Comments on Fourth revised straw proposal and Nov 1, 2022 stakeholder call discussion

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

The Bonneville Power Administration (Bonneville)[1]continues to support the development of an imbalance reserve product that is co-optimized with energy and ancillary services and also supports development of a reliability capacity down product. These products are important additions to the CAISO’s day-ahead market that will improve reliability by better positioning resources capable of addressing the significant uncertainty that manifests between the day-ahead market and real-time market timeframes.

However, as noted in prior rounds of comments, Bonneville has significant concerns with the proposed market power mitigation (MPM) measures for energy, reliability capacity, and the imbalance reserve product. The new measures create high risk of over-mitigation, which discourages participation of external supply in the CAISO BAA and introduces significant concerns for any hydro entity considering participation in the EDAM.

Bonneville notes that the 4^th Revised Straw Proposal exempts non-EDAM entities from market power mitigation when offering the imbalance reserve product over interties.  While this exemption partially addresses Bonneville’s immediate concerns about over-mitigation impacting system reliability, it does not resolve broader concerns about over-mitigation, and it may inadvertently create incentive to opt out of EDAM participation. 

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

2. Provide your organization’s comments on the summary of changed from the third revised straw proposal and responses to stakeholder feedback, as described in section 1:

Section 1 provides a reasonable listing of the changes and/or clarifications from the third revised straw proposal.

Bonneville appreciates the clarification regarding mitigation for non-EDAM intertie resources providing imbalance reserves.  We urge the CAISO to re-evaluate the need for imbalance reserve mitigation in general (and in addition to price caps) with additional quantifiable analysis. Bonneville is also supportive of the CAISO’s reconsideration to re-introduce the concept of a default bid for reliability capacity mitigation that would act as part of a mitigation floor, provided the default bid adequately considers entities’ costs, including opportunity cost. 

3. Provide your organization’s comments on the need for DAME, as described in section 2:

The CAISO has provided a compelling summary in Section 2 on the need for DAME.  It is reasonable for the CAISO to address the large imbalances between its markets and attempt to reduce operator out-of-market actions.  Both issues, as explained by the CAISO, are ominous signs the market is not functioning as intended and is forgoing optimal physical and financial efficiency.

4. Provide your organization’s comments on the proposed DAME, as described in section 3:

Section 3 provides an adequate overview of the proposed enhancements to the current DA market.  As stated above, the proposed new products appear to provide a reasonable solution to the CAISO’s initiative to better manage net load uncertainty and reduce the need for out of market actions taken by system operators.

Energy and availability bids should be mitigated based on bid-in demand, rather than imbalance reserve deployment scenarios in the IFM.  The values that imbalance reserves availability bids are mitigated to, must properly account for the complex and dynamic nature of hydropower opportunity costs, including the value of storing water for days, weeks, or months to meet future higher value energy demands. The competitive LMPs proposed to be used for mitigation of imbalance reserves do not accomplish this.

Continued focus on mitigation measures rather than on transparent market price signals drives Bonneville’s strong desire for measures that insulate external suppliers from over-mitigation, like allowing participants to forego awards rather than have bids mitigated or capped. As discussed extensively in the hydro DEB process, Bonneville is concerned about over-mitigation because it represents a reliability risk.  If our bids are mitigated, resulting in unintended dispatch at uneconomic prices to other balancing authorities, limited hydro reservoirs can be depleted in situations where that generation is necessary to meet load in future periods.  It is critical that Bonneville retain the ability to meet its future load without reliance on market purchases, caused by over-mitigation.

Bonneville strongly suggests the CAISO give more thought to its Default Availability Bid concept as applied to imbalance reserves and reliability capacity in the market power mitigation passes for IFM and RUC.  Launching new reliability products supported by a static, system-wide Default Availability Bid for mitigation is imprudent.  Although the CAISO recognizes the need for further development in this area, the implementation of DAME should include a mitigation design that is at least modestly better than a one-size-fits-all solution.

5. Provide your organization’s comments on the additional DAME design considerations, as described in section 4:

Bonneville has no comments on section 4 at this time.

6. Provide your organization’s comments on the alignment between Resource Adequacy, DAME, and the Extended Day-Ahead Market, as described in section 5:

Bonneville has no comments on section 5 at this time.

7. Provide your organization’s comments on the proposed WEIM Governing Body Role, as described in section 6:

Bonneville has no comments on section 6 at this time.

8. Provide any additional comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

Bonneville has no additional comments.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

The California Community Choice Association (CalCCA) appreciates the opportunity to comment on the California Independent System Operator’s (CAISO’s) Day-Ahead Market Enhancements (DAME) Fourth Revised Straw Proposal. In general, this version of the proposal has made positive changes to preserve the ability of resource adequacy (RA) resources to serve California load through real-time. However, the CAISO should modify the proposal to include a must-offer obligation for imbalance reserves. In summary:

• The CAISO should modify the proposal to require resources providing flexible RA to bid f or imbalance reserves;
• The CAISO’s proposal correctly maintains the RA real-time must offer obligation; and 
• The CAISO should adopt the proposed inter-SC trade and reverse settlement mechanisms to avoid duplicative capacity payments.

2. Provide your organization’s comments on the summary of changed from the third revised straw proposal and responses to stakeholder feedback, as described in section 1:

Day-Ahead Must-Offer Obligations for Imbalance Reserves

The CAISO’s proposed day-ahead bidding obligations for RA resources would require them to bid for reliability capacity but would not require them to bid for imbalance reserves. The CAISO should continue to require RA resources providing flexible resource adequacy to bid for imbalance reserves. The CAISO indicates its rationale for not requiring imbalance reserve bids from RA resources is to avoid modifying the RA program to the extent possible. However, without a must-offer obligation, there is no guarantee that enough resources will offer to meet the requirement. Additionally, the CAISO balancing authority area (BAA) will need to demonstrate sufficient imbalance reserves to pass the Extended Day-Ahead Market (EDAM) resource sufficiency evaluation (RSE). The CAISO should not assume it will get enough imbalance reserve bids without the flexible RA resources having a requirement to offer them and risk the CAISO BAA not passing the EDAM RSE. This proposal would result in a failure to utilize the flexible capacity that all California LSEs were required to procure to provide for reliable grid operation.

Imbalance reserves are fifteen-minute dispatchable and they are required to submit economic bids – both qualifications for providing flexible RA. Flexible RA resources can provide imbalance reserves and therefore should be required to offer them. This is not dissimilar to the ancillary service must offer obligation, in which if a RA resource is certified to provide an ancillary service, it must bid for that ancillary service.

The CAISO should initially require flexible RA resources to bid for imbalance reserves upon DAME implementation and monitor the participation from non-flexible RA resources. A later initiative can then consider whether or not modifications to the flexible RA program or its bidding obligations are necessary.

RA Real-Time Must-Offer Obligation

The CAISO has modified the proposed resource adequacy real-time bidding obligations to retain the resource adequacy real-time must-offer obligation. CalCCA supports this modification, as California load serving entities (LSEs) purchase RA to be available to serve California load through real-time. Grid conditions can change between day-ahead and real-time and having the RA fleet available throughout those time horizons will ensure the grid can operate reliably even when uncertainty materializes beyond what is covered through imbalance reserves.

Inter-SC Trades and Reverse Settlements to Avoid Double Capacity Payments

CalCCA, among other stakeholders, expressed concern that paying RA resources imbalance reserves or reliability capacity payments would double compensate generators for capacity already paid for through RA contracts.  The CAISO proposes to address this concern by (1) extending its inter-SC trading functionality for imbalance reserves, and (2) collecting reliability capacity revenues for reliability capacity awarded to RA capacity and re-distributing those revenues back to CAISO load.

During the workshop, stakeholders and the CAISO discussed whether or not these proposed mechanisms were necessary given the existing RA contracts between LSEs and generators, with some stakeholders suggesting RA contracts already allow generators to pay out capacity payments they receive from the CAISO market to the LSE who holds their RA capacity. Following this discussion, CalCCA surveyed its members to determine whether or not existing contracts are already structured to avoid double payments, thus obviating the need for the inter-SC trade and reverse settlement mechanisms proposed by the CAISO. The feedback CalCCA received indicates that there is still a need for mechanisms to ensure there are no double payments for capacity upon implementation of imbalance reserves and reliability capacity. While in some RA contracts the buyer is entitled to CAISO market revenues associated with capacity attributes of the RA resource, others either do not have such provisions or do not have an efficient process in place to identify and settle those payments bilaterally between the buyer and the seller. This feedback points to a continued need for a mechanism to avoid duplicative capacity payments. Therefore, CalCCA supports the inter-SC trade and reverse settlement mechanisms proposed in the Fourth Revised Straw Proposal.

3. Provide your organization’s comments on the need for DAME, as described in section 2:

CalCCA has no additional comments at this time.

4. Provide your organization’s comments on the proposed DAME, as described in section 3:

CalCCA has no additional comments at this time.

5. Provide your organization’s comments on the additional DAME design considerations, as described in section 4:

CalCCA has no additional comments at this time.

6. Provide your organization’s comments on the alignment between Resource Adequacy, DAME, and the Extended Day-Ahead Market, as described in section 5:

CalCCA has no additional comments at this time.

7. Provide your organization’s comments on the proposed WEIM Governing Body Role, as described in section 6:

CalCCA has no additional comments at this time.

8. Provide any additional comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

CalCCA has no additional comments at this time.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

In general, CDWR supports CAISO’s proposal to maintain existing Resource Adequacy (RA) Must-Offer Obligation (MOO) with no Imbalance Reserve (IR) must offer requirements from RA resources, and requests that CAISO clarify Residual Unit Commitment (specifically, Reliability Capacity under DAME) requirement from use limited resources such as hydro and pumping load.

2. Provide your organization’s comments on the summary of changed from the third revised straw proposal and responses to stakeholder feedback, as described in section 1:

CDWR appreciates CAISO’s responses to stakeholder feedback and changes from the third revised straw proposal.

CAISO proposes no changes to Energy and Ancillary Services MOO but does propose changes to the MOO for IR bids requirement.  The CAISO proposes that the market will procure IRs separate and distinct from RA capacity.  CAISO will no longer require MOO for all eligible resources to provide IRs or to re-configure flexible RA resources to procure IR attributes.  CDWR supports CAISO elimination of earlier proposed Day-Ahead IR MOO for RA resources. No IR MOO from generic RA resources preserves self-scheduling capability from certain resources for which it is essential.  Use Limited Resources are associated with uncertainty (for example hydrology based hydro resources) in their operation and relying on IR from use limited RA resources would not address the uncertainty which the IR products would be expected to accomplish. CDWR believes that a voluntary approach for providing IRs on eligible resources including Use-Limited Resources would be desirable.

CAISO proposes that resources that are offering Residual Unit Commitment (RUC) bids will be required to bid Reliability Capacity (RC) upward and downward.  How will Use-Limited Resources be required to provide RUC availability bids?  If a Use-Limited Resource providing RA capacity submitted the RUC availability bid, will the resource be required to bid the RC product?  CDWR is concerned about CAISO’s proposal on the RUC availability bid requirement because some Use-Limited Resources providing RA capacity that are offering the RUC bids would be unavailable to bid for RC.  A voluntary approach applying to Use-Limited Resources providing RA capacity offering RC in the RUC availability bids would be necessary.

CAISO’s current Tariff, Section 40.6.4.2 on RUC Availability Bids exempts some resources providing RA capacity from submitting RUC availability bids for that capacity.  These resources include Pumping Loads, Reliability Demand Response Resources (RDRR), NGRs, Run-of-River Resources, and Intermittent Resources.  CDWR seeks clarification (as described in section 8 below).

CDWR notes that CAISO’s current BPM of Reliability Requirements (Section 7.1.1) adds confusion as to which RA resources are required to bid in RUC.  Section 7.1.1 states that Use-Limited Resources are required to submit RUC availability bids.  However, Pumping Loads and Hydro Units without qualifying use limits are not required to submit RUC availability bids.  Based on Section 7.1.1, CDWR’s qualified Use-Limited Resources, which include its Hydro Units and Participating Loads, would be required to submit RUC availability bids.  Section 7.1.1 of the BPM contradicts Tariff Section 40.6.4.2, which does not require a Pumping Load be a non-use limited resource for it to be exempt from RUC MOO.  CAISO’s BPM should align with its Tariff to clarify the Pumping Loads and Hydro Units as Use-Limited Resources are not required to submit the RUC availability bids. For further clarification and illustration, please refer to the section 8 as shown below.

3. Provide your organization’s comments on the need for DAME, as described in section 2:

CAISO states that the IRs will provide benefits in the EDAM.  These benefits include reduction of each EDAM BAA individual net load uncertainty requirements, confidence in energy transfer, lower cost of the reserves, and a consistent treatment of uncertainty in the EDAM RSE.  CDWR requests the CAISO provide a benefit analysis, showing how these benefits will be obtained.

4. Provide your organization’s comments on the proposed DAME, as described in section 3:

No comments

5. Provide your organization’s comments on the additional DAME design considerations, as described in section 4:

No comments

6. Provide your organization’s comments on the alignment between Resource Adequacy, DAME, and the Extended Day-Ahead Market, as described in section 5:

 CDWR supports aligning DAME, EDAM, and RA in the implementation.

7. Provide your organization’s comments on the proposed WEIM Governing Body Role, as described in section 6:

No comments

8. Provide any additional comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

 An excerpt from BPM of Reliability Requirement is provided here for an illustration and clarification.

 7.1.1 Summary of Bidding Requirements for Resources Providing RA Capacity

1. With regard to the existing rules on RUC (identified as RC under proposed DAME), some selected resource types have been chosen in the above table for illustration and clarification. At present, CDWR is the SC for the resource types: “Use -Limited Resources”, under which both Participating Load (PL) and use limited hydro resources belong to. All of them are treated as use limited resources. With this resource category, all PL and hydro resources would be required to offer RUC. However, the resource type, “Pumping Load (without qualifying use limits)” requires no RUC requirement from a PL that is a “pumping load”. It appears that a PL that is a pumping load, will have no RUC requirement irrespective of “Use Limited resource” status. If the intent is not to require RUC from a PL that is a pumping load irrespective of use limited status, then the resource type “Pumping Load (without qualifying used limits)” in the above table creates confusion with a notion that in order to get RUC exemption the PL must be without a qualifying use limit. The tariff section 40.6.1 does not require a PL to be non-use limited resource either. Therefore, to eliminate the confusion, CDWR suggests changing the resource type, “Pumping Load (without qualifying use limits)” to “Pumping Load”. This concept should be carried forward to DAME with regard to RC requirements.
2. Please clarify that no bid insertion of (RUC or RC under DAME) will carry forward to DAME for the resources on the table listed above.
3. Will the “use limited resources” that are hydro resources be required to offer RC? Will bid insertion be waived for RC for these resources as a continuation of RUC into DAME? Since the RUC will change to RCU and RCD, use limited hydro resources will have RUC obligation in both directions compared to the existing RUC provision in upward direction only. This may create operational challenges with regard to how resource may be operated by RC dispatches specially for interconnected hydro systems with environmental constraints. In addition, RCU or RCD awards will need to have RTM economic bids for energy as proposed which would be a challenge for hydrology based and environmentally constrained resources for which self-scheduling is necessary. CDWR prefers voluntary approach to RC requirement from use limited hydro resources as well. This is in line with historical precedence that use limited hydro resources were exempt from RUC requirement in the past.
4. CDWR seeks clarification regarding 15 min and 1 hour dispatchable PL resources. For these 2 categories, what reference should be made to determine the applicable category? Is the criteria based on Masterfile parameters?

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

CESA offers the following comments to the Fourth Revised Straw Proposal (FRSP):  

• The ISO should not enforce a real-time energy bid price cap for resources awarded Imbalance Reserve (IR) 

• The use of local market power mitigation (MPM) for IR is neither properly documented nor warranted given the fact that a bid cap will be in place. 

• If the CAISO continues to advocate for MPM for IR, it should explain in more detail the interactions between this provision and the energy MPM.  

• The CAISO should not seek to establish any form of cost allocation for Reliability Capacity (RC) as it applies to Resource Adequacy (RA) assets.  

• These matters are already addressed in RA contracts and the development of CAISO mechanism is unwarranted. 

2. Provide your organization’s comments on the summary of changed from the third revised straw proposal and responses to stakeholder feedback, as described in section 1:

See CESA’s answer to Questions 1, 4, and 5.  

3. Provide your organization’s comments on the need for DAME, as described in section 2:

CESA offers no comments at this time. 

4. Provide your organization’s comments on the proposed DAME, as described in section 3:

The use of local market power mitigation (MPM) for IR is neither properly documented nor warranted given the fact that a bid cap will be in place. 

In section 3.2 of the FRSP, the ISO notes that MPM would be applied to the IR product. Specifically, regarding local MPM for IR, the ISO underscores that it would be based on the same optimization, bids, set of binding constraints, and set of shift factors as for energy. Since the CAISO mitigates energy offers through the use of default energy bids (DEBs), the ISO proposes the creation of a homologue for availability, a default availability bid (DAB). The DAB would thus be used to mitigate imbalance reserve offers to the higher of it or the competitive locational marginal price.  

CESA does not support the use of local MPM for IR, particularly considering the limited documentation regarding its potential effects. In this context, if the CAISO continues to advocate for MPM for IR, it should explain in more detail the interactions between this provision and the energy MPM. More fundamentally, CESA does not support application of MPM considering that the IR product will already be subject to a bid cap which greatly eliminates the opportunity for an asset to exert market power. 

The CAISO should not seek to establish any form of cost allocation for Reliability Capacity (RC) as it applies to Resource Adequacy (RA) assets. 

In section 3.5 of the FRSP the ISO describes a proposal to ensure reverse settlement of RC payments made to RA resources given that those revenues have been defined by some stakeholders as potentially duplicative. Given said claims, the ISO proposes that a resource’s RCU/RCD awards will be stacked above/below the resource’s IFM schedules (energy, ancillary services, and imbalance reserves) to determine the overlap with RA capacity. Then, settlements will reverse the RCU/RCD payments for the RCU/RCD awards that overlap with RA capacity and distribute to metered demand based on load ratio share. Finally, settlements would calculate and allocate the RCU/RCD costs based on the approach proposed above.  

CESA opposes the ISO establishing any form of cost allocation mechanism for RC considering that these matters are already addressed in RA contracts. The development of CAISO mechanism is unwarranted given its duplicative nature. 

5. Provide your organization’s comments on the additional DAME design considerations, as described in section 4:

The ISO should not enforce a real-time energy bid price cap for resources awarded Imbalance Reserve (IR). 

In section 4.3 of the FRSP, the CAISO describes a proposal that would enforce a real-time energy bid price cap on all resources that receive an imbalance reserve up or reliability capacity up award. The ISO notes that this proposal would set the real-time energy bid price cap consistent with the price expected if the entire upward uncertainty requirement materialized. To set the real-time energy bid cap, the CAISO proposes to use a forecasted price using statistical regression.  

CESA does not support the establishment of a real-time energy bid price cap for resources awarded IR. Resources must be able to reflect their actual costs in energy bids, which is important for price formation and efficient market outcomes. The establishment of such cap is not clearly warranted considering the ISO’s ultimate goal should be to ensure that it will have the adequate mix of resources to cover intra- and inter-hourly needs. Furthermore, offer caps would limit the generator's ability to reflect their marginal costs of operation in the real-time energy market. There is an even higher need for flexibility in real-time energy offers during tight supply conditions due to various reasons, like severe weather conditions and gas supply shortages. In this context, all post-market cost recovery processes are inherently inefficient and dilute market signals. The same set of issues (DAME mitigation rules and real-time offer caps) affects use-limited resources like hydro and energy storage, which require flexibility in the real-time energy offers to reflect the opportunity cost to provide power. Thus, we recommend that CAISO consider implementing DAME without the real-time offer caps, monitor the market metrics, and carefully consider the real-time offer caps for future enhancement. 

6. Provide your organization’s comments on the alignment between Resource Adequacy, DAME, and the Extended Day-Ahead Market, as described in section 5:

CESA offers no comments at this time. 

7. Provide your organization’s comments on the proposed WEIM Governing Body Role, as described in section 6:

CESA offers no comments at this time. 

8. Provide any additional comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

CESA offers no comments at this time. 

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

Please see the attached comments.

2. Provide your organization’s comments on the summary of changed from the third revised straw proposal and responses to stakeholder feedback, as described in section 1:

Please see the attached comments.

3. Provide your organization’s comments on the need for DAME, as described in section 2:

Please see the attached comments.

4. Provide your organization’s comments on the proposed DAME, as described in section 3:

Please see the attached comments.

5. Provide your organization’s comments on the additional DAME design considerations, as described in section 4:

Please see the attached comments.

6. Provide your organization’s comments on the alignment between Resource Adequacy, DAME, and the Extended Day-Ahead Market, as described in section 5:

Please see the attached comments.

7. Provide your organization’s comments on the proposed WEIM Governing Body Role, as described in section 6:

Please see the attached comments.

8. Provide any additional comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

Please see the attached comments.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

The objectives of the DAME initiative include enhancing the California Independent System Operator’s (CAISO) day-ahead market to efficiently account for load forecast uncertainty, ramping needs, and differences between bid-in load and actual anticipated needs.[1]  CAISO seeks to add new capacity products to the day-ahead market to meet those objectives.  Specifically, CAISO proposes that the Integrated Forward Market (IFM) should procure Imbalance Reserves (IR) capacity capable of increasing or decreasing generation to account for net load imbalances that materialize between the day-ahead and real-time markets.[2]  CAISO also proposes to add Reliability Capacity (RC), a capacity product procured through the Residual Unit Commitment (RUC) process.  RC would be the sole product in the RUC process; it and would be used to meet the difference between bid-in load and the CAISO Forecast of CAISO Demand, and to backfill virtual supply with physical resources.[3]  CAISO proposes a total of four new capacity products (IR up, IR down, RC up, RC down) and all four products will have their own Locational Marginal Price (LMP).[4]

The Fourth Revised Straw Proposal includes designs to mitigate potential double-payments of Resource Adequacy (RA) contracts with the addition of the proposed IR and RC capacity products.[5]  Cal Advocates appreciates the CAISO’s work to develop these solutions and recommends the refinements below.

CAISO has not estimated procurement volumes and prices of IR and RC.  Cal Advocates recommends that the CAISO provide an analysis that estimates the impacts of proposed DAME new capacity products on ratepayer costs. This analysis should account for the Extended Day Ahead Market (EDAM) design which would utilize the proposed DAME new capacity products.

[1] DAME Fourth Revised Straw Proposal, October 26, 2022 (DAME Fourth Revised Straw Proposal) at 5.

[2] DAME Fourth Revised Straw Proposal at 22-23.

[3] DAME Fourth Revised Straw Proposal at 22-23.

[4] DAME Fourth Revised Straw Proposal at 57.

[5] DAME Fourth Revised Straw Proposal at 37-39, 46.

2. Provide your organization’s comments on the summary of changed from the third revised straw proposal and responses to stakeholder feedback, as described in section 1:

Cal Advocates has no comment on this issue at this time.

3. Provide your organization’s comments on the need for DAME, as described in section 2:

Price and Volume Estimates of DAME Products are Necessary to Determine Ratepayer Impacts

CAISO asserts that the addition of IR and RC will result in a “more efficient and effective market outcome” than the current market design;[1] however, it remains unclear if ratepayer costs will increase or decrease if those products are implemented.  The default availability bids for IR and RC market power mitigation as contemplated in the Second Revised Straw Proposal could range from $4.69 to $33.39 per megawatt hour (MWh).[2]  In the current draft proposal, the CAISO assumes that a default IR bid would be set at some percentile level of ancillary service bids.[3]  CAISO has not provided estimates of actual clearing prices and procurement volumes of IR and RC.  Instead, the CAISO has reported historical net load imbalances[4] and included a methodology to establish IR procurement requirements in the current proposal.[5]

CAISO should provide an analysis that estimates the volume and pricing of IR and RC.  This analysis is necessary to estimate the procurement costs of DAME products and to determine if the DAME proposal provides net benefits to ratepayers.  CAISO has commissioned a study that will consider quantitative benefits of imbalance reserve procurement in the context of the EDAM.[6]  In addition, the DAME initiative should include an opportunity for stakeholders to provide input on the proposed methodology for calculating net ratepayer benefits.  

[1] DAME Fourth Revised Straw Proposal at 5.

[2] DAME Second Revised Straw Proposal, July 21, 2021 at 40.  Available at: http://www.caiso.com/InitiativeDocuments/SecondRevisedStrawProposal-Day-AheadMarketEnhancements.pdf.

[3] DAME Fourth Revised Straw Proposal at 40-41

[4] Net load imbalances will be accommodated by IR.  DAME Fourth Revised Straw Proposal at 13.

[5] DAME Fourth Revised Straw Proposal at 32.

[6] The CAISO plans to release the study prior to the next DAME proposal draft.  DAME Fourth Revised Straw Proposal at 18.  See also DAME Fourth Revised Straw Proposal Stakeholder Meeting Presentation, November 1, 2022, at 13.

4. Provide your organization’s comments on the proposed DAME, as described in section 3:

Inter-Scheduling Coordinator Trading (IST) for IR Should be Mandatory and Enforceable

IR and RC provide services that are currently unpaid for by the market, but the services’ value is accounted for in RA contract prices.  RA resources currently provide services similar to IR and RC through Must Offer Obligation (MOO) requirements.[1]  In order to avoid double-payments to contracted[2] RA resources for IR, the current DAME proposal includes the optional use of an IST mechanism.  The IST mechanism currently exists to transfer market revenue or energy volumes for certain market products to avoid double-payments.[3]  The mechanism allows the LSE Scheduling Coordinator (SC) to coordinate with the resource SC to arrange the transfer of a CAISO payment or product from the resource to the LSE.[4] 

CAISO proposes that IST be expanded to include IR payments for contracted RA capacity.  A resource SC could transfer IR payments received from the CAISO back to the LSE that contracts for the RA, avoiding duplicative payments for services already provided for in the CAISO MOO and paid for in the RA contract.  However, the use of ISTs for IR must be mandatory and enforceable for contracted RA capacity unless the contract has specific provisions to distribute IR revenue between counterparties to avoid double-payment.  An optional use of IST may fail to prevent double-payment if either party declines to use ISTs.  In order to avoid the potential for double-payments, the CAISO’s next draft proposal should include an IST mechanism that is mandatory and enforceable.

[1] DAME Fourth Revised Straw Proposal at 37, 46.

[2] Double-payment issues of RA for IR and RC payments are limited to RA contracts between a load-serving entity (LSE) and the resource controller.  RA resources in which the LSE itself is the Scheduling Coordinator (SC), either through direct resource ownership or another arrangement such as a tolling agreement, avoids duplicative payment since the LSE would receive all payments for IR and RC directly.

[3] DAME Fourth Revised Straw Proposal at 37-38.

[4] ISTs must be arranged before the run of the day-ahead market.  The CAISO has validation processes to track ISTs.  For more information, see DAME Fourth Revised Straw Proposal at 38.  See also CAISO Inter-SC Trades for the California ISO Nodal Market Tutorial Version 1.3, August 4, 2009. Available at: https://www.caiso.com/Documents/SIBRInter-SCTrades_IST_Tutorial.pdf.

5. Provide your organization’s comments on the additional DAME design considerations, as described in section 4:

Cal Advocates has no comment on this issue at this time.

6. Provide your organization’s comments on the alignment between Resource Adequacy, DAME, and the Extended Day-Ahead Market, as described in section 5:

Cal Advocates has no comment on this issue at this time beyond the RA concerns related to DAME design raised above.

7. Provide your organization’s comments on the proposed WEIM Governing Body Role, as described in section 6:

Cal Advocates has no comment on this issue at this time.

8. Provide any additional comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

Cal Advocates has no additional comments at this time.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

The Independent Energy Producers Association (IEP) supports the introduction of the new imbalance and reliability products and other reforms recommended by staff in the 4^th Revised Straw Proposal (4RSP). However, in a joint letter from the Western Power Trading Forum (WPTF), the California Energy Storage Alliance (CESA), and IEP (collectively the “Joint Parties”) sent to CAISO CEO Elliot Mainzer on September 22, 2022, the Joint Parties expressed our alarm over certain aspects of the DAME reform package that staff presented during the September 14, 2022 workshop.

In the letter, the Joint Parties raised three objections. First, we strongly opposed the use of a clawback mechanism to take imbalance reserve revenues back from facilities with resource adequacy contracts. As we stated in the letter, imbalance reserves constitute a new product class that is distinct from generic or flexible capacity. IEP is pleased to see that no such clawback mechanism has been retained in the 4RSP. Second, the Joint Parties objected to the inclusion of a local market power mitigation (LMPM) mechanism using default availability bids. We expressed skepticism that this mechanism is necessary because local market power is already mitigated via default bids for energy. We are disappointed to see that the 4RSP suggests that default imbalance reserve up (IRU) bids be mitigated in the day-ahead market via a default availability bid, a proposal that staff had previously considered and rejected. Third, the Joint Parties requested that staff eliminate the separate bid cap on real-time energy for facilities that have received imbalance rewards, which the 4RSP continues to recommend. Below, we provide more detail on the substance of our objections.

2. Provide your organization’s comments on the summary of changed from the third revised straw proposal and responses to stakeholder feedback, as described in section 1:

With the exceptions noted above, IEP supports the changes staff proposes in the 4RSP compared to the previous iteration.     

3. Provide your organization’s comments on the need for DAME, as described in section 2:

IEP concurs with the rationale provided in the 4RSP on the need for imbalance reserve and reliability capacity products in CAISO’s market processes. Figure 1 of the 4RSP demonstrates that the range in the imbalances between the day-ahead and fifteen-minute market net load seems to be increasing over time. Similarly, Figure 2 shows that adjustments to the RUC forecasts have grown sharply over the past few years. It is preferable to resolve the imbalance and RUC deviations via market processes rather than out-of-market dispatches and load adjustments to achieve more cost-effective and consistently reliable solutions.

4. Provide your organization’s comments on the proposed DAME, as described in section 3:

Duplicative Payments for Imbalance Reserves 

In the September 14, 2022 presentation, staff introduced an option for re-allocating some portion of IRU awards to load using an automatic clawback mechanism that would apply to resources with resource adequacy (RA) contracts. This proposed mechanism was particularly troubling to IEP as an unwarranted interference in market outcomes. If CAISO staff believes that IRU is materially different product than generic RA capacity, then the day-ahead market should not claw back revenues from resources that can provide the additional service. IEP supports staff’s decision not to include such a mechanism in the 4RSP. The optional Inter-Scheduling Coordinator trading function is a more appropriate mechanism to facilitate transfers from sellers who have agreed to remit imbalance reserve awards to their RA counterparties in their RA contracts.

Local Market Power Mitigation

In the Third Revised Straw Proposal (3RSP), CAISO staff declined to support an LMPM mechanism stating that it agreed with “[m]any stakeholder [who] believed that tying the default availability bids to the 90^th percentile spinning reserve bid was too arbitrary.”[1] In the 4RSP, staff reverses course on its determination in the 3RSP and argues again that a default availability bid is needed for IRU to mitigate market power because imbalance requirements will allocated and procured at a nodal level. The 4RSP suggests using the broad methodological approach of tying default availability bids to spinning reserve bids as previously proposed but leaves stakeholders with less information than before by replacing the 90^th percentile benchmark with a proposal to use a “high percentile value of historical spinning reserve bids.”[2] The challenge staff has evidently faced in choosing a percentile value reinforces the arbitrariness of this approach. Staff has previously shown that default energy bids already largely mitigate the potential exercise of market power. If CAISO determines that LMPM is truly necessary in the imbalance reserve market, IEP prefers that CAISO adopt an IRU bid cap instead of more complex default availability bid.

[1] 3RSP at 13.

[2] 4RSP at 29.

5. Provide your organization’s comments on the additional DAME design considerations, as described in section 4:

Cap on Real-Time Energy Offers

CAISO is concerned that resources with high variable energy costs will submit low imbalance or reliability bids, win awards in these markets, and then rarely be dispatched in real time to provide the incremental service due to their high energy costs. To address this concern, CAISO staff recommends a real-time offer cap designed to force high energy cost resources to bid any “missing money” that would result from dispatch at the bid cap price into their imbalance reserve or reliability capacity bids. [1] 

The 3RSP had included two possible options for setting the real-time bid cap. Option 1 would calculate a price derived from default energy bids meeting demand at a P97.5 net load forecast while Option 2 would use statistical regression techniques. In the 4RSP, staff selects Option 2, broadly based on a to-be-determined quantile regression on natural gas prices. The 4RSP provides no other details, noting only that analysis is underway and that a more detailed methodology will be included in the forthcoming Draft Final Proposal.[2]

As stated in the joint letter to CEO Mainzer, IEP opposes the inclusion of a distinct real-time bid cap that applies only to resources with imbalance awards. Market fundamentals should ensure that resources with relatively low variable costs will be incentivized to participate in the imbalance market and dispatch in real-time market. While IEP does not see a need for a separate real-time bid cap, without a more detailed description of the methodology and examples of the implications on imbalance bidding behavior and supplier revenues, stakeholders cannot provide substantive comment on this issue. IEP looks forward to the release of the Draft Final Proposal to better understand how likely the proposed bid cap will constrain real-time bids and the impact the cap may have on imbalance market participants.

[1] 4RSP at 52. 

[2] 4RSP at 53-54.

6. Provide your organization’s comments on the alignment between Resource Adequacy, DAME, and the Extended Day-Ahead Market, as described in section 5:

No comment

7. Provide your organization’s comments on the proposed WEIM Governing Body Role, as described in section 6:

No comment

8. Provide any additional comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

No comment

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

See attached comments.

2. Provide your organization’s comments on the summary of changed from the third revised straw proposal and responses to stakeholder feedback, as described in section 1:

See attached comments.

3. Provide your organization’s comments on the need for DAME, as described in section 2:

See attached comments.

4. Provide your organization’s comments on the proposed DAME, as described in section 3:

See attached comments.

5. Provide your organization’s comments on the additional DAME design considerations, as described in section 4:

See attached comments.

6. Provide your organization’s comments on the alignment between Resource Adequacy, DAME, and the Extended Day-Ahead Market, as described in section 5:

See attached comments.

7. Provide your organization’s comments on the proposed WEIM Governing Body Role, as described in section 6:

See attached comments.

8. Provide any additional comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

See attached comments.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

Middle River Power LLC (“MRP”) continues to largely support the CAISO’s DAM+E proposal as set forth in the 4^th Revised Straw Proposal (“4RSP”).. MRP supports the development of the Reliability Capacity (“RC”) and Imbalance Reserve (“IR”) market capacity products to provide the CAISO with the operating flexibility that is now being secured through out-of-market operator adjustments to the Residual Unit Commitment (“RUC”) load forecast. 

While MRP supports the general direction of this initiative, MRP continues to have concerns about various aspects of the initiative.  Those include: (1) the CAISO’s proposal to implement Local Market Power Mitigation (“LMPM”) for IR and RC capacity bids; (2) the CAISO’s proposed Real-Time Energy Offer Cap for these proposed new capacity products; and (3) the CAISO process for setting and adjusting the IR procurement targets.  MRP will discuss these concerns in the following sections. 

2. Provide your organization’s comments on the summary of changed from the third revised straw proposal and responses to stakeholder feedback, as described in section 1:

MRP supports the CAISO’s proposal to continue the real-time must-offer obligation (“MOO”) for RA capacity instead of limiting that RT MOO to Day-Ahead (“DA”) energy and capacity market awards.  While MRP appreciates the CAISO’s initial willingness to limit the RT MOO to DA energy and capacity awards, it is possible that, under some extreme or unexpected conditions, RT operating requirements may fall outside of the operating capability envelope defined by those DA awards.  It is therefore reasonable to extend the RT MOO to all RA capacity.  MRP respectfully urges the CAISO to implement this extension in a consistent way, i.e., to not exclude certain RA resources from having to comply with the RT MOO.   

3. Provide your organization’s comments on the need for DAME, as described in section 2:

MRP supports the CAISO’s rationale for implementing these new capacity products.  First, MRP strongly supports the CAISO obtaining the operating flexibility it needs through market products instead of from out-of-market operator adjustments to the RUC demand forecast.  Second, MRP supports efforts to ensure that energy from these nodal capacity products can be deployed in real-time – a vast improvement over the current flexible ramping product.   MRP encourages the CAISO, as it gains more experience with these nodal capacity products, to collect and make available to market participants information on how successfully the CAISO allocates both load and uncertainty on a nodal basis[1] and the CAISO’s success in ensuring the real-time deliverability of energy from these capacity products. 

[1] 4RSP at page 31 (“The market would use imbalance reserve deployment scenarios to ensure imbalance reserves are transmission-feasible to the locations the uncertainty is expected to materialize if they are fully deployed.”)

4. Provide your organization’s comments on the proposed DAME, as described in section 3:

Local Market Power Mitigation for IR and RC bids

MRP continues to question the need for the CAISO to apply LMPM to the RC and IR capacity bids.  MRP questions the need for LMPM on these capacity bids given:

1) These are effectively system products, not nodal products.  While these products are analyzed through nodal deployment scenarios, the CAISO does that primarily to ensure that the energy from these products can be deployed.   

(2) Energy, not capacity, provides counterflow to non-competitive transmission constraints. The CAISO does not need to procure IR and RC to have access to mitigated energy to manage non-competitive transmission constraints.  The CAISO already has access to mitigated energy through its energy markets.  If the CAISO does not have a sufficient supply of mitigated energy to manage flow on these non-competitive constraints, that deficiency signals a failure of the RA program, not a need to apply local market power mitigation to system capacity products. 

MRP does not support the implementation of local market power mitigation for capacity bids. Nevertheless, MRP wishes to comment on the CAISO’s proposal for setting the Default Availability Bids (“DABs”) for these capacity products.  The CAISO has proposed that the DAB that applies to all resources would be “…set conservatively using a high percentile of historical spinning reserve bids.”[1]  While MRP appreciates the CAISO’s stated desire to set a conservative DAB, MRP also encourages the CAISO to expressly provide a proposal, along with numerical examples, for exactly how the DABs would be set.  

Setting the IR requirement

With regards to setting the IR procurement targets, the CAISO proposes the following process:

1. Use quantile regression to estimate parameters of load forecast, month, and hour on the 97.5 percentile of load imbalance
2. Use quantile regression to estimate parameters of wind forecast, month, and hour on the 2.5 percentile of wind imbalance
3. Use quantile regression to estimate parameters of solar forecast, month, and hour on the 2.5 percentile of solar imbalance
4. Combine estimated parameters from steps 1-3 using the identity Net Load = Load – Wind – Solar
5. Scaling the resulting target by an “adjustment ratio” to account for the fact that a 97.5 percentile net load imbalance (using the identity Net Load = Load – Wind – Solar) would not simultaneously have 97.5 percentile load imbalance and 2.5 percentile wind imbalance and 2.5 percentile solar imbalance at the same time.[2]

While MRP does not disagree that it would be unlikely for a 97.5 percentile load imbalance to occur at the same time as a 2.5 percentile solar imbalance and a 2.5 percentile wind imbalance, the CAISO’s description of how the proposed “adjustment ratio” would be used in setting the IR procurement target is incomplete.  MRP respectfully urges the CAISO to fully describe the process for setting IR procurement targets in the next proposal, including providing numerical examples with regards to how the “adjustment ratio” would work. 

MRP also strongly believes that, because the IRP procurement target affects the prices that the CAISO will pay for this capacity product, the process for setting the IR procurement targets should be set forth in sufficient detail in the CAISO Tariff.  MRP understands the CAISO’s desire to acquire and consider experience with these products and to have some flexibility with regards to setting revised procurement, targets, but also strongly believes the CAISO should present that experience to and discuss that experience with market participants before making any changes to IR procurement targets. 

Relaxing IR Procurement and the Associated Penalty Prices

The CAISO’s proposal to simplify the penalty prices structure for deficiencies in IR procurement seems reasonable.   If possible, the CAISO should expressly justify the proposed relaxation threshold (the smaller of 2% of a Balancing Authority Area’s load or 30 MW) in the next proposal.  

Methods for Addressing “Double Payment” Issues with RC and IR products. 

The CAISO has proposed to allow suppliers to submit non-zero capacity bids for RC and IR capacity.  MRP supports this and agrees with the CAISO that price formation and leaning issues will result, especially under the “pooling” paradigm that is one of the purported benefits of EDAM, if California RA suppliers are required to bid zero for these products while other non-California suppliers are not required to. 

The CAISO has proposed two methods for addressing so-called “double payment” of IR and RC capacity for resources already selling RA capacity. 

• For RC, analogous to the current RUC capacity, the CAISO proposes to automatically claw back RC payments from RA capacity through a market settlement and return those payments to load. 

• For IR capacity, the CAISO proposes to extend its current Inter-Scheduling Coordinator (“Inter-SC”) trading functionality to allow buyers and sellers of RA capacity to enter into an Inter-SC trade to return any IR revenues associated with RA capacity to RA buyers. 

On the November 1, 2022, a representative from the Western Power Trading offered that the claw-back functionality was unnecessary because pro forma RA contracts already contained provisions that return “the right” CAISO market revenues to the buyer.  While MRP understands the CAISO’s apparently desire to not trigger the need for parties to renegotiate their RA contracts following a CAISO market change, RA buyers and sellers are in the best position to determine how best to equitably share CAISO market revenues under their RA contracts, and a CAISO “one-size-fits-all” approach to allocating CAISO market revenues between RA buyers and RA sellers is unlikely to be optimal and may be problematic.

MRP agrees with parties on the November 1 call that clawing back revenues through a CAISO settlement mechanism and peanut-buttering those revenues to load is vastly inferior to allowing that allocation to be handled between buyers and sellers.  

While MRP is not yet sure how it would work mechanically, the CAISO‘s proposal to create a VOLUNTARY mechanism for reallocating IR revenues via an extension of its Inter-SC trading functionality could be reasonable, and appropriately leaves that consideration to RA buyers and sellers.. 

[1] 4RSP at page 29.  The CAISO’s presentation for the November 1, 2022 stakeholder meeting says, at slide 19, that the DAB price will be a “…static price set based on [a] high percentile historical spin/non-RA RUC offers.” 

[2] 4RSP at page 32.   MRP notes that the term “adjustment ratio” does not appear in the document cited in FN 10 in the 4RSP.

5. Provide your organization’s comments on the additional DAME design considerations, as described in section 4:

The Proposed Real-Time Energy Offer Cap

The CAISO continues to propose that energy offered from IR and RC be subject to a real-time offer cap to prevent resources from bidding low IR and RC capacity prices, being awarded these products, and then submitting high offers for energy that would be unlikely to be dispatched in the real-time market associated with the capacity awards. 

MRP remains unpersuaded of the need for a RT energy offer cap for these system capacity products that is any different than the RT energy offer cap that will be applied system-wide within the CAISO’s markets. MRP offers that it should be relatively easy to determine if market participants offering RC and IR products are engaging in economic withholding with their associated energy bids; if so, the CAISO should deal with that economic withholding under the CAISO’s current market monitoring and enforcement authority rather than creating a new real-time energy bid mitigation scheme that applies narrowly to these capacity products. 

The 4RSP indicated the CAISO was considering using a single variable quantile regression based on natural gas prices to set the RT energy offer cap, was testing this methodology, and would detail the final proposed methodology in the upcoming Draft Final Proposal.[1]   The 4RSP also indicated that the CAISO was considering turning off the RT Energy Offer cap during “…predefined tight system conditions”.[2]  Details matter, and the details of how the CAISO intends to set the RT energy offer cap or the conditions under which the CAISO would turn off the energy offer cap are yet to be forthcoming.  Still, even though the details behind these proposals remain undeveloped, MRP does not support the real-time energy offer cap.

Allowing Variable Energy Resource (VERs) to provide capacity up products

The 4RSP continues to allow VERs to provide imbalance reserves and reliability capacity in both directions.[3]  The CAISO further proposes that VERs not be permitted to provide up products beyond their forecast levels.  MRP believes this is a reasonable limitation, however, it is not clear how accurate the forecasts are.  To the extent that VER forecasts overstate resources’ ultimate production (CAISO-directed curtailments notwithstanding), this limitation would not ensure a reliable and deliverable product.  Given the reliability nature of these capacity products, MRP requests the CAISO provide aggregated information as to the accuracy of the CAISO’s VER forecasts, both in the DA and RT time frames, to give market participants some sense of how often VERs that are awarded these products would be unable to provide them. 

[1] 4RSP at pages 53-54. 

[2] 4RSP at page 54.

[3] Id.

6. Provide your organization’s comments on the alignment between Resource Adequacy, DAME, and the Extended Day-Ahead Market, as described in section 5:

MRP notes that FN 28 on 4RSP page 59 (“For the CAISO, the real-time must-offer obligations from day-ahead capacity awards replace the real-time must-offer obligations from the resource adequacy program.  However, Local Regulatory Authorities could enforce real-time must-offer obligations with their contracted supply at their discretion.”) appears to be left over from a prior iteration of the straw proposal and conflicts with the discussion on retaining the real-time RA MOO on page 27.

7. Provide your organization’s comments on the proposed WEIM Governing Body Role, as described in section 6:

MRP has no comment on this aspect of the proposal. 

8. Provide any additional comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

MRP has no further comment. 

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

NV Energy appreciates the opportunity to comment on the CAISO’s Day Ahead Market Enhancement initiative and recognizes the importance of the proposed market enhancements not only as an enhancement to the CAISO’s current market, but also as a potential foundational element for the Extended Day Ahead Market (EDAM). At this time, NV Energy cannot support the Imbalance Reserve Product as currently proposed in the fourth revised straw proposal.?Additionally, NV Energy does not believe that blanket statements about the need for specific products or enhancements are enough to support the proposed changes. New market products or major enhancements should not be introduced without sufficient analysis to illustrate the need and the impact they would likely have on the market. Furthermore, NV Energy is concerned about the expedited timeline for these Day Ahead Market enhancements that implement a new market product at the same time of EDAM. It is important to note that the Flexible Ramping Product, the real-time flexible ramping version of the Imbalance Reserve, was implemented on November 1, 2016 and has not reduced the CAISO’s load bias or operated as intended since implementation. Therefore, it is very important that we carefully consider major market enhancements so that they provide value and benefits to customers and do not create any unintended consequences or issues.  

2. Provide your organization’s comments on the summary of changed from the third revised straw proposal and responses to stakeholder feedback, as described in section 1:

NV Energy is appreciative that CAISO is conducting a benefits study with a sensitivity analysis to determine the benefits of the Imbalance Reserve Product but recommends that CAISO provide sufficient time for stakeholders to evaluate the study results in order to provide meaningful comments before CAISO finalizes any design. To date,?CAISO has stated the Imbalance reserves are an important component of EDAM and the product increases the benefits of EDAM. However, CAISO has not stated specific reasons why this product increases the benefits for all EDAM Entities or why it is necessary to include in the market design for EDAM over a must offer requirement.  NV Energy understands this would benefit some EDAM Entities by providing additional revenue, however, it isn’t clear that this product provides a benefit for all.? NV Energy would like to understand why an imbalance reserve product would be more beneficial for all market participants than must offer rules that carry into a real time market. Therefore, it is important that the benefit study show the benefits for each individual Balancing Authority Area rather than a footprint wide study and that CAISO explain why an Imbalance Reserve Product is better than a must offer requirement for EDAM.   

CAISO has stated that the Imbalance Reserve Product would have been very beneficial during the heat wave and during stressed system conditions.  NV Energy agrees that it would be important to have a market product that could procure additional supply for future heat waves or during west wide stressed system conditions. Although, this doesn’t mean that the market should procure supply for this uncertainty during all times of the year and NV Energy cannot support the level of uncertainty that CAISO has proposed to procure for this product. CAISO has proposed to procure the full Imbalance Reserve requirement rather than utilize a demand curve which would procure Imbalance Reserves based on the probability the capacity is needed in real-time. This proposed change could have a significant impact on the Day-Ahead prices of this product and may result in over-procurement in capacity for a large portion of the year, which could also have an impact to the real-time market prices. Therefore, NV Energy reiterates a request that CAISO explain the rationale for procuring up to the 97.5 percentile of uncertainty. Additionally, it is our understanding that this product is designed to procure capacity to reduce instances of operator load conformance and to establish a price for capacity that might otherwise be procured outside the market. However, it is unclear whether this product would procure too much capacity. In other words, is it necessary to procure capacity in the Day Ahead Market to cure almost 100% of the uncertainty?

NV Energy cannot support the proposed biddable imbalance reserve product or the proposed pricing relaxation structure. Originally, CAISO proposed to utilize a demand curve for purchasing the Imbalance Reserves to ensure that capacity was procured when necessary. NV Energy would be more supportive of the imbalance reserve product if the CAISO pursued the demand curve option. CAISO has not provided any data analysis to stakeholders regarding the impact of this product to market participants and to market prices. NV Energy will not support such a large market change without analysis. Specifically, NV Energy would like to see analysis on the pricing of this product and the impact to both the day ahead and real-time markets, the cost of implementing the product to customers, the EIM area’s monthly Imbalance Reserve requirement, impacts to the import/export curtailments in RUC and quantities of non-binding commitments that would result in imbalance reserve awards that would be reoptimized in real-time. Currently, CAISO is proposing a level of 98% price relaxation prior to the power balance constraint which is excessive. The T-60 forecast in real time for load has a 1-2% MAPE, forecast error for EIM today. In Day Ahead it is reasonable to assume that the forecasting error will become larger because the time horizon will range from 14 hours to 38 hours. Therefore, the proposed 2% relaxation is not reasonable. Given the fact that the Flexible Ramping Product has not operated as intended in the Real-Time market to date, it is unreasonable to design the Imbalance Reserve Product as a biddable product instead utilizing and relaxing prices from a demand curve. The biddable aspect of this product could be implemented at a future date, when stakeholders have sufficient time to consider all of the impacts of the design and mechanisms needed to protect customers. Stating this another way, NV Energy will not support this product as a currently proposed biddable product, the relaxation proposal, and does not support the level of uncertainty (p95) for procurement.   

CAISO has proposed to implement a real-time bid cap to cap the level that generators can bid in real-time when awarded Imbalance Reserves from Day Ahead. NV Energy does not support this proposal at this time. Any concerns about real-time bidding should be monitored by the Department of Market Monitor rather than creating a bid cap for generators without sufficient time to think about all of the consequences of that design. One of NV Energy’s concerns with this proposal would be the issue of gas procurement and the misaligned timeline of the Day Ahead Market awards in relation to when gas trading occurs.  

Finally, NV Energy understands the proposed Imbalance Reserve Product would procure capacity to meet the uncertainty that occurs from Day Ahead to Real-Time for each Balancing Authority Area that joins the EDAM. For potential EIM Entities with significant third-party OATT customers, the Imbalance Reserve requirement would need to be proportionally sub-allocated. In effect, the CAISO would be creating a new product that would be an addition to the existing ancillary service reserve requirements.? It is important to note that typically FERC has provided OATT customers the option to either purchase these types of ancillary services directly from the Transmission Provider or to allow the customer to self-supply these services. Therefore, it is important to consider how the costs of this product would be allocated and how a Transmission Provider could provide the optionality for a Transmission Customer to self-supply this service.

3. Provide your organization’s comments on the need for DAME, as described in section 2:

No Comment

4. Provide your organization’s comments on the proposed DAME, as described in section 3:

There was a lot of discussion on the stakeholder call about the issues related to California’s Resource Adequacy being utilized as supply towards other EDAM participants loads. This is a concern for Nevada’s Resource Adequacy supply as well. Therefore, NV Energy proposes for CAISO to consider a Reliability Unit Commitment (RUC) run with the transfers locked between each Balancing Authority while counting the transfers that occurred in the IFM. This proposal might also be beneficial considering the CAISO Balancing Authority will be the only area that includes convergence bidding.  

5. Provide your organization’s comments on the additional DAME design considerations, as described in section 4:

No Comment

6. Provide your organization’s comments on the alignment between Resource Adequacy, DAME, and the Extended Day-Ahead Market, as described in section 5:

No Comment

7. Provide your organization’s comments on the proposed WEIM Governing Body Role, as described in section 6:

No Comment

8. Provide any additional comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

No Comment

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

 PG&E appreciates the CAISO’s continued efforts to improve the DAME proposal. The 4^th Revised Straw Proposal includes several changes that PG&E is still evaluating.   To ensure PG&E understands the full range of implications, PG&E requests another opportunity to comment after the CAISO publishes technical appendices. PG&E supports the overall direction of the DAME proposal and highlights the following suggestions that will enhance critical components of the initiative:

• For the Net Transfer Limit to effectively retain Resource Adequacy Capacity within California, it must be (1) revised so that the Bid-in Supply[1] only includes those bids which count towards the Day-Ahead RSE Obligation, and (2) extended to RUC and HASP.  The current design defines the NTL as the difference between all bid-in supply in a BAA and the BAA’s day-ahead RSE obligation (in E-DAM) where all bid-in supply includes the capacity which would count towards DA RSE obligation (high quality) and those which would not (low quality)[2]. By counting low quality resources, the NTL allows for more export, which is supported by California’s high quality resources, such as RA, while the low quality capacity might not show up in real-time. Therefore, PG&E believes that the CAISO should revise the design such that the NTL is the difference between only the high quality resources within a BAA and the BAA’s RSE obligation.

In addition, the current NTL design cannot effectively retain RA within California unless the NTL is extended to RUC and HASP. The E-DAM draft final proposal indicated that RUC will be optimized across the E-DAM footprint[3], which would allow for California’s RA capacity being exported without any restrictions. A similar argument carries over to HASP. To bridge this gap, PG&E proposes to define NTL in the HASP as the difference between all high quality resources (that count towards WEIM RSE) within a BAA and the BAA’s WEIM RSE obligation.   

On the condition that the above two issues are addressed, PG&E believes the Net Transfer Limit (NTL) is a workable solution that retains reliability associated with California’s RA fleet[4].

• The Inter-SC Trade mechanism is inappropriate for resolving Resource Adequacy’s duplicative payment issues and the CAISO should examine a more comprehensive after-market allocation process instead.  Because inter-SC trade values must be submitted into the SIBR system before the Day Ahead market is run, it is impossible for participants to know the actual quantities of the Imbalance Reserve (and associated revenues) that would need to be transferred.  Instead, as currently described, this process would ultimately require that Buyers and Sellers further reconcile a now more-complicated Imbalance Reserve revenue process through contract processes.

• • As an example: A Generator with a PMAX of 150 MW, a Ramp Rate of 30 MW/minute and an RA obligation of 100 MW submits both energy and IRU bids for their full 150 MW capacity.  Because it is possible for the generator to receive an IRU award for its full output it must also submit an Inter-SC Trade transfer for 100 MW of IRU (to transfer any revenues for its full RA capacity, if so awarded).  After the Day Ahead market clears the unit receives a 50 MWh Energy award and a 100 MWh IRU award – meaning that the Inter-SC trade process transfers not only the 50 MWh of IRU that corresponds to the unit’s remaining RA position, but also the awarded 50 MWh of non-RA capacity that the generator was eligible to keep and would require additional after-market steps to resolve.

To streamline implementation and appropriately resolve duplicate RA payment issues, PG&E believes the CAISO should develop an after the market mechanism which allows for allocation of any IR revenues received through a Day Ahead market award.

• The proposed Real-Time Market Ramp Deviation Settlement should be simplified with a real-time Must Offer Obligation and a No Pay process. Under section 4.1 the CAISO states that “Imbalance reserves in the day-ahead market and flexible ramping product in the real-time market both provide additional capacity for ramping. Market payments for the provision of ramping services should net in each market.”  This is conceptually incorrect, because:
  • All day-ahead Imbalance Reserves awards are considered realized if bids are submitted into the Real-Time market. Specifically, if the capacity of Imbalance Reserves (IR) is bid appropriately, there are four possible market outcomes: (1) it is awarded energy, (2) it receives an award to provide ancillary service capacity, (3) it is reprocured as FRP, or (4) it does not receive a market award of any product in real-time. In each of these four cases the IR capacity has met its obligation and should be allowed to keep its IRP award payment, in recognition of the associated day-ahead opportunity costs.
  • The concept of Deviation Settlement (i.e., “net”) is not applicable to capacity products. Deviations of energy schedules in the sequential markets are eligible for buyback because the associated operational costs change. On the contrary, awards of capacity products, such as Imbalance Reserves and Flexible Ramping Products, are not schedules and cannot have a “deviation” in the sequential markets[5].
  • Deviation settlement of Flexible Ramping Products and Imbalance Reserves is on an unequal basis,  because (1) the price of Imbalance Reserves includes both the resource’s capacity bid and the opportunity cost of not providing energy, whereas the price of Flexible Ramping Product does not include an explicit bid cost, and (2) the role of Imbalance Reserves is to ensure that the Real-Time market has a sufficient depth of economic bids, while the role of Flexible Ramping Products is to address uncertainty that materializes between subsequent market runs in the Real-Time multi-interval market optimization[6].  The CAISO recognizes the difference in their outline of the Imbalance Reserve Unavailability No Pay process but fails to do so under section 4.1 of the current Draft Final Proposal.  

For the above reasons, PG&E suggests that the CAISO simplify the interaction between Imbalance Reserve capacity and the corresponding Flexible Ramping capacity by eliminating the proposed Real-Time Market Ramp Deviation Settlement and instead use the No Pay process to address unavailable capacity due to unavailable capacity or reduced ramp rates.  Additionally, PG&E recommends the CAISO recognize that opportunity costs of a Real-Time Flexible Ramping award are separate and distinct from those associated with an Imbalance Reserve award. The CAISO should compensate Imbalance Capacity at the greater of the two market prices, to reflect the use of the capacity in resolving both market constraints.

Other Issues

In addition to the above three highlighted issues, PG&E provides the list below of issues PG&E believes they must be  addressed before implementation of DAME alone or within E-DAM.

1. Settlement allocation for Imbalance Reserves Down.  The proposed Tier 1 allocation for Imbalance Reserves Down appears to apply inaccurate cost allocations to supply resources awarded Reliability Capacity Up in the later RUC process.  The proposed formulas: Generation: MAX (0, FMM lower economic limit as affected by rerates or self-schedules – Day-ahead energy schedule) and Imports: MAX (0, FMM self-schedule – Day-ahead energy schedule) both fail to incorporate the possibility that a resource is allowed to include RCU capacity awards in their Real-Time bids as self-scheduled energy.  Since any self-scheduled energy must be at the bottom of a resource’s bid stack, scheduling RCU in this fashion would result in the allocation formulas assigning an IRD allocation charge for the self-scheduled RCU award.

2. RA’s duplicative cost associated with Reliability Capacity awards in RUC. PG&E is concerned that the proposed allocation approach is unfair and unreasonable and not compliant with FERC’s ruling. On the contrary, PG&E believes  CAISO’s proposal related to the issue may be unnecessary. PG&E understands from the DAME stakeholder call on Nov 1^st that the vast majority, if not all, of the current RA contracts already specify that any RA Capacity payments made to RA Capacity must be transferred back to the RA Buyer.  PG&E is currently working to verify this within our own portfolio. If this statement is indeed true, then any RC payments to RA would settle per contract and go back to the appropriate buyer without the need for an additional process. 

3. Real-time energy offer cap. PG&E supports the CAISO’s effort to develop a solution to addressing the problem but believes the proposed Real-Time Energy Offer Cap could result in serious financial consequences for generators in some scenarios. Therefore, PG&E suggests the CAISO reformulate the solution by considering the role of generators’ Default Energy Bid (DEB).

PG&E agrees the problem exists that the resources with high-priced energy offer are likely awarded Imbalance Reserves Upward (IRU), because their bids for IRU could be seen lower by the market optimization than those bids which underlying energy costs are much less. Such awards will allow those resources of high-priced energy bids crowding out those of low-priced energy bids. Consequently, the market cost is shifted from day-ahead to real-time, and real-time prices will spike when those IRU awards are realized.  A similar problem happened in Summer 2020 and before, when the market awarded FRP to PDRs, whose underlying energy costs sit on top of the supply stack.       

However, PG&E finds that applying Energy Offer Cap could expose generators to risks of financial losses when the resources’ real-time cost is higher than CAISO’s estimated cap. In such scenarios, Energy Offer Cap would distort real-time price signals, by artificially suppressing system marginal cost. Moreover, it would disincentivize resources bidding for Imbalance Reserves, which deviates DAME’s objectives.

Therefore, PG&E suggests the CAISO reformulate the solution by considering a resource-specific approach, which allows resources to hedge against cost uncertainties in real-time and minimizes disturbing day-ahead bidding behavior. A potential direction is to apply mitigation to the bids of resources awarded IRU at MAX (Energy Offer Cap, DEB).     

4. Local Market Power Mitigation. PG&E requests another opportunity to comment after the CAISO updates the technical appendix of Market Power Mitigations with formulas, which are critical for stakeholders to fully understand the implementation of the proposal.  As the current proposal stands, PG&E sees no convincing evidence to support the need for applying Market Power Mitigation to Imbalance Reserves and Reliability Capacity Products, because:
   • It is economically not sound to mitigate a capacity product, which holds resources’ capacity to be scheduled and exposed to the price in the markets.

The mitigation process fundamentally mistreats the definition of Market Power. Market power refers to the ability of a firm to influence the price at which it sells a product or service by manipulating either the supply or demand of the product or service to increase economic profit. This definition does not apply to the two capacity products, which nodal prices are determined through deployment scenarios[7]. The demand of the deployment scenarios  are defined based on CAISO’s distribution of future load realizations.  In other words, it is the way that CAISO formulates the two products in the market optimization that determines their price, rather than the bidders possessing the ability to manipulate the future load uncertainties. The CAISO should reformulate the optimization instead of applying “mitigation,” if wishing to eliminate this price impact.  Therefore, PG&E does not believe Market Power Mitigation is needed for the two products. In the case that CAISO later provides additional evidence to support this need, PG&E requests the CAISO clearly outline the mitigation approach, since the proposed approach does not account for energy bids alongside the capacity bids, which could simultaneously cause a binding constraint and should be ranked together in the pivotal test.    

5. IRP bidding rules: Must Offer Obligation for Imbalance Reserves. PG&E believes that Imbalance Reserves should be required of flexible RA resources. This would allow flexible RA to be fully counted in meeting California’s Day-ahead RSE obligation, which will include requirements for Imbalance Reserves.  In addition, having Must Offer Obligation of Imbalance Reserves for flexible RA is critical for the market to pre-procure eligible resources to provide Flexible Ramping Products in real-time. Finally, PG&E suggests that the CAISO  track bid insertion of energy bids, i.e., if energy bids are not inserted for a given resource, neither should imbalance reserve bids be inserted in the day ahead market.

6. Need for downward products. PG&E finds that the CAISO's analyses do not support the need for the two new downward flexibility services, given the very large amount of curtailable VER capacity available in the system for most of the day, and the substantial capability to potentially use batteries for downward flexibility simply by shifting charging MWhs from one period to another.  

PG&E has questions regarding how RCD requirements would be consistently met without creating a secondary need for RCU in RUC.  It is expected that there will be times when the Day Ahead solution will result in a large amount of block minimum load or self-scheduled energy. It is also expected that if such a solution occurred during an hour where the market also awarded physical supply in excess of the Day Ahead load forecast, the RCD process would result in a situation where the necessary reduced block energy is more than the RCD target.  How would this be managed overall, and would the RUC process then need to award addition RCU to meet the artificially generated upward gap?

Therefore, PG&E requests the CAISO to consider initially implementing only the upward services, or at a minimum not implementing Reliability Capacity Downward and only implementing the imbalance reserves and upward reliability capacity.

7. HSL data requirement for VERs. PG&E questions the need for implementation of the HSL data requirement for all VERs as a condition of this initiative.   This incremental information, accompanied by other system work required by VERs, is not justified within the framework of the DAME initiative. PG&E proposes separating this effort from DAME, making sure there is stakeholder buy-in, and implementing as a smaller initiative of its own on an appropriate and manageable timeline.

8. MSG compensation in RUC. PG&E questions how MSG decommitment in RUC will be compensated because it appears to modify the IFM solution without compensation and cannot be put under the umbrella of reliability capacity down product.

9. Storage State of Charge (SoC) feasibility. PG&E questions whether the  an SOC constraints proposed in Section 4.5 are appropriate given that the high and low deployment scenarios used to procure imbalance reserves should already be considering SOC feasibility to ensure that CAISO procurement of imbalance reserves from batteries will be feasible to SOC in the DA market, in both the upward and downward directions. 

PG&E suggests that the constraints, if implemented, should be inactive at the beginning of the DAME go-live, particularly because they will already overlap with the estimation of effects of regulation energy on SOC being implemented at the same time via the ESE initiative.

10. Bid eligibility: VERs. PG&E requests the CAISO to clarify whether the forecast used to define VER RUC capacity needs to be the CAISO forecast. 

11. RUC requirement. PG&E requests the CAISO clarify whether Imbalance Reserves procured in the IFM offset the Reliability Capacity requirement of the opposite direction in the RUC. For example, if the IFM has procured 100MW Imbalance Reserves Downward, and the RUC requirement is estimated to be 500MW Upward, whether the RUC requirement will be adjusted to 400MW (=500-100) Upward. If not, why.  

12. Congestion Revenue Rights. PG&E urges the CAISO to estimate the congestion revenue of Imbalance Reserves. This proposal would settle the cost of imbalance reserves through a cost allocation rather than a direct settlement with load and VERs using the locational marginal price of imbalance reserves. The CAISO acknowledges that CRR will have shortfall due to the CAISO not collecting congestion revenues to cover the imbalance reserve marginal cost of congestion in the imbalance reserve deployment scenarios[8]. However, the proposal later states that “the CAISO does not expect this to be a major issue.” PG&E finds that this statement is overoptimistic and not consistent with CAISO’s earlier estimation of Imbalance Reserves requirement as high as 10% of day-ahead net load[9].

[1] The Bid-in Supply Element of the Net Transfer Limit is formulated in Appendix 4, CAISO’s Final Draft Proposal of Extended Day-Ahead Market, the “Net EDAM Export Transfer Constraint.”

[2] I.d. 1, the formulation defines a coefficient a, which is between 0 and 1, as confidence factor non-RSE eligible supply.

[3] Section II.C.3., CAISO’s Final Draft Proposal of Extended Day-Ahead Market.

[4] In CAISO’s Third Revised Straw Proposal of Extended Day-Ahead Market, the CAISO proposed Day-Ahead Available Balance Capacity alongside the Net Transfer Limit. Cal LSEs’ existing RA contracts require RA capacity to offer into IFM. The DA ABC’s design conflicts this requirement, thus would require renegotiating RA contracts or a compensation mechanism for reserving RA from IFM. For this reason, PG&E finds NTL more feasible in implementation.

[5] For example, if a resource receives 50MW award of day-ahead spinning reserves, it is paid for reserving 50MW of spinning reserve quality capacity for real-time use. So long as the resource maintains a corresponding 50MW of capacity available, it has fulfilled its obligation of the spinning award and is eligible to receive its full payment. Whether the subsequent markets make use of the 50MW (I.e., to dispatch it as energy to meet a contingency event, or keep it as reserved Spin capacity) does not affect the value of the spinning award.

[7] The deployment scenarios of Imbalance Reserves are defined in Section 4.9, Appendix B of Day-Ahead Market Enhancements, Version 9.1, August 2021. The CAISO confirmed that DAME 4^th RSP has the same formulation in email communication to PG&E.  

[8] Section 4.2, CAISO, Fourth Revised Straw Proposal of Day-Ahead Market Enhancement.

[9] Section 2, i.d..

2. Provide your organization’s comments on the summary of changed from the third revised straw proposal and responses to stakeholder feedback, as described in section 1:

See comment #1.

3. Provide your organization’s comments on the need for DAME, as described in section 2:

See comment #1.

4. Provide your organization’s comments on the proposed DAME, as described in section 3:

See comment #1.

5. Provide your organization’s comments on the additional DAME design considerations, as described in section 4:

See comment #1.

6. Provide your organization’s comments on the alignment between Resource Adequacy, DAME, and the Extended Day-Ahead Market, as described in section 5:

See comment #1.

7. Provide your organization’s comments on the proposed WEIM Governing Body Role, as described in section 6:

See comment #1.

8. Provide any additional comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

See comment #1.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

PacifiCorp appreciates the opportunity to comment on the DAME Fourth Revised Straw Proposal. PacifiCorp generally supports the CAISO’s work to fix the market inefficiencies resulting in out of market actions. Net load uncertainty is an important issue and PacifiCorp believes it can be more efficiently managed using uncertainty products procured in the day-ahead market. CAISO’s updated descriptions of how it is thinking about imbalance reserves are helpful, and we look forward to seeing the EDAM benefits study. Data showing the role of imbalance reserves in EDAM will give market participants more information to determine how imbalance reserves could affect operations. PacifiCorp is supportive of CAISO using a quantile regression to calculate the imbalance reserve requirements for each BAA and appreciate that the calculation includes tunable parameters.  Being able to adjust this product after gaining operational experience is a good idea. Additionally, while PacifiCorp generally agrees with CAISO’s need to mitigate imbalance reserve and reliability capacity awards, PacifiCorp would like to see more analysis to determine the default availability bid. There is still some concern that resources could be mitigated to a level that makes their bids uneconomic. PacifiCorp looks forward to continuing the discussions on the DAME and thanks the CAISO for all the effort put in thus far.

2. Provide your organization’s comments on the summary of changed from the third revised straw proposal and responses to stakeholder feedback, as described in section 1:

PacifiCorp supports the revisions from the third revised straw proposal, in particular the updated descriptions of CAISO’s thinking behind the imbalance reserves and reliability capacity products. However, PacifiCorp requests CAISO provide an update to their analysis in Appendix C with newer data so potential EDAM entities have a better understanding of the imbalance reserve requirements that may be expected.

3. Provide your organization’s comments on the need for DAME, as described in section 2:

PacifiCorp generally agrees with CAISO’s desire to cover imbalances between the DA and RT with a market product. Decreasing the frequency of out-of-market actions would broadly benefit all EDAM market participants. Furthermore, we are appreciative of CAISO’s decision to study the estimated EDAM benefits.

4. Provide your organization’s comments on the proposed DAME, as described in section 3:

PacifiCorp is supportive of the framework described in section 3 and would like to express willingness to work with CAISO on tuning the imbalance reserve procurement method to ensure appropriate amounts of procurement for uncertainty. Using a quantile regression based on the 97.5 and 2.5 percentile will likely give conservative amount of imbalance reserves for each BAA. PacifiCorp asks that the CAISO be proactive in adjusting the percentiles being used as operational experience is gained.

PacifiCorp also asks the CAISO to provide more analysis on how the default availability bids will be set for mitigated resources. It is not yet clear to PacifiCorp that our energy-limited resources would not be mitigated below our willingness-to-provide if the floor was set at a high percentile of historical spinning reserve bids. As stated in the proposal, it is likely CAISO and stakeholders would need to reconvene to develop a more rigorous default availability bid methodology. As such, it is important for the success of the imbalance reserve and reliability capacity products that suppliers don’t deem the risk of mitigation as being higher than the rewards of providing. We look forward to seeing CAISO’s explanation in the next draft of the proposal.

5. Provide your organization’s comments on the additional DAME design considerations, as described in section 4:

Pacificorp supports using High Sustainable Limit (HSL) data to inform RTD forecasts for dispatch of Variable Energy Resources (VERS).  However, using this real-time datapoint to inform a day-ahead forecast seems premature without data to support performance. The CAISO proposes using variable energy resources (VERS) to provide imbalance reserves and reliability capacity.  While concerned about using VERs to provide such capacity in the day-ahead market, the CAISO seeks to alleviate some of that concern by applying a capacity constraint tied to the VER day-ahead forecast.  The CAISO also proposes VERs to provide a High Sustainable Limit (HSL) in real-time updated with at least 5-minute granularity.  The 2020 White Paper on HSL considers the use of HSL as an input to a persistence forecast for RTD markets and provides data to support improvements to those forecasts.  The CAISO also anticipated improvements to the FMM, and day-ahead forecasts as well, but did not offer supporting data.  While HSL seems to be appropriate to inform RTD forecasts, has the CAISO observed enough improvement to DA and FMM forecasts attributable to increased use of HSL? If so, does the observed improvement support using those forecasts to inform a capacity constraint on imbalance and reliability capacity products in the day-ahead market?  Will the CAISO require all VERs to provide an HSL, or only those providing imbalance reserve up or reliability capacity?  Requiring all VERs to provide an HSL out of the gate could present challenges regarding certain contractual obligations and equipment configuration.  

6. Provide your organization’s comments on the alignment between Resource Adequacy, DAME, and the Extended Day-Ahead Market, as described in section 5:

No comment.

7. Provide your organization’s comments on the proposed WEIM Governing Body Role, as described in section 6:

PacifiCorp does not disagree with the CAISO Staff’s finding that proposals 2 through 4, to the extent they change rules of the real-time market, would not be applicable to EIM Entities through EIM, and therefore, do not fall within the scope of joint authority.

8. Provide any additional comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

PacifiCorp would like to thank CAISO staff for their hard work on this initiative. We believe there is a need for enhancements to the day-ahead market and believe the improvements will be important for a successful EDAM. CAISO’s willingness to improve the products and processes in this proposal after it is implemented are also welcome to PacifiCorp, because the EDAM will continuously evolve after implementation to better fit the needs of the entire footprint. The successive drafts have gotten us closer to a workable framework, and so we look forward to the improvements in the next draft proposal.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

PGP supports the goals of the Day Ahead Market Enhancement initiative and the progress made to date, as well as the engagement of stakeholders on this initiative. There are many aspects of this that have bigger picture implications as they relate to the EDAM, price formation, participation frameworks and interoperability with external RA programs such as the WRAP that may need a different set of stakeholders with different expertise and interests. Continuing to move in the direction of directly addressing any intersection with different market initiatives will enhance the process. While the concept of moving some CA-specific issues to a separate working group may seem to make sense from an efficiency perspective, PGP proposes that any attempt to do so mirrors the guidelines in the draft governance proposal, and any issue that may impact price formation, including bidding requirements, be maintained in an open forum for the benefit of all potential market participants, not just CA entities.

2. Provide your organization’s comments on the summary of changed from the third revised straw proposal and responses to stakeholder feedback, as described in section 1:

PGP appreciates the explicit documentation of the interaction between this initiative and the Extended Day Ahead Market proposal that has been included in this draft. The diversity benefits, confidence in transfers improvements, efficiency gains, and improved consistency across the market participants are all benefits of the DAME that are critical to the successful operation of the extended day ahead market.  The improved documentation of the intersection of these market products with RA resources in the CAISO as well as the alignment with the net export transfer constraint is also welcome clarification, though much more work needs to be done in this area to enhance regional understanding and implementation of these aspects of the proposal. That said, as these initiatives are quite interlinked at this time, PGP recommends further discussion at EDAM to allow for questions on the big picture to be addressed in the appropriate place. Some areas of note that were raised in the stakeholder call include the role of RUC in EDAM, alignment with the DA RSE including uncertainty calculations, bidding requirements, and diversity benefits, price formation implications, and WRAP interoperability.  

3. Provide your organization’s comments on the need for DAME, as described in section 2:

As PGP has noted in other comments, the persistent need for CAISO market operators to introduce load bias to procure adequate system flexibility is a systemic issue that needs to be addressed. As presented, the DAME initiative has the intention of reducing the need for, and frequency of, such operator actions through the creation of these imbalance reserve products and enhancements to the Reliability Unit Commitment process to align physical supply commitments in the DA market process with the DA forecast. PGP supports the implementation of the imbalance reserve calculation as early as possible to guide market operator adjustments and limit the use of the high load scenario for advisory data to drive these out of market actions until the DAME can be implemented. Analysis showing how the new calculation differs from the max load scenario in volumes historically would be beneficial to help understand potential impact.

PGP also supports the concept of taking advantage of the diversity benefit of a larger footprint in Enhanced Day Ahead Market through a reduced reserve requirement to manage net load uncertainty and ramping needs across the footprint for those entities that bring resource sufficiency to the market. While this is stated as a potential benefit of DAME and the new imbalance product, further documentation on how the diversity benefit will be calculated and how historical datasets may be aligned for use in the quantile regression would be a welcome addition to the documentation, as this has direct implications for how various market footprints translate into market benefits. Given this may be an analysis that could be completed to garner support for EDAM, PGP recommends it would be a worthwhile exercise, even if it was just using a subset of historical data requested from current WEIM BAAs. The majority of these benefits would likely be accrued during very tight system conditions, so aligning such a data request with historical net-load events that have already been well documented and analyzed by the ISO may be an approach to gain some valuable insights while limiting the analytical undertaking. This sort of analysis may also help to interpret the “arbitrary” penalty interval for inability to procure sufficient reserves and RSE failure to better understand how it relates to the expected imbalance reserves as calculated by the methodology. Further consideration of the net export transfer constraint and how it impacts these calculations will need to be included in this analysis, and it may demonstrate that this concept significantly erodes market benefits to those that intend to use it, and a mechanism to incorporate such impacts into the diversity benefit allocation might be required.

PGP stresses that timely review of any study results would be beneficial at this stage of the initiatives that are in process, rather than when the proposals are in final review.

4. Provide your organization’s comments on the proposed DAME, as described in section 3:

Regarding the product definitions, PGP supports introduction of the new products, including the RC down product, as the market needs to be able to DEC if the virtual market over-commits supply.

Given that the RUC process will be focused managing the difference between virtual participation driving physical commitments and the actual load forecast, the DAME and proposed RUC process now needs to explicitly address how allowing virtual bidding in ISO while other EDAM participants potentially go through the transition period as proposed in the Draft final EDAM design. This design seems to indicate likely higher RUC volumes in CAISO vs other EDAM BAAs. Beyond the RUC commitments, participants also need examples that show how RC cost allocation would address differences in virtual participation for different EDAM entities. As brought up by other participants on the call, this may indicate a separate RUC process is needed per BA, or clarification on how the RUC of the broader footprint will be improved. Better documentation of the proposed RUC process for EDAM/DAME would also potentially address the need for this net transfer constraint proposed in EDAM.

PGP also requests clarification of how data from EDAM entities will be used to calculate the diversity benefit. Specifically, PGP has concerns that inappropriate alignment of data sets may bring up interoperability questions with WRAP operations program. Further clarification of the roles and responsibilities around forecasting and the use of the VERs and load forecasts in markets with and without virtual market participation would benefit both the DAME and the EDAM initiatives.

Regarding the bid mitigation procedures, PGP would appreciate further documentation for why intertie resource bids not mitigated, given they have direct impacts on ATC and prices at the interties.

5. Provide your organization’s comments on the additional DAME design considerations, as described in section 4:

PGP supports the objective of co-optimizing energy and imbalance reserve awards to avoid regular awards to entities who are unlikely to be dispatched, but would like to see further examples of how the bid-cap may work. While the regression approach seems to show more promise than the P97.5 version, PGP believes this is likely to be most important in areas where there is a lack of historical data to support the regression. Adequately valuing flexibiltiy that is offered to the market is a critical design component, and PGP appreciates the analysis done to date to evaluate the appropriate approach for ensuring the right resources are selected to provide these products. PGP looks forward to the additional analysis expected in the draft final to support the proposal, but will not support an approach that does not have very strong coverage. This cap should work as a flag to improve the optimization only, and not as an actual price cieling. 

6. Provide your organization’s comments on the alignment between Resource Adequacy, DAME, and the Extended Day-Ahead Market, as described in section 5:

  As discussed on the call, PGP supports alignment of penalty bands with RSE from EDAM final proposal, and further discussion of alignment of the products. After performance of the methodology for calculating the uncertainty and diversity benefit are tested further, PGP supports re-evaluation of the threshold for de-minimus issues if data indicates a change.

PGP requests further clarification of how the net export constraint could be calculated, and how it may impact the diversity benefits and allocation thereof within the Imbalance Reserve product optimization.

PGP supports alignment of the VER participation but need clarifying documentation on forecast requirements for all resource in EDAM and in DAME, particularly for non-CAISO entites.

7. Provide your organization’s comments on the proposed WEIM Governing Body Role, as described in section 6:

Given that all of these items have the potential to impact LMPs, PGP suggests all should fall under Joint Authority in alignment with the latest governance proposal.

8. Provide any additional comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

PGP echoes stakeholder concerns expressed on the call regarding the need for analysis to demonstrate how this will improve system operations and reduce the need for load conformance actions by market operators.

PGP would like to see the EDAM benefits analysis before these proposals go forward for approval, and appreciates the continued effort and conversation on this initiative to get it right and in alignment with the EDAM market design before implementation.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

REV Renewables (REV) supports the need for a new Imbalance Reserve (IR) product, particularly as it can reduce the manual out-of-market actions CAISO takes today to increase supply through the residual unit commitment (RUC) process, which can lead to inefficient market outcomes. However, it is critical to have a viable IR product in which CAISO operators will trust and resources will participate. Rather than creating product restrictions proactively for fear of worst case scenarios, CAISO should simplify the IR and RC products, closely monitor implementation, and if improper or inefficient market outcomes emerge then CAISO would have the data to address the issue as needed. REV offers the following comments in an effort to make IR and RC effective market products.

In particular, REV has the following concerns:

• Real Time (RT) Energy Offer Cap Should Be Withdrawn - REV opposes CAISO’s proposal that energy offered from IR and RC be subject to a RT offer cap. CAISO has not provided sufficient analysis to justify this proposal, and could distort market prices if resources cannot reflect their actual costs in the RT or if RT energy costs are shifted into IR product offers. REV suggests that, rather than restrict RT energy offers proactively for fear of resources gaming the product, CAISO monitor implementation and deal with any economic withholding under the CAISO’s current market monitoring and enforcement authority.
• Local Market Power Mitigation (MPM) for IR is Not Justified – CAISO has not provided sufficient detail and analysis to justify why local MPM for IR and RC bids are necessary. Local MPM for energy bids should be sufficient to provide counter flow to non-competitive transmission constraints, and a capacity product would not resolve these constraints.
• Reliability Capacity (RC) Settlements for Resource Adequacy (RA) Resources Should Remain with Contract Holders - As discussed in the stakeholder call, most/all RA contracts in place already contain a provision to give back any CAISO payments for reliability back to the RA buyer. Therefore, this mandatory reverse settlement process is duplicative and unnecessary.

2. Provide your organization’s comments on the summary of changed from the third revised straw proposal and responses to stakeholder feedback, as described in section 1:

REV appreciates CAISO’s responsiveness to stakeholder feedback. In particular, REV supports the revision that IR profits will not be reversed for RA resources. IR is a new, ramping reserve product that is not tied to provisions in resource adequacy contracts, and therefore resources should be compensated appropriately.

3. Provide your organization’s comments on the need for DAME, as described in section 2:

 REV supports the need for a new Imbalance Reserve (IR) product, particularly as it can reduce the manual out-of-market actions CAISO takes today to increase supply through the residual unit commitment (RUC) process. As shown in Figure 2 of the proposal, CAISO operators seem to be increasingly relying on out-of-market RUC adjustments to meet load uncertainty, which is leading to inefficient price formation and market outcomes. It is critical that CAISO create a viable IR product in which CAISO operators will trust and resources will participate. As these IR and RC products get implemented, REV encourages the CAISO to collect and make available to market participants information on changes to RUC adjustments, hourly and real time load conformance, and how successfully the CAISO allocates both load and uncertainty on a nodal basis and the CAISO’s success in ensuring the real-time deliverability of energy from these capacity products.

4. Provide your organization’s comments on the proposed DAME, as described in section 3:

 Local MPM Should Not Be Extended to IR and RC bids

CAISO has not justified the need to extend local MPM to IR and RC bids or shown why local MPM for energy is not sufficient mitigation. Energy, not capacity, provides counter flow to non-competitive transmission constraints. The CAISO does not need to procure IR and RC to have access to mitigated energy to manage non-competitive transmission constraints. The CAISO already has access to mitigated energy through its energy markets. If the CAISO does not have a sufficient supply of mitigated energy to manage flow on these non-competitive constraints, that deficiency signals a failure of the RA program, not a need to apply local market power mitigation to system capacity products. If CAISO continues to pursue local MPM for IR and RC, it should provide more analysis on formation of default availability bids and provide its detailed example of “Appendix C” referenced in the proposal.

CAISO’s Proposal to Relax IR Procurement and the Associated Penalty Prices is Reasonable

REV supports the CAISO’s proposal to simplify the penalty prices structure for deficiencies in IR procurement. REV recommends that the CAISO expressly justify the proposed relaxation threshold (the smaller of 2% of a Balancing Authority Area’s load or 30 MW) in the next proposal.

CAISO Should Not Create a Mandatory Settlement Process for IR Payments for RA Resources.

REV does not support CAISO’s proposal to automatically class back RC payments from RA capacity and return those payments to load. RA buyers and sellers are in the best position to determine how best to equitably share CAISO market revenues under their RA contracts, and indeed most/all contracts today already contain provisions to return these revenues to buyers. CAISO should not intervene in this process since, in reality, it may create more complications on cost allocation equity issues among load.

REV supports the CAISO‘s proposal to create an optional mechanism for reallocating IR revenues via an extension of its Inter-SC trading functionality, since it appropriately leaves that consideration to RA buyers and sellers.

REV supports CAISO’s proposal to allow suppliers to submit non-zero capacity bids for RC and IR capacity. REV agrees non-zero bids will be important for price formation and to avoid leaning issues under a broader western day ahead market.

5. Provide your organization’s comments on the additional DAME design considerations, as described in section 4:

The Proposed Real-Time Energy Offer Cap Should be Withdrawn

REV opposes CAISO’s proposal that energy offered from IR and RC be subject to a RT offer cap. CAISO’s reasoning for this cap is that resources could bid low IR and RC capacity prices, receive an award for these products, and then submit high offers for energy that would be unlikely to be dispatched in the real-time market associated with the capacity awards. However, resources must be able to reflect their full costs in the market for efficient market outcomes, and the RT energy offer cap could prevent this ability. CAISO suggests that if RT energy costs are high then those costs should be reflected in IR product offers, but this presents an improper shifting of costs from one product to another and could distort product prices. Additionally, if a resource reflects high RT energy costs in IR bids, then it could be unwound by the CAISO’s proposal to apply local MPM on IR. REV suggests that, rather than restrict RT energy offers proactively for fear of resources gaming the product, CAISO monitor implementation and deal with any economic withholding under the CAISO’s current market monitoring and enforcement authority.

Lastly, if CAISO continues to pursue a RT energy offer cap, it must provide details on the methodology for the cap, which remains lacking in the current proposal.

6. Provide your organization’s comments on the alignment between Resource Adequacy, DAME, and the Extended Day-Ahead Market, as described in section 5:

 REV has no comments at this time.

7. Provide your organization’s comments on the proposed WEIM Governing Body Role, as described in section 6:

 REV has no comments at this time.

8. Provide any additional comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

 REV has no additional comments at this time.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

Overall support

SDG&E appreciates the opportunity to comment and supports CAISO’s Day-Ahead Market Enhancements (DAME) proposal. DAME is a very important component of the Extended Day-Ahead Market Enhancements proposal. However, SDG&E does have some concerns regarding Load Serving Entities (LSEs) potentially double paying for the same CA Resource Adequacy (RA) capacity. Further, some additional concerns and clarification are requested for the inter-Scheduling Coordinator (inter-SC) trading proposal for the Imbalance Reserve (IR) product.

SDG&E Opposes the RUC Reverse Settlement

SDG&E’s RA-only contracts already contain a provision that gives the buyer, “all revenues from the Capacity Attributes associated with the Unit during the Delivery Period up to the Unit Contract Quantity including . . . Residual Unit Commitment (RUC) Availability Payments.” It is our further understanding, which SDG&E is still working to confirm, that this is standard for all RA-only contracts. Therefore, we believe this reverse settlement is unnecessary.

2. Provide your organization’s comments on the summary of changed from the third revised straw proposal and responses to stakeholder feedback, as described in section 1:

No comment.

3. Provide your organization’s comments on the need for DAME, as described in section 2:

SDG&E supports the creation of IR because it helps to ensure confidence in market transfers and also allows EDAM to leverage the benefits of regional diversification.

However, as a standalone product separate from EDAM, SDG&E is less convinced that IR is a cost-beneficial product. SDG&E understands the benefits in theory. The Residual Unit Commitment (RUC) process is an inefficient tool for committing flexible resources in the DA timeframe. Therefore, as a standalone product, it seems that CAISO is proposing to trade some RUC biasing (that its operators are currently having to perform to maintain grid reliability) for IR procurement. The efficiency gain from IR committing flexible resources, as opposed to operator RUC biasing, should reduce the overall amount of MWs procured.

But if there are also costs to IR, then that could significantly alter the evaluation of DAME as a standalone proposal. It is possible that Load Serving Entities (LSEs) will have to double pay for IR. To the extent that CA Resource Adequacy (RA) units receive payments for IR, CA LSEs could be forced to pay twice for the same capacity – once through our RA contracts, and second through IR settlements.

4. Provide your organization’s comments on the proposed DAME, as described in section 3:

Inter-Scheduling Coordinator (inter-SC) Trading

CAISO has proposed to solve the potential double payment problem by opening up inter-SC trading to IR as well.

SDG&E’s first concern is that the IR double payment issue may also be solved by the same provision of the RA-only contract. To reiterate, it states, “Buyers shall be entitled to receive and retain all revenues from the Capacity Attributes associated with the Unit during the Delivery Period up to the Unit Contract Quantity including . . . Residual Unit Commitment (RUC) Availability Payments.” SDG&E’s understanding is that IR payments would count as a capacity payment under this provision of the contract, similar to RUC availability payments. SDG&E requests clarification or confirmation on whether CAISO agrees and shares this same understanding. SDG&E is continuing to look into this contract provision, but feels that with consensus amongst both buyers and sellers that IR revenues would flow to the buyer under this provision of the RA-only contract, then CAISO would not need to address the double payment issue since the RA-only contract provision already handles it.

However, if it turns out that the RA-only contract does not cover IR revenues paid to generators, then SDG&E has some concerns with this aspect of the proposal. SDG&E’s first concern is that it does not understand CAISO’s example on how the inter-SC trade solves the problem. On page 38 of the DAME Fourth Revised Straw Proposal, CAISO provides an example of how the inter-SC trade would function. It writes:

• SC1 represents LSE1. LSE1 is under contract with Resource A. SC2 is represents Resource A.
• Before the day-ahead market, SC1 and SC2 submit an inter-SC trade for 10MW of imbalance reserves up.
• SC2 bids the 10MW of imbalance reserves up in the day-ahead market.
• If the market clears the 10MW award, SC2 receives a market payment for the 10MW * IRU locational marginal price.
• After the market, the inter-SC trade settles and SC2 pays SC1 for the 10MW of imbalance reserves up at the market-settled price.

In this example, it is not clear to SDG&E why SC2 would enter into this agreement in the first place. If SC2 bid their IR into the Day-Ahead Market (DAM), it would receive an IR payment for 10 MW. But by entering into the Inter-SC trade it seems like it is foregoing that revenue.

SDG&E is further concerned that the inter-SC trading solution is the wrong solution to the problem. Even if the inter-SC trading proposal works, this seems like an unnecessary hassle. To avoid the double payment problem, LSEs would have to enter inter-SC trade agreements with each of their RA units every single day. CAISO should consider a design that does not place additional burdens on market participants. It should be able to calculate the value of IR flowing to RA units and credit that money back to the LSEs who paid for those units. The burden should not fall on market participants.

Real-Time Must Offer Obligation (RT MOO)

SDG&E appreciates CAISO heeding stakeholder feedback and agreeing to retain the RT MOO. Without the RT MOO, there is risk that market participants could economically withhold to increase market prices. Given that CA LSEs have already paid for the RT MOO in their RA contracts, there is no reason to take on this risk.

Market Power Mitigation (MPM) for IR

SDG&E supports CAISO’s decision to include MPM for IR. Because IR targets only that limited subset of resources that are capable of providing flexible ramping, it is easy to envision scenarios where the available supply for IR would be constrained and therefore vulnerable to economic withholding. Other participants have argued that the price cap of $247 should be sufficient market power mitigation, but SDG&E does not believe this would be a sufficient MPM measure to avoid participants exercising market power when the supply of IR is constrained.

5. Provide your organization’s comments on the additional DAME design considerations, as described in section 4:

No comment.

6. Provide your organization’s comments on the alignment between Resource Adequacy, DAME, and the Extended Day-Ahead Market, as described in section 5:

SDG&E supports CAISO efforts to align these key initiatives, however, SDG&E would prefer to have the concerns related to RA double payments resolved and the DAME initiative finalized ahead of the EDAM proposal as the DAME initiative materially impacts the CA LSEs.

7. Provide your organization’s comments on the proposed WEIM Governing Body Role, as described in section 6:

No comment.

8. Provide any additional comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

No additional comments.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

Seattle City Light (SCL) finds the changes to the 4^th Revised Straw Proposal to generally be refinements and clarifications, which is reassuring given the duration of the initiative and the substantial reworking between the previous proposal. The changes are largely positive, supporting a fair and thoughtful design to cure current market short comings. SCL supports Imbalance Reserves as a product and appreciates that hydro resources in particular, given their ability for fast ramping and flexibility in dispatch, will lend themselves well to this product and being able to serve this need in the market. It is encouraging to see yet another way that the value of hydro can benefit the market and demonstrates the importance of resource diversity across the west.  

2. Provide your organization’s comments on the summary of changed from the third revised straw proposal and responses to stakeholder feedback, as described in section 1:

see comments in 1

3. Provide your organization’s comments on the need for DAME, as described in section 2:

SCL agrees that there is a need for the Imbalance Reserve product and that inclusion of this product would reduce out-of-market actions in the RUC process.

4. Provide your organization’s comments on the proposed DAME, as described in section 3:

SCL supports and would like to highlight the following issues addressed in section 3:

• Changes to the CAISO RA must offer rules and settlement are sensible and should benefit non-CAISO EIM areas. Removing the required $0/MWh RA RUC bid will ensure equitable pricing and awards between CAISO and non-CAISO areas, reducing the risk of CAISO RA capacity flooding the EDAM area and improperly displacing other resources. Maintaining real-time must offer of RA resources will improve real-time liquidity.
• The proposed net export transfer constraint to address concerns about RA capacity being exported to the detriment of the host BA is also a reasonable solution, but there is the potential for overuse. SCL requests clarification regarding how the limits would be set (i.e. via CIDI ticket or Masterfile- set ahead of time and are more static in nature, alternatively set in BAAOP with changes made every day/hour). SCL would recommend setting them via CIDI ticket or by Masterfile changes with a more static approach. For transparency, SCL would further request that CAISO post the net export transfer constraints for each EDAM BA and CISO BA.
• SCL supports the Imbalance Reserve Graduated Penalty Prices and appreciates that the new proposal seeks to protect a higher proportion of IRU from relaxation over low-priority export self-schedules but still preventing price spikes driven by acute shortages. Aligning the final relaxation values with EDAM RSE consequences for failure is key as it is important as this product both works and fits within the broader EDAM RSE framework.
• SCL supports the Imbalance Reserve Procurement Requirement calculation using a quantile regression set to 2.5/97.5 percentiles. Mirroring the FRP requirement is reasonable but SCL suggests any post-implementation lessons learned from the quantile regression requirement methodology of the FRP enhancements be applied to the DAME Imbalance Reserves requirement methodology. SCL also suggests that there be close monitoring post-implementation of Imbalance Reserves to capture the accuracy of the procurement. Right-sizing and shaping the requirement is key to sufficient procurement while minimizing excess procurement costs.

5. Provide your organization’s comments on the additional DAME design considerations, as described in section 4:

no comment

6. Provide your organization’s comments on the alignment between Resource Adequacy, DAME, and the Extended Day-Ahead Market, as described in section 5:

SCL would like to emphasize the criticality of aligning and ensure all aspects of RA, DAME, and other initiatives such as Price Formation, that will impact the EDAM work together in concert. Taking a holistic approach is needed for the success of EDAM, and DAME is an important component of the overall design.  

7. Provide your organization’s comments on the proposed WEIM Governing Body Role, as described in section 6:

no comment

8. Provide any additional comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

??????no comment.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

No comment.

2. Provide your organization’s comments on the summary of changed from the third revised straw proposal and responses to stakeholder feedback, as described in section 1:

No comment.

3. Provide your organization’s comments on the need for DAME, as described in section 2:

No comment.

4. Provide your organization’s comments on the proposed DAME, as described in section 3:

No comment.

5. Provide your organization’s comments on the additional DAME design considerations, as described in section 4:

SEIA supports the CAISO proposal for variable energy resource (VER) eligibility described in section 4.4 of the straw proposal. SEIA agrees with CAISO’s assertion that resources should be able to provide the services they are technically capable of providing including imbalance reserves and reliability capacity up and down for VERs. SEIA believes the CAISO proposal to cap DA awards at the resource’s Pmax will provide VERs the flexibility to reliably provide imbalance reserves and reliability capacity. 

6. Provide your organization’s comments on the alignment between Resource Adequacy, DAME, and the Extended Day-Ahead Market, as described in section 5:

No comment.

7. Provide your organization’s comments on the proposed WEIM Governing Body Role, as described in section 6:

No comment.

8. Provide any additional comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

No comment.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

The Six Cities do not support finalization of the Day-Ahead Market Enhancements proposal absent completion and evaluation of the CAISO’s analysis, described at page 8 of the Fourth Revised Straw Proposal, to “estimate the net benefits of the EDAM” and “the role of imbalance reserves within the EDAM net benefits.”  The Six Cities remain concerned that revisions to the Integrated Forward Market (“IFM”) and Residual Unit Commitment (“RUC”) processes contemplated in the Fourth Revised Straw Proposal are likely to give rise to increased complexity, increased costs to customers, and potentially increased operating challenges for resources as compared with the currently effective IFM and RUC designs.  The anticipated benefits of the proposed DAME revisions at this point remain completely theoretical, while complexities associated with new market features create risks of unanticipated consequences or dysfunctions.  The Six Cities and other market participants repeatedly have urged the CAISO to undertake some type of simulation or other quantitative analysis to support a conclusion that benefits of the DAME revisions are likely to exceed associated costs.  The CAISO apparently anticipates that the analysis described at page 8 of the Fourth Revised Straw Proposal will be responsive to those requests, and the Cities will reevaluate the DAME proposal in light of that additional information.

The interrelationships among the DAME proposal and the Extended Day-Ahead Market (“EDAM”) design remain ambiguous.  The Fourth Revised Straw Proposal indicates that the CAISO plans to align the elements of the DAME and EDAM designs, the approval process for those designs, and the implementation timeline for the revisions arising out of the two initiatives.  At the same time, the Fourth Revised Straw Proposal states (prematurely) that “the day-ahead market enhancements will be implemented for the CAISO balancing authority area regardless of the outcome of the EDAM.”  (Fourth Revised Straw Proposal at 61).  For the Six Cities to support such an outcome, the CAISO must present something more than theoretical presumptions to support a conclusion that implementation of the DAME revisions would produce benefits for the CAISO BAA, in the context of the existing Day-Ahead Market footprint, sufficient to outweigh the costs of implementing the revisions, the increased complexities, and the risks of unanticipated adverse consequences.

2. Provide your organization’s comments on the summary of changed from the third revised straw proposal and responses to stakeholder feedback, as described in section 1:

The Six Cities support retention of the real-time must-offer obligation for Resource Adequacy (“RA”) resources as indicated at page 8 of the Fourth Revised Straw Proposal.  However, footnote 28 at page 59 of the Fourth Revised Straw Proposal appears to be inconsistent with the statement at page 8.  The Six Cities request confirmation that RA capacity will continue to have a real-time must-offer obligation whether or not it receives Day-Ahead Market awards.

3. Provide your organization’s comments on the need for DAME, as described in section 2:

See the Six Cities’ response to Item 1 above. 

4. Provide your organization’s comments on the proposed DAME, as described in section 3:

In addition to the general concerns with the DAME proposal discussed in response to Item 1 above, the Six Cities provide the following comments on specific elements of the design discussed in section 3 of the Fourth Revised Straw Proposal:

In previous comments in this initiative, the Six Cities have opposed elimination of the ability to self-schedule within the day-ahead timeframe from resources that are eligible to provide Imbalance Reserves (“IR”).  In addition to general concerns with removing flexibility from resource owners as between economic bidding or self-scheduling, certain of the Six Cities face distribution system-related conditions that require internal units to operate.  Such conditions may be weather-related, such as during high temperatures, where a City’s load exceeds its import capability to its distribution system, and its units must produce energy in order to avoid load shed within the City, or they may be related to internal maintenance or other operational reasons.  The design elements included in the Fourth Revised Straw Proposal appear to allow self-scheduling by resources that have not bid for and received awards for IR or Reliability Capacity (“RC”) (Fourth Revised Straw Proposal at pages 24-25), and the proposal states that there is no day-ahead must-offer obligation for IR (Id. at 27).  The Six Cities request confirmation that the combined effect of the indicated design elements would continue to permit self-scheduling other than for resources that have voluntarily submitted economic bids for Energy or IR.   

The Six Cities support the CAISO’s proposal to reverse RC payments for RA capacity as described at page 46 of the Fourth Revised Straw Proposal.  However, the proposed allocation of the reversed payments to metered demand based on load ratio share is inappropriate.  Reversal of RC payments to RA capacity should be distributed to the entities that have paid for the RA capacity.  In addition, it would appear appropriate to reverse payments for IR to Flexible RA capacity to eliminate duplicate payments for the commitment to make flexible capacity available to the markets.  The CAISO’s proposal at page 10 of the Fourth Revised Straw Proposal to address duplicative payments for IR through Inter-SC Trades does not appear adequate, as it is unclear how Inter-SC trades could be arranged in anticipation of IR awards.  

5. Provide your organization’s comments on the additional DAME design considerations, as described in section 4:

In addition to the general concerns with the DAME proposal discussed in response to Item 1 above, the Six Cities provide the following comments on specific elements of the design discussed in section 4 of the Fourth Revised Straw Proposal:

The Six Cities do not agree with the CAISO’s suggestion, at page 51 of the Fourth Revised Straw Proposal, to simply monitor for adverse impacts on funding for congestion revenue rights (“CRRs”) in connection with the proposed implementation of the IR product.  The CAISO should endeavor to continue evaluating the risks to CRR funding that may result from introduction of the IR product as part of the cost/benefit analysis of the DAME revisions, so that potential approaches for addressing adverse impacts on CRR funding can be considered as a part of this initiative.

The Six Cities support further exploration of the concept of a real time energy bid price cap for resources that receive IR up or RC up awards.  The Six Cities do not have detailed recommendations regarding the determination of such a bid cap at this time but will continue to evaluate this issue when more details are available.   

6. Provide your organization’s comments on the alignment between Resource Adequacy, DAME, and the Extended Day-Ahead Market, as described in section 5:

See the Six Cities’ response to Item 1 above. 

7. Provide your organization’s comments on the proposed WEIM Governing Body Role, as described in section 6:

The Six Cities have not identified concerns with the CAISO’s determinations of the issues that would be subject to joint versus advisory authority.  To the extent that the DAME revisions move forward in tandem with the EDAM proposal, it would appear that elements of the DAME that are incorporated into the EDAM design would be subject to joint authority under the Board’s proposal to review the EDAM design under the joint authority approach.

8. Provide any additional comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

The Six Cities have no additional comments on the Fourth Revised Straw Proposal at this time. 

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

see attached

2. Provide your organization’s comments on the summary of changed from the third revised straw proposal and responses to stakeholder feedback, as described in section 1:

see attached

3. Provide your organization’s comments on the need for DAME, as described in section 2:

see attached

4. Provide your organization’s comments on the proposed DAME, as described in section 3:

see attached

5. Provide your organization’s comments on the additional DAME design considerations, as described in section 4:

see attached

6. Provide your organization’s comments on the alignment between Resource Adequacy, DAME, and the Extended Day-Ahead Market, as described in section 5:

see attached

7. Provide your organization’s comments on the proposed WEIM Governing Body Role, as described in section 6:

see attached

8. Provide any additional comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

see attached

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

Salt River Project Agricultural Improvement and Power District (SRP) appreciates the opportunity to submit the following comments on the DAME fourth revised straw proposal. SRP encourages continued discussions of DAME, including the relationship between DAME and the Extended Day Ahead Market (EDAM) initiative. SRP understands that the CAISO intends to consider the DAME and EDAM initiatives together. SRP requests the CAISO provide clarification if either the DAME or EDAM initiative can be implemented independently in the event either initiative experiences any delay of implementation or approval by the CAISO Board of Governors and WEIM Governing Body. Additionally, SRP requests clarification on whether the CAISO intends to conduct a single or separate tariff filing for the DAME and EDAM initiatives.

2. Provide your organization’s comments on the summary of changed from the third revised straw proposal and responses to stakeholder feedback, as described in section 1:

SRP appreciates the CAISO presenting changes from the revised straw proposal and responses to stakeholder feedback. SRP encourages the CAISO to consider this approach for future DAME revisions and for other CAISO stakeholder calls. SRP also encourages the CAISO to continue to ensure the DAME and EDAM initiatives are aligned.

3. Provide your organization’s comments on the need for DAME, as described in section 2:

SRP appreciates the CAISO’s efforts to commission a study to evaluate the benefits of imbalance reserves in the context of EDAM. SRP understands the CAISO intends to release a completed study prior to publishing the final DAME proposal and encourages the CAISO to make available any preliminary results of the study to allow stakeholders time to review the results.

4. Provide your organization’s comments on the proposed DAME, as described in section 3:

SRP requests the CAISO provide the rationale for why the imbalance reserve product in the upward direction (IRU) will be subject to Market Power Mitigation but the imbalance reserve product in the downward direction (IRD) will not be subject to Market Power Mitigation.

SRP appreciates the CAISO proposing graduated penalty prices to mitigate significant price volatility from shortages of IRU and limiting the quantity of the IRU requirement that can be relaxed based on economic conditions. SRP encourages the CAISO to provide examples of how economic exports and low-priority exports would be prioritized relative to imbalance reserve. SRP also appreciates efforts of the CAISO to incorporate a revised graduated penalty price structure of imbalance reserves that may give market operators less incentive to “backfill” the relaxed imbalance reserves requirements by increasing the residual unit commitment (RUC) load forecast. However, SRP remains concerned that CAISO operators would have the ability to make adjustments to the RUC load forecast.

5. Provide your organization’s comments on the additional DAME design considerations, as described in section 4:

SRP appreciates the proposal establishing the criteria for variable energy resources (VERs) to provide imbalance reserves in a way that does not compromise system reliability by limiting energy and upward reserves held on VERs to the VER forecast. However, SRP remains concerned with the use of VERs for imbalance reserve products which are intended to correct uncertainty issues, when VERs are foundational to the cause of uncertainty issues.

6. Provide your organization’s comments on the alignment between Resource Adequacy, DAME, and the Extended Day-Ahead Market, as described in section 5:

SRP appreciates the CAISO’s efforts to align DAME and EDAM and encourages further discussion on this topic, including a stakeholder session dedicated to the discussion of the relationship between the two initiatives.

7. Provide your organization’s comments on the proposed WEIM Governing Body Role, as described in section 6:

SRP recommends joint authority for all aspects of the DAME proposal because of the interdependency between DAME and EDAM for market operations and the fact that the Governance Review Committee (GRC) is in the process of updating WEIM governance to include EDAM.

8. Provide any additional comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

No comment at this time.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

Vistra opposes the direction the CAISO is taking in this proposal. While we are opposed at this time, we want to collaboratively work with the CAISO to change direction on an Imbalance Reserve up product that will provide value to the overall market design. We cannot support any proposal that proposes changes to the Residual Unit Commitment process. Vistra urges the CAISO to abandon the RUC proposal and to focus on the Imbalance Reserve proposal with stakeholders so we can successfully enhance the market design to address uncertainty between day-ahead and real-time. We provide the following detailed comments to provide context for this opposition.

2. Provide your organization’s comments on the summary of changed from the third revised straw proposal and responses to stakeholder feedback, as described in section 1:

Vistra supports the CAISO updates to resource adequacy day-ahead bidding obligations in Section 3.1 to no longer update RA must offer obligations to include a must offer into the Imbalance Reserve product. See our responses to question #6 below on the alignment between RA, DAME, and EDAM for more information.

3. Provide your organization’s comments on the need for DAME, as described in section 2:

The CAISO officially began the Day-Ahead Market Enhancement effort in June 2019. The conversations around a potential need began much earlier than 2019. There are many market conditions that are significantly different than when this initiative was originally envisioned. For instance, the amount of storage resources providing flexibility to the grid has significantly increase and the size of the Energy Imbalance Market providing flexibility through EIM transfers has significantly increased. These are just two of many fundamental factors that are different from the mid-2010s to 2022.

Reliability Capacity Needs

The CAISO has not provided any support for changing the core design of RUC from using RUC capacity and RUC availability bids in this proposal nor has it supported that the day-ahead schedules that are sent to real-time market do not provide sufficient downward must offer obligation to buy back or move MSGs to the appropriate configuration. The CAISO should not move forward its proposal to redesign RUC to move to a market that procures the new names of “reliability capacity up” and “reliability capacity down”. Vistra urges the CAISO to abandon this proposal in its entirety.

Imbalance Reserve Needs

The CAISO provides a chart in Figure 1: Monthly Trend of Day-Ahead Net Load Imbalance[1] that shows the monthly trend of the difference in net load forecasted in day-ahead market versus that in the fifteen minute market. Vistra’s feedback on the need assessment for the CAISO is that this chart seems to miss the mark. It is not whether there are net load differences between day-ahead and real-time that drive whether a new market product is necessary to better position the fleet in day-ahead to more efficiently meet real-time needs, but instead it is whether a new product would result in more efficient prices cleared in the real-time market when dispatching to cover the uncertainty. While the CAISO provided some price analysis in Figure 3: Pricing Differences across Day-Ahead and Real-Time Markets (Jan 2017 – Mar 2019)[2] this information is three years stale and lacks relevance to support the need given the changes in CAISO market since March 2019.

While we would like to see additional analysis on whether real-time market results indicate that there is a tightness in the market such that it cannot cover uncertainty needs in the Fifteen Minute Market with the set of resource offers into real-time from economic or self-scheduled real-time offers, including from resources that received a financial binding day-ahead award. For instance, if the CAISO provided data showing that the day-ahead market is not committing long-start, fast ramping resources in the day-ahead market such that the flexible capacity is not available to real-time that would be a clear data point to support another mechanism to ensure long-start flexible capacity is committed. We do not believe this is the concern.

Vistra surmises a key reason operators may want to bias RUC demand is so RUC results ensure the amount of imports or internal supply is largely retained inside the BAA and limit the amount that can support exports. We understand the stated concerns for why this may be done, but we think it misses the forest through the trees. While the operators are concerned with having sufficient capacity to dispatch in real-time to address “load uncertainty, renewables uncertainty, and solar net movement”[3], we believe the right question is why the operators think RUC is a useful tool to address these concerns. We question whether operators have grown increasingly wary that there will not be incremental real-time import offers that the hour ahead scheduling process could procure if needed. We hypothesize that this availability over the past years has become increasingly thin because the bilateral intertie market has weakened significantly with the expansion of the Energy Imbalance Market. It is hard to parse out the psychology behind operator decisions but we believe them to be rooted in practical concerns based on actual operating experience, such as fears of their limited ability to secure imports in real-time if needed. We will need to continue to unpack the drivers causing operators to feel that the real-time market cannot respond to these uncertainties, if an imbalance reserve product is implemented.

We do not think the use of RUC biases will disappear with introduction of nodal Flexible Ramping Product or the proposed Imbalance Reserve Product. However, we hope the frequency and size of the biases will adjust to allow for a fuller discussion with CAISO operations on what the drivers are once these identified concerns are addressed in the market design. Resolving some stated concerns so that we can narrow in on the precise challenges confronting operators when they decide to load bias has value.

Vistra does support intellectually the need for an upward uncertainty product in the day-ahead market. While the data provided could be debated, conceptually ensuring that the day-ahead market dispatches leaves unloaded capacity from 15 minute ramp capability resources unloaded for real-time incremental dispatches is academically sound. On the other hand, no support has been provided for a downward uncertainty product as this is being provided organically through 15 minute ramp capable resources awarded financially binding energy awards.

We are not advocating for a standard market design approach, but it is meaningful that all Independent System Operators/Regional Transmission Organizations either have adopted a day-ahead uncertainty product or are in the process of developing one. If developed correctly, we believe the new product could unlock significant value for flexible energy attributes that would further incent flexibility. If developed poorly by exposing resources to significant operational risks, the product would do more harm than good. Vistra urges the CAISO to rethink its design to propose a product that unlocks this value without harming the fleet, which the current proposal introduces harm to the ability of the fleet to operate prudently if this service is awarded. 

[1] 4^th Revised Straw Proposal at 13.

[2] 4^th Revised Straw Proposal at 16.

[3] Summer Market Performance Report – September 2022, Page 120, http://www.caiso.com/Documents/SummerMarketPerformanceReportforSeptember2022.pdf.

4. Provide your organization’s comments on the proposed DAME, as described in section 3:

Vistra has two high-level pieces of feedback for the CAISO on its proposed day-ahead market enhancements in Section 3:

• Vistra opposes any changes to RUC. CAISO should remove Sections 3.4 and 3.5 proposing changes to the Residual Unit Commitment process because there is no need for these changes.
• Vistra conceptually supports an Imbalance Reserve product but cannot support the product as proposed, and offers an alternative path to move this item forward. CAISO should revise its proposal in Section 3.3 for the Imbalance Reserve product to better address the stated needs and resolve mitigation concerns by design. With Vistra’s proposed design changes, CAISO will be able to remove Section 3.2 on Market Power Mitigation changes, because these changes will no longer be needed with the revised approach.

We provide additional detail below.

Vistra opposes any changes to RUC

Vistra cannot support any of the elements of the proposal to enhance RUC. As discussed in response to question #3, no need to change RUC has been supported by the CAISO. Nor has there been any support for a downward MOO. The day-ahead schedules provide sufficient downward must offers to the real-time market where the excess supply would be bought back if real-time conditions do not necessitate.

Further, Vistra explains below in response to Question #6 there is no reason to change RUC design because the rationale is flawed. RUC should be a voluntary BAA-level run in EDAM, not footprint wide. This is largely because the assumption that RA offers can be non-zero is incorrect. Vistra would expect the Department of Market Monitoring to monitor for any deviation from the appropriate practice of RA resources that have a must offer obligation to be $0/MWh in RUC if CAISO allows RA resources to bid into RUC.

Vistra urges the CAISO to be practical and to remove RUC changes from scope, so they do not threaten the success of a revised imbalance reserve proposal.

Vistra conceptually supports an Imbalance Reserve product but cannot support the product as proposed, and offer an alternative path to move this item forward.

The development of an uncertainty product in the day-ahead markets is a market design improvement that markets across the country either already have or are developing. Vistra believes the CAISO should propose a day-ahead uncertainty product. However, as formulated Vistra cannot support the nodal product proposed by the CAISO, nor do we think it addresses the stated needs.

CAISO would benefit from understanding how other markets have or are addressing uncertainty in its day-ahead market processes, for example:

• SPP has actively adopted flexibility products in its market to address uncertainty needs[1].
  • Recently implemented Ramp Capability product to reserve 10-20 minute ramp capability[2].
  • FERC approved its Uncertainty Reserve product[3] to procure ramp capability for a one hour horizon[4] to be implemented in 2023.
    • SPP will monitor and assess for transmission deliverability intra-day to ensure reliable deployment.
    • Zonal reserve product that can be set at either a system requirement or within reserve zonses[5].
    • No offers from online resources[6], but allow offers from offline resources up to $1,000/MWh[7] to allow amortizing commitment costs of off-line resources into the Uncertainty Reserve offers, which is necessary because make-whole payments exclude periods with an uncertainty reserve award[8].
    • Lost opportunity cost for online resources[9].
    • Mitigate offline resource offers up to the amortized commitment costs[10].
    • Day-ahead and real-time product.
• ISO-NE is pursuing several potential enhancements, including an energy imbalance reserve product[11], as apart of its Day Ahead Ancillary Services Initiative[12] targeting end of 2023 filing.
  • Zonal reserve product co-optimized with energy in day-ahead,
  • Settles as call option on real-time energy, to provide efficient incentives for resources to be able to provide RT energy when needed so that there is a financial position that internalizes the replacement cost to the market if they do not perform in real-time.
    • Call option for an Energy Imbalance Reserve Award has a strike price, K, that is set prior to the day-ahead market.
    • Resources get paid a clearing price (set in the day-ahead) and are charged the difference between the real-time clearing price and that strike price (K) when the clearing price exceeds the strike price.
    • If a resource also sells energy in real-time, it also receives the real-time clearing price for each MWh of energy produced. Any option charges associated with high real-time clearing prices are (more than) offset by real-time energy revenues.
    • If resource with an award is not available in real-time it must pay for the incremental real-time replacement cost of energy not delivered at the difference between real-time clearing price and strike price.[13]
• MISO is pursuing potential enhancements, including the adaptation of the reserve and ramp product suite to prepare for higher levels of uncertainty[14], as part of its Reliability Imperative[15].
  • Creating probabilistic forecasts that could inform dynamic reserve requirements[16].
  • Ensuring zonal reserve deliverability through focusing on forward planning that ensures sufficient zonal or sub-zonal capacity resources and urges proactive transmission upgrades to ensure there is sufficient transmission to support power flows across the system.[17]
  • Working to “better quantify the uncertainty around various risk factors so that we can continue to improve these tools, the operator decisions they inform, and over the long term, identify and implement market products to maintain reliability and efficiency (see the two other key workstreams of MISO’s Reliability Imperative, MSE and Operations of the Future).”[18]
• NYISO is exploring in its ongoing Energy & Ancillary Services initiative appropriate price signals for generating resources that are responsive to real-time changes in system conditions, including for quick start capability, ramping, flexibility, load following, and dynamic reserves as intermittent resources increase[19].
  • Dynamic reserve requirements for each zone
  • More granular zones[20]
  • Disincentivize inflexibility through its upcoming Balancing Intermittency project and the initiative to review Real-Time Market features to enhance incentives to follow NYISO instructions directly respond to expected ramping and flexibility needs[21].
  • 5-minute external transaction scheduling enhancements to explore how best to schedule external transactions every 5-minutes with neighboring areas[22] (a similar service that Energy Imbalance Market affords CAISO today and that seams with a day-ahead market that allows for greater intertie coordination could also address).
  • Exploring regulation up and down instead of a single regulation product.
• PJM plans to pursue reforms in the next five years to address system flexibility needs[23].
  • Disincentivize inflexibility through developing new rules and processes to disqualify resources for uplift credits when they do not adequately follow PJM dispatch instructions[24].
  • Actively investigating flexibility metrics to explore a new product to procure intra-hour flexibility (like Imbalance Reserves or Flexible Ramping Product) in the next five years.[25]
  • Increase incentives for demand flexibility.[26]

Vistra believes that the efforts from other regions considering solutions to address similar uncertainty concerns can provide valuable insights to the CAISO on where the industry is moving to address these concerns. We are concerned that this design deviates significantly from other designs being implemented or considered, and in a way that increases the complexity and risks imposed on market participants.

Vistra urges the CAISO to take a big step back and reconsider the direction it is taking. There is still time to change direction to a design that is more durable and less complex, while mitigating to a much greater extent market power concerns. Vistra proposes the CAISO revise its Imbalance Reserve Product in the next iteration to propose a product that:

1. Procures system-wide or zonal reserve requirements for uncertainty up[27].
2. Reserve requirements should identify dynamic reserve requirements for the expected uncertainty between day-ahead and real-time at either the system level or the zonal level depending on whether operators enforce zonal requirements.[28]
3. Operators should have the ability to identify which granular zonal requirements[29] should be calculated and enforced in the market, which will allow them the ability to enforce zones that they believe the existing transmission availability can support[30].
4. Use offer caps to mitigate capacity reserve offers to a cap aligned with the same ancillary services cap used for CAISO’s existing reserve products at $250/MWh. No further mitigation is necessary because with either a system or zonal product the ability to exercise locational market power is not possible. With system or zonal requirements there is expected to be more resources able to provide the service than the requirement, resolving any market power concerns.[31]
5. Co-optimize the Imbalance Reserve requirement with energy and ancillary service offers, but respect that Imbalance Reserves is providing the lowest quality ancillary sevice product that cannot be used to meet spinning reserve needs so not it is inappropriate to include Imbalance Reserve in any cascading of ancillary service requirements. This is a new reserve product that will not support the ancillary service reliability requirements established through BAL but instead is a lower quality service than spinning requirements. Logically, spinning reserves cannot be used to meet Imbalance Reserves and Imbalance Reserves based on its likelihood of deployment and operationalizing through market dispatch cannot be used to meet spinning reserves.
6. Determine the marginal clearing price for Imbalance Reserves based on opportunity cost pricing, including the Imbalance Reserve capacity offer in the optimization.

[1] Report of Southwest Power Pool, Inc., AD21-10, Pages 6-7, https://elibrary.ferc.gov/eLibrary/filedownload?fileid=1BFA3065-574B-C2FE-9FE9-83EBA1900000.

[2] Id at Page 7.

[3] The Commission approved SPP’s Uncertainty Reserve product proposal on August 16, 2022. Southwest Power Pool, Inc., 180 FERC ¶ 61,088 (2022). SPP is working to implement Uncertainty Reserve in 2023.

[4] Report of Southwest Power Pool at Page 7 and 25.

[5] Southwest Power Pool, Inc. filing “Submission of Tariff Revisions to Add Uncertainty Reserve Product to the Integrated Marketplace” under ER22-914, Page 19, https://elibrary.ferc.gov/eLibrary/filedownload?fileid=CD915646-3465-C392-9CED-7EA196000000.

[6] Id at Page 15.

[7] Id at Page 18.

[8] Id at Page 21.

[9] Id at footnote 20.

[10] Id at Page 23.

[11] Report of ISO New England Inc., AD21-10, October 18, 2022, pages 51-59, https://elibrary.ferc.gov/eLibrary/filedownload?fileid=1A5042B5-32FD-C887-9F0C-83ECC7A00000.

[12] ISO New England Inc., NEPOOL Markets Committee Presentation Regarding Day-Ahead Ancillary Services Initiative (October 5, 2022), at https://www.iso-ne.com/staticassets/documents/2022/10/a07_mc_2022_10_12-13_dasi_presentation.pptx.

[13] CAISO’s no pay provisions for ancillary services are equivalent to this concept in our opinion and could be leveraged to address lack of performance in real-time.

[14] Report on Modernizing Electricity Market Design of the Midcontinent Independent System Operator, Inc., AD21-10, October 18, 2022, pages 12-13, https://elibrary.ferc.gov/eLibrary/filedownload?fileid=897EF372-978A-C67A-9DEA-83EBE6200000.

[15] Reliability Imperative and Market Redefinition, at https://www.misoenergy.org/stakeholderengagement/MISO-Dashboard/market-redefinition---reliability-imperative/; Markets of the Future Report at https://cdn.misoenergy.org/MISO%20Markets%20of%20the%20Future604872.pdf#:~:text=MISO%E2%80%99s%20conclusion%20is%20that%20the%20foundational%20market%20constructs,but%20only%20with%20significant%20market%20enhancements%20and%20optimizations.

[16] Report on Modernizing Electricity Market Design of the Midcontinent Independent System Operator, Inc., Page 25-26.

[17] Id at Page 12, 29-30.

[18] Id at Page 24.

[19] Response of the New York Independent System Operator, Inc. to Order Directing Reports, AD21-10, Page 21, https://elibrary.ferc.gov/eLibrary/filedownload?fileid=143A0487-98B7-C07C-9FFE-83EC6E400000.

[20] Id at Page 23, “More Granular Operating Reserves. The NYISO is exploring the implementation of reserve requirements within certain constrained load pockets in New York City and expects to review a complete market design with stakeholders in 2024.”

[21] Id at Page 22.

[22] Id at Page 23.

[23] Report of PJM Interconnection, L.L.C. in Response to Order Directing Reports under AD21-10, Page 6, https://elibrary.ferc.gov/eLibrary/filedownload?fileid=62E4B06B-4F5A-CECE-9B90-83ECC5A00000.

[24] Id at Page 29.

[25] Id at Page 18-19.

[26] Id at Page 14.

[27] CAISO has introduced complexity by proposing Uncertainty Reserve Up and Down. However, the CAISO has not supported a need for the downward product to be procured in day-ahead. Day-ahead schedules provide the downward flexibility in real-time already where a downward product is not expected to provide incremental value. The design should advance a zonal uncertainty up product – alone.

[28] Vistra notes that we believe the requirement proposal largely achieves this goal already although CAISO should clarify the uncertainty calculated will be for either system or the zone being enforced.

[29] For example, Vistra is envisioning a process by which Operations could establish the granular zones based on their seasonal studies by defining a zone in area(s) with risks of deliverability into the area.

[30] CAISO has introduced complexity by proposing a nodal product where for a nodal product questions on how the deployment of the reserves could load thermal constraints and potentially violate those limits become of concern. For an area with deliverability limitations, the CAISO operators should be able to identify zones where resources within that zone must meet the requirement, but by not pursuing a nodal approach it will allow the Flexible Ramping Product to position the zonal reserves to the most optimal location in real-time. With this there is no need for CAISO to perform any deployment scenarios, greatly simplifying this proposal and the strain on the market processes.

[31] CAISO has introduced market power concerns by proposing the product to be nodal. Vistra opposes a nodal product for several reasons of which we believe it introduces risks to the market that will not exist in a system or zonal product.

5. Provide your organization’s comments on the additional DAME design considerations, as described in section 4:

Vistra reserves the right to provide comments on these elements in the future. Given the concerns with the general direction the CAISO is taking, we will reserve analysis on these until a direction is confirmed.

6. Provide your organization’s comments on the alignment between Resource Adequacy, DAME, and the Extended Day-Ahead Market, as described in section 5:

Vistra provides the following select feedback on the alignment between RA (California RA and Western RA program), DAME, and EDAM:

• CAISO correctly revises their proposal for imbalance reserve to recognize it is not procured through generic or flexible RA and that RA resources should not be required to offer this product.
• CAISO correctly removes the proposal to no longer recognize the real-time must offer obligation.
• CAISO errs in assuming California RA obligations will change such that RA resources will not be required to offer $0/MWh into RUC, and errs in concluding there is value in these resources reflecting non-zero bids.
• CAISO needs to explore the potential interaction between the Western Resource Adequacy Program obligations and the RUC process.

CAISO correctly revises their proposal for imbalance reserve to recognize it is not procured through generic or flexible RA and that RA resources should not be required to offer this product.

Generic RA does not include capacity attributes for any type of flexibility. Flexible RA requirement is for a three-hour ramp capability from resources based on their three-hour ramping capability, which does not require 15 minute ramping capability. Neither Generic or Flexible RA capacity contracts include 15-minute ramping capability.

The Imbalance Reserves would procure “reserves” from resources with 15 minute ramping capability only[1]. The CAISO should affirmatively acknowledge that Imbalance Reserves is an energy reserves product of which this product could be offered by a RA resource, but is not necessary.

CAISO correctly removes the proposal to no longer recognize the real-time must offer obligation.

Vistra appreciates the CAISO revising its proposal to “keeps the RA RT MOO in place”[2]. We appreciate the CAISO hearing and acting on stakeholder feedback. This change will ensure that CAISO is administering the Local Regulatory Authority’s program, where capacity is procured to be available in both day-ahead and real-time. Until regulators change the RA program to remove a real-time MOO then no change should be made. While the issue seems resolved for California RA program by retaining the real-time MOO there is still work to be done to explore how WRAP views the day-ahead and real-time MOO (or hold back potentially) should be administered through an EDAM market.

CAISO errs in assuming California RA obligations will change such that RA resources will not be required to offer $0/MWh into RUC, and errs in concluding there is value in these resources reflecting non-zero bids.

Vistra believes the main, potentially exclusive, reason the CAISO thinks they need to pursue RUC changes is because they think they are going to be able to receive Federal Energy Regulatory Commission approval of its Extended Day-Ahead Market proposal that would run a RUC process on the EDAM footprint and would allow for pooling of BAAs that pass the day-ahead RSE in the Western Energy Imbalance Market Resource Sufficiency Evaluation test. Both of these proposed EDAM changes are not supported and should not be implemented.

Vistra strongly objects to the EDAM proposal that assumes the CAISO will successfully advance a Residual Unit Commitment change that allows for a RUC run that solves for an EDAM footprint as opposed to a BAA footprint. Consequently, we also do not support the CAISO’s proposal that adopts that same assumption for developing its Day-Ahead Market Enhancements proposal.

Vistra can only support an EDAM market RUC process that solves at a BAA level – not the footprint.

The RUC process cannot be run on an EDAM footprint wide process without causing significant concerns nor should BAAs that pass the DA RSE test be able to inappropriately escape their requirements to be balanced in real-time in an Imbalance Energy Market. The CAISO should assume that RUC process will be an option made available to any EDAM BAA on a voluntary basis that performs a BAA level residual unit commitment to issue either RUC capacity (e.g. WRAP capacity secured) or RUC availability bids to meet its BAA’s demand forecast. This will best ensure it can pass its BAA-level Western Energy Imbalance Market Resource Sufficiency Evaluation test.

Because the RUC pass even in EDAM will be at a BAA level, the CAISO’s concern on what price that Resource Adequacy resources offer into the market are moot. It will be imperative to perform the RUC pass at the BAA level because even if the CAISO removes the bid insertion for RUC capacity at $0/MWh and allow for RA resources to actively submit availability bids, we expect that RA contract will continue to require RA resources to submit availability bids at $0/MWh. Without the Local Regulatory Authorities’ affirmatively changing their rules to remove the day-ahead must offer obligation into IFM and consequently RUC, the CAISO should assume all RA resources would offer $0/MWh into RUC. For this reason and others, it is prudent to perform RUC at a BAA level. The CAISO concerns about the $0/MWh offers resulting in RA resources being expected to support energy needs around the footprint will be corrected by performing RUC for each BAA. We stress that if the CAISO performs this on a footprint basis, there is no way to correct for the concerns unless the LRA changes its rules to stipulate RUC is a service incremental to its RA obligation. We believe this is a heavy lift and highly unlikely to occur.

CAISO needs to explore the potential interaction between the Western Resource Adequacy Program obligations and the RUC process.

CAISO has not sufficiently explored how the Western RA program (“WRAP”) will establish its must offer rules for any entities enrolled in WRAP participating in the day-ahead market through EDAM. It is unclear to Vistra at this point in time how WRAP resources providing surplus energy capability to another entity, or any deficient entities that have secured WRAP surplus energy, will need to be able to participate in RUC processes. We continue to believe to ensure the least amount of disruption to administering the WRAP through an EDAM that it essential that RUC process is performed on a BAA level. In this way, the resource providing surplus energy should be removed from availability in the BAA its located through a modeled withdrawal and the deficient BAA should have its energy reflected as a modeled injection in its area’s BAA-level RUC run. We believe further discussion is needed. 

[1] 4^th Revised Straw Proposal at 6: “Only resources that can be dispatched in the fifteen-minute market would be eligible to provide imbalance reserves. Imbalance reserve awards would be capped at the resource’s 15-minute ramping capability.”

[2][2] 4^th Revised Straw Proposal Stakeholder Call Presentation at slide 17.

7. Provide your organization’s comments on the proposed WEIM Governing Body Role, as described in section 6:

With the 4^th Revised Straw Proposal the CAISO clarifies that the Day-Ahead Market Enhancements in its entirety to be a necessary component of the Extended Day-Ahead Market, which is Joint Authority[1]. The CAISO stated, “The enhancements proposed in this initiative are also essential elements of an extended day-ahead market (EDAM) as they maximize the benefits of West-wide diversity in the day-ahead market’s optimization.”[2]

Vistra does not support the CAISO’s proposed classification as described. DAME should be Joint Authority for all elements because the new products being proposed are being proposed based on needing them for Extended Day-Ahead Market.

[1] 4^th Revised Straw Proposal at Page 8, 34, 54, 58, and 59.

[2] 4^th Revised Straw Proposal at Page 5.

8. Provide any additional comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

None at this time.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

Wellhead appreciates the opportunity to provide these comments on the CAISO’s Day-ahead Market Enhancements (DAME) Fourth Revised Straw Proposal. Wellhead has been generally supportive of the concept to introduce new day-ahead products – especially the imbalance reserve up and down. These products have the potential to provide significant benefits and value to the market. However, we are concerned that the complexity of the market design as currently proposed introduces significant risks, costs, and market inefficiencies that outweigh the potential benefits the new products can provide. At this point, Wellhead respectfully requests that the CAISO simplify the design such that the true benefits of the new products can be realized by the market, and additionally ease implementation. Wellhead believes that the prudent next step, especially with new products, is to start simple and enhance if gained experience indicates changes are needed.

2. Provide your organization’s comments on the summary of changed from the third revised straw proposal and responses to stakeholder feedback, as described in section 1:

See #4 below

3. Provide your organization’s comments on the need for DAME, as described in section 2:

Wellhead strongly supports the Imbalance Reserve Product and supports the implemetation at the earlist opportunity so that the CAISO can work to end the pratice of obtainig the required flexibility through out-of-market operator adjustments to the RUC,and RT (HASP, FMM) demand forecasts.  

4. Provide your organization’s comments on the proposed DAME, as described in section 3:

As discussed in response to question #1 above, Wellhead believes that simplifying the approach strikes the appropriate balance of achieving an efficient and effective market design that minimizes cost and risk that comes with an overly complex design. Thus, our comments below focus in on areas of simplification. The majority of the suggested simplifications are based on recognizing the imbalance reserve products as a reserve product and thus creating a market design more similar to that of the other reserve products. The current design seems to intermix reserve product market design elements with energy product market design elements, which are leading to the need for overly complicated proposal.

• Simplify the mitigation by applying a bid cap to the imbalance reserve up product and allow the existing LMPM process to address potential market power concerns with IRU through energy bid mitigation. The CAISO has demonstrated through its own modeling efforts that the existing energy bid mitigation process addresses the edge case concern of market power being exercised through the imbalance reserve offers. Through mitigating energy offers as done today, it naturally and indirectly mitigates market power through imbalance reserve up offers. Furthermore, mitigation then requires the need for the CAISO and stakeholders to develop a reasonable default capacity bid for the new products – a default bid for which there currently is no founded methodology. Underestimating a competitive offer price at which to mitigate imbalance reserve offers creates the unintended consequence of resulting in an inefficient market outcome with inaccurate price signals.

• Eliminate the real-time energy bid cap as it is unwarranted and results in the inability of resources to reflect actual costs in the market. While eliminating the real-time energy bid cap does simplify the proposal in the sense the CAISO no longer needs to develop a methodology for establishing the bid cap or conditions under which the bid cap is relaxed, the primary benefit of removing the real-time energy bid cap is maintaining price formation and a competitive market. The real-time energy bid cap will result in suppressing real time energy prices if resources are not able to fully reflect their costs in their offers. A key component of any effective and efficient competitive market design is founded on the concept of ensuring resources can fully reflect their costs in the market; this element of the proposal seems to run counter to the concept of a competitive market. Additionally, the CAISO’s suggestion to reflect those costs in the imbalance reserve product offers shifts costs from being reflected in one product (real-time energy prices) to another (imbalance reserve up). This shifting of costs will also have a price distorting impact on the imbalance reserve product prices as well. Lastly, the CAISO’s suggested solution to addressing the risk created with the real-time energy bid cap is unwound by the CAISO’s proposal to apply local market power mitigation on imbalance reserves - making the CAISO’s suggested solution ineffective.

CAISO should not be implementing any mechanism to address what is believed to be a double payment concern for RA resources receiving RCU/RCD payments. As discussed at length during the last stakeholder call, existing RA contracts already address how to handle any RUC revenues received. The CAISO should recognize that the most efficient and effective way to handle what the CAISO is considering potential double payment concerns is to allow the contracting parties of the RA capacity to manage any potential revenues arising from RUC

5. Provide your organization’s comments on the additional DAME design considerations, as described in section 4:

No addtional comments at this time

6. Provide your organization’s comments on the alignment between Resource Adequacy, DAME, and the Extended Day-Ahead Market, as described in section 5:

No addtional comments at this time

7. Provide your organization’s comments on the proposed WEIM Governing Body Role, as described in section 6:

No addtional comments at this time 

8. Provide any additional comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

No addtional comments at this time

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

WPTF appreciates the opportunity to provide these comments on the CAISO’s Day-ahead Market Enhancements Fourth Revised Straw Proposal. WPTF has been extremely engaged with the CAISO and other stakeholders throughout this entire four year effort and provide these comments with what we believe to be a common goal of the CAISO and stakeholder community – a day-ahead market design that provides for transparency, competitiveness, and efficient market outcomes with appropriate price signals.

WPTF is extremely concerned that the direction the CAISO continues to take, especially as it relates to the Imbalance Product, falls short of obtaining the common goal. Instead, the specific design introduces significant market inefficiencies that outweigh the potential benefits the new day-ahead products could provide.  As we have continued to communicate to the CAISO, and discuss in more detail below, there are modifications that can be made to the current proposal that will significantly reduce the market inefficiencies of the current design and still provide benefits to the market.

We believe the CAISO has lost sight of the fact that the main benefit of the IR product is due to its market benefits, not reliability benefits. RUC already ensures sufficient capacity is committed to meet real-time needs, EIM and EDAM already have resource sufficiency tests, and the California RA program already has a real-time must-offer obligation. All RA capacity (and RS capacity) has to offer into real-time, if available, and this will not change after the implementation of DAME. The only RA and RS capacity that does not offer into the real-time market are long-start resources that were not committed by IFM or RUC. Thus, the IR product benefits are solely increases in efficiency – it will make the DA market more efficient by including long-start resources currently committed by RUC in the IFM optimization. It will make the RT market more efficient due to the additional resources obligated to offer an economic bid rather than self-schedule.  

Because the primary benefits of the IR product are within the market, it is incredibly important to preserve these benefits to the maximum extent possible. As with any market design, there are trade-offs that must be evaluated and decided upon. In making those trade-off decisions its imperative that the CAISO and stakeholder community transparently evaluate the pros/cons and weigh the benefits and costs of the market design to ensure the appropriate and warranted trade-offs are being made. WPTF is concerned that the CAISO has skipped this step and in doing so is making unfounded trade-off decisions that are resulting in an inefficient and costly market design that will outweigh any potential benefit the new products may be able to provide.

Our comments below take the approach of evaluating the pros and cons of some of the key market design elements. We strongly encourage the CAISO to consider the proposed modifications to achieve an overall market design that still achieves the common goal of this initiative while striking an appropriate balance of benefits and costs. These changes could also be considered a first step, and if after gained experience, the CAISO believes modifications are necessary and warranted they can then re-engage stakeholders at that time. 

DAME First Step Proposal Overview: WPTF proposes that the CAISO initially treat the imbalance reserve product as a capacity or ancillary service-like product that is co-optimized, but not included in the ancillary service cascade. Imbalance reserve is not energy and should not be treated as energy in the day-ahead market. It is simply additional flexible reserve capacity that can be dispatched if needed in real-time and looks more like an ancillary service product than it does an energy product. The only element of the design that makes the imbalance reserve product somewhat similar to an energy product is the deployment scenarios and desire to procure nodally. This leads to significant additional complication in the proposal. WPTF believes the deployment scenarios and nodal procurement are optional elements that are only being put in place due to the concern that a resource procured for reserves will not be deliverable in real-time. WPTF notes that ancillary services are not procured nodally and despite some concerns voiced from time to time, the zonal procurement of ancillary services has never been such an issue that its ever been included in an initiative to resolve. There are manual workarounds that ultimately yield a competitive ancillary services market and deliverable ancillary service products.

Therefore, WPTF proposes that as a first step, the CAISO procure imbalance products zonally. Additionally, we propose that CAISO will pre-qualify resources to provide imbalance reserve and that operators will have the option to block resources that are known to be behind a constraint that makes the imbalance reserve undeliverable in real-time. Procuring zonally will eliminate the need for the deployment scenarios, mitigation, and real-time offer cap. Instead, the CAISO can put an offer cap on the imbalance reserve product. We understand that the “con” of this proposal is that there is the possibility for some IR capacity to be awarded that ultimately may not be deliverable in real-time. We believe this con can be mitigated and believe that because congestion patters change between day-ahead and real-time, there is never any guarantee that something deliverable in day-ahead is necessary deliverable in real-time anyway. This is why the CAISO runs a security constrained dispatch in real-time.

We note that the imbalance reserve product is inherently different than flexible ramping product, which solely exists in real-time. The FRP must be nodal to be effective because it’s reserving energy for immediate deployment. The IRP is solely ensuring capacity offers an economic bid into the real-time market. Finally, we do not believe a lower real-time bid cap for resources providing IR product is just or reasonable and should be entirely removed from the proposal.

WPTF provides our evaluation of the pros/cons of several key elements of the current proposal and offers revisions/modifications that find a more appropriate balance.

Nodal Procurement of Imbalance Reserve Products

PROs:

WPTF understands the CAISO’s desire to procure the imbalance reserve product nodally given that the idea is it will help ensure when it’s converted to energy in real-time, it is deliverable. The proposal to procure nodally has the advantage of being more likely to be deliverable, but it’s important to note that procuring the imbalance reserve products nodally will ensure the underlying energy, if converted to energy, is deliverable but only if real-time conditions exactly match that of day-ahead. Nodal procurement and “deliverability” in the day-ahead market does not equate to deliverability of the underlying energy in real-time when the uncertainty actually materializes. At best, nodal procurement may increase the probability of being deliverable in real-time but only when congestion and load patterns between the day-ahead deployment scenarios exactly match that of day-ahead; and its well documented that congestion patterns change drastically between the day-ahead and real-time market.

CONs:

We view the nodal approach as having the following cons:

1. Distorts price signals
2. Creates a known market design that will increase CRR shortfall
3. Introduces the need to apply LMPM which is complex and unprecedented for a capacity product

Distorts price signals: It is WPTF’s understanding the congestion resulting from the deployment scenarios will be reflected in the nodal energy prices. This has a price distorting effect. The congestion created in a day-ahead market simulation run that assumes uncertainty will materialize in the real-time market by deploying a capacity product will be reflected in the energy price. The resulting energy price will no longer be reflecting the marginal cost to serve energy at that location; it will now reflect the marginal cost to serve energy at that location assuming the highest level of uncertainty materializes in real-time as predicted by the CAISO. WPTF believes this fundamentally undermines the concept of nodal prices and no longer sends appropriate price signals for the marginal cost of serving load at that location in the day-ahead market.

Creates a known market design that will increase CRR shortfall: Congestion revenue rights are paid based on the marginal congestion components of its source and sink nodes; the CRR payments are funded based on the congestion costs collected from the day-ahead market. Anytime there is a difference between congestion costs collected and the CRR payments, there is a shortfall in funding which is now allocated back to CRR holders. Per the CAISO’s current proposal, the deployment scenarios will contribute congestion costs that are reflected in the day-ahead marginal congestion components, thus impacting CRR payments. The CAISO has also noted they will not be collecting congestion costs on flows associated with the deployment scenarios. In other words, the current market design is knowingly implementing an element that will increase CRR shortfalls which will then flow back to CRR holders. WPTF does not believe this aligns with cost causation principals and that the shortfall created due to the deployment scenarios and the way the CAISO has opted to price the new products should harm CRR holders.  

Introduces the need to apply LMPM which is complex and unprecedented for a capacity product: It is WPTF’s understanding that the CAISO believes it needs to apply LMPM to the imbalance reserve up product because its being procured nodally and thus could impact energy prices. As discussed in greater detail in the following section, applying LMPM to the imbalance reserve product introduces significant complexity and inefficiencies in the market for no perceived benefit. Here again, this is another inefficient and ineffective element of the market design that could be greatly simplified.

Mitigation of Imbalance Reserves

As discussed in our prior comments and during stakeholder calls, WPTF strongly encourages the CAISO to not implement local market power mitigation on imbalance reserve up as its mitigation measure. It’s our understanding that the reason the CAISO believes local market power mitigation is the necessary mitigation measure is because the CAISO is also proposing to procure the product nodally. First, as described above, WPTF believes nodal procurement should not be the initial design of this product and thus the need for LMPM becomes moot under zonal procurement. Second, even if the CAISO continues to procure nodally, the only benefit of applying LMPM is under very limited conditions as discussed by the CAISO during a MSC call. Thus, the realized benefit of apply LMPM to imbalance reserve up product is minimal since its only realized when the very limit set of conditions occur. However, applying LMPM as currently produced encompasses the following cons or costs:

1. Over mitigation
2. Unfounded methodology for a capacity default bid
3. Contradicts other elements of this proposal

Over mitigation: Mitigation is not a cost-less exercise. There is always the possibility of over-mitigation where a resource is unable to reflect its willingness to provide offer price and there are not conditions present where they can exert market power. Under the mitigation scenarios within this design merely offering in a capacity product can lead to additional mitigation of a resource’s energy bid. This is counter-intuitive in that the energy requirement has not changed and the resource is offering in additional products… but now is more likely to be mitigated. This is particularly concerning for storage resources because their default energy bids have not been found to be robust and to yield rational dispatch instructions.

Unfounded methodology for a capacity default bid: As part of the LMPM design, the CAISO will need to estimate a “competitive” offer price for the imbalance reserve product to use as a bid floor in the mitigation process. However, there is no founded methodology for even estimating the cost of offering a capacity or reserve product. This is one of the main reasons why most other ISOs (including the CAISO) apply market power mitigation on reserve products through a bid cap and not a process that requires coming up with a default competitive offer calculation. The CAISO has offered the idea of basing the competitive reserve offer on the spin price. WPTF does not agree with the premise that the spin price is a good indication of the cost to reserve capacity in the day-ahead market. Spinning reserves are only dispatched if a contingency event occurs in real-time; whereas the CAISO has always characterized the imbalance product as being a reserve capacity that has a higher likelihood of being converted to energy in real-time. Thus the cost profile of spinning reserves and the imbalance product are drastically difference as one has to consider several other costs, risks, and market opportunities when offering to provide imbalance reserves that do not have to be considered for spinning reserves.

Contradicts other elements of this proposal: As discussed later in these comments, the CAISO is also proposing a real-time energy bid cap for resources that are awarded imbalance reserve up in the day-ahead market. One concern with that element of the proposal is the resource’s inability to fully reflect the cost in real-time energy offers. Thus, the CAISO’s solution to that issue is for those resources to reflect the costs it cannot reflect in real-time energy offers into the imbalance reserve product offers. However, the CAISO will then be applying mitigation to the imbalance reserve products offers which will result in resource’s inability to effectuate the CAISO’s own proposed solution to an issue it created.   

WPTF Assessment of Pros and Cons: Given the pros and cons of nodal procurement compared to zonal, we do not believe the CAISO should continue to pursue nodal IR procurement as a first step. If zonal procurement (which can be implemented much more easily than nodal) cons end up not being able to be mitigated, then WPTF recommends evaluating again the different options in a subsequent initiative.

Real-time Energy Bid Cap

The CAISO is proposing that they need to somehow account for a resource’s real-time energy offer into the IR capacity product design. The argument is that two resources may have the same capacity bid, but different underlying energy costs and the optimization will not be able to differentiate between these resources. In order to do this, they propose to determine and enforce a real-time energy bid price cap on resources being awarded IR up or the reliability capacity up products.   

PROs: WPTF does not see any benefits to this approach and believes the CAISO’s rationale is confused and not based on any known economic principles. The only pro we see is that if the CAISO does not remove this component and continues down the nodal IR proposal path, it will be a very easy FERC protest for us.

CONs: This is price distortionary, unnecessary, will disincentive IR offers, and fails the basic test of rationality.

2. Provide your organization’s comments on the summary of changed from the third revised straw proposal and responses to stakeholder feedback, as described in section 1:

See above. 

3. Provide your organization’s comments on the need for DAME, as described in section 2:

See above. 

4. Provide your organization’s comments on the proposed DAME, as described in section 3:

See above. 

5. Provide your organization’s comments on the additional DAME design considerations, as described in section 4:

See above. 

6. Provide your organization’s comments on the alignment between Resource Adequacy, DAME, and the Extended Day-Ahead Market, as described in section 5:

See above. 

7. Provide your organization’s comments on the proposed WEIM Governing Body Role, as described in section 6:

N/A

8. Provide any additional comments on the Day-Ahead Market Enhancements (DAME) 4th Revised Straw Proposal and the November 1, 2022 stakeholder call discussion:

N/A