MW of exports that benefited other BAAs, the cost difference between what the generator is paid and what the load paid in that specific BAA is large. Under the example, the cost difference will be allocated to BAA-C. Customers in BAA-C would be asked to absorb $14,000 of congestion costs, when instead the loads in BAA’s that received the energy (ore benefited from the generation’s export dispatch) should be allocated the costs. Put simply, customers inside BAA-C would have to pay an additional $14,000 so that a generator sitting in that BAA can export to serve and benefit other BAA loads. This appears to be an unreasonable and unacceptable cost shift for the loads inside that exporting BAA. Idaho Power cannot support a proposal in which a BAA’s load customers could see significant cost shifts simply because generation in its BAA is selected to provide counterflow on a constraint in another BAA. Idaho Power encourages CAISO to review this example find an allocation solution in which those that benefit from the counter-flow energy also bear the cost of that action.

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

Idaho Power appreciates the opportunity to participate in this stakeholder process. At this time, Idaho Power does not view the proposed alternative approach to be preferred over the current EDAM design as it appears to unjustly shift costs to load customers of exporting BAAs that are providing counter-flow. However, we encourage CAISO to work with stakeholders to find a solution to that counter-flow issue as the rest of the proposal appears to solve some of the parallel flow concerns.

Idaho Power also requests CAISO explain what data it plans to collect and review to determine if changes to the “transitional” approach should be changed. At a minimum, CAISO should monitor the most frequently binding constraints, what revenue is collected and how it is distributed among BAAs. This information should be provided on some frequency (perhaps quarterly) to participants. It could be monitored and presented in the Market Performance reports and meetings or even reports produced by the Department of Market Monitor. In addition, it might be well served for CAISO to stand up a working group on congestion where data can be presented and discussed by interested stakeholders.

We look forward to continued conversations and working towards a solution that will solve the parallel flow issue, but not create unintended cost shifts to loads held captive in a BAA with exporting generation providing counter-flow to the binding constraint.

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

The Interwest Energy Alliance (Interwest) appreciates the CAISO seeking to implement a targeted change to help address concerns that have been raised as a result of ongoing discussions surrounding EDAM implementation, including those raised in PacifiCorp’s OATT filing. Interwest believes modification to the current congestion revenue allocation approach is necessary and generally supports the proposed alternative approach in the Issue Paper. However, we note that this is a highly complex topic with significant ramifications to CAISO participants, EDAM Entities, and loads and generators across the future EDAM footprint. And while it is imperative that CAISO move quickly to implement the alternative approach to allow it to be in place for EDAM go-live, it will also be critical to continue monitoring the impacts and potential unintended consequences of congestion revenue allocations both before and after EDAM goes live. Interwest hopes that CAISO will continue to provide stakeholders with examples, including additional “real life” examples during market simulation, and that CAISO will provide a transparent forum for ongoing dialog and exploration of congestion revenue allocation issues.

Importantly, we note that there are issues raised in protest to PacifiCorp’s OATT filing that have not yet been addressed or resolved in this stakeholder process. Interwest would first need to review any subsequent filings related to PacifiCorp’s proposed OATT with the FERC before committing to resolving concerns raised in that proceeding.

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

The current approach to congestion revenue allocation is highly problematic in part because firm OATT transmission rights that are scheduled on or before the day-ahead deadline are not offered congestion hedging directly from CAISO. Instead, these customers must rely on the EDAM Entity to provide that congestion hedge/protection to allow them to continue to exercise their transmission rights. As many stakeholders have raised, the current approach to congestion revenue allocation leaves EDAM Entities in a position where they may not be able to provide a full financial hedge to their firm OATT customers that schedule before the day-ahead market deadline, because they will not receive sufficient revenues from the market operator’s allocation process. Yet the ability to provide that protection is critical to EDAM’s design and to the balance of operating this novel market within the OATT construct. Thus, it is imperative that CAISO find a way to ensure that EDAM Entities are, at a minimum, provided with sufficient congestion revenues to hold their transmission customers harmless for their balanced self-schedules submitted before the day-ahead market deadline. Accomplishing this in a timely manner likely requires targeted modifications to the current congestion revenue allocation construct in the CAISO’s EDAM tariff.

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

Interwest appreciates CAISO offering an alternative approach for congestion revenue allocation between EDAM Entities for consideration. The alternative approach appears to be more appropriate for EDAM go-live and to better position EDAM Entities to be able to provide sufficient financial protection for the use of transmission rights on their systems.

However, despite CAISO and stakeholders seeking to understand the potential outcomes in this abbreviated stakeholder process, the alternative approach is complex and has the potential to have unintended consequences. Thus, while Interwest generally supports implementation of the alternative approach, we ask that CAISO continue to host stakeholder discussions on this topic. The provision of additional examples, including examples that are optimized, would be worthwhile. CAISO continuing to engage stakeholders – on an ongoing basis – on the topic of congestion revenue allocation will help prepare all parties for the evaluation of a future, more permanent, proposal.

Interwest encourages CAISO to engage with stakeholders on this topic on a regular basis going forward.  In fact, we recommend that a standing committee be formed to respond to and manage the need for additional review and potential adjustments which may be found to be appropriate by stakeholders in response to a growing body of information about market impacts as we prepare for the EDAM to go live, and thereafter.

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

Interwest applauds CAISO for taking up this issue and for taking it up in an expedited fashion. While the expediated nature of this stakeholder initiative is not ideal for fully exploring the impacts of this change, it is necessary to move quickly in order to keep EDAM on schedule. While we are generally supportive of implementing the proposed alternative approach as quickly as possible, we also note that this topic is of critical importance to EDAM’s expected participants and to the value proposition EDAM offers potential future participants. Congestion revenue allocation and other transmission related issues will require continued attention from CAISO and from stakeholders. We ask that CAISO provide a transparent, regular forum for exploring these issues and outlining potential enhancements and improvements to the current process as EDAM progresses towards operation and thereafter.

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

NV Energy is appreciative of CAISO for quickly initiating a stakeholder initiative to address recent concerns regarding the congestion rent allocation element of the EDAM market design. This action demonstrates governance and stakeholder processes that can move quickly to respond to emerging issues. In general, NV Energy is supportive of this stakeholder effort and the transitional congestion allocation methodology proposed by CAISO. NV Energy looks forward to the development of the straw proposal and refinement of the transitional concepts.  

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

NV Energy understands that the current design is a result of allocating the congestion revenue to the Balancing Authority Area (BAA) where the constraint is located because that BAA is bearing the costs to manage that constraint. However, this design may not allow sufficient protection on a neighboring BAA that could have market prices impacted by the neighboring constraint. EDAM is the incremental joining of traditional OATT service on the external EDAM Entities’ system and the CAISO’s Day Ahead market. Today, NV Energy’s transmission customers take service for a fixed access charge price, providing transactional certainty. While actions on NV Energy’s transmission system may have effects on neighboring systems and vice versa, those flows are managed without passing through costs to customers. Especially at the onset of EDAM, certain customers will want to continue to self-schedule in accordance with existing transactional arrangements. In addition, other transmission customers, including NV Energy on behalf of its native load will want to participate in the market but not be exposed to unanticipated congestion costs that could erode projected participation benefits.  EDAM should, to the extent possible without cost-shifts among different customer classes, not impose additional congestion charges for firm OATT service customers. Accordingly, NV Energy believes the additional protections provided by the proposed transitional approach are important enhancements to the design.

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

NV Energy is supportive of the direction of this proposed transitional method. CAISO has indicated that the proposed design will be monitored and potentially altered in a future stakeholder initiative. NV Energy supports this data-driven approach that will incorporate actual market results and appreciates that CAISO will monitor the impacts from the resulting design in this initiative in order to quickly react if unintended consequences or inefficiencies occur. Additionally, NV Energy recommends that the Market Monitor examine the market activity for changes in market participant behaviors with respect to self-scheduling and bidding differences between the two market time horizons. The market design should not incentivize market behavior that creates market inefficiencies. Congestion rent has the potential to be a large impact for customers and the design should not harm or favor one particular customer class over another. 

During the March 24^th stakeholder call, some stakeholders requested a principle for the long-term design for a near perfect hedge of their firm rights from source to sink. NV Energy believes that it may not be possible to achieve a perfect hedge during all market situations for all firm rights holder customers. It would be helpful if CAISO could weigh in to this discussion and inform stakeholders whether or not this would potentially shift costs from one type of transmission customer to another or to the feasibility of this potential principle. NV Energy is not aware of a market design that achieves a near perfect hedge. Instead of focusing on achieving a principle that maybe unachievable, NV Energy believes it would be important that the transitional market design preserves market efficiencies and does not shift costs from one transmission customer at the expense of another.

CAISO has proposed to keep congestion revenue that results from parallel flows with the BAA that the congestion revenue was generated within and not the BAA where the constraint was located. NV Energy supports the direction of this proposal as it works in the scenario where there is no counter flow. In this scenario, any market pricing impact that resulted from a binding constraint in a neighboring balancing area would flow back to the BAA which appears appropriate and provides a parallel flow hedge. However, this proposal may not be entirely appropriate for the scenario when counter flow exists. It appears that this proposal may actually shift costs inappropriately to BAAs that are helping to resolve a constraint in the counter flow example. Therefore, NV Energy recommends that CAISO address this concern in an enhancement reflected in the forthcoming Straw Proposal. 

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

No additional comment. 

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

• PG&E understands the concerns of long-term firm point-to-point rights holders and recognizes that the launch of EDAM poses an abrupt paradigm switch for these customers.  

• PG&E is open to a transitional solution that addresses the concerns of these point-to-point rights holders while ultimately returns to the current method of rent allocation.
  • The transitional solution should have a known and fixed timetable. This will allow point-to-point rights holders to plan and adjust their investment strategies accordingly.
  • The transitional solution should return to the current method of rent allocation in order to continue the positive progress of regionalization.

• CAISO should consider a hybrid approach.  It is our understanding that the current and alternative methods can be combined as long as the sum of the weights is equal to one.  This means it is theoretically possible to spit the rents 50:50 between the two methods or 75:25, etc.  If this is true, CAISO could create a schedule where by the allocation method starts with the transitional allocation method and slowly approaches the current method.

• For illustration, PG&E has provided an example where in the first year the transitional solution evenly weights the two allocation methods and then transitions back to today’s method over five additional years.

• Such a schedule would meet many of the initiative goals:
  • Provide a greater hedge to congestion risks in the near term,
  • Provide a smooth transition back to today’s allocation method,  and
  • Provide a known timetable on which all market participants plan.

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

See question 1.

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

See question 1.

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

See question 1.

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

PacifiCorp appreciates the CAISO conducting an expedited stakeholder process to address concerns with how the EDAM design allocates congestion revenues related to parallel or unscheduled flows. The CAISO’s proposal is directly responsive to the concerns raised by stakeholders that the existing EDAM design failed to account for this issue. Specifically, several stakeholders have argued that the parallel flow issue creates an entire category of “unhedgeable” congestion risk.  The CAISO’s revised proposal treats parallel flow congestion revenues the same as the internal congestion revenues under the current EDAM design.  As a result, congestion charges will be returned to the EDAM BAA that paid the congestion, not the BAA where the constraint is located.  This will increase the pool of congestion revenue available for sub-allocation and directly address the discrete unscheduled flow issue that was the central concern of stakeholders. 

PacifiCorp supports the transitional nature of the approach proposed by the CAISO. The Company views it as a sufficient solution for EDAM go-live because it will help ensure that long-term transmission rights holders will not be subject to unmanageable levels of congestion risk when they use their transmission rights through self-schedules.

In PacifiCorp’s opinion, the timing related to launching a new market and then expanding the number of participating entities over the next few years makes the need to pre-determine how the congestion revenue allocation design will change impractical and pre-mature. The CAISO and market participants will need time to gain sufficient experience and data from implementing the proposed design in EDAM operations before seeking enhancements. Furthermore, enhancement discussions should not commence until the EDAM footprint has expanded such that there is some consistency in how energy flows across the EDAM footprint. For example, attempting to evaluate EDAM energy flows when the market only consists of PacifiCorp, Portland General Electric, and the CAISO is unlikely to give stakeholders data that is representative of the energy flows that will occur when the EDAM footprint expands. Therefore, any enhancement made before there is a representative footprint may not be a good solution once the footprint is mature.  

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

PacifiCorp supported the original congestion revenue allocation design that was approved by FERC. In response to discussions with the CAISO and other stakeholders, PacifiCorp supports adopting the alternative proposed by the CAISO for allocating congestion revenue to the EDAM balancing areas.

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

PacifiCorp supports the alternative approach presented by the CAISO. The revised allocation method directly addresses the unscheduled flow congestion exposure issue and concerns raised by stakeholders that congestion from parallel flows will reduce congestion revenue allocations to EDAM balancing areas, which would then not be able to allocate those revenues to long-term transmission rights holders. It is not possible today to understand how exactly parallel flows will impact congestion revenues in the EDAM and how much congestion risk long-term transmission rights holders will be exposed to. It therefore makes sense that the proposed allocation methodology is transitional. The CAISO and market participants will need operational experience and information on congestion patterns in the EDAM to better understand whether the allocation method is providing a reasonable hedge against congestion for long-term rights holders.

With respect to the transitional nature of the proposed allocation approach, PacifiCorp does not believe the nature or timing of any future enhancement should be pre-determined. The CAISO and market participants should hold off on determining any enhancement until there is a mature EDAM market footprint and enough information on EDAM congestion patterns to develop a congestion revenue allocation method supported by evidence. Premature discussions on how to change the congestion revenue allocation design could  lead to a “solution” that does not work as the EDAM footprint continues to expand. Furthermore, the proposed design needs to be monitored and evaluated for a significant amount of time before it can be assumed that an enhancement is needed in the first place. While future analyses may reveal potential efficiency improvements in the congestion pricing design, the EDAM congestion allocation method as modified here will ensure that customers have the opportunity to hedge both internal congestion and parallel flow congestion. 

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

In general, PacifiCorp believes the CAISO put together a reasonable design for allocating congestion revenues arising from parallel flows to EDAM balancing areas and the company is comfortable moving forward with the design. The Issue Paper and stakeholder meeting provided enough information to ensure all market participants are informed of the proposed design. As such, PacifiCorp supports the expedited timeline for this initiative.  

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

PGE thanks CAISO staff and regional stakeholders for the comprehensive effort to understand potential challenges of the existing congestion revenue allocation model outlined in the FERC-approved EDAM tariff.

PGE supports the transitional design as a positive step to help address the stated concerns of regional stakeholders. PGE recognizes that this is a complex design question, and that the complexity of congestion revenue allocation design may require future modifications to address scenarios beyond those contemplated in the existing EDAM design. To that end, PGE encourages the CAISO to facilitate future stakeholder engagement to evaluate how the proposed transitional approach has functioned relative to the initiative’s key objectives and whether additional reforms to congestion revenue allocation are prudent once market data becomes available.

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

PGE appreciates the feedback of stakeholders, including concerns regarding the current FERC-approved EDAM design which allocates congestion revenues to the balancing area where the physical constraint is located. PGE acknowledges that CAISO’s rationale for the current design was to facilitate a smooth integration for WEIM participants into EDAM and that leveraging the same congestion revenue allocation process aligned with this objective.

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

PGE is supportive of the CAISO facilitating these conversations regarding congestion revenue allocation. Although PGE believes that the design is just and reasonable as approved, we recognize that the approach may offer alternatives during a market participant’s transition from WEIM to EDAM.  Additionally, PGE recognizes that this proposal is limited in its scope and application and, as such, offers a transitional solution that the CAISO should revisit as market participants gain more experience and the EDAM footprint expands.

Separately, although the proposed change would require an amendment to the existing EDAM tariff, the changes are of appropriate scope and would not hinder ongoing EDAM implementation efforts underway by entities including PGE.

PGE also supports preserving the existing congestion revenue allocation for the WEIM, since the issues highlighted with the FERC-approved congestion revenue allocation methodology are more likely to emerge during the day-ahead timeframe.

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

PGE appreciates the visual examples that the CAISO provided as part of the issue paper, particularly as they relate to different market scenarios.  However, there were several stakeholder questions about scenarios not contemplated by the proposal.  For example, PGE understands that the scope of this initiative is narrow and not intended to address congestion arising between EDAM BAAs and non-EDAM BAAs. PGE asks the CAISO to outline the extent of the modified congestion revenue allocation proposal.

As part of PGE’s EDAM implementation efforts, PGE supports both the further operational examples of the design change and if satisfactory, the CAISO’s expedited timeline for filing these changes as a tariff update. PGE also understands that congestion revenue allocation design should and will continue to evolve in the coming years, both within the EDAM footprint and across the region.

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

Powerex appreciates the opportunity to submit comments on the CAISO’s EDAM Congestion Rent Allocation Issue Paper, and on the discussion during the March 24, 2025 stakeholder meeting. 

Powerex supports a fulsome discussion and examination of the allocation of congestion rent in EDAM, and specifically whether entities that hold firm OATT rights on a participating transmission service provider (TSP) system will receive a properly constructed source-to-sink hedge against day-ahead congestion charges. 

As explained in recent testimony by Dr. David Patton of Potomac Economics (see Attachment 1):

“Any market participant scheduling power between locations on the transmission system can face substantial locational risks associated with congestion. … These net congestion costs can be volatile and uncertain. A properly constructed source-to-sink congestion revenue offset that provides a substantial hedge against such charges is essential for facilitating efficient market activity.”[1]

Unlike other day-ahead organized markets, the current EDAM design does not provide any financial hedge to customers that hold firm OATT rights. Instead, EDAM delivers an allocation of congestion rent to each participating TSP, and then leaves it to each TSP to decide how to amend its respective transmission tariff to treat firm OATT rights. The specific details of the EDAM allocation of congestion revenues to TSPs therefore have important implications for the ability of each TSP to provide a source-to-sink financial hedge to their firm transmission customers. 

The current EDAM design and the CAISO’s proposed alternative design appear to swing between two extremes in their approach to allocating congestion revenue: either by allocating all congestion revenue to the BAAs where the binding constraints are located (the current approach), or by allocating all congestion revenue to the BAA where it was collected (the proposed transitional alternative approach).  Neither approach is based on the long-standing principle explained by Dr. Patton:

“In both centralized markets and in non-market areas, the customers that pay for the transmission system receive property rights that embody the congestion value of the system through financial or physical transmission rights. The consistent application of this principle throughout the industry is no accident or coincidence, it is dictated by equity.”[2]

CAISO should clearly articulate congestion revenue principles:  Powerex believes that meaningful progress is only possible after the CAISO clearly expresses what it views as the underlying principles for the allocation of congestion revenue, and how this relates to respecting firm OATT rights.  It is acceptable for a market to have transitional mechanisms, but not transitional principles.

This complex issue requires a more fulsome stakeholder process: Powerex believes it is not realistic to expect that a workable initial approach to this complex issue can be developed in the compressed timeframe CAISO has established for this expedited stakeholder process.  

However, this does not necessarily require the launch of EDAM to be delayed until such a mechanism is developed and approved by FERC.  Powerex and multiple other stakeholders have urged the CAISO to support a limited carve-out for customers to schedule the use of their firm OATT rights outside of EDAM and without exposure to EDAM congestion charges.  The firm OATT rights that utilize this limited carve-out would be treated in a comparable manner to those OATT rights that choose to participate in EDAM, including being subject to physical reductions on a pro rata basis.  Such a carve-out will also enable customers to use their firm OATT rights to participate in other regional markets and programs.  EDAM participants are expected to also seek the ability to use firm OATT rights on TSPs that participate in Markets+, and all stakeholders are now looking to SPP and the CAISO to work collaboratively to make all markets work in the West.

A limited carve-out would ensure that no customer is forced to participate in EDAM as a condition of transmission service and would be straightforward to implement.  This would provide the most straightforward path for TSPs to amend their OATTs to enable their own participation in EDAM while ensuring they continue to provide transmission service on terms that are just and reasonable, and consistent with the pro forma OATT.   Continued resistance by the CAISO to a limited carve-out, however, unnecessarily ties the ability of EDAM to move forward to the development of an appropriate mechanism to provide firm OATT customers an adequate financial hedge against EDAM congestion charges.

Powerex therefore recommends that the CAISO:

• Support a limited carve-out for firm OATT rights to be scheduled outside of EDAM, allowing EDAM to be launched with its initial participants without undue delay; and
• Launch a comprehensive stakeholder process, free of artificial time constraints, to develop a durable framework for respecting firm OATT transmission rights in EDAM.  The starting point for such a stakeholder process should be to clarify the underlying principles of what firm OATT rights do and do not provide in the context of a day-ahead organized market.

[1] See Attachment 1, Testimony of Dr. David B. Patton, Ph.D., submitted in Powerex’s March 28, 2025 Answer in FERC Docket No. ER25-951 (“Patton Testimony”) at 17:22-18:9.

[2] Patton Testimony at 9, lines 3-7.

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

PacifiCorp’s filing of its proposed OATT amendments brought to light that the EDAM’s current approach for allocating congestion revenues is incompatible with participating TSPs providing a properly constructed source-to-sink hedge against EDAM congestion charges to its customers that purchase firm transmission service under their OATT. 

As explained by Dr. Patton:

Under EDAM, the participating TSP will not receive the congestion revenues necessary to provide its firm transmission customers with a hedge for the full congestion price difference between the source and sink of their transmission service.[1]

The root cause of this outcome is that EDAM allocates congestion revenue to the BAA where binding constraints are located, which does not necessarily correspond to the rights held by entities that entitle them to cause parallel flows on neighboring transmission facilities.  Dr. Patton testifies that this approach “is highly problematic and somewhat misguided” and produces outcomes that “are contrary to the existing OATT framework and contrary to the design of other day-ahead markets, which recognize that transmission service includes an entitlement to cause parallel flow on other systems when that transmission service is used.”[2]

In Powerex’s view, all day-ahead organized markets require a workable mechanism for allocating congestion revenue to provide a source-to-sink financial hedge to firm transmission customers.  Powerex is fully aware that a workable financial hedge will not be a “perfect” hedge, just as physical transmission rights are subject to reductions from their notional quantity from time to time.  Powerex has never demanded a “perfect hedge,” and arguments that providing a perfect hedge would be unworkable, or superior to physical rights, are not a justification for not providing a properly constructed source-to-sink hedge.

[1] Patton Testimony, at 21:12-15.

[2] Patton Testimony, at 20:13-21:9 (emphasis added).

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

The CAISO’s alternative proposal appears to take the extreme opposite approach from the current approach: it would allocate all of the congestion revenues collected in a given BAA (positive or negative) to that same BAA.  Like the current approach, the alternative approach is focused on BAAs and is not grounded in a recognition of firm OATT rights.  While the alternative approach may (depending on the specific details of the proposal) provide a BAA with funds to offset the congestion charges applied to self-schedules that use firm OATT transmission service, it goes far beyond this, and creates its own set of problems. Based on a very initial examination, given the limited time provided, Powerex believes this may result in the following problematic outcomes:

1. The proposal appears to enable a BAA to receive congestion protection from causing an unlimited amount of parallel flow on other systems, potentially far beyond the amount that would typically be caused by schedules using firm OATT rights. Since the allocation of congestion revenue is a zero-sum exercise, the allocation of congestion revenue associated with this “excess” parallel flow will necessarily come at the expense of other entities, including firm rightsholders or CRR holders in other areas.

2. The proposal appears to cause the applicable host BAA to be charged for any net congestion revenues received by generators and loads inside its area that are merely responding to EDAM’s economic dispatch to provide relief for congestion occurring elsewhere in the EDAM footprint (i.e., providing counterflow). This would in turn require that BAA to recover these costs from its own customers. This outcome appears to be illustrated in CAISO’s “Counterflow Award” example as it relates to the outcomes in BAA C and BAA B.

3. Outcomes under the proposal appear to depend on the location of the reference bus used to calculate the congestion component of the LMP at each location. The reference bus is typically of little importance in LMP markets since settlements are primarily (1) for the full amount of the LMP at a given location, making its decomposition irrelevant; or (2) for congestion charges for delivering energy, which are based on the difference in the congestion component between two locations, not the outright level.  But the CAISO’s alternative proposal will create charges and revenues based on the actual level of the marginal congestion component of LMP, which can be large or small, or positive or negative, depending on the location of the reference bus against which congestion is measured. 

4. It appears that EDAM outcomes involving transfers between BAAs that are both on the same “side” of a binding constraint may also be impacted by this proposal, even though there is no congestion differential between those areas. Even if the LMP is identical in both BAAs, a reversal of the MCCs would appear to impact the net payments and charges between BAAs.

In summary, the proposal would apply an overly broad rule to reverse all congestion settlements in each BAA. This goes far beyond addressing the congestion exposure of firm OATT rightsholders and is likely to introduce multiple unintended consequences, including inappropriate revenue and cost shifts and problematic incentives.  The list above represents only some of the areas that Powerex has identified in the very short time provided to evaluate the proposal. More time to develop a workable proposal is clearly needed.

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

The CAISO Should Support and Enable a Limited Carve-Out for Customers to Use Their Firm OATT Rights Outside of EDAM

It is understandable that the CAISO and other entities would want to minimize any potential delay to the implementation of EDAM, but the issues that led to this stakeholder process cannot realistically be explored—let alone addressed—in the highly compressed timeframe contemplated by the CAISO.  However, the launch of EDAM can be separated from developing the enhancements necessary to address the complex issues at the heart of this stakeholder process.  Specifically, EDAM can move forward without delay, and without seeking approval of a material change in the EDAM Tariff, by TSPs providing a limited “carve out” of OATT rights in their OATT amendments. 

As explained in the testimony of Dr. Patton:

I believe transmission customers should have an opportunity to schedule the use of their firm PacifiCorp transmission service ahead of EDAM, with EDAM optimizing the use of generation and transmission that has not already been scheduled. This is analogous to the ability that customers have today to schedule the use of their transmission rights ahead of the Western EIM or ahead of SPP’s Western Energy Imbalance Services market.[1]

To avoid any potential confusion: Powerex is not requesting the ability to “withhold” unused transmission capacity from the market, but rather the ability to schedule the use of firm OATT transmission service outside of the EDAM process, and without being subject to EDAM financial settlement.  Dr. Patton explained that:

[w]ithholding transmission or underutilizing transmission are concerns that arise when valuable transmission capability is unused. If the option I describe above [to schedule the use of firm OATT rights outside of EDAM] were implemented, it would raise no risk that the capability would not be fully utilized. … In other words, whether the customer’s use of the transmission takes place “inside” or “outside” EDAM does not change how much transmission is available for use.[2]

A limited carve-out will also enable customers to use their firm OATT rights to participate in the regional markets and programs of their choosing.  EDAM participants will likely also seek to utilize firm transmission service on non-EDAM TSPs to enable their participation in EDAM, just as has been enabled for a decade in the Western EIM.  It is time for the CAISO and SPP to work toward a reciprocal and constructive approach to enable all regional markets and programs in the West to flourish.

The CAISO has previously opposed providing even a limited carve-out, insisting instead that all OATT transmission customers must be compelled to participate in EDAM as a condition of transmission service.  CAISO’s opposition to a limited carve-out needlessly ties resolution of complex congestion revenue allocation concerns to the timetable for EDAM implementation.  It does not need to be that way.  In fact, insisting on pressing forward with a proposal whose implications have not been examined only increases the risk of delays to EDAM implementation, as it makes it more likely that there will be another round of late-discovered problems requiring another expedited process to push through ad hoc measures just to get EDAM to “go-live.”  Powerex believes that facilitating the use of a limited carve-out for the scheduling of firm OATT rights can provide EDAM critical “breathing room” to launch EDAM promptly, while also providing the time necessary to develop a coherent congestion revenue allocation approach that respects OATT rights, gains broad stakeholder support, and enables participating TSPs to file OATT amendments that are just and reasonable, and consistent with the pro forma OATT.

Powerex therefore recommends that the CAISO support and enable a limited carve-out that enables customers to schedule the use of firm OATT rights ahead of EDAM, and without being subject to EDAM settlement. 

This Stakeholder Process Should Identify Solutions to Provide a Workable Financial Hedge to Firm OATT Customers, Without Artificial Time Constraints Related to EDAM Launch

Powerex also recommends that the CAISO, free of artificial time constraints, develop a workable allocation framework for EDAM congestion revenue. This must begin by clarifying the goal that such an allocation seeks to achieve.  To date, the CAISO has not indicated what principles should drive the allocation of EDAM congestion revenues.  It continues to defend its current approach even as it puts forward an alternative approach that leads to radically different outcomes.  And the CAISO’s qualification of any alternative as “transitional” casts significant doubt on what principles will be pursued going forward.  Given the amount of revenue potentially at stake and the critical need for entities to be able to manage the cost and risk of transmission service in order to undertake forward contracting or resource development activity, it is unreasonable to keep stakeholders in the dark about how the CAISO views this issue.

Powerex therefore believes that the critical starting point in this stakeholder process should be a clear recognition that firm OATT rights “include an entitlement to cause parallel flow on other systems when that transmission service is used”[3] and thus will be eligible to receive a complete source-sink hedge from EDAM congestion costs. This should be clearly affirmed as a long-term guiding principle, which is not “transitional” even as the specific mechanisms that apply it will understandably evolve.  Conversely, if the CAISO does not share this principle, it should clarify precisely what, if anything, it believes firm OATT rights provide in the context of a day-ahead organized market, and how it proposes to respect those rights.

Powerex believes the appropriate path forward is for EDAM to enable participating TSPs to provide a source-to-sink financial hedge against EDAM congestion charges to customers that hold firm OATT rights on their system.  Allocating congestion revenues based on firm OATT rights would have numerous advantages over the current EDAM design and the CAISO’s proposed alternative approach, including:

• Preventing the excess over-allocation of congestion revenues beyond established firm entitlements to create flows affecting a constraint;
• Eliminating “use it or lose it” incentives associated with providing a hedge based on actual use rather than to the firm rights that are held;
• Avoiding inefficient incentives to self-schedule rather than to participate in economic dispatch;
• Maintaining incentives for transmission customers to invest in OATT transmission service; and
• Supporting the wide range of forward contracting and investment activity critical to reliability and affordability.

In the development of the Markets+ design, stakeholders worked collaboratively to achieve these objectives while ensuring equitable treatment of point-to-point and network transmission service, addressing the challenges associated with ensuring revenue adequacy, and providing a limited carve-out for customers to use their transmission rights outside of Markets+, including specifically to make those rights available to EDAM.  The approach received widespread stakeholder support from differently-situated entities, and was accepted by FERC.  Powerex believes reviewing that approach may be informative to EDAM stakeholders now seeking to tackle the same problem.

[1] Patton Testimony, at 24:22-25:1.

[2] Patton Testimony, at 25:6-14.

[3] Patton Testimony, at 21:7-9.

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

The Public Power Council appreciates the California ISO beginning a stakeholder process to address concerns around the Extended Day-Ahead Market (EDAM) congestion revenue methodology.  As demonstrated in related FERC proceedings, there is clear concern among Western Stakeholders on both the existing EDAM congestion revenue approach and how prospective EDAM entities have chosen to modify their OATTs to implement EDAM.  PPC believes the Issue Paper does a good job of describing and framing the issue.  However, based on the discussions in the stakeholder meeting and subsequent Market Surveillance Committee, PPC is concerned the timeline established by the CAISO is insufficient for stakeholders to fully explore this issue and develop a solution that is broadly workable and does not lead to unintended consequences that may require further modifications to the EDAM congestion rent approach. 

The issues surrounding congestion rent and parallel flows are clearly complicated and raise a variety of tradeoffs around market efficiency, market participant incentives, and the appropriate allocations of costs and benefits to market participants, transmission providers and customers.  PPC believes it would be prudent to take the time necessary to fully vet any potential modifications to the EDAM congestion rent approach and begin by first establishing principles and objectives to guide congestion rent approach modifications in the current and future stakeholder processes. 

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

PPC has concerns about the current EDAM design for congestion revenue allocation.  The issue paper clearly articulates issues that can arise from the existing design where transmission customers can be exposed to new incremental congestion charges with no mechanism to hedge these costs.  PPC also notes concerns are broadly tied to how EDAM entities choose to implement their EDAM participation.  While PPC understands modifications to OATTs to facilitate EDAM participation are largely outside of the CAISO’s jurisdiction, it is difficult to practically separate the EDAM congestion allocation approach, how EDAM entities decide to implement EDAM, and stakeholder perspectives on the wholistic approach.  PPC asks to the extent possible, this stakeholder process incorporate discussion around not just the allocation approach at the BAA level, but implementation details and the downstream impacts to transmission customers.

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

PPC appreciates the CAISO putting forward a potential modification to the congestion rent approach as a starting point.  At this time, it is difficult for PPC to determine whether we would support the alternative approach.  While at first glance it appears the approach may be a step in the right direction, the proposal raises many questions on the unintended consequences and market participant incentives it may create.  Notably, the approach appears to allow a BAA to cause significant parallel flow – potentially associated with infeasible schedules – without any cost exposure.  Additionally, the proposed approach might inadvertently negate congestion charges entirely, including in counterflow scenarios.  Additional discussion on the implications and appropriateness of this is needed.  PPC believes additional discussion including further numerical examples including transfer revenues are needed to fully understand the alternative approach. 

PPC recommends the CAISO further clarify the transitional nature any modifications to the EDAM congestion allocation design that are adopted as a result of this stakeholder process.  PPC believes additional detail around how CAISO sees further congestion rent approaches developing and the type of information it would monitor to trigger another stakeholder process would be informative.  Further, PPC recommends developing clear principles and objectives, broadly supported by stakeholders, to guide this and future stakeholder initiatives.

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

None at this time.

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

PSE appreciates CAISO’s efforts to consider a framework for a more equitable distribution of congestion revenue associated with parallel flows that occur in EDAM. The expedited timeline proposed by the CAISO does not allow sufficient time to consider the impacts of this change, but PSE agrees these nascent markets need the ability to flexibly adapt based on what we learn in market operations over time and recognizes CAISO’s efforts to balance many competing interests. Despite this need for an adaptive approach, PSE has concerns about the open-ended nature of the initiative and the long-term uncertainty it creates. It was also apparent in the March 24, 2025, workshop there is not a consistent understanding across market participants regarding how firm OATT transmission rights overlay with EDAM and what purposes and value those rights should retain in an organized day-ahead market. A necessary starting point should be a common understanding that CAISO will strive to provide firm transmission customers of an EDAM entity with an effective congestion hedge. If that is not CAISO’s objective in this initiative, that needs to be clearly stated. It is critical the CAISO establish clear principles for this initiative so there is a common understanding for how this transitional initiative will be measured. These principles should include a fundamental evaluation of what rights firm OATT transmission conveys, what the initiative seeks to accomplish, as well as a clear timeline and process for when, how, and by what metrics the initiative will be evaluated.   

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

The EDAM design defers certain design elements - such as congestion revenue allocation - to individual EDAM entity OATTs. As a threshold matter, this design may inherently exacerbate seams between transmission service providers (TSPs) if those TSP’s implement these mechanisms in different ways. A single transmission customer delivering a resource to load may be exposed to different risks or costs as they move across multiple systems. CAISO’s EDAM tariff explicitly provides for EDAM transmission service providers to carve out rights belonging to their respective transmission customers. In the absence of EDAM transmission service providers availing themselves of that option, the existing design – allocating congestion revenue to the BA in which the constraint occurs – ignores the effects of parallel flows in adjacent BAAs and may consistently undermine a utility’s ability to hedge its congestion exposure and the value of firm OATT rights. This exposed transmission customers of EDAM entities to increased financial risk.  

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

The transitional approach represents a meaningful step toward addressing stakeholder concerns regarding parallel flow impacts on congestion revenue distribution. CAISO’s proposal attempts to better align with cost causation principles by distributing revenue back to the BA in which congestion costs accrue, particularly for market participants utilizing transmission service reservations as transmission hedges. This alignment is especially relevant when congestion prices at nodes reflect shadow price constraints in neighboring BAAs, as market participants in affected areas contribute to system-wide congestion costs. It is appropriate that entities incurring these costs receive proportional revenue allocation, particularly when intended as a hedge for firm transmission customers.

PSE also appreciates the comments of PowerEx in the March 24 workshop regarding the potential for congestion revenue to be allocated to schedules on non-firm rights. PSE suggests CAISO could work with EDAM entities to determine the potential for underfunding of congestion revenue allocation due to allocation to schedules on non-firm rights.

PSE recommends CAISO establish a permanent stakeholder working group dedicated to this issue, in addition to ongoing oversight upon market go-live. This group would:

• Monitor and analyze data collection efforts
• Evaluate emerging solutions
• Assess parallel flow impacts
• Examine cost shift implications among affected BAAs
• Review constraint management effectiveness

PSE also supports the development of a more permanent solution to address these complex issues. Potential approaches worthy of exploration include:

• Implementation of Congestion Revenue Rights (CRRs)
• Integration of Financial Transmission Rights (FTRs)
• Development of a hybrid flow entitlement solution

These options merit thorough evaluation to determine the most effective, sustainable, and equitable long-term framework. 

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

n/a

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

Salt River Project Agricultural Improvement and Power District (SRP) appreciates the CAISO publishing the EDAM Congestion Revenue Allocation Issue Paper in response to concerns raised by SRP and numerous other entities at FERC related to PacifiCorp’s proposed revisions to its Open Access Transmission Tariff (OATT) to facilitate EDAM participation in its eastern and western balancing authority areas (BAA). SRP is a major load serving entity in the western interconnection with long-term firm point-to-point transmission rights on PacifiCorp’s system and is a participant in the Western Resource Adequacy Program (WRAP). More generally, SRP has an interest in durable and reasonable market designs and outcomes throughout the west that it transacts in.

SRP has been actively engaged in the development of western markets, including EDAM, and wants the CAISO, PacifiCorp, and other early EDAM Entities to be successful in the implementation and operation of EDAM. SRP acknowledges that, like any new market, EDAM will require market design changes as the market matures and evolves. 

In SRP’s opinion, this is not the appropriate time for this initiative. Alternative approaches should not be considered until after FERC rules on PacifiCorp’s OATT revisions. While SRP agrees that enhancements to the EDAM congestion revenue allocation approach should be considered through a stakeholder process, the timing of this initiative is distracting from the PacifiCorp OATT revisions and unnecessarily rushing a stakeholder process that deserves thorough analysis and careful consideration given its complexity and implications for market participants all over the west.

Regarding the collection and allocation of congestion rents and exposure to market settlements, SRP’s concerns can be resolved within the current EDAM design if EDAM Entities provide the option of a transmission “carve-out.” SRP requests that the CAISO encourage this approach and work with EDAM Entities to facilitate carve-outs. The CAISO tariff already allows EDAM Entities this option. CAISO and PacifiCorp could completely abate this issue utilizing a carve-out for transmission customers that do not want their transmission included in EDAM.  This is a core attribute of the Markets+ design which is superior in every respect to PacifiCorp’s flawed proposal in this context.

Despite concerns with the timing and expedited nature of this initiative, SRP is encouraged by the CAISO’s willingness to initiate this stakeholder process and prioritize it. SRP is also encouraged by the CAISO’s willingness to significantly revise its current paradigm for allocating congestion revenues for congestion that occurs in the CAISO’s BAA but is caused by parallel flows resulting from transmission scheduled outside of the CAISO BAA. It is important that transmission customers of EDAM Entities that have purchased firm transmission from those entities and do not want to participate in EDAM are not materially impacted by EDAM either operationally or financially.

To that end, SRP believes that the CAISO’s proposal to allocate all congestion due to parallel flows to the BAA where the schedules originated may be too broad. SRP’s core concern is that PacifiCorp’s long-term firm transmission customers are effectively hedged. In proposing to broadly allocate congestion due to parallel flows back to PacifiCorp at the BAA level, CAISO’s proposal does not attempt to differentiate congestion caused by long-term firm transmission customers versus those using non-firm or even short-term firm transmission rights. A far better approach for the CAISO to pursue would be to more precisely allocate congestion back to only long-term firm transmission customers of PacifiCorp and other EDAM Entities. The CAISO’s stakeholder process should consider this nuance going forward. Arguably, congestion caused by non-firm and possibly even short-term firm transmission should not necessarily be allocated back to the EDAM Entity. To do so could expose the market to gaming opportunities depending on the price of congestion. In addition, SRP is concerned with 1) the “transitional” nature of the CAISO’s proposal resulting in long-term uncertainty to PacifiCorp’s transmission customers, 2) the lack of clarity in the calculations used for examples to demonstrate the alternative approach, and 3) as discussed by others during the March 24 stakeholder meeting on this initiative, details remain unclear regarding loop flow and counterflows.

SRP also remains significantly concerned about other aspects of PacifiCorp’s OATT revisions that are not addressed in this initiative. These include sub-allocation of congestion to its transmission customers and the eroding of the value and benefits of firm transmission service (e.g., eliminating the firm aspect of firm service for intra-day schedules). While these concerns arguably go beyond the scope of this stakeholder initiative, it is worth noting here for completeness. In short, despite PacifiCorp’s and CAISO’s repeated assurances that OATT-based transmission rights will be respected in EDAM, PacifiCorp's proposed OATT revisions fundamentally change the type of service provided to its transmission customers.  

Rather than expedite a transitional approach, SRP encourages the CAISO to use this initaitive process to work with stakeholders to develop a durable list of guiding principles that it will use to develop long-term market design changes related to congestion revenue allocation. 

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

The CAISO’s current EDAM design for congestion revenue allocation is only workable for EDAM Entity non-affiliated transmission customers if the EDAM Entity OATT revisions allow transmission carve outs. The current design combined with PacifiCorp’s proposed OATT revisions, leave those transmission customers significantly exposed to congestion charges without an effective hedge.

To be clear, SRP is not asking for a perfect hedge in this context; however, under PacifiCorp’s proposed OATT revisions, the CAISO’s current design would often expose PacifiCorp’s transmission customers to congestion occurring in the CAISO BAA based on the Department of Market Monitoring’s (DMM) data. This provides PacifiCorp’s transmission customers with no hedge to the primary cause of congestion charges—congestion occurring in the CAISO’s BAA.

Forcing this construct on PacifiCorp’s non-affiliated transmission customers is untenable. SRP, for example, procured long-term firm point-to-point transmission rights on PacifiCorp’s system in its eastern BAA to wheel power from a generator through PacifiCorp’s BAA to SRP’s load. SRP executed a five-year agreement with PacifiCorp for that transmission service. Attendant to that agreement was a right for SRP to utilize that transmission as needed and have a reasonable amount of certainty as to the cost of that service. Exposing SRP to significant, new charges (particularly highly variable and unpredictable charges) midstream fundamentally changes the agreement that SRP and PacifiCorp made.

As SRP and many other entities wrote in their protests at FERC, this clearly violates FERC’s policy regarding the provision of transmission service to load serving entities, which is intended to shield those entities from highly variable and unpredictable congestion charges when they have procured physical or financial rights to serve their loads. The current congestion allocation approach in EDAM devalues and degrades SRP’s transmission rights on PacifiCorp’s system and strongly discourages SRP’s further purchase or investment in firm transmission on PacifiCorp’s system, or any other potential EDAM system. If this concern is not addressed, it will be exacerbated as other entities such as NV Energy and Portland General Electric enter EDAM and other entities, including SRP, enter Markets+.

A two-market footprint in the western interconnection is inevitable; therefore, engaging in a collaborative, constructive regional conversation to address how transmission rights are managed is necessary. As discussed further below, there are reasonable, sensible solutions to this issue if the entities are willing to work collaboratively and constructively to develop long-term market design enhancements.

In the near term, SRP’s concerns can be resolved within the current EDAM design if EDAM Entities provide the option of a transmission “carve-out.” The CAISO’s approved tariff allows a scheduling coordinator for a transmission service provider in EDAM to notify the CAISO that certain transmission rights are unavailable to the market in accordance with the provider’s OATT and CAISO will adjust day-ahead market availability of the impacted transmission elements and associated transmission service rights.

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

While generally supportive of certain aspects of the CAISO’s proposed alternative approach, SRP is concerned that the proposed alternative approach seeks to address the concerns of SRP and others at the BAA level without addressing transmission customers specifically. While suballocation to transmission customers is traditionally an issue for a Transmission Service Provider in the CAISO’s markets, the alternative approach does not address the fundamental issue raised by SRP and others that want firm transmission customers in the EDAM footprint to receive an effective hedge. The sources of congestion occurring because of parallel flow will most likely come from a number of transmission uses, including the exercise of long-term firm, short-term firm and non-firm rights. In seeking to address this issue at the BAA level, the CAISO’s proposal does not recognize this nuance. SRP believes a superior approach would be to address the allocation and treatment of congestion at the transmission customer level.

Based on initial review of the alternative approach, SRP is concerned that it could lead to gaming opportunities. For example, a transmission customer on PacifiCorp’s system could purchase non-firm or even potentially short-term firm transmission and schedule that transmission to take advantage of congestion prices in the CAISO BAA. SRP’s position is that long-term firm transmission customers on EDAM systems should be hedged, not all transmission customers. SRP believes the CAISO should revise its alternative approach to address this in a more nuanced manner than its current broad-brushed BAA level proposal.

SRP is also concerned about the “transitional” aspect of the proposal. SRP agrees with other commenters in the stakeholder workshop who voiced concerns that the transitional nature of the CAISO’s proposal does not provide PacifiCorp’s transmission customers with certainty about how congestion will be treated in the future. SRP respectfully requests the CAISO encourage EDAM Entities to enable transmission carve-outs in the near term and work with stakeholders to define guiding principles for a long-term solution.

Based on assertions made by CAISO staff at the workshop, there are several possibilities for radically changing the future state of the proposed alternative approach. For example, the CAISO’s proposal could be seen as a transition to a congestion revenue rights (CRR) model like the model currently used in the CAISO market. Such a transition by itself does not address parallel flows on the CAISO’s system. Another option discussed during the workshop was the transitional approach being a temporary solution, and the CAISO’s current congestion allocation paradigm may be put back into place in the future based on market data and information.  

Following the March 24 workshop, some calculations for the proposed alternative approach remain unclear. SRP requests that the CAISO further explain and refine these calculations in any future workshops and proposals. SRP also encourages the CAISO to accept stakeholder-developed examples and scenarios for discussion during future meetings. SRP believes this effort would identify potential unintended consequences and provide an opportunity for stakeholders and the CAISO to work together to minimize or mitigate such consequences.

As discussed by stakeholders during the March 24 meeting on this initiative, details remain unclear regarding loop flow and counterflows. SRP requests that the CAISO provide an educational presentation to better inform stakeholders on this topic before the due date for additional comments on this initiative.

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

SRP believes it is important for the CAISO and its stakeholders to develop and agree on a set of principles regarding how congestion revenue will be allocated applicable to any market or design going forward. Initially, SRP believes these principles should include:

• Recognize and preserve (or even enhance) the value of long-term firm transmission rights of transmission customers in the EDAM footprint through market and tariff design.
• Provide an effective financial congestion hedge for schedules using long-term firm transmission within the EDAM footprint, even if the schedules will export power out of, or wheel power through, the EDAM footprint.
• Recognize that parallel flow impacts may originate from entities outside of EDAM and ensure equitable treatment of those entities.
• Create a common approach and uniform treatment throughout the EDAM footprint – transitioning from the current Transmission Service Provider-dependent/BAA-level approach.
• Enable efficient interchange transactions in a western interconnection with multiple markets.

SRP requests that these principles be applied in all future evaluations. SRP encourages adequate procedural and substantive safeguards to ensure transparency of this initiative.

The simplest effective solution to SRP’s concerns is to allow transmission customers that do not want to be exposed to congestion from market optimization and settlements to opt or carve their transmission out of EDAM. Based on comments from the CAISO and PacifiCorp, it seems like neither entity has a desire to explore this possibility. Ironically, EDAM transfers in the Markets+ footprint will be afforded this ability. In fact, large portions of PacifiCorp’s loads would be significantly impacted if Markets+ entities employed the same rules that the CAISO and PacifiCorp are seeking to apply here. It is unfortunate that neither the CAISO nor PacifiCorp are willing to consider a similar approach for the EDAM footprint, despite being significant beneficiaries of the Markets+ design. 

It is important to understand that SRP’s core concern is the devaluation and degradation of its firm transmission rights on PacifiCorp’s system. Neither the CAISO nor PacifiCorp can credibly claim that EDAM implementation under the current EDAM rules or PacifiCorp’s proposed tariff revisions maintains or preserves OATT-based transmission rights. To the contrary, it makes transmission customers (particularly load serving entities such as SRP not intending to participate in EDAM) with firm service second-class customers.  

The inequitable allocation of congestion revenue causing an ineffective hedge for SRP is a primary concern, but not the only concern. Another concern that SRP included in its protest of the PacifiCorp tariff at FERC is eliminating the scheduling priority of firm transmission service during intra-day scheduling. As a major load serving entity, SRP is often required to address late-breaking changes to its generation fleet, transmission and loads. PacifiCorp’s proposal eliminates SRP’s ability to use its firm transmission rights as contemplated under the OATT to address those changes. PacifiCorp’s proposal essentially downgrades SRP’s firm transmission rights to non-firm rights during the intra-day period. That concern is not addressed by this initiative.

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

San Diego Gas and Electric (SDG&E) appreciates the opportunity to provide comments on the EDAM Congestion Revenue (CR) Allocation Issue Paper put forth by CAISO on March 17. As a principle, SDG&E supports the implementation of EDAM as a significant step in better integrating power markets in the West. To that end, it is important to keep EDAM on track and ensure that its design supports broad participation and maximizes market benefits.

SDG&E believes that the narrow scope of this initiative is appropriate given the expedited timeline, and appreciates CAISO’s explanation of the issue, background, and potential solution. To the extent that adjustments to the CR allocation process are needed, we are supportive as it is critical to find a workable and equitable solution for all stakeholders participating in the market. We are also supportive of CAISO’s plans to track and evaluate implementation of the proposed transitional solution as this will provide transparency to stakeholders and support development of a long-term solution.

Additionally, as described below, there are several elements that would be helpful to include in the forthcoming proposal.

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

No comment.

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

SDG&E is supportive of this transitional approach as it provides a method for addressing the issue in the near-term, while allowing for development of a long-term solution. Stakeholders sought additional detail on several items during the workshop on March 24 and the Market Surveillance Committee meeting on March 28, including the cost impact of the transitional approach, the incentive created by the transitional solution and how that aligns with desired EDAM participant behavior, and the timeline for development of a long-term solution. SDG&E recommends that CAISO address these points within its upcoming proposal paper to ensure that stakeholder concerns are addressed. Regarding the incentive comment, SDG&E notes that although the proposed method is transitional, it is important that it is implemented in a way that prevents gaming behavior (i.e., undue collection of congestion revenue) and mitigates scheduling that causes parallel flows. Data on prevention/mitigation activities should be included in CAISO’s tracking and evaluation process. Additionally, while providing a timeline is challenging, we encourage CAISO to provide more detail on the long-term solution schedule it envisions. This will provide a greater level of certainty for stakeholders and help to ensure that the process is kept on track.

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

Similar to the stakeholder comments referenced above, SDG&E recommends that CAISO’s forthcoming proposal paper include a side-by-side impact comparison between the current approach and recommended transitional solution. Additionally, it would be helpful for CAISO to explain how the transitional approach will impact Congestion Revenue Rights funding. This will provide clarity for stakeholders and facilitate analysis of CAISO’s proposal.  

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

The Six Cities reiterate that, at this time, the CAISO’s Extended Day Ahead Market (“EDAM”) tariff includes rules for allocation of congestion revenues as between EDAM balancing authorities (“BAs”) that have been accepted by FERC as just and reasonable after a full and fair opportunity for parties opposed to the allocation methodology to litigate their concerns.  The policies that are reflected in the EDAM tariff were discussed during the CAISO’s EDAM stakeholder initiative and represent a balancing of interests and considerations among stakeholders.  It is disappointing that the CAISO has reopened this element of its approved EDAM Tariff in response to what amount to collateral attacks on the EDAM market design by parties who chose to regard PacifiCorp’s Open Access Transmission Tariff (“OATT”) filing to implement EDAM as creating a second bite at the apple to re-challenge elements of EDAM that they dislike. 

At this time, the Six Cities do not believe that there is sufficient information or justification for revising the accepted methodology for allocation of congestion revenues in situations involving parallel flows.  As discussed below, the Six Cities seek additional information regarding the anticipated impacts and design of the CAISO’s proposed “transition” allocation methodology and, pending receipt of that information, reserve any position on whether the currently-accepted methodology should change.

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

Please refer to the comments above.  The original reason for the current methodology—i.e., that the BA where the constraint resulting in congestion is located has the incentive and responsibility to manage the impacts of the constraint—has not changed.  However, the Six Cities would consider supporting or not opposing transitional changes following review of more information regarding the anticipated impacts of the CAISO’s alternative approach and assuming that the alternative approach is limited in duration. 

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

The impacts of the alternative approach on the CAISO BA are not clear and, absent further information, the Six Cities do not take a position on the alternative approach at this time.  In particular, it is difficult to meaningfully evaluate the implications of the transitional method without more information about which BAs are likely to give up congestion revenues and which BAs are likely to receive a larger share of revenues and, under this revised allocation, the amount of revenue at issue.  Given the parties who seemingly support this approach or are seeking a redesign of the currently-accepted methodology, the Six Cities are concerned that it will likely be the CAISO that will be transferring revenues to other EDAM BAs.  Does the CAISO agree that this is the likely scenario?  What amount of estimated congestion revenues may be at issue?  Could the CAISO provide examples of which constraints may be most likely to generate parallel flows that would result in a revenue allocation shift under the alternative approach and explain how frequently they might bind?  How much congestion revenue is attributable to parallel flows and would be covered by the transitional proposal? 

The Six Cities would also like to understand more about the CAISO’s expectations regarding the impacts of this alternative on the current problem of CRR underfunding.  Might this exacerbate or improve underfunding?  Why or why not?

Additionally, there was discussion during the stakeholder meeting regarding the need to better define what is meant by parallel or unscheduled flows for the purpose of this initiative.  Please include a more detailed explanation of this in the next paper. 

If the alternative approach were to be adopted—and the Six Cities reiterate that they are not supporting this change at this time—it would be appropriate to make it effective on an interim basis, with a clear sunset date for the interim approach to provide certainty to EDAM BAs regarding when the transitional mechanism would no longer be applicable and the congestion revenue allocation mechanism would revert to the current design.  As proposed by the CAISO, the scope and duration of the transitional period are unclear.  A transition period of no more than 2-3 years would seem to be reasonable.  However, if the CAISO or stakeholders observe unintended consequences, the CAISO should not be precluded from reevaluating the allocation methodology before the end of the transition period.

Finally, the Six Cities note stakeholder comments during the meeting suggesting that this alternative mechanism could be applicable only with respect to existing transmission contracts and only for the duration of those contracts, while the status quo should continue to apply to any new transmission service agreements by EDAM BAs/transmission service providers.  If it is not possible for the CAISO to separate congestion revenues due to parallel flows and allocable to the EDAM BA on this basis, then the Six Cities suggest a phase-in to the currently effective design over a period of time, such as three years (consistent with a sunset date for the mechanism, which could be applicable on a BA-specific basis).  Under this phase-in, each year an incrementally greater quantity of allocable congestion revenues from parallel flows would be distributed to EDAM BAs based on the approved methodology, and the revenues distributed based on the proposed alternative methodology are correspondingly reduced.

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

The Six Cities have no further comments at this time.

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

SCE does not object to the proposed alternative congestion revenue allocation methodology as a temporary measure to help BAAs and existing OATT transmission customers transition to the EDAM market, but believes that the current methodology is a better long-term solution and requests the CAISO consider more certain time limits (e.g., no more than three years after a BAA joins EDAM) on the interim alternative methodology.

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

The current EDAM congestion revenue allocation appears to be a preferable design in the long run. It limits incentives (or provides disincentives) to BAAs to sell OATT transmission service that causes loop flow in other EDAM balancing accounts. It also is consistent with the congestion revenue allocation that has been used in WEIM and will continue to be used in the real-time markets for EDAM.

SCE believes the best long-term solution is to have all transmission sales be financial transmission rights that releases rights based on expected physical flows on the network, rather than “contract path”.  In the CAISO, and in the future in EDAM, these are CRRs allocated through a “simultaneous feasibility test” (SFT), to help reduce the occurrence of loop-flow through the other BAAs in EDAM. SCE recognizes that this is not possible during the initial phases of EDAM, but this should be the ultimate goal. Not only would this help resolve the loop flow issues, but it would also allow entities to potentially be allocated or procure CRRs across the entire EDAM footprint. Until such a solution becomes possible, SCE believes that the current method of allocating transmission congestion is preferable in the long term.

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

SCE does not object to the adoption of the alternative approach as an interim measure to ease the transition of the BAAs and existing transmission customers into the EDAM paradigm. Existing transmission customers purchased their OATT transmission with the expectation that they would be provided with the physical ability to move power over the transmission without incurring additional costs for the transmission service. However, SCE is concerned that the aspects of their OATT transmission service when combined with the EDAM market construct might create, as Scott Harvey discussed at the MSC meeting, “better than OATT” transmission service for these customers and creates a “use it or lose it” incentive for OATT transmission holders to self-schedule their transmission even if their generation is higher cost than other generation in order to receive the congestion revenue.[1] These would likely create market inefficiencies that should be avoided.

For these reasons, as well as the issues discussed in answer 2, SCE strongly suggests that the alternative approach should be limited to a well defined interim period, such as for the first three years a BAA participates in EDAM.[2] It is important that transmission customers know what to expect from their transmission purchases. The CAISO must make clear that the alternative allocation is a temporary method designed to allow them to adjust to the new market structure, but that it is temporary and they shouldn’t depend on it remaining in place after the specific interim period.

The CAISO’s presentation to the MSC stated that the CAISO would perform analysis during the first 1-2 years of market operations and then “launch a stakeholder initiative to evaluate design evolution across a spectrum of congestions hedging designs.”[3] SCE concurs that the CAISO should conduct data collection and analysis during the first several years, and offers suggestions for the type of data to be collected below, but believes that the default should be to revert to the current market design after a three year interim period. If the data and analysis suggest a better allocation method it can certainly be discussed and considered, but SCE believes that it is important to ensure that the interim method is exactly that – and interim method – and doesn’t become a de facto permanent method because of an incredibly slow-moving stakeholder initiative.

As examples of the types of data that should be collected and analyzed, SCE has the following suggestions:

• Dollar amount of congestion attributed to loop flow and awarded to BAAs not where the constraint is located
• Loop flow congestion dollars as a percentage of congestion dollars on constraints where loop flow occurred
• Percentage of constraints where there was congestion awarded to other BAAs
• For constraints were loop flow congestion occurred, the percentage of the time that loop flow congestion occurred
• Percentage of congestion dollars for OATT transmission that comes from loop flow, by OATT contract, and by BAA
• Comparison of OATT transmission self-scheduling under EDAM with previous use of OATT transmission
• For non-CAISO BAAs, how many internal constraints are binding, the level of congestion, and how much is attributable to EDAM transactions and how much is attributable to OATT transmission

[1] Presentation to the MSC by Scott Harvey, March 28, 2025, slide 11-12.

[2] As mentioned both in the presentation at the MSC by Scott Harvey and the presentation by Susan Pope to WEM Governing Body, another possible method to limit the impact that could be considered might be that, as suggest by Susan Pope (slide 19), “the parallel flow MWs for which each BAA would be eligible for congestion revenue allocation could be capped(.)”

[3] CAISO Presentation to the MSC, March 28, 2025, slide 12.

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

SCE appreciates that it is not possible at this time to estimate the level of congestion that might result from these loop-flow concerns but hopes that CAISO will attempt to develop estimates based on both market-sim and parallel operations before the actual go-live date. Such information will be important to the EDAM BAAs in determining how their own congestion revenue might be impacted to determine if they will need to make any adjustments to their plans on how such revenue will be returned to customers and ratepayers. It may also help inform the CAISO in any modeling of loop flow in its own CRR allocation process.  A major focus of these test periods should be to ensure the CAISO is able to implement the transition proposal.  That is, there is a straightforward and simple method for assigning congestion revenue to the different categories of internal BAA congestion, the loop-flow created congestion between BAAs, and the transfer revenue that may result from scheduling limit constraints at interties or transfer points between EDAM balancing areas.

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

Tacoma Power (Tacoma) appreciates the opportunity to provide these comments to the California Independent System Operator (CAISO) on the March 17, 2025 Issue Paper: EDAM Congestion Revenue Allocation. As a participant in CAISO’s Western Energy Imbalance Market (WEIM) and the Western Power Pool’s Western Regional Adequacy Program, and an entity that has made a long-term commitment to the Southwest Power Pool’s Markets+, Tacoma has an interest in seeing the progress and momentum toward greater market coordination across the Western Interconnection continue and succeed.

Tacoma recently stated to FERC that the existing EDAM framework for allocation of internal congestion revenue will constrain the ongoing development and interoperability of both EDAM and Markets+. That concern is based in part on the inequity the current EDAM framework creates between entities within and without of the CAISO balancing area. That inequity occurs when a price difference arises on a transmission path within that balancing area but also creates congestion pricing on a parallel transmission path outside of that balancing area. The current EDAM framework allocates that parallel congestion revenue back to the balancing area where the price difference arose, regardless of the source and sink that actually incurred the congestion costs.

The current EDAM framework may also force others in the region, whether they are participating in EDAM or Markets+, to pursue similar outcomes in the interest of fairness, equity, and financial necessity. Enacting similar provisions across the West could further impede the progress and economic benefits of centralized electricity markets.

Tacoma commends the CAISO for implementing a stakeholder process that appears to be based on a recognition of that inequity in the EDAM framework and the potential region-wide negative impacts if others in the West are forced to implement similar frameworks. As part of that stakeholder process, the issue paper contemplates a potential transitional option where “congestion revenue associated with parallel flows would stay with the balancing area where the congestion revenue was collected (i.e., is retained in the balancing area), which can then allow that EDAM entity to sub-allocate under the terms of its OATT and provide a more complete congestion hedge for its transmission customers exercising their transmission rights, when coupled with congestion revenue accrued associated with congestion effects internal to the EDAM entity’s balancing area as a result of the internal transmission constraint.”

On its face, the potential transitional option appears to take an incremental step toward a more equitable framework for the allocation of congestion revenues. But the time period between the March 17, 2025 release of the issue paper and the April 7, 2025 comment deadline is simply insufficient for a fulsome evaluation of this potential transitional option. In particular, the time frame and parameters of the issue paper prevent a thorough comparison of the potential transitional option to other alternatives for improving the EDAM congestion revenue framework.

Additionally, the potential transitional option lacks the durability that entities across the Western Interconnection need to continue the progress toward more centralized electricity markets. CAISO’s issue paper contemplates a transition period, possibly three years, during which CAISO would gather data on the operation of the potential transitional option, and then initiate a new stakeholder process to consider enhancements or new market designs. But that transition period would occur concurrently with market building and implementation activities of EDAM, Markets+, and participants in both markets.

The next few years will be a crucial culmination of lengthy market development activities across the West. It should be in the interest of all stakeholders to help ensure that both EDAM and Markets+ can operate successfully and that trades impacting participants in both markets can occur in ways that benefit all market participants and the region. CAISO should initiate a more robust stakeholder process that will thoroughly consider and compare multiple potential options to make the EDAM frameworks for congestion revenue allocation more equitable. That kind of process can result in a durable and non-transitional framework that will benefit the region.  

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

The Energy Authority (TEA) and its western regional partners[1] support revision of the base EDAM congestion revenue allocation framework to achieve more equitable outcomes. That said, the timeline set for this initiative is overly aggressive, the proposed interim solution fails to recognize the potential for unintended consequences, and a simpler bridge solution has not been considered. TEA and its regional partners therefore do not support the CAISO moving forward as proposed.

Under any of the paths forward discussed below, the CAISO and stakeholders need to take the time necessary to develop and fully assess expected outcomes before locking in on policy changes that will have significant consequences for all CAISO market participants, future EDAM customers, and resource and transmission developers. Moving too quickly simply risks a contested FERC proceeding that will ultimately likely delay implementation efforts more than taking additional time in the policy development phase.

The best path forward for CAISO’s entire pool of market participants, including load serving entities across the broad market footprint and the end-use consumers they serve, would be for CAISO to develop a path-specific physical transmission rights based congestion revenue rights assignment and allocation framework[2] that can be applied consistently across all future EDAM areas. Ideally this type of program would link held physical transmission rights to congestion hedge payouts, syncing with CAISO’s financial rights based Congestion Revenue Rights (CRR) market fundamentals. Bridging program designs in this way would set proper incentives and align outcomes across the entire EDAM footprint and minimize seams internal to the CAISO’s day-ahead markets. There are significant dollars at stake for all entities involved, as well as the potential for significant cost-shifts, diminished market benefits, and outcomes not grounded in cost-causation with any interim proposal that does not address the fundamental problems with the EDAM congestion design. This effort warrants taking the time to get it right on day one even if that path results in a minor delay of the go-live date of EDAM for PacifiCorp.

If the CAISO chooses to pursue the “interim solution” considered in the Issue Paper, it should at a minimum extend the timeline for the initiative into early summer, or as long as it takes to sufficiently study potential outcomes. Understanding expected outcomes however requires knowledge of the ultimate sub-allocation approach that will be applied at the EDAM BAA level during the time the interim proposal is in place. If FERC declines to act on the protests filed by the majority of its transmission customers and PacifiCorp’s EDAM implementation moves forward with the misguided two-tier allocation methodology proposed, the CAISO and stakeholders will need to consider the appropriateness of the interim Alternative Approach and the potential for unintended or discriminatory outcomes under that framework. However, if FERC acts on the filed protests or PacifiCorp elects to proactively address its customers’ concerns by, for example, supporting LT-F transmission opt-outs, the impact of the interim Alternative Approach would shift considerably for NT customers of EDAM Entities and allow it to gain support in the CAISO and future FERC processes.[3] Moreover, under either path forward, it is likely PacifiCorp will have to make revisions to its Tariff to reflect cost-allocation issues arising from the interim Alternative Approach, which would be more efficient to do after its current Tariff is acted upon by FERC.

Rushing the policy development process as proposed simply pushes the timeline risk and policy debate into the FERC process where it is far less efficient for the CAISO to work with stakeholders to clear concerns or adjust aspects of the proposal.

[1] TEA has coordinated with Utah Associated Municipal Power Systems (UAMPS), Cowlitz PUD, Klickitat PUD, Lewis PUD, and Franklin PUD, in its assessment of the CAISO EDAM Congestion Revenue Allocation IP and development of the positions expressed in these comments, each of whom will have load, generation, and/or transmission affected by this proposal, as will TEA itself.

[2] At a high level, a path-based framework would look to equitably allocate congestion rights and therefore congestion revenues between long-term Point-to-Point and Network users based on a combination of their investment in and likely use of the Transmission Service Provider’s system and would allow entities to acquire or trade available physical rights in addition to initial allocations to support efficient hedging activity. Importantly, this framework would not require rights holders to uneconomically self-schedule supply or demand to receive appropriate congestion allocation.

[3] As noted in multiple submitted Protests in the PacifiCorp filing, “opt-outs” are not an ideal long-term solution to congestion allocation issues. However, allowing most or all LT-F PTP customers not serving demand on the EDAM system where their rights are held to schedule outside of EDAM would vastly simplify congestion settlement for the remaining EDAM Entity customers and allow a single-tier measured-demand based allocation to be less problematic as an interim solution, avoiding creating improper self-scheduling incentives that undermine overall EDAM benefits.

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

The current EDAM congestion revenue allocation framework as it applies to parallel flows is clearly problematic. The degree to which it is problematic though hinges on the EDAM BAA sub-allocation framework, and specifically whether EDAM BAAs permit LT-F PTP users to “opt-out” of EDAM when not serving demand on an EDAM system. If EDAM BAAs supported this feature and revised the sub-allocation methodology for the remaining load-serving entities on their systems to be more closely tied to cost-causation, there would likely be less congestion on the system and less inter-BAA impacts to monitor while long-term solutions are developed. It remains unclear why EDAM Entities oppose this straightforward solution when those entities also are the dominant load-serving entity for their area, primarily rely on network service, and are similarly exposed to the cost-shifts in question. This “opt-out” solution could itself be proposed as interim pending a durable congestion rights assignment and revenue allocation program being developed for EDAM after some initial information-gathering term or as the market itself achieves scale over the next 1-3 years.

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

As noted above, the best path forward would be for CAISO to develop an appropriate congestion revenue rights assignment and congestion revenues allocation framework for application across all future EDAM areas that:

• Meets cost-causation principles for both PTP and NT customers;
• Delivers proper incentives for economic market participation; and
• Removes inefficient seams to the extent possible between CAISO’s CRR program and EDAM’s physical-rights based program.

TEA and its regional partners believe it is possible to develop, test, and implement such a program without overly delaying EDAM go-live. Groundwork for such a program has been laid since CAISO first developed its current design in 2022 and the significant stakeholder support for and potential benefits from achieving a new design should ensure its success on a reasonable timeline.

The interim Alternative Approach needs significant additional study and analysis, and likely at a minimum requires adjustments to guard against unwarranted cost-shifts, before moving forward to a straw proposal. TEA and its western regional partners have suggested multiple areas below where additional information is needed and have posed multiple highly-likely transactional scenarios for the CAISO and stakeholders to consider outcomes around. These should be explored in a workshop, with opportunity for additional follow-up.

Even if the interim Alternative Approach was adjusted though based on the additional work recommended, the two-tier framework PacifiCorp filed for BAA sub-allocation would still deliver problematic results if approved as filed. The backwards incentives created by the proposed intra-BAA sub-allocation methodology will likely exacerbate congestion in the market and cause loads and resources across the footprint to see additional price separation impacts, which increases the need to get the inter-BAA allocation right. Further, under the interim Alternative Approach, load-serving users attempting to participate efficiently in the market may be exposed to uplift allocations based on the two-tier BAA sub-allocation framework that would not track with cost-causation.

The interim Alternative Approach’s potential downsides could however be mitigated to an extent if the PacifiCorp EDAM Tariff revisions are adjusted to support “opt-outs” of LT-F PTP rights. This change would significantly reduce incentives for transmission customers to uneconomically schedule on the PacifiCorp system as there would no longer be direct competition between LT-F PTP customers and NT customers to secure scarce congestion revenues through submitting balanced self-schedules. As such, the cost-allocation focus at the BAA-level could return to developing mechanisms to ultimately provide an appropriately allocated hedge to load-serving interests internal to the market that are efficiently scheduling resources while using long-term rights to receive a congestion hedge while at the same time ignoring scheduling activity that is largely inconsequential to the EDAM solution of the BAAs performing the sub-allocation. This may significantly reduce the complexity of minimizing cost-shifts between NT customers due to counterflow impacts in the inter-BAA allocation as well.

Absent PacifiCorp voluntarily revising its Tariff to address intervenor concerns in this way though, the uncertainty around the sub-allocation framework is likely to persist pending the FERC process being completed. That uncertainty makes it challenging for stakeholders and the CAISO to weigh the risks and benefits of the interim Alternative Approach. As such, it would be sensible for CAISO to wait to complete scoping and testing until after the BAA sub-allocation policy is settled, and to adjust its timeline for moving forward.

Regarding the application of inter-BAA congestion revenue allocation only for the day-ahead market, additional information is needed to determine whether there would be a benefit in pursuing changes at this time. WEIM Real-Time Congestion Imbalance Offset (RTCIO) settlements to maintain neutrality between WEIM BAAs have been large in recent years, and it is unclear how those may change as entities join EDAM or depart the WEIM for other markets. It is also unclear how EDAM and DAME implementation will impact WEIM participation norms, day-ahead bilateral market activity, and other fundamentals that could impact modeled and settled real-time congestion in CAISO’s market. Given that, the CAISO should not foreclose adopting different rules if there would be benefits to doing so near-term or as EDAM achieves scale.

Whether CAISO moves forward with an interim approach or begins work now on a durable solution, it is important that principles are established by stakeholders, captured by the CAISO, and acknowledged by the WEM Governing Body. While these EDAM Congestion Revenue Allocation principles could begin from the Principles the EDAM Entities established in 2020[1], there are significantly more stakeholders involved in the effort at this stage than had influence at that time, and that the market design and market conditions have evolved considerably. As such, the CAISO should at a minimum hold a workshop for stakeholders to discuss any draft principles and take written feedback specifically on a draft set of principles prior to bringing them to the WEM Governing Body with any proposal.

[1]  https://www.caiso.com/Documents/EDAM-Common-Design-Principles-Concepts.pdf

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

To be able to more thoroughly assess the interim Alternative Approach, TEA and its western regional partners respectfully request the CAISO explore the following questions and scenarios before moving forward with the interim Alternative Approach:

• CAISO’s counterflow example from its March 24, 2025, presentation appears to show an insufficient collection of congestion revenue in two instances at the BAA-level from load relative to what is owed to generation when focusing solely on the external constraint impacts (i.e., not netting with other congestion allocations). Is that interpretation correct? If so, how frequently and in what scenarios could this be expected to occur, and how would EDAM BAs deal with the associated cost-allocation issues to prevent undue cost-shifts between customers?
• Does the CAISO view shift-factor thresholds (i.e., choosing 0.2% vs. 2% or another number) as having a meaningful impact on the accuracy of inter-BAA congestion revenue allocation, and if so, should reducing (or increasing) the default threshold in some or all instances be considered alongside any other EDAM congestion revenue program changes?
• Do LAP definitions have a meaningful impact on the same, and if so, are there metrics that the CAISO would use to advise Sub-LAP development for EDAM BAAs (e.g., for SMUD vs. WAPA-SNR within the BANC BAA, or the Northern vs. Southern part of the NV Energy BAA if it were to join EDAM)?
• Is it reasonable to be concerned that inter-BAA congestion impacts will be exacerbated and cost-allocation or cost-shift risks increased if heightened levels of self-scheduling occur in EDAM, whether associated with exports or wheelthroughs using PTP rights, or associated with load using NT rights?
• Please describe the self-scheduling mechanics that would be applied to NT users on an EDAM BAA system that would allow sub-allocation according to external constraint impacts.
  • To the extent defining Sub-LAP aggregations of NT loads in some instances would be recommended, please also describe the self-scheduling mechanics for entities serving multiple Sub-LAPs with a broad Designated Network Resource portfolio, including on- and off-system resources.
• Please expand the market-results examples to include the following scenarios:
  • Self-scheduled wheelthroughs across an EDAM BAA sinking in the CAISO with and without transfer-constraint congestion, with a binding CAISO constraint, and for both prevailing and counter-flow on that constraint.
  • Balanced self-schedule exports from an EDAM BAA sinking in the CAISO with and without transfer-constraint congestion, and for prevailing and counter-flow on a binding CAISO constraint.
  • Economically-bid non-EDAM CAISO intertie export sinking in a non-CAISO BAA alongside a self-scheduled EDAM Internal Interface transfer import into the CAISO BAA from a non-CAISO EDAM BAA affecting a common ITC/ISL.
  • Self-scheduled imports from a non-EDAM BAA to an EDAM BAA LAP or Sub-LAP creating prevailing flow or counter-flow on a binding CAISO constraint.
  • Self-scheduled WRAP holdback deliveries from an EDAM BAA to a non-EDAM BAA creating prevailing flow or counter-flow on a binding CAISO constraint.
  • Imbalance Reserve deployment factor impacts on external constraints in any relevant scenarios.
  • Direct or indirect EDAM net-export constraint application impacts, if any.
• Please coordinate with an EDAM Entity BAA to provide a reasonably-accurate sub-allocation example under their filed design (e.g., PacifiCorp’s Two-Tier allocation proposal), including for a counterflow scenario.

TEA and its western regional partners appreciate the CAISO’s and other stakeholders’ efforts to date on these impactful issues and look forward to continued work to enhance the EDAM model prior to market go-live. 

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

The Utah Municipal Power Agency (“UMPA”) and Deseret Generation & Transmission Co-operative, Inc. d/b/a Deseret Power (“Deseret”) appreciate the opportunity to comment on the EDAM Congestion Revenue Allocation Issue Paper.  UMPA/Deseret continue to stress that the discussion surrounding congestion revenue allocation should focus on returning congestion revenue to the correct transmission customer, not the correct balancing authority area.  UMPA/Deseret have long advocated for transmission customers to have a direct settlement relationship with the market operator (CAISO) which would make this determination of which balancing authority area should receive congestion revenue mute because there would be no sub-allocation by EDAM entities. 

As outlined in UMPA/Deseret’s protest[1] to PacifiCorp’s proposed OATT, the proposed sub-allocation of congestion revenue in PACW and PACE has significant impacts to day-ahead market efficiency and will undermine the benefits of EDAM.  If fact, Dr. Scott Harvey, in his Market Surveillance Committee presentation[2] on March 28, 2025, highlighted market design considerations when evaluating alternative congestion rent allocations.  PacifiCorp’s proposed congestion revenue allocation to its transmission customers includes elements that should be avoided, particularly a use-it-or-lose self-scheduling provision, congestion rent shortfalls to native load, and lack of a simultaneous feasibility test.

The PacifiCorp sub-allocation incents transmission customers to bid or self-schedule based on the transmission customer’s expectations of congestion, and to do so as frequently as hour to hour.  If a transmission customer believes there is no congestion in the direction of its transmission rights, it will economically bid to get a share of the congestion revenues through the Step Two allocation (residual measured demand), whereas if the customer believes it risks congestion exposure, it will self-schedule to receive the source-to-sink congestion revenue via Step One. Also, if the transmission customer believes congestion will be in the opposite direction of its transmission rights, it would economically bid and capture the higher price paid to the source than is charged to the sink and also receive a portion of the Step Two allocation. The resulting incentive structure has significant ramifications that should not be permitted.

Additionally, since the PacifiCorp sub-allocation includes Conditional Firm transmission as eligible to receive a Step One allocation, the sum of Firm Point to Point rights, Network Integration Transmission Service (NITS) rights, and Conditional Firm rights would not pass a simultaneous feasibility test.  This disincentivizes, particularly, native load using NITS service from economically bidding.  In short, NITS customers will have to self-schedule to ensure the EDAM does not harm them relative to Conditional Firm self-scheduling over constrained paths.

The CAISO has stated that the proposed changes in this initiative are transitional.  It is not clear where the congestion revenue allocation will transition to.  If the transition is to a different method of allocating congestion revenues between EDAM balancing authorities, stakeholders will continue to debate provisions that don’t address the key issue: how to allocate congestion revenues to transmission customers in a fair and equitable manner across the EDAM footprint.  

UMPA/Deseret provided comments[3] to PacifiCorp on October 18, 2024, that highlighted the need for a regional approach to congestion revenue allocation within the EDAM footprint.  The comments recognized that completing a stakeholder initiative prior to go-live could be difficult.  UMPA/Deseret stated a willingness to initially allocate all congestion revenue to measured demand as long as “the framework for allocation determined through the stakeholder process is on track to be implemented within a reasonable time.”  In fact, UMPA/Deseret proposed a stakeholder process timeline that would develop a common source-sink congestion revenue allocation to transmission customers with implementation one year after PacifiCorp’s planned go-live date of April 2026.

UMPA/Deseret also provided a high level congestion revenue allocation process that would distribute congestion revenues to transmission customers:  “The monthly allocation process (1) determines the eligible quantities LSEs are allowed to nominate, (2) a voluntary, multi-tiered nomination process followed by a simultaneous feasibility test, (3) the award of monthly source/sink congestion hedges, (4) a methodology to address under-collection due to transmission outages within the month, and (5) direct settlement with the market operator for awarded source/sink congestion hedges and allocation of residual congestion revenue to measured demand.”

UMPA/Deseret reiterate that the EDAM congestion revenue allocation must transition from a balancing authority area paradigm to transmission customer paradigm. The market operator (CAISO) should develop a fair and equitable congestion revenue allocation process to transmission customers, not continue to focus on allocation rules between balancing authority areas and ignoring the market inefficiencies of PacifiCorp’s sub-allocation.  A standard congestion allocation process should be applied across all EDAM balancing authorities and coordinate with the CAISO current congestion revenue rights design. This will maximize market efficiency and minimize potential seams issues within the EDAM footprint.

[1] See FERC docket ER25-951

[2] https://www.caiso.com/documents/extended-day-ahead-market-congestion-revenue-allocation-harvey-presentation-mar-28-2025.pdf

[3] https://www.oasis.oati.com/woa/docs/PPW/PPWdocs/18_Oct_2024_Deseret.UAMPS.UMPA_Comments.pdf

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

See above.

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

See above.

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

No comment.

1. Please provide a summary of your organization’s overall feedback on the Extended Day-Ahead Market (EDAM) Congestion Revenue Allocation Issue Paper.

 The Western Power Trading Forum (WPTF) appreciates the California ISO's (CAISO's) efforts to initiate an expedited stakeholder process to evaluate the EDAM congestion revenue allocation framework in light of concerns raised in the PacifiCorp OATT proceeding. WPTF strongly supports transparent, efficient, and competitive market structures and believes that the current EDAM design, while rooted in the WEIM precedent, presents challenges to achieving equitable and effective congestion hedging for firm point-to-point (PTP) and network (NT) transmission customers of EDAM entities. WPTF supports the ISO's consideration of a transitional alternative approach and supports near-term development of long-term congestion revenue allocation enhancements that recognize the role of parallel flows and their financial implications and overall improve the congestion revenue rights assignment and allocation framework in EDAM. 

2. Please provide your organization’s feedback regarding current EDAM design to congestion revenue allocation (section IV of issue paper).

WPTF acknowledges the ISO’s rationale for the current EDAM design, which allocates congestion revenues to the balancing area where the constraint is located. However, we note that this approach, while consistent with WEIM practice, does not adequately address the implications of parallel flows and risks shifting much larger costs and benefits between EDAM areas given the likely scale of EDAM settlements as compared to WEIM. Without addressing the parallel flow issue, EDAM entity BAAs may receive inadequate revenues to be able to provide effective congestion hedges for firm PTP and NT transmission rights holders, potentially undermining the value, and ability to value, OATT-based transmission service rights.

WPTF is concerned that the current design may result in an unbalanced distribution of congestion revenues that does not align with cost causation principles. By allocating all congestion revenue to the location of the constraint, even if that revenue arises from congestion price impacts in adjacent BAAs, the current design may fail to recognize the financial responsibilities borne by the transmission customers of those BAAs. This misalignment could create market inefficiencies and disincentives for transmission service utilization or participation in EDAM.

3. Please provide your organization’s feedback regarding the alternative approach to EDAM congestion revenue allocation associated with parallel flows on neighboring systems (section V of issue paper). Please include feedback regarding the alternative approach application in the day-ahead market and the transitional nature of the alternative approach.

WPTF supports further exploration of the transitional alternative approach, which would allocate congestion revenues associated with parallel flows to the balancing area where the revenue accrues rather than the location of the constraint. This approach generally appears to better align with the principle of financial responsibility and provides EDAM entities with the necessary tools to deliver a more complete congestion hedge for firm PTP and NT transmission customers at times, acknowledging that additional study needs to be performed. Additionally, we support further exploration of more narrowly applying the alternative approach to only schedules associated with qualified firm PTP and NT transmission rights.

The example scenarios provided in the issue paper demonstrate how in some illustrative examples the alternate approach enables a more equitable distribution of congestion revenues and helps align market outcomes with physical system realities as compared to the current EDAM approach. However, the net impact to transmission customers remains unclear and it will be difficult to judge the actual efficacy of the changes until either robust market simulations are performed pre-market go-live or until the market is producing binding financial results. WPTF therefore agrees that this approach should be transitional, as it will eventually provide valuable operational experience and data to inform future market design refinements.

Limiting the application of this transitional approach to the day-ahead market is appropriate. As noted in the issue paper, day-ahead markets are typically where congestion hedging mechanisms are designed to function. Maintaining the current allocation framework in real-time (WEIM) avoids unnecessary complexity and preserves consistency for non-EDAM participants. While WPTF is usually a supporter of aligned day-ahead and real-time market rules, we note that the impacts are limited because this is a settlement rule difference, not an optimization difference. Thus, the LMP formulation will be the same, it is only the allocation of congestion revenues that will differ and so will not impact virtual settlement. 

WPTF supports a defined transitional period—potentially two years that can be effectuated through a sunset date in the Tariff—during which the ISO collects and publishes detailed data on congestion revenue flows, shift factors, and constraint impacts across BAAs. This information will be vital for evaluating the feasibility and design of long-term solutions, including potential CRR or FTR frameworks. The CAISO should, however, be prepared to adjust the proposal to the extent possible through an emergency filing if it brings significant unintended consequences following EDAM go-live.

4. Please provide any additional feedback regarding the issue paper and stakeholder meeting materials (March 24th).

WPTF appreciates the illustrative examples and visualizations, which help clarify complex market dynamics. We encourage the ISO to continue this level of transparency in the forthcoming straw proposal and to include quantitative impact assessments of the proposed alternative allocation method under various likely market scenarios. WPTF emphasizes that no design is perfect and EDAM is a novel design. It is important to focus on the broad picture and make enhancements over time, though it is also important to recognize that these decisions can have significant financial impacts for market participants and can affect critical resource development decisions and bring costs that eventually harm the consumers that EDAM is aiming to benefit. 

Looking ahead, to help provide some level of certainty regarding the potential for future policy changes, WPTF believes that enhancing EDAM over time will require a clearly articulated and commonly accepted set of principles that reflect both foundational goals and evolving market realities. At the outset of EDAM’s design, a collaborative effort produced a set of core principles covering participation, transmission and supply commitment, resource sufficiency, congestion rent allocation, transfer confidence, GHG accounting, and price formation.[1] These principles have served as useful guideposts.

However, as EDAM matures and new challenges arise—such as the need for equitable treatment of congestion revenue—WPTF recommends that CAISO, in partnership with stakeholders, revisit and refine these principles. Specifically for congestion revenue allocation, an updated principle could emphasize that "Congestion revenue should be allocated in a manner that balances congestion price impacts and firm transmission service rights, in support of fair and efficient market outcomes and effective hedging."

This revision would build on the original objective of holding transmission customers harmless without creating uplifts and expand it to recognize the complexity of integrated, multi-BAA operations. Updated principles could also better reflect the importance of data transparency, cost causation alignment, and the need for periodic review of allocation methodologies as market participation broadens.

WPTF encourages the CAISO to initiate a structured process to review and revise EDAM design principles at regular intervals, particularly at key junctures such as the end of a transitional design phase. Doing so will help ensure EDAM’s long-term success by aligning market mechanics with stakeholder expectations, regulatory objectives, and operational realities.

WPTF looks forward to continued engagement in this process and appreciates the CAISO’s commitment to refining EDAM to support robust participation, equitable outcomes, and long-term market success. 

[1] https://www.caiso.com/Documents/EDAM-Common-Design-Principles-Concepts.pdf