Comments on Extended Day-Ahead Market - Bundle 1 Straw Proposal

1. Please provide your organization’s overall position on the EDAM bundle 1 straw proposal:

2. Provide summary of your organization’s comments on this proposal:

The American Wind Energy Association (AWEA) is a national trade association representing a broad range of entities with a common interest in encouraging the expansion and utilization of land-based and offshore wind energy resources in the United States. AWEA’s more than 1,000 member companies include wind turbine manufacturers, component suppliers, project developers, project owners and operators, financiers, researchers, utilities, marketers, customers, and others.  AWEA-California is a project of AWEA representing companies that develop, own, and operate utility-scale wind, solar, storage, offshore wind, and transmission assets. AWEA-California is focused on driving immediate and sustained development of new utility-scale renewable energy to propel California toward a carbon-free electric future. 

As discussed more in these comments, as currently structured, AWEA opposes the EDAM Bundle 1 proposal. Before CAISO continues with EDAM development it must remedy fatal flaws in the EDAM proposal and should also make a number of improvements to ensure the market operates efficiently and equitably across the entire footprint. While there are a number of improvements that need to be made to the EDAM Bundle 1 proposal, the most glaring fatal flaw that requires remediation relates to the proposed elimination of intertie bidding and self-scheduling at CAISO interties to or from EDAM Balancing Authority Areas (BAAs) – a proposal which has a number of consequences for generation contract and transmission rights. Eliminating intertie bidding and self-scheduling at CAISO interties to and from EDAM BAAs may undermine existing generation contracts and will devalue transmission rights on key EDAM transmission providers’ system. As outlined below, elimination of intertie bidding and self-scheduling at CAISO interties that connect to EDAM BAAs will:

• Jeopardize the ability for most resources located outside of a California BAA to qualify as Portfolio Content Category (PCC) 1 under California’s current Renewable Portfolio Standard (RPS) rules. Therefore, unless a substitute RPS compliance mechanism is developed and implemented, CAISO’s EDAM proposal will leave California’s RPS highly vulnerable to a dormant commerce clause challenge. While California’s RPS rules may be able to be modified, the outcome of such a modification is highly uncertain, far from assured, and not something that CAISO has committed to or outlined a plan for achieving.

• Eliminate the mechanism currently used for imported resources to be specified at their actual emissions rate for purposes of compliance with the California Air Resources Board (CARB) GHG regulations (i.e., the reliance on E-tags in the ARB’s Mandatory Reporting Regulation), thereby throwing into question whether these resources (particularly zero emissions resources) would be treated as such under CARB regulations after EDAM is implemented or if they would have a carbon emission compliance obligation associated with them. Additionally, given the challenges with addressing carbon accounting in the Energy Imbalance Market (EIM) to date, the proposal to eliminate intertie bidding or self-scheduling in EDAM could undermine CARB’s existing GHG regulations for imports, potentially undermining the California cap-and-trade program unless a suitable replacement can be developed.[1]

• Devalue transmission rights to CAISO interties, which will likely cause many third-parties to forego these substantial investments. Under the existing Open Access Transmission Tariff (OATT) framework, this will likely result in significant revenue sufficiency concerns for transmission providers that provide service to CAISO interties, which EDAM has not yet been scoped to address or mitigate. In the near term, it also raises equity issues for owners of those transmission rights.

Given the above effects of eliminating intertie bidding and self-scheduling, we caution that under the current EDAM proposal, both current and planned out-of-state renewable resources could be disqualified from PCC1 under the existing rules and regulations for the California RPS. While AWEA understands that there are operational efficiencies that can be gained through elimination of intertie bidding/self-scheduling at the CAISO interties once EDAM is operational, these operational efficiencies cannot be considered in isolation. To achieve these operational efficiencies, CAISO cannot simply ignore a cornerstone of California’s RPS rules which allowed resources across the West to secure PCC1 treatment and has helped ensure California’s RPS is not subjected to a challenge under the dormant commerce clause.

The ability to deliver PCC1 energy under today’s rules is a key underpinning of a multitude of existing and future Power Purchase Agreements (PPAs) and is, therefore, critical to renewable energy developers, renewable energy owners, and Load Serving Entities (LSEs) alike. The EDAM proposal, as we understand it, would not ensure source specific e-tagging, which is the mechanism currently used to demonstrate scheduled RPS delivery and identification of imports to California. By removing the resource specific e-tag construct, the California RPS Program (as currently implemented) would no longer have a compliance instrument (the E-tag) to point to in proving delivery pursuant to Public Utilities Code Section 399.16(b)(1)(i.e., the PCC-1 delivery requirements), thereby creating a situation where out of state resources have no clear mechanism to prove their emissions profile or demonstrate PCC-1 compliance.  This change could have the effect of disqualifying a significant amount of GHG-free imports and RPS claims, in favor of in-state resources that would still have a mechanism to show GHG compliance and RPS compliance by virtue of being physically located in California.  This situation would clearly lead to state laws that discriminate against out-of-state resources in favor of in-state resources without any rational basis of justification.. This situation would precipitate from the CAISO’s Straw Proposal and CAISO must mitigate for it in the next iteration of the EDAM Bundle 1 proposal.

The CAISO cannot simply assume that RPS rules, and/or CARB’s GHG accounting rules, will be successfully changed to accommodate EDAM’s market design. In fact, implementation of the EIM has proven these rules and regulations often are difficult or impossible to change to accommodate a market structure. Since the EIM go-live date, the California Energy Commission and California Public Utilities Commission have yet to recognize EIM imports as being eligible for PCC-1 treatment. Despite a recognition in the 2017 CEC RPS eligibility guidebook (9^th ed.) to address this issue, to date the RPS rules have not been updated to address EIM Transfers. The only state agency that has updated their import accounting rules to address EIM imports is the CARB’s amendments to the Mandatory Reporting Regulation (MRR). The MRR was recently amended to assign emissions costs to EIM imports on the basis of a “secondary-dispatch concept.” This concept has led to the imposition of costs on imports that did not apply to imports that are transacted bilaterally and subject to e-tagging. AWEA has concerns that this same application of GHG costs may result to transactions that flow through the EDAM, given that source specific e-Tag schedules from EDAM BAAs to the CAISO BAA will likely no longer exist under CAISO’s proposal.  The point here is that the CAISO must proactively address EDAM’s design to ensure it works in concert with the state’s rules regarding RPS compliance, resource qualification, and GHG rules.

For a multitude of reasons, discussed more in the body of these comments, CAISO must reinstate intertie bidding and self-scheduling at the CAISO interties to and from EDAM BAAs under EDAM. Left unchanged, this fatal flaw appears to have the potential to undermine EDAM’s success.

In these comments, AWEA also urges CAISO to ensure consistency in the market design across EDAM BAAs and to minimize the areas where EDAM Entities can implement their own rules and procedures that could substantially affect the market’s outcomes as well as its overall equity and efficiency. This is particularly important for the design of Congestion Revenue Rights (CRRs). If, as CAISO leaves open in the Straw Proposal, each EDAM BAA is able to choose its own approach to CRRs – or even whether to utilize them – the result of EDAM may actually be to create even more barriers to remote and diverse clean energy procurement in the Western Interconnection than there are today. This result is an unacceptable outcome for EDAM and, if implemented, could impede the ability of western states to meet their clean energy objectives. At a minimum, EDAM must not make it more difficult and costly for LSEs to procure more diverse resources. Ideally, EDAM should remove barriers and increase incentives/capability for more diverse and remote resource procurement. But, at a minimum, CRRs must be implemented in a consistent manner across the EDAM footprint to ensure EDAM does not further discourage diverse renewable resource procurement.

As discussed more in these comments, AWEA has significant concerns with the EDAM Bundle 1 proposal. We recognize that designing EDAM will be a challenge. Because EDAM is not the same as the implementation of an expanded ISO, EDAM must be designed to function alongside (and not in conflict with) the OATTs of EDAM Entities. It must also function alongside existing bilateral markets and in conjunction with the EIM. Finding the appropriate balance between respecting existing RPS rules and contractual OATT transmission rights while also maximizing the operational efficiencies of EDAM will likely be one of the largest challenges associated with its successful implementation. In pursuing operational efficiencies, EDAM’s market design cannot ignore the realities of state RPS policies, PPAs, or existing OATT transmission rights. EDAM must be designed in a manner that will support California’s clean energy goals, including by not further restricting the resources that can qualify as PCC-1 under the California RPS. AWEA encourages CAISO to host additional workshops and meetings to help find a resolution, in particular, to the issues that arise from the proposed prohibition on intertie bidding and self-scheduling at the CAISO interties during which CAISO can further explain its rationale for this proposal and any challenges CAISO believes would result from allowing intertie bidding and self-scheduling within EDAM. Once stakeholders understand CAISO’s rationale and concerns, solutions can begin to be identified.

AWEA looks forward to working with CAISO to help enable successful resolution of the issues identified in these comments and hopes to be able to support future EDAM proposals, once amenable resolutions to the issues identified in these comments are found.

[1] We recognize that accounting for GHG costs is currently slated to be considered in Bundle 2 of EDAM. However, eliminating self-schedules and intertie bids to and from EDAM BAAs will substantially increase the complexity of addressing GHG costs in the market and will remove the only mechanism that works reasonably well for imports into California.

3. Provide detailed comments including examples on the Resource Sufficiency Evaluation topic:

Elimination of Intertie Bidding and Self-Scheduling Must be Addressed

In the Bundle 1 EDAM Straw Proposal: there is a paragraph under the Resource Sufficiency section (page 16-17) that states, in part:

CAISO proposes that bids and self-schedules for imports and exports at CAISO intertie scheduling points would not be permitted from or to balancing authority areas participating in the EDAM. All participation for the EDAM balancing authority area will be at the resource level in its balancing authority area.

This element of the proposal is highly concerning especially with respect to its interactions with the State’s RPS, GHG accounting program, and with respect to its impact on transmission rights to reach CAISO interties. AWEA discusses each of these concerns below.

Elimination of Intertie Bidding and Self-Scheduling Would Undermine the Existing California RPS Rules and Long-Term Contractual Agreements Between Renewable Developers and LSEs

CAISO’s proposal to eliminate intertie bidding/self-scheduling creates operational efficiencies and results in a simplified market solutions/modeling for CAISO. But it must be revised, as its implementation would result in a number of highly problematic outcomes, mostly notably, without substantial changes to the current RPS rules, potentially putting California’s current RPS law and associated rules at odds with the Dormant Commerce Clause which prohibits states from enacting laws that discriminate against out-of-state commerce in favor of in-state business interests, and exposing the RPS and GHG programs to litigation risk. The Dormant Commerce Clause could be implicated by the limitation of out-of-state RPS resources from competing for RPS contracts through the lack of a clear compliance instrument that demonstrates compliance with the State’s established scheduling requirements for PCC-1 and establishing GHG-free imports in the MRR. The resulting uncertainty could undermine existing and planned renewable PPAs.

As discussed below, without intertie bidding or self-scheduling to CAISO’s interties, resources that are not directly connected to a California BAA would likely no longer be able to qualify as PCC1 under the current California RPS’s existing rules/regulations, thereby potentially excluding out-of-state resources from PCC-1. The exclusion of out-of-state resources from qualification as PCC-1 risks placing California’s RPS in conflict with the Dormant Commerce Clause. The proposal could also undermine hundreds of MW of existing, long-term PPAs and negatively impact PPAs for planned resources that have been executed or are being considered and, thus, we expect will be strongly opposed by the generators and LSEs that are parities to these PPAs.

Today, per the CPUC Energy Division’s PCC Classification Review Process Handbook[1], entities seeking PCC-1 qualification that are not directly connected to a California Balancing Authority must demonstrate delivery to a California BAA through a pseudo-tie, dynamic schedule or an hourly/sub-hourly schedule. For dynamic schedules and hourly/sub-hourly schedules the CPUC relies, in part, on e-Tags to determine whether the renewable generation can qualify as PCC-1.[2] For a resource to count as delivered to a California BAA, the associated e-Tag must show the Load/Sink Point on the e-Tag as within a California Balancing Authority. If there are no intertie bids or self-schedules under EDAM, then these resources will not be able to include a California Balancing Authority as the Load/Sink Point on their e-Tags.

Even if CAISO e-tags EDAM transfers between BAAs (which it does not appear CAISO has committed to doing), there remains uncertainty on how those types of transfers would be viewed in the context of the RPS regulations by the relevant regulators (e.g. CPUC).  And, as far as AWEA is aware, there has been no discussion about the possibility of utilizing source specific e-Tags in EDAM (to demonstrate a schedule from the resource itself to CAISO for RPS compliance purposes). Even if this was addressed and e-Tags were created from a resource-specific point to CAISO, for purposes of RPS compliance, the concern remains that actual system operations under EDAM may prevent the delivery of some amount of these resources in real-time (potentially reducing the amount of their output that can qualify as PCC-1). This type of after-the-fact verification that may be recommended as a solution, may increase the risk associated with PCC-1 deliveries and discourage LSEs from entering into PCC-1 arrangements.

AWEA recognizes that there may be technical solutions to the PCC-1 qualification issue resulting from the elimination of intertie bidding and self-scheduling in EDAM. But approval of a substitute rule/regulation in EDAM cannot be an afterthought and cannot be taken for granted during EDAM’s market design process. Lack of a resolution to this issue could undermine more than 1,700 MW of long-term PPAs which envisioned PCC-1 qualification in this manner, potentially placing these projects and their off-takers at substantial risk. Thus, resolution of this issue cannot simply be assured away or taken for granted and must be proactively addressed in EDAM’s design structure.

Additionally, though some may claim a technical solution exists and can be implemented, the final implementation of a solution for PCC1 qualification under EDAM seems unlikely based on previous experience with EIM transfers and PCC1 qualification. To date, EIM Transfers, have not been able to be counted as PCC-1 under the CPUC or CEC’s guidebooks. The CPUC Energy Division’s qualification handbook states:

Under the current rules of the ISO tariff electricity transferred into California becomes property of the ISO at the border of the CAISO’s service territory. Consequently, it is impossible for a retail seller to retain the title of RPS electricity that enters into California via EIM transfer.[3]

And the CEC’s 2017 Guidebook states:

EIM transfers are not specifically contemplated by RPS statute or through the CPUC implementation of the Portfolio Content Category (PCC) Classification Decision (D.11-12-052) or Compliance Decision (D.12-06-038), or through the Energy Commission’s implementation of PCC classifications for POUs in the Energy Commission’s RPS POU Regulations (20 CCR Sections 1240, 3200 – 3208). The California Independent System Operator, CPUC, and the Energy Commission have begun the discussion to address how RECs associated with electricity scheduled under EIM would be classified according to the PCCs established in Public Utilities Code Section 399.16, and how the EIM schedule would be reviewed. However, as of publication date, no update is available for this item. This and other additional issues may be addressed in the future.[4]

While EIM and EDAM are clearly different markets, no solution has yet been identified for EIM and the interagency discussions alluded to in a 2017 CEC Guidebook have apparently not resulted in any meaningful resolution of this issue. Thus, relying on development of a solution for EDAM through this same interagency work does not provide the assurances necessary that a cornerstone of the California RPS (and a significant number of PPAs) can be upheld under EDAM as currently proposed. We take no comfort in empty reassurances that a “new” method for PCC-1 qualification can be stood up under EDAM. CAISO must address this by reinstating intertie bidding and self-scheduling to and from EDAM BAAs in the next version of the EDAM Bundle 1 proposal.  

AWEA recognizes the potential operational benefits of having resources in EDAM BAAs simply bid at their resource locations (and, thus, eliminating intertie bidding/self-scheduling). However, operational benefits cannot undermine existing long-term PPAs as well as the ability for future out-of-state resources to supply PCC-1 renewable energy to LSEs located in CAISO. In developing EDAM’s market design, CAISO cannot ignore issues that are fundamental to existing and future contract structures and LSE RPS compliance. CAISO should ensure that intertie bidding and self-scheduling to and from EDAM BAAs can continue to occur within the EDAM framework.

Elimination of Intertie Bidding and Self-Scheduling Would Undermine the Existing Paradigm for Applying GHG Costs to Imports

AWEA understands that CAISO plans to address accounting for GHG costs as part of Bundle 2 of EDAM. However, there are elements of the Bundle 1 proposal that may hamstring the CAISO’s ability to address GHG costs for imports in the context of the Bundle 2 proposal. As CAISO and stakeholders are already well aware, addressing GHG costs for imports will be challenging from a technical and policy perspective and no amenable solution has yet been identified, despite significant time and effort from 2016-2018 as part of the CAISO’s Regional Integration and EIM GHG Compliance initiative. Thus, it is imperative that the Bundle 1 proposal does not result in additional challenges and limitations for GHG accounting for EDAM. Specifically, by eliminating intertie bidding and self-scheduling to CAISO interties, again it is our understanding there would no longer be source specific e-Tags for imports. This would make the resource specific emissions factors that can be applied to specified imports into California no longer exist when the resource comes through an EDAM BAA. Thus, CAISO must leave in place intertie bidding and self-scheduling to ensure that the existing mechanisms to account for GHG costs for imports can continue to function.

Elimination of Intertie Bidding and Self-Scheduling will Devalue Transmission Rights to CAISO Interties

In addition to the concerns discussed above regarding California’s RPS and GHG policies, AWEA has other concerns with the proposal to eliminate intertie bidding and self-scheduling to and from EDAM BAAs. One other notable concern relates to the resulting devaluation of transmission rights to CAISO interties under this proposal. It is a concern clearly shared by other stakeholders and was discussed in depth during the July stakeholder meetings.

Again, eliminating intertie bidding/self-scheduling and allowing EDAM resources to bid at their resource location would clearly provide operational benefits and maximize efficient use of the interties between EDAM BAAs and the CAISO. But this policy cannot be implemented without thorough consideration of its implications for other aspects of the OATT/bilateral framework that exists today and will continue to exist under EDAM. Namely, by eliminating the ability for resources to bid or self-schedule at the CAISO interties that adjoin EDAM BAAs, CAISO will severely restrict the value of transmission rights that are held through potential EDAM BAAs to CAISO interties. Therefore, in the short-medium term, any party owning transmission rights to a CAISO intertie (through an EDAM BAA) will likely see the value of those transmission rights reduced or eliminated. In the long-term, these entities may be far less likely to renew their purchase of these transmission rights, leading to transmission revenue sufficiency issues for future EDAM BAAs (or more accurately, Transmission Providers in EDAM BAAs). The CAISO’s proposal will eliminate the ability for entities with transmission to a CAISO intertie adjoining an EDAM BAA to use their transmission rights to deliver via CAISO intertie bidding framework, thereby leaving provision of those rights to EDAM as the only option to utilize those transmission rights. This construct raises questions about whether, for transmission to CAISO interties, transmission donation is truly voluntary in the EDAM and if such a proposal will be able to garner FERC acceptance.

The problems discussed above are perhaps most easy to understand by considering an example: BPA and transmission rights on the Southern Intertie to deliver to CAISO. Assume, for sake of this example, that BPA is an EDAM participant. Under CAISO’s proposal all of the third-parties that own transmission on BPA’s Southern Intertie to CAISO would no longer be able to participate in CAISO intertie bidding or even self-scheduling at those interties. Historically, the ability to submit intertie bids (or self-schedules), by virtue of the transmission rights owned by these third-parties, has been a strong incentive for third-parties to purchase this transmission capacity. But, under CAISO’s proposal, the transmission capacity they have purchased could not be used to bid at CAISO interties and could only provide value to the owner if it is provisioned to EDAM. The Transmission Customer might get transfer fee revenue (if CAISO correctly allocates such fees to the Transmission Customers and not simply the BAAs) but the customer has lost a significant benefit of holding those transmission rights to the CAISO intertie. It is not hard to envision a situation in which these long-term transmission rights holders choose to not renew their capacity rights on the Southern Intertie. A review of rights on BPA’s portion of the Southern Interties show that third-parties make up about 85% of the total capacity purchased on that system. If a significant portion of these entities opted to not renew their transmission rights as a result of the elimination of CAISO intertie bidding, it is clear to see the financial predicament that could ensue, potentially resulting in a significant increase in the cost of transmission to remaining customers, including BPA network customers.

The momentous issue of transmission costs implications cannot be swept aside because of the operational efficiencies that will be gained, even though they may be significant. If EDAM is truly going to work in concert with the OATT framework this dynamic must be addressed in a future CAISO EDAM proposal. There may be several ways to address this issue, including: allowing intertie bidding to and from EDAM BAAs (which also addresses the RPS and, potentially, GHG concerns raised above) or addressing transmission revenue sufficiency concerns for EDAM BAAs within the proposal (e.g. through agreed upon revenue transfers between participants to address likely loss of transmission revenues from EDAM participation). CAISO must recognize the impacts that EDAM’s design has on the OATT framework if EDAM is truly going “harmonize” with the OATT, as stated in the Straw Proposal.

AWEA encourages CAISO to further consider the secondary impacts of the EDAM proposal (such as those caused by the elimination of intertie bidding to and from EDAM BAAs and the impacts this would have on the incentives to procure transmission rights to CAISO interties) and to develop a Straw Proposal that addresses and mitigates these impacts.

The Need for Emergency Access to Available Resources in EDAM to Prevent System Emergencies and Blackouts

The goal of the Resource Sufficiency Evaluation (RSE) is a laudable one: to ensure that BAAs can individually meet their needs without inappropriately leaning on the EDAM to make up for capacity, flexibility or transmission needs. The RSE is also designed to capture “diversity” benefits that occur across the footprint, helping to reduce the overall requirements that BAAs must meet to pass the RSE. CAISO has proposed that, in instances when a BAA fails the RSE its EDAM transfers would be limited to the level of transfers that occurred prior to the RSE failure. CAISO considers the approach of limiting EDAM Transfers to be more workable than an approach that would allow unlimited transfers but would have a financial charge/penalty. There are a number of reasons CAISO believes that limiting transfers is preferable to implementation of an administratively determined penalty.

CAISO should more thoroughly consider the potential reliability implications associated with limiting EDAM (and perhaps more importantly EIM) transfers and enact procedures to allow power to flow when it is needed to prevent a blackout. If EDAM (or EIM) transfers are available and could help ensure supply adequacy for a BAA that is entering emergency system conditions, then there should be a mechanism for those transfers to be enabled by the market. CAISO should consider whether the EIM/EDAM transfer limit could be frozen in the event of a resource sufficiency failure, but CAISO could provide the failing BAA with a notification of the failure along with an immediate indication of other BAAs that could have supplied transfer capability, if not for the market transfer limitation. This would enable these entities to enter into a bilateral arrangement to facilitate power flows and address system emergencies. This type of a mechanism could be instrumental in helping ensure supply adequacy across the West and, if implemented for EDAM and the EIM, may help prevent the need for load shedding in the future. Alternatively, establishing a very high price for transfers when the RSE is failed should also be considered. At the end of the day, while CAISO may not want to establish an administrative penalty price for failing the RSE, there should be an established mechanism that allows for available transfers to occur (even when the RSE test is failed) to help prevent blackouts and the associated, substantial human and economic toll they take.

CAISO Should Ensure Consistency in the Resource Sufficiency Requirements within EDAM

CAISO has proposed that the RSE would take place at the BAA-level, in the same way the EIM’s resource sufficiency tests occur at the BAA-level. CAISO and the EIM Entities have also acknowledged there may be a need for BAAs to implement tests at the LSE-level. AWEA recognizes the potential need for a more granular resource sufficiency evaluation but recommends that the ISO proceed with caution on allowing different approaches to this test across the EDAM footprint. If an EDAM Entity wishes to enact an LSE-level RSE, the LSE-level test should be consistent with the CAISO’s resource sufficiency test. To ensure equitable treatment and consistency across the market, it should be CAISO (and not the individual EDAM BAAs) that outlines the LSE-level requirements within its tariff and it should be CAISO that performs any LSE-specific resource sufficiency tests.

Additionally, the existing ancillary service schedules BAAs charge third-party customers may overlap with resource sufficiency requirements and this dynamic will need to be more fully considered as EDAM moves forward.

[1] CPUC – Energy Division: Portfolio Content Category Classification Review Process Handbook, October 2017, available here: https://www.cpuc.ca.gov/WorkArea/DownloadAsset.aspx?id=6442454933

[2] For pseudo-tied resources, the CPUC classification as PCC-1 does not require submission of individual e-Tags. However, this does not guarantee that pseudo-tied resources will not be impacted by this element of the Bundle 1 EDAM proposal. We encourage more discussion around the treatment of pseudo-ties, as well as other methods for scheduling to a California BAA for PCC-1.

[3] See: https://www.cpuc.ca.gov/WorkArea/DownloadAsset.aspx?id=6442454933 at p.2, footnote #3.

[4] See: https://efiling.energy.ca.gov/getdocument.aspx?tn=217317, at p.3.

4. Provide detailed comments including examples on the Transmission Provision topic:

Care should be Taken in Properly Delineating and Articulating Roles of the Transmission Provider, Transmission Customers, BAAs and LSEs 

In sections discussing Transmission Provision and Congestion Revenue distribution, the Straw Proposal does not appear to have clearly delineated and articulated the role between BAAs, LSEs Transmission Providers, and Transmission Customers. Precision needs to be used when utilizing these terms in the EDAM proposal.

Notably it will be critical that the role of the Transmission Customer is clearly defined and that Transmission Customers that provide transmission to EDAM (either within a BAA or between BAAs) are properly identified as the entities eligible for congestion distribution, rather than simply having congestion/transfer fee allocation always accrue to the BAA. In many instances, third-parties have procured transmission rights to deliver power within and between BAAs and if that transmission is utilized by EDAM, it is the entity paying for it (generally the Transmission Customer) that should be provided with financial compensation. CAISO should review the Straw Proposal for the use of these terms and ensure the accurate entity is being described in each instance.

Concerns Remain Regarding Pricing Implications of Moving to “Bucket 3” Transmission

In comments submitted following the February 2020 EDAM workshops, AWEA noted the potential for market/pricing impacts associated with the transmission provision construct where two buckets of transmission are “free” to the market while a third has an associated hurdle rate. We noted that it appears that the sudden imposition of a transmission charge to EDAM transfers could have negative impacts on market efficiency and prices, which would be exacerbated if there are different EDAM wheeling rates between EDAM BAAs and/or if entities are allowed to freely modify the amount of free transmission that is available to the market. The Straw Proposal does not provide any assurances that CAISO has analyzed this issue in any more depth. We encourage further consideration of the pricing impacts by CAISO, the Department or Market Monitoring, and the Market Surveillance Committee (MSC). If this proposal proceeds, a formal opinion from the MSC should be sought regarding the impacts of the three-bucket approach to transmission provision in EDAM.

In addition, in a future proposal, CAISO should provide more detail on how it proposes to equalize the hurdle rates between EDAM and EIM to ensure that transactions are not pushed into EIM simply because it has a lower hurdle rate than EDAM.

Use of Transmission and Transmission Requirements Within EDAM BAAs

The Straw Proposal primarily discusses the provision of transmission for EDAM transfers between BAAs. The Straw Proposal also outlines potential approaches to EDAM’s use of non-participating transmission within a BAA and seeks feedback on how physical transmission capability internal to an EDAM BAA should be considered by the market.

Generally, the full use of transmission rights (even non-participating transmission rights) within a BAA is optimal and should be pursued in EDAM. As CAISO outlined in the paper, this is the approach it employs in its markets: not limiting internal physical transmission capability due to unused transmission rights but respecting such rights by providing a perfect congestion hedge when the transmission is actually used in accordance with an entity’s rights. This approach should generally be pursued for EDAM as well. But in order to implement this approach, CAISO will need to ensure that the congestion hedge is actually provided to the entity that held the rights. This further supports a consistent approach to congestion revenue distribution which is discussed more in the next section of AWEA’s comments.

In addition to considering the use of transmission rights within a BAA, AWEA urges CAISO to outline a standard approach to any potential transmission requirements that will be placed on resources that participate in EDAM. It will be critical for the same transmission requirements to apply footprint wide It is also critical to ensure that transmission requirements established by individual BAAs are not used as a mechanism to prevent or discourage third-party participation in EDAM. Therefore, as part of the CAISO stakeholder initiative, it would be helpful to explore whether the market will include any specific transmission-related requirements for resources within an EDAM Entity area.

5. Provide detailed comments including examples on the Transfer and Congestion Revenue Distribution topic:

Without Consistency in CRRs (and other key market elements), EDAM May Actually be Worse than the Status Quo

In comments on the February technical workshops, AWEA urged the CAISO to promote consistency of rules and requirements across the participating EDAM footprint. AWEA advocated for inclusions of this as an overarching principle for EDAM. However, CAISO has yet to adopt this principle. Ensuring consistency in EDAM is, perhaps, most critical with respect to congestion revenue distribution and CAISO must propose and adopt an EDAM-wide approach to CRRs to prevent adverse effects from EDAM’s implementation.

Within the Straw Proposal, CAISO leaves open the option for each individual EDAM to have its own methods and approach for congestion revenue distribution and potentially even whether to use CRRs or not. If inconsistent congestion revenue distribution mechanisms are implemented across the EDAM footprint, then EDAM will actually create additional risks and barriers to procurement of diverse, remote resources than what exists under today’s bilateral/OATT construct. Under today’s bilateral construct, an LSE (for instance in CAISO) can enter into a PPA with a resource outside of the CAISO BAA. The LSE (or the resource) can then procure contractual transmission rights to deliver the resource to the CAISO interties. The PPA price is known to the LSE and the cost of the transmission rights are also known. This helps provide price certainty to the LSE procuring the resource and price certainty can be provided, even if the resource must be transmitted across multiple BAAs to reach to LSE.

Under EDAM, contractual transmission rights will likely be replaced with CRRs to provide a financial hedge to the appropriate party. However, if different EDAM BAAs have different mechanisms for distributing congestion revenue in the BAA, then the LSE may not actually be able to secure an appropriate hedge and may only be able to secure a partial hedge for the same transaction described above. This will certainly further discourage the procurement of regional resources. While EDAM is unlikely to be able to fully address barriers to remote resource procurement, it certainly shouldn’t increase them over and above what already exists today.

To remedy this concern and ensure that EDAM is actually an improvement to system operations and resource procurement, CAISO should mandate a consistent approach to CRRs for all participating BAAs. This system should ensure that transmission rights holders are provided with congestion revenue distribution in a manner that provides a financial hedge to reasonably replace the physical transmission rights that a transmission customer has today.

6. Additional comments on the bundle 1 straw proposal or EDAM initiative:

CAISO must ensure that EDAM is developed and implemented in a manner that does not undermine and invalidate critical contracts and policies that exist in the West. Most importantly EDAM must not undermine the California RPS and various long-term PPAs by upending the current PCC-1 qualification structure. Failure to rectify this unfortunate unintended consequence of the EDAM proposal will destabilize California’s RPS structure, making it highly vulnerable to a dormant commerce clause challenge. Similar concerns apply to EDAM’s impact on GHG costs for imports into CAISO, as described above.

Since EDAM is designed to work “in concert” with the OATT framework, it must also respect and protect the benefits associated with contractual transmissions rights. If EDAM cannot do so, then it will be critical that the design of the market address transmission revenue sufficiency issues through a separate proposal implemented concurrently with EDAM.

Additionally, EDAM must be designed in a way that, at a minimum, does not increase barriers associated with remote resource procurement. One-way CAISO can help address this is to ensure consistency across the EDAM footprint, mostly notably with respect to the design and allocation of CRRs. These should be consistent for every EDAM BAA to prevent EDAM from being worse at incentivizing diverse resource procurement than the status quo.  

EDAM must also ensure that Transmission Customers who pay for transmission rights, not just BAAs or Transmission Providers, are appropriately compensated for their transmission rights through the allocation of congestion rent and transfer fees. CAISO should take care in the next version of the EDAM proposal to carefully delineate between BAAs, LSEs, Transmission Providers and Transmission Customers within the proposal.

1. Please provide your organization’s overall position on the EDAM bundle 1 straw proposal:

Bonneville Power Administration[1] (Bonneville) appreciates the opportunity to comment on CAISO’s Extended Day-Ahead Market (EDAM) Bundle 1 Straw Proposal dated July 20, 2020 and the subsequent stakeholder workshops held on July 27 and 29, 2020. Bonneville notes its general support for the comments submitted by the EIM Entities and seeks to expand on them here in areas where Bonneville encourages deeper exploration. Bonneville also notes its general support for the comments of the Public Generating Pool (PGP) and the Public Power Council (PPC).

Bonneville remains supportive of the exploration of EDAM and continued work on the Bundle 1 topics. Bonneville’s comments reflect our current thinking on the EDAM Bundle 1 topics, which may evolve as additional information becomes available about the August and September 2020 heat wave events. We acknowledge that CAISO has provided a Preliminary Root Cause Analysis[2] and that CAISO plans to continue to review root causes of the August events as more data becomes available and provide a final analysis by the end of the year.  While CAISO’s analysis is specifically focused on implications for the CAISO BAA, Bonneville believes the August and September 2020 heat wave events merit thorough evaluation across the broader EIM Entity footprint to also identify and develop a plan to resolve important implications for EDAM design, as well as changes to the Energy Imbalance Market (EIM) that might be needed to ensure reliable operations for Summer 2021.

Additionally these comments do not address the impacts of the CAISO’s recent update provided on its Day-Ahead Market Enhancements (DAME) initiative, specifically in regards to moving forward with sequential integrated forward market (IFM) and residual unit commitment (RUC) processes. The feasibility and workability of a sequential IFM-RUC day-ahead market solution for EDAM is unclear, as achieving a reliable and efficient commitment of physical supply needed to meet demand from a single optimization has been a foundational element for extending CAISO’s day-ahead market to EIM Entities. On the October 29, 2020 DAME initiative update stakeholder call, CAISO suggested potential further assessment of the added efficiencies that may be gained by integrating IFM and RUC in the future[3]. Bonneville requests that the integration of IFM and RUC be explicitly included in an early EDAM stakeholder initiative bundle as its own topic.   

[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 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] Preliminary Root Cause Analysis: Mid-August 2020 Heat Storm

[3] P. 7 of DAME Initiative Update presentation

2. Provide summary of your organization’s comments on this proposal:

3. Provide detailed comments including examples on the Resource Sufficiency Evaluation topic:

I. Resource Sufficiency Principles

Bonneville generally supports the CAISO’s proposed principles for the EDAM Resource Sufficiency (RS) test as they generally align with our principles.  Bonneville believes the August 2020 heat wave event highlights the criticality of ensuring that the EDAM RS test promotes reliability, incents the right forward procurement and prevents entities from leaning on the EDAM to meet its capacity and flexibility needs.  And Bonneville believes more analysis of the heat wave event is needed to fully identify and analyze lessons learned that should be applied to ensuring the RS test that is developed for EDAM meets those objectives.

Bonneville reiterates the four core objectives[1] that EIM Entities have established for considering EDAM resource sufficiency:

• Promotes reliability;
• Sustains robust market depth and promotes participation;
• Ensures fairness; and
• Complements individual RA/IRP processes

Additionally in previous comments,[2] Bonneville expanded on these core objectives with additional principles that emphasize promoting participation through efficient implementation:

• Simple and workable: EDAM Entities must be able to efficiently determine whether or not they are able to pass their own RS test. This includes knowing the distribution of the hourly net load forecast used and an estimate of the diversity credit available to their EDAM Entity multiple hours before the market run kicks off at 10am on the day-prior.
• Full transparency: Buyers and sellers must be equally informed of the characteristics of products that are sold and used to satisfy the EDAM RS test. This includes any transfer of bid range (or products being used to transfer bid range) from one EDAM Entity to another. Transparency also includes an indepdendent, external rigorous after-the-fact review of RS test inputs, outputs and historical performance to inform consideration of enhancements on a routine (at least annual) basis.
• Preventive enforcement: A simple and workable EDAM RS test will encourage EDAM entities to self-iterate to meet the test as needed (ie. open book test), rather than having a single entity administer a test that is run at the last minute, which can result in limiting the participation of those entities that fail with little or no prior notice or opportunity to cure (ie. pop quiz). If EDAM Entities seek access to the benefits provided by the efficient day-ahead dispatch, EDAM Entities will endeavor to satisfy the test.
• Transmission deliverability: There needs to be a simple and workable test to determine if transmission contract rights are available to meet the RS test.

The above set of core objectives and principles define the lens through which Bonneville evaluates the CAISO’s EDAM RS evaluation proposal.

II. Diversity Benefits

Bonneville supports the concept of diversity benefits as it allows EDAM BAs to hold fewer imbalance reserves to cover uncertainties between the day-ahead and 15-minute market. Bonneville requests further detail regarding the calculation of net load uncertainty and diversity benefits, along with examples of the pro-rata distribution of those diversity benefits based on contribution to the net load uncertainty.

Bonneville also believes this is an area that requires further examination given the curtailment of exports that occurred during the August 2020 heat wave event. If EDAM Entities hold fewer imbalance reserves to cover uncertainties between day-ahead and real-time and instead rely on EDAM transfers through the sharing of diversity benefits, having those transfers curtailed because the source BA is experiencing emergency conditions will have reliability implications for the sink BA. Bonneville requests CAISO work with EIM Entities and other stakeholders to explicitly address the interplay between curtailments of exports by an EDAM Entity BA or the CAISO BA and the sharing of diversity benefits.   

III. Trading Bid Range

Bonneville strongly supports trading bid range capacity in the EDAM and urges the CAISO to extend the ability to trade bid range to the EIM as well.

IV. Timelines

Bonneville strongly advocates that the final RS requirements be set at 5am in the Pre-Schedule timeframe. Bonneville does not see additional benefit or significant reduction in uncertainty by updating the final RS requirements at 8am or 9am in the day-ahead timeframe. For Bonneville, timeliness and certainty of the final RS targets take precedent over incremental precision of the RS requirements.

As with all products, buyers and sellers must be equally informed of the characteristics of products that are sold and used to satisfy the EDAM RS test. EDAM Entities must be able to accurately determine whether or not they are able to pass their own RS test. This includes knowing the distribution of the hourly net load forecast used and an estimate of the diversity credit available to their EDAM Entity multiple hours before the market run kicks off at 10am on the day-prior. Bonneville requests additional information regarding the RS evaluation timelines and how the Bonneville BA, including non-participating resources and loads, will be measured in the EDAM RS test.

V. Resource Sufficiency Evaluation

Bonneville reiterates the critical importance of the CAISO’s Day-Ahead Market Enhancements (DAME) initiative to the success of EDAM, as it establishes the foundation for ensuring day-ahead obligations with physical capacity. This includes demonstrating the ability to meet a P50 demand forecast and showing a level of imbalance reserves to cover a defined confidence level (e.g. 95%) of historical uncertainties between the day-ahead and 15-minute markets. This also establishes a baseline for resource sufficiency in other BAAs within the EDAM footprint.

Ancillary services requirement: CAISO proposes each EDAM BA meet 100 percent of its forecasted ancillary services requirement. It is Bonneville’s understanding that each EDAM BA will have the discretion to determine its forecasted ancillary services requirement to meet reliability standards. We request to have this explicitly stated in future proposals.

Bonneville also believes how the ancillary services requirement is accounted for in the EDAM RS test merits additional discussion. It is our understanding that the CAISO BA passed the EIM RS test during periods of reserve shortage and while being in emergency conditions. This outcome appears counterintuitive and warrants additional consideration in regards to how ancillary service requirements are reflected in the RS evaluation both for the EDAM and the EIM.

Imbalance reserve requirement: CAISO has provided information on how the imbalance reserve requirement would be calculated in the CAISO BAA, but it remains unclear how the imbalance reserve requirement will be calculated for EDAM BAAs outside the CAISO BAA and what uncertainty will be included as part of the requirement for each BA. Bonneville notes that a threshold issue for our joining the EDAM is that the uncertainty around export schedules be incorporated into the calculation of the sink BA imbalance reserve requirement.  Based on CAISO discussions, Bonneville believes this is consistent with the proposal but requests CAISO confirm that this is the case. Bonneville’s position is that the source BA should not have the responsibility to hold imbalance reserves to cover the uncertainty of export schedules, as this aligns with trading in the current bilateral market. Today, Bonneville requires all resource types and load to adjust schedules near real-time to align with the most up-to-date forecasts, thereby limiting imbalance caused from the day-ahead to real-time uncertainty in forecasted generation and/or load. Bonneville requests CAISO elaborate on the uncertainty components included in the imbalance reserve requirement for sink BAs versus source BAs in EDAM in future proposals.

VI. Failure Consequences

Bonneville reiterates the EIM Entities’ comments that preventative enforcement of RS requirements is critical to ensuring that entities continue to have appropriate incentives to contract for sufficient energy, capacity, and flexibility ahead of each EDAM daily market run and hence not lean on the capacity and/or flexibility investments made by other entities.  Bonneville believes this is a key area that warrants further evaluation and discussion with consideraton of the August and September heat wave event.

Intra-BAA compliance: LSEs will have an important role in ensuring BAs submit sufficient bids and self-schedules to meet the RS criteria. CAISO has requested comments on data elements and items to allow BAs to sub-allocate requirements to LSEs, however, Bonneville needs more  information and examples in order to suggest improvements. For example, CAISO proposes the use of default load aggregation points (DLAP), on which Bonneville looks forward to collaborating with the CAISO, along with any other tools that will help with compliance of individual LSEs.

VII. EIM Resource Sufficiency Evaluation

As mentioned previously, Bonneville believes further assessment of the Summer 2020 heat wave events is needed to identify implications for the design of an EDAM RS test, along with potential changes needed to the current EIM RS test to ensure the test is performing according to its intended objectives of promoting reliability and ensuring “no leaning”. Notwithstanding the need for potential changes to the EIM RS test, Bonneville supports the inclusion of an EIM real-time RS test for EDAM BAAs. This will be important in ensuring that activities between day-ahead and t-75 do not diminish the day-ahead awards and providing an additional “check” for EDAM BAs. Bonneville is open to a modified EIM RS test for EDAM participants who pass the day-ahead RS test. Furthermore, an EIM real-time RS test should still be required of those participating in EIM only and not in EDAM.

VIII. Energy Limits

CAISO’s EDAM Bundle 1 stakeholder presentation[3] included a graphic on energy limits (slide 33) that imposed energy limits on peak hours. It is unclear if this is CAISO’s proposed solution or an illustrative example. Bonneville requests CAISO provide an explicit energy limit section in future proposals that covers two areas:

• How energy-limited resources qualify for the RS test, and
• What enhancements are available to allow the market to better optimize energy-limited resources to (a) allow its supply to be dispatched in the highest value hours, while (b) ensuring the resource’s total dispatch across the day does not exceed its energy limitations. 

IX. On-Going Independent Monitoring and Review

As noted in the Resource Sufficiency principles, Bonneville believes an independent, external after-the-fact review of RS test inputs, outputs and historical performance to inform consideration of enhancements on a routine (at least annual) basis is a critical component of ensuring full transparency.

[1] EIM Entities Presentation on EDAM Resource Sufficiency Design, slide 6, February 11, 2020.

[2]  BPA comments on Feb 2020 EDAM Workshop

[3]EDAM Bundle 1 Straw Proposal presentationV

4. Provide detailed comments including examples on the Transmission Provision topic:

I. Introduction

As one of the largest transmission service providers (TSPs) in the West, Bonneville has a strong interest in how transmission is provided to EDAM amidst the backdrop of open access transmission principles needing to be upheld and each EDAM TSP maintaining their NERC functions and responsibilities.  Bonneville believes there are many details that require further discussion before BPA can fully evaluate the feasibility and workability of how the OATT construct overlays with the EDAM design in a manner that respects transmission principles, rights and obligations. 

As a general matter, Bonneville supports full cost recovery of transmission used to support EDAM transfers provided they are based on use, impact, fairness, equity, and transparency.  Bonneville notes specific interest in understanding how transmission rights of non-participating LSEs will be treated in the RS evaluation and under Bucket 1 transmission, which is not addressed in the Straw Proposal.  Bonneville believes this is important in determining the extent to which the market is voluntary. 

II. Transmission Provision Principles

In general, Bonneville supports the CAISO’s first principle of maintaining fair and open access while maximizing the transmission system usage and respecting scheduling rights and other contractual arrangements as a bedrock principle supporting the provision of transmission in the EDAM. 

Bonneville also strongly supports the second principle that recognizes that local control over transmission planning and investment decisions remain solely with the EDAM Entity.

With respect to Principle 3, Bonneville believes that in order to maintain voluntary participation, EDAM must be structured in a way that allows load serving and other entities to elect not to participate.

III. Internal Transmission Limits

Bonneville supports the CAISO’s approach to internal transmission that requires the CAISO to work with each individual BA to model their internal system as needed to accommodate internal transmission for EDAM.  The CAISO cannot assume all internal transmission to the BA is available for market optimization.  Bonneville could have a significant number of entities within its BAA that do not participate in both the EIM and the EDAM, and Bonneville’s short-term network constraints are unique to transmission customer rights and modeling of those rights on BPA flowgates.  Bonneville is planning on setting up TCOR (transmission corridor) limits if it joins the EIM that will limit flows across defined transmission constraints.  Bonneville proposes the CAISO make use of the TCOR limits as a starting point to inform EDAM. Through working collaboratively with Bonneville on adjustments to the EIM-informed TCORs, a new export limit, agreeable to Bonneville, could be established to support EDAM transfers before the EDAM becomes operational.

Bonneville is concerned about the proposal for TSPs to make unscheduled transmission available to the market.  Under the current Open Access Transmission Tariff (OATT) framework, a transmission customer with point-to-point transmission rights can resell or redirect its unscheduled rights. Any unscheduled point-to-point transmission rights that remain unscheduled and any unused network integration transmission service may be resold by the TSP as non-firm transmission on a first-come, first-served basis at the TSP’s non-firm transmission rate.  Bonneville is concerned that the CAISO assumption to make unscheduled or unused transmission internal to an EDAM BAA available to the market without regard to OATT rights may give the market priority over unscheduled/unused transmission internal to the EDAM BAA. This may also interfere with the transmission customer’s ability to donate its unused transmission under bucket 2 or inappropriately penalize the transmission customer with congestion offset charges if the transmission customer chooses to use its pre-paid transmission rights after the day-ahead market closes.

IV. Transmission to Enable EDAM Transfers

Bonneville supports the CAISO’s proposal relative to the three buckets of transmission to enable EDAM transfers. 

Bucket 1:

Bonneville requests clarity regarding the treatment of non-participating LSE transmission with respect to Bucket 1 transmission.  Bonneville suggests that non-participating LSE load and transmission be taken into account in the determination of a BAA’s RS evaluation.  However, the transmission used by a non-participating LSE to serve its load cannot be available for market optimization.  The non-participating LSE must be able to schedule its resources to load under the OATT much as it does today. 

  Bucket 2:

No additional comments beyond that offered by the EIM Entities.

Bucket 3: 

No additional comments beyond that offered by the EIM Entities.

V. EIM Wheeling Charge

Bonneville supports exploring application of the usage fee to the EIM.   A factor that must be considered is that transmission used in the EIM may be of a different quality (curtailment priority) than that used in EDAM.  This difference may warrant a separate, EIM-specific usage fee.  Enabling compensation for transmission in EIM would more accurately reflect the cost of EIM transfers and would enable Bonneville to explore using the direct provision of ATC method for making transmission available for EIM transfers.

Bonneville also requests CAISO provide examples of the inconsistencies that can occur between the day-ahead and real-time markets if a different usage fee was used for EDAM Bucket 3 transmission and the EIM wheeling charge.

5. Provide detailed comments including examples on the Transfer and Congestion Revenue Distribution topic:

I. Transfer and Congestion Revenue Principles

Bonneville does not have additional comment to provide on the Transfer and Congestion Revenue Distribution topic beyond what was provided in the EIM Entities’ comments. With that said, Bonneville reiterates the foundational principles the EIM Entities have developed to help guide the development of market rules regarding congestion rents in the EDAM and highlights key areas of support below.

1. All transmission (Bucket 1-3) made available to EDAM should be eligible for congestion and/or transfer revenues.  This includes transmission internal to an EDAM Entity BAA or at interchanges (seams).
2. EDAM congestion and transfer payments should go from CAISO as the market operator to the EDAM Entity and then be sub-allocated to transmission customers.  The exception to this principle is congestion revenue rights (CRR), which will be settled directly between the CAISO and the CRR holder.
3. EDAM design should preserve the rights of non-participating OATT transmission right holders in regard to congestion and transfer rents charged through market mechanisms. EDAM design should instead allow each TSP to maintain its authority, through its tariff and business practices, to determine the appropriate approach to allocate any applicable EDAM congestion costs and revenues to its transmission customers.
4. The allocation of congestion and transfer revenues associated with BAA transfers, including the CAISO BAA, should be fairly and equitably shared between the exporting and importing areas.  For Bucket 3 transmission, any hurdle rate should go 100% to the exporting BAA and then all incremental revenues above the hurdle rate should be equitably allocated between the importing and exporting BAAs.

II. Allocation of Transfer Revenues

Bonneville highlights its support for the CAISO’s proposal to split transfer revenues associated with transmission Bucket 1 and 2 50/50 between the importing and exporting BAAs.  Bonneville does not support the CAISO’s proposal to allocate transfer revenues associated with Bucket 3 100% to the exporting BAA.  Rather, transfer revenues for Bucket 3 should go first to the exporting BAA to cover the exporting balancing authority’s hurdle rate.  Any additional (incremental) transfer revenue should then be split equitably between the importing and exporting BAAs. 

III. Allocation of Transfer Revenues and Interte Congestion Revenues

Bonneville highlights its support for a 50/50 split of both transfer and congestion revenues between importing and exporting BAAs.  A 50/50 split results in an equitable, predictable market outcome that properly incentivizes the donation of transmission to the market.  As above, transfer revenues for Bucket 3 should go first to the exporting BAA to cover the exporting BA’s hurdle rate and additional (incremental) transfer revenue should then be split equitably between the importing and exporting BAAs.

IV. Transfer and Congestion Revenue Settlements

Bonneville highlights its support for a settlement paradigm where the CAISO as market operator settles with an EDAM Entity, who will then sub-allocate to its transmission customers.  Transmission customers with congestion revenue rights would settle directly with the CAISO. 

6. Additional comments on the bundle 1 straw proposal or EDAM initiative:

I. Intertie Bidding Framework

Bonneville believes more work is needed to consider the interaction between the proposed elimination of the intertie bidding framework and respecting transmission customer’s OATT rights, as well as CAISO’s proposed transmission principles as described in the Straw Proposal. Bonneville proposes the intertie bidding framework be kept in place when EDAM becomes operational and that CAISO and EDAM parties continue to monitor it. After gaining operational experience in EDAM, CAISO and EDAM parties can evaluate if intertie bidding is still necessary.

II. EIM Governing Body Role

Bonneville strongly supports CAISO’s “joint authority” proposal to bring all aspects of the proposed EDAM design to both the EIM Governing Body and the CAISO Board of Governors for approval. As CAISO noted, EDAM is fundamentally about expanding the existing EIM to include an opportunity for day-ahead market participation. It would be inappropriate for the EIM Governing Body to not have an approval role in the EDAM design. Bonneville also supports that CAISO tariff amendments to implement EDAM move forward only if both the EIM Governing Body and CAISO Board of Governors have approved the proposed market design.

1. Please provide your organization’s overall position on the EDAM bundle 1 straw proposal:

2. Provide summary of your organization’s comments on this proposal:

CDWR generally supports the implementation of EDAM.  DWR is concerned about the changes in Congestion Revenue Rights.  See detailed comments below.

It would be beneficial to DWR to see increased reliability and improved integration of renewables. Specifically, increased reliability means fewer unplanned outages of generators or being called upon to reduce load out of market.  Secondly improved renewable integration supports DWR’s efforts to be zero-carbon by 2045.

3. Provide detailed comments including examples on the Resource Sufficiency Evaluation topic:

None.

4. Provide detailed comments including examples on the Transmission Provision topic:

None.

5. Provide detailed comments including examples on the Transfer and Congestion Revenue Distribution topic:

From the CRR point of view, CDWR supports CAISO’s EDAM initiative.  CDWR supports CAISO’s proposal to pay the Transmission Providers (TP) the congestion differences between the Balancing Authority Area (BAA) Marginal Cost of Congestion (MCC) as long as the payments to the TP do not contribute to the shortages in the CRR Balancing Account of any BAA.  These shortages are currently paid by Load Service Entities (LSEs).  CDWR suggests that CAISO initiate a Stakeholder process to pursue the development of EDAM CRR Design and Policy that details how EDAM CRR will be allocated and settled, and how the MCC differences between BAAs are calculated once EDAM is implemented.

6. Additional comments on the bundle 1 straw proposal or EDAM initiative:

None.

1. Please provide your organization’s overall position on the EDAM bundle 1 straw proposal:

Please see link below for DMM's comments:

http://www.caiso.com/Documents/DMMCommentsonExtendedDay-AheadMarketBundle1StrawProposalJuly202020-Nov132020.pdf

2. Provide summary of your organization’s comments on this proposal:

Please see Section 1 for link to comments.

3. Provide detailed comments including examples on the Resource Sufficiency Evaluation topic:

Please see Section 1 for link to comments.

4. Provide detailed comments including examples on the Transmission Provision topic:

Please see Section 1 for link to comments.

5. Provide detailed comments including examples on the Transfer and Congestion Revenue Distribution topic:

Please see Section 1 for link to comments.

6. Additional comments on the bundle 1 straw proposal or EDAM initiative:

Please see Section 1 for link to comments.

1. Please provide your organization’s overall position on the EDAM bundle 1 straw proposal:

2. Provide summary of your organization’s comments on this proposal:

CMUA supports consideration of expanded market opportunities and functionality beyond the current CAISO Balancing Authority Area (BAA) footprint.  As CMUA has several members within the CAISO BAA, we note that market changes may likely have significant impact on those members’ operations and the ultimate costs borne by their customer-owners.  As reflected in the Straw Proposal on Bundle 1 issues, there simply is not enough specificity at this time to formulate a firm position on whether the proposals are reasonable and will result in benefits to California consumers.  We urge the CAISO to keep working to develop specific proposals, along with empirical data that assesses the total benefits that may accrue to its BAA, and how treatment of any specific sub-issues will affect consumers.

3. Provide detailed comments including examples on the Resource Sufficiency Evaluation topic:

CMUA supports the concept of a RS test.  CMUA supports the general principle that in the EDAM, each BAA continues to own its reliability obligations, and must be able to meet those obligations independently.  This “no leaning” principle has both reliability and economic implications.  Not only must EDAM participating BAAs be able to meet load serving obligations, but the underlying generation fleet in the Day Ahead unit commitment must provide the confidence that allows each BAA to take advantage of the efficiencies of that process and the diversity benefits from a larger footprint.

CMUA also agrees that the RS Test must not undermine individual state and utility Resource Adequacy (RA) and/or procurement policies.  But, it seems likely there will be a relationship between the two, and that is not necessarily bad.  If underlying RA policies result in a significant amount of failures, this should result in examination of the underlying planning and procurement policies.  It also emphasizes the need for a clear understanding of the consequences of failure (market separation, penalties?).  Detail in this key area is needed.

4. Provide detailed comments including examples on the Transmission Provision topic:

Transmission provision in the EDAM is a key issue where the exact nature of the “voluntary” participation arises.  CMUA urges greater articulation of what transmission commitment is anticipated.  For example, it is our understanding that the transmission needed to deliver resources identified to meet the RS Test will be contributed to the optimization without additional cost, given that these costs are being paid for already.  Can this amount of transmission contribution be quantified?  Is this the majority of transmission?  Does it vary from EIM Entity to EIM Entity, as we would suspect?  Having a grasp on these facts would facilitate understanding of the issue and help develop consensus.  Similarly, California entities have pointed out that under the California ISO market design, all transmission is made available for the optimization.  In contrast, EDAM contribution beyond the RS-required transmission is voluntary.  Is that voluntary flexibility unfettered?  Are there ways to better define rules that will allow the market to understand what will be made available in the optimization, while still allowing the flexibility needed to meet obligations under the respective Open Access Transmission Tariffs of the entities participating in EDAM?  These details need to be explored in any subsequent proposal.

5. Provide detailed comments including examples on the Transfer and Congestion Revenue Distribution topic:

CMUA is particularly concerned that the issue of congestion revenue allocation is not well understood among stakeholders.  This is not merely an issue of understanding principles and concepts; we need to put empirical numbers to various design options.  It does not appear that benefits from EDAM will be so robust as to render the issue immaterial.  It would be difficult to gain consensus on an overall market design, however principled, if the design shifts costs and benefits between regions in a manner disproportionate to the overall benefits of the EDAM. 

CMUA joins other stakeholders in calling for the formation of a specific Working Group that focusses on this issue to delve into additional details and consider options for allocating congestion revenues stemming from EDAM transactions.

6. Additional comments on the bundle 1 straw proposal or EDAM initiative:

CMUA has no other comments at this time.

1. Please provide your organization’s overall position on the EDAM bundle 1 straw proposal:

The Energy Division (ED) staff of the California Public Utilities Commission (“staff”) appreciates this opportunity to provide comments on the California Independent System Operator’s (CAISO) Extended Day-Ahead Market (EDAM) bundle one straw proposal. This proposal covers the first ‘bundle’ of topics in EDAM: resource sufficiency (RS) evaluation, transmission provision, and distribution of transfer and congestion revenue. In the following comments, staff will address items in this bundle, as well as CAISO’s proposed key principles and benefits of EDAM.

2. Provide summary of your organization’s comments on this proposal:

EDAM Key Principles

In the proposed EDAM construct, each balancing authority area (BAA) would retain reliability responsibilities, states would maintain control over integrated resource planning (IRP), and the market would be voluntary much like the current Energy Imbalance Market (EIM).

As expressed in our earlier comments, staff remains concerned that the proposed voluntary nature of the EDAM for all BAAs except CAISO BAA entities likely raise equity issues. In addition, CAISO has not adequately described how proposed changes would interface with California’s existing programs, such as the Resource Adequacy (RA) program (beyond simply suggesting each BAA remains responsible for its own reliability and RA) or how CAISO plans to optimize for its own BAA while simultaneously serving as a multi-state operator.

Further, staff finds that the proposed EDAM construct resembles a Regional Transmission Organization (RTO) in many respects, yet it is missing two key benefits of RTOs: combined reliability planning and guaranteed transmission access. Staff is unclear about whether additional benefits beyond those already realized by the EIM will accrue to California entities through participation in this regional day-ahead market- and whether this will outweigh the added complexity and inequities resulting from CAISO entities’ required participation in the EDAM versus other BAA entities’ optional participation, and potential impacts resulting from any unforeseen implementation errors.

EDAM Key Benefits

The proposal outlines what CAISO views as the main benefits of a new EDAM- namely the opportunity to reduce commitment and dispatch costs through greater coordination in the day-ahead timeframe across a wide geographic footprint. In addition, CAISO envisions market efficiencies through optimized use of transmission and hourly energy shaping, diversity benefits assisting with renewable integration, and improved reliability through greater coordination among BAAs in the West.

Staff’s concerns with these assumptions are as follows. Overall, the EIM has already unlocked many of these benefits and it is not clear that the incremental benefits of an EDAM construct are large enough to merit the complex changes necessary to implement them. Staff is not convinced of the renewable curtailment reductions claimed by CAISO, as planning for renewables in the day-ahead timeframe is already relatively easy and flexible. Not only is the EIM already providing most relevant benefits, but also most of the need to curtail is likely to come from real-time forecasting changes.

Essentially, CAISO is assuming that even after years of experience in the EIM, all of these entities are making commitment decisions in the day-ahead market without anticipating the actual real-time conditions. Staff finds this assumption to be unreliable at best. On the other hand, EDAM implementation would be extremely complicated, and even careful implementation of significant, complicated changes is likely – indeed, certain – to generate errors that could have far-reaching economic consequences that could far outweigh potential benefits.

3. Provide detailed comments including examples on the Resource Sufficiency Evaluation topic:

The primary objectives of the Resource Sufficiency Evaluation (RSE) outlined in the proposal are to prevent leaning, ensure reliability, and share in diversity benefits. Overall, Resource Sufficiency is determined at the BAA level, and CAISO proposes that the RSE would have two daily tests (‘hourly capacity’ and ‘cumulative ramp capability’) to ensure that each BAA has sufficient economic bids from resources offering into the market. While EDAM participation is voluntary for non-CAISO entities, all BAAs would have the same day-ahead obligations to meet the RSE on a daily basis.

• The range of new products CAISO is introducing associated with the RSE adds excessive complexity and could make compliance difficult to measure. For example, the concept of trading “bid range,” which would allow BAAs to trade capacity and flexibility bilaterally with one another at 5am before the EDAM RSE is conducted at 9am and EDAM runs at 10am—this additional layer of complexity seems problematic. In addition, many products are contingent on development and approval in the Day-Ahead Market Enhancements (DAME) and other initiatives, and these changes are not yet solidified or accepted by stakeholders, let alone approved by FERC at this point. In fact, as of early November 2020, CAISO has announced its intent to drastically alter the DAME proposal. In light of these coming changes, it is not possible to realistically evaluate all of the proposals in the EDAM plan at this time.
• Staff is concerned about how to reconcile the RSE only being a construct that provides capacity, whereas in certain cases California could have sufficient capacity but no way to access associated energy if import bids are too high because of FERC Order 831. For example, if CAISO has triggered its threshold for accessing bids up to $2,000/MWh, import RA bidding up to that cap would count toward our RSE, but in theory may be inaccessible from an energy standpoint because it does not clear the market. This could threaten California’s reliability.
• Staff re-emphasizes its concern regarding the incompatibility of RA Must-Offer Obligations (MOO) in the CAISO BAA with voluntary participation in EDAM in light of the need to ensure reliability in the CAISO BAA. This mismatch could create leaning- precisely what the RSE intends to prevent- or other adverse consequences for California entities such as RA resources being relied upon by outside entities, but paid for by California. Staff believes that CAISO should review the events of this past summer and evaluate how the current EDAM proposals would have helped or hindered security of California load under those conditions.
• Staff also believes the question of who bears substitution requirements for cases in which RA is insufficient needs further consideration.

4. Provide detailed comments including examples on the Transmission Provision topic:

Among other objectives, EDAM transmission design seeks to maximize efficient scheduling of energy and reserves, as well as incent transmission availability while maintaining voluntary participation. Transmission would be made available to the market by participants and transmission providers in one of three distinct ‘buckets’ representing the origin and value of the transmission and the associated requirements for cost recovery through a usage fee and/or congestion/transfer revenue (see the next section below). The first two firmest ‘buckets’ would be used to enable transfers at no hurdle rate, whereas the hurdle rate of the third ‘bucket’ would serve as the limiting factor for its usage.

• As expressed in our previous comments, staff requests that discussion of market power mitigation elements be integrated throughout this process and not left until bundle three. For example, we are concerned not only that the value of firm transmission being advocated may be inflated, but also that the potential for certain EIM entities to withhold transmission may give rise to market power and reliability challenges. It is critical to protect against market power exerted by entities with voluntary transmission provision.
  • In addition, relevant release dates must be aligned to the market structure. There cannot be an Open Access Transmission Tariff (OATT) construct that allows for withholding of transmission when EDAM rules require releasing it.

• Staff concerns persist regarding how EDAM would ensure seamless transmission availability to support California grid reliability while maintaining voluntary participation. Staff seeks further information on how CAISO will ensure transparency and market power mitigation.
• In addition, it is not clear how the proposed EDAM transmission provision construct would affect transmission revenue requirements and transmission rates across California Investor-Owned Utilities (IOUs).

• Staff is concerned about the disparity in transmission provision rules; under the proposed construct, internal BAA transmission limits would be determined and offered at the discretion of each EDAM BAA. This would likely create a structural disadvantage for transmission providers within the CAISO BAA who have to make all of their transmission available in all hours.
• Further work is needed to formulate rules surrounding when long-term firm transmission has to be released to be used by others.
• Overall, it is still not clear how transmission will be provided for EDAM and who benefits from the proposed rules. In addition, staff would like to better understand the landscape of transmission offerings outside of California, including what transmission rights exist across different BAAs (that currently participate in the EIM and may participate in EDAM) and the rules and timelines for releasing these transmission rights to other entities. This would help stakeholders better understand how a potential RSE in EDAM might work, as well as the different incentives transmission providers face within their jurisdictions. Could CAISO gather this information from EIM BAAs and make it available to stakeholders?

5. Provide detailed comments including examples on the Transfer and Congestion Revenue Distribution topic:

Congestion/transfer revenue is a new concept intended to isolate congestion impacts on EDAM transfer paths; those revenues resulting from over-collection would be allocated to participants and EDAM BAAs based on a yet-to-be-determined methodology with the goal of promoting accurate and equitable outcomes while giving flexibility to the EDAM BAAs to determine a framework most expedient for their area.

• Staff has outstanding concerns regarding how congestion rents might be allocated equitably and in such a way as to preclude potential gaming.

6. Additional comments on the bundle 1 straw proposal or EDAM initiative:

Staff appreciates the opportunity to comment on the EDAM bundle one straw proposal and looks forward to continuing participation in the stakeholder process.

1. Please provide your organization’s overall position on the EDAM bundle 1 straw proposal:

2. Provide summary of your organization’s comments on this proposal:

EDF-R appreciates this opportunity to comment on the CAISO’s EDAM Bundle 1 Straw Proposal. EDF-R opposes the EDAM Bundle 1 Straw Proposal with caveat. EDF-R enthusiastically supports the goals of EDAM, but EDF-R views the elimination of bidding and self-schedules at interties as a showstopping issue. Overall EDF-R views the Bundle 1 Straw Proposal as a strong jumping off point, and provides these brief comments with the hope that concerns can be resolved as the proposal matures.

3. Provide detailed comments including examples on the Resource Sufficiency Evaluation topic:

EDF-R supports the Resource Sufficiency Evaluation principles to ensure each BAA has sufficient generation to meet load and that there is access to sufficient transmission for the market to solve for efficient dispatch throughout the EIM footprint.

EDF-R opposes EDAM forgoing bidding/scheduling at the interties. This would impact tracking delivery and accounting of renewable attributes with power deliveries from outside California. This seems in conflict with California legislation and the Product Content Category 1 (PCC1) under California’s current Renewable Portfolio Standard (RPS) rules. The CPUC Energy Divisions PCC Classification Review Process Handbook states that entities seeking PCC1 qualification that are not directly connected to a California BA must demonstrate delivery to California through a pseudo-tie, dynamic schedule, or hourly/sub-hourly schedule.  E-tags allow for an external resource to show the load/sink point and are critical for a resource to count as ‘delivered’ to California.  Without intertie bids and self-schedules, resources external to California will not be able to include important load/sink information on their E-tag.  This would be detrimental to counting as a PCC1 resource.  Any EDAM solution has to accommodate RPS accounting as it exists now or be crafted with partner agencies that can make the legislative changes needed to transition to a new accounting framework.

EDF-R is a member of AWEA and supports the AWEA comments submitted on the EDAM Straw Proposal.  We include the comments above to emphasize our concern and echo AWEA that forgoing bidding/self-scheduling at interties is a showstopping issue on this proposal.

Additionally, EDF-R suggests that in the next iteration of the Straw Proposal the CAISO provide additional detail on how import Resource Adequacy resources can continue to qualify/provide RA without intertie bidding.

EDF-R also requests clarification on if the CAISO believes intertie bidding between EDAM BAAs is incompatible with EDAM on a technical level, or if the CAISO believes intertie bidding is redundant with the implementation of changes described in the Straw Proposal.

4. Provide detailed comments including examples on the Transmission Provision topic:

EDF-R suggests that transmission asset owners may view the CAISO’s proposal to shift existing contracts from a firm transmission service model to the EDAM’s transmission rent model as risky and unpredictable because they may shift the cost balance of the contracts or require the contracts be modified. EDF-R would support EDAM proposals that would equitably transition existing arrangements until the natural end of their contract term, and suggests that the CAISO could include a transition process similar to the process the CAISO used in 2012 to determining existing facilities for the purpose of determining NQC and honoring that value. (https://www.caiso.com/Documents/RevisedTechnicalBulletin-DeliverabilityRequirements-QueueClusters1-4_Determination-NetQualifyingCapacity.pdf)

In the existing NQC process a generating facility is considered existing if there is an executed bilateral contract committing it to provide Resource Adequacy capacity to an ISO load-serving entity. EDF-R suggests a similar framework could be deployed for existing transmission contracts.

In this framework the CAISO would allow transmission owners to surrender a portion of a transmission line to EDAM market and reserve the transmission right needed to fulfill existing bilateral contracts. This would allow contracts to naturally expire and eliminate perceived financial risks of potential transmission rent price unpredictability and the need to renegotiate contracts. This framework could require annual attestation that the contract is in effect and would require CAISO retain bidding at interties to support the existing bilateral contracts.

EDF-R also requests the CAISO share any considerations or thinking to this point with respect to transmission service types. It seems straightforward that transmission owners could submit their -Network transmission to the EDAM. Has the CAISO considered allowing partial participation models, for example, for transmission service that curtails Firm PTP service on an hours basis (a number of hours condition), or based on certain pre-defined system conditions?

5. Provide detailed comments including examples on the Transfer and Congestion Revenue Distribution topic:

EDF-R supports distributing revenues equitably and reaffirms support for a policy that respects traditional bilateral scheduling rights.

EDF-R looks forward to continued CAISO and stakeholder conversations about the Congestion Revenue Rights (CRRs) distribution processes discussed in the proposal. EDF-R believes consistency in CRR distribution design across the EDAM footprint is important for participants and market efficiency.  Having to work with a variety of designs across BAAs increases risk to participants.  CRRs are a foundational component in many resources’ overall balance sheet. And, EDF-R can envision complications if BAAs elect to design other ways of distributing funds.  To the extent the CAISO offers a CRR market as a service, the consistency of processes across BAAs will be valuable and appreciated.  EDF-R looks forward to those conversations during the stakeholder process.

6. Additional comments on the bundle 1 straw proposal or EDAM initiative:

1. Please provide your organization’s overall position on the EDAM bundle 1 straw proposal:

The EIM Entities are pleased to have the opportunity to comment on the EDAM Bundle 1 Straw Proposal. The EIM Entities joining these comments include: Arizona Public Service Company (“APS”), Avista Corporation (“AVA”), Balancing Authority of Northern California (“BANC”), Bonneville Power Administration (“BPA”), Idaho Power Company (“Idaho Power”), The City of Los Angeles, Department of Water and Power (“LADWP”), NV Energy (“NV Energy”); PacifiCorp, Portland General Electric Company (“PGE”); Powerex Corp. (“Powerex”), Public Service Company of New Mexico (“PNM”), Public Service Company of Colorado (“PSCo”), Puget Sound Energy, Inc. (“PSE”), Salt River Project (“SRP”),The City of Seattle, acting by and through its City Light Department (“Seattle City Light”), The City of Tacoma, Department of Public Utilities, Light Division (“Tacoma Power”), Tucson Electric Power (“TEP”), Turlock Irrigation District (“TID”); and NorthWestern Corporation d/b/a NorthWestern Energy (“NWE”). Some EIM Entities may not have yet formulated their own specific positions on all issues addressed within this document.  Therefore, while these comments represent a general consensus position of the group as a whole, these comments may not necessarily represent the views on every specific issue by each individual EIM Entity. Note: for purposes of these comments, the EIM Entities refer to their collective group as the “EIM Entities,” even for future EDAM scenarios when the collective group could also be referred to as “EDAM Entities.”

Quite a bit of time has elapsed since the kick-off of the Extended Day Ahead Market (EDAM) stakeholder process.  The reasons for this delay are evident and reasonable, including the challenges imposed by the pandemic, pendency of other key market design elements, the complexity of EDAM issues, and August/September heat wave grid events that have not only rightly demanded attention, but also are causing a reassessment of certain underlying market design elements.

Because of the temporal gap from kick-off to these initial comments, the EIM Entities would like to take this opportunity to re-emphasize our commitment to this process as well as go back to the core principles for an EDAM that the EIM Entities put forward for consideration in September, 2019, and which we link here (“Principles”) {EDAM Principles and Elements of the EIM Entities}. We continue to be focused on achieving the goals contained in the Principles and Elements in a collaborative manner.  The goals include:

• Ensuring a voluntary market design.  This reflects the desire to build off the success of the Energy Imbalance Market (EIM) and to pursue additional economic and environmental benefits for market participants and their respective customers in regions across the West. The EIM Entities recognize that developing a workable and equitable EDAM will be a challenge.  EDAM is not a full RTO, and does not have all the elements of the Day Two market currently administered within the CAISO Balancing Authority Area, and finding a design that bridges the gap between the CAISO’s market and bilateral/OATT markets outside of California is hard.  However, given the need to expand regional market coordination, and the barriers to alternative solutions, we continue to view an incremental EDAM as the next logical and achievable step in the evolution of Western wholesale markets. 
• Ensuring equity and “no leaning” by the development of a robust Resource Sufficiency (RS) test that ensures that the central unit commitment process is achieved over the resource fleet that can meet reliability obligations of the participating Balancing Authority Areas.  This is critical so that EDAM participants can confidently rely on the market and achieve the diversity that is a key factor to achieve benefits.  As it is developed, an RS test should measure whether each entity has taken sufficient steps ahead of the day-ahead market timeframe to ensure it has access to sufficient resources to serve its demand and balance its system, and be consistently applied to all participants.
• Be consistent with existing Open Access Transmission Tariff (OATT) obligations.  Outside of CAISO, transmission customers generally take service under a pro forma OATT at rates that are developed based on Federal Energy Regulatory Commission (FERC) policies. The EDAM transmission framework must be compatible with existing practices and FERC requirements, which is a challenging task. It must respect existing uses, minimize cost shifts, and also enable enough transmission contribution to make the market work well. 

Below the EIM Entities have set forth more detailed proposals and comments on several issues in Bundle 1 of this Stakeholder Process for consideration by the CAISO and stakeholders.  As indicated in our prior comments, we intend to work with the CAISO and stakeholders to find a comprehensive design for an EDAM that brings broad-based benefits to all participants, those within CAISO and those Balancing Authority Areas that voluntarily elect to participate, and to the region.

2. Provide summary of your organization’s comments on this proposal:

Based on EIM Entities’ review of the straw proposal, there are an encouraging number of principles and structural components that are shared or similar with the EIM Entities’ Principles. There are a number of areas where dialogue and design efforts must continue to realize the collective goal of a regional day-ahead market that is effective in its ambitious objectives to produce widespread customer benefits, enhance regional reliability, reduce carbon emissions, and remain enticing to market participants. 

The EIM Entities note that these comments are preliminary and may need to be revised as market events that occurred in August and September 2020 are analyzed and better understood. The EIM Entities may supplement or revise these comments as more conclusions are reached in either the root cause analysis being performed by CAISO or the review being conducted by the EIM Entities. 

Also, these comments do not address the impacts of the CAISO’s recent update provided on its DAME proposal, specifically with regards to the continued use of a sequential integrated forward market (IFM) and residual unit commitment (RUC) for the CAISO BAA. Achieving a reliable and efficient commitment of physical generating units utilizing available transmission to meet load from a single optimization has been a foundational element for how the EIM Entities have viewed EDAM. The CAISO, EIM Entities, and stakeholders will need to thoroughly examine the full set of implications of the CAISO’s new DAME proposal on EDAM market design and identify what future enhancements may be necessary to enable a reliable and efficient multi-BAA optimization. The EIM Entities request that the integration of IFM and RUC be explicitly included in an early EDAM stakeholder initiative bundle as its own topic.

3. Provide detailed comments including examples on the Resource Sufficiency Evaluation topic:

The EIM Entities fully support the CAISO’s identified RS principles of ensuring no leaning, supporting reliability, and sharing diversity benefits. The EIM Entities are committed to achieving these high-level objectives and emphasize that it is critical to EDAM’s success that a day-ahead RS test is accurate, transparent, and includes explicit requirements that are consistently applied. Most critical is that RS supports grid reliability and does so in an equitable manner.

Considering recent heat wave events, the EIM Entities believe that an examination of the existing EIM RS framework is needed to assist in RS design for EDAM. Specifically, the EIM Entities request an evaluation of the EIM RS test results during recent events and a comparison of those results to the actual operating conditions across the entire EIM area. This analysis should inform what near-term enhancements might be necessary to ensure the EIM RS test is functioning in a manner that is consistent with the CAISO’s identified principles. The EIM Entities believe this review will benefit EDAM by helping to inform what design elements should be included (or modified or avoided) in developing an accurate day-ahead RS test. In the meantime, as articulated in these comments, the EIM Entities re-iterate the fundamental principles we believe should support a successful EDAM.

1.  EDAM Resource Sufficiency requires explicit rules to ensure it is accurate and applied consistently to all participants

The CAISO’s straw proposal did not define any specific criteria to validate supply counted toward RS. It appears that under the CAISO’s proposal, the only condition for supply to be counted towards meeting RS is agreement that EDAM transfers will be curtailed pro-rata with load. As previously identified by the EIM Entities in written comments and during the workshops, it is crucial to ensure accurate results by requiring that each resource’s contribution to RS is consistent with its true capability to perform when needed, and that external supply used for RS reflects real, identifiable resources and is supported by a day-ahead e-Tag. The EIM Entities request that CAISO include these requirements in the next proposal.

2.  The RS test design must be straightforward with timely information and clear requirements

As the details of RS are developed, CAISO must ensure the test design is straightforward and allows entities to clearly understand the requirements. For example, final requirements must be provided early enough (i.e., no later than 5 am during the preschedule timeframe) to ensure compatibility with day-ahead bilateral trading timelines. In addition, market participants must have access to software tools (e.g., a spreadsheet interface) and supporting information as needed to confidently meet EDAM RS obligations.

3.  Effective failure consequences are needed to prevent leaning

The EIM Entities appreciate the CAISO’s initial proposal to apply an EDAM transfer limit to entities that fail the day-ahead RS test, but believe that more consideration of this topic is needed to ensure that outcomes are consistent with the objectives of the RS test. For example, the existing EIM RS test’s failure consequence results in a “capping” of EIM imports at the previous hour’s value, allowing a failing Balancing Authority Area (BAA) to continue to rely on EIM imports even during conditions in which it did not have sufficient supply to meet its reliability needs on a stand-alone basis.  As stated above, the EIM Entities believe appropriate consequences for failing a day-ahead RS test are necessary to properly ensure no leaning and to provide sufficient incentives to contract for sufficient energy, capacity and flexibility in advance of EDAM (through bilateral transactions or other forward commercial activities). The EIM Entities also believe that CAISO and stakeholders should carefully consider multiple options to ensure these RS objectives are achieved. 

4.  The design and application of RS must be subject to on-going independent monitoring and review

With respect to RS, independent external review is important given the many roles that CAISO plays in the RS evaluation - CAISO as one of the EDAM BAs that is in the RS test, the entity responsible to ensure it is accurately designed and applied to the CAISO BAA and others, and also the entity that compiles and provides metrics on the test results and performance (e.g., through the Market Performance and Planning Forum). The EIM Entities reiterate the need for independent, transparent and objective review and assessment of both EDAM design and ongoing performance as experience is gained with EDAM RS.

4. Provide detailed comments including examples on the Transmission Provision topic:

The EIM Entities agree with the CAISO that the “firmness” of transmission is an important element of making EDAM work and providing confidence to each Balancing Authority (BA) and Load Serving Entity (LSE) that their BAA reliability requirements will be met. The EIM Entities have previously identified that transmission provision design for EDAM must recognize that EIM Entities will be relying on these transfers to avoid committing units and to serve load, and that all transmission in the EDAM must therefore be of “high quality” and not subject to curtailment in all but the rarest of circumstances.

The CAISO has defined this level of firmness as the same “curtailment priority as internal load” in each BA. In an OATT framework, the level of firmness for transmission is defined for each BA, depending on the type of service that is procured and according to the Transmission Service Provider’s (TSP) OATT structure. Importantly, firmness is not related to the length of the product term (annual, monthly, weekly, daily, hourly), but rather the type of product (Network Integration Transmission Service (NITS) or Firm point-to-point (PTP), Conditional Firm PTP service, Secondary NITS and Non-Firm PTP), which defines its North American Electric Reliability Corporation curtailment priority.

While the most straightforward requirement would be to require that all OATT transmission associated with EDAM be strictly “Firm”, the EIM Entities believe such a requirement could result in challenges for some EIM Entities that occasionally serve load with Non-Firm transmission or may need to purchase Non-Firm transmission in the rare instance that Firm is unavailable. The EIM Entities believe that EDAM requirements must be consistent with the objective of ensuring that EDAM transmission is highly reliable, but also balance those requirements with the need to ensure that EIM Entities can continue to reliably serve load in a manner that is similar to existing practices.

The EIM Entities believe that appropriate requirements can be developed by separating the EDAM transmission requirements into two categories. The first category addresses transmission used to meet an EIM Entity BAA’s RS requirement. The second category is applicable to transmission that is made available to EDAM for market optimization. The EIM Entities’ proposed approach for each category is described below.

1.  Resource Sufficiency Transmission Requirements

Importantly, the transmission used to meet an EIM Entity’s RS requirements will not be limited to EDAM market transactions. It will also include transmission service associated with each BAA’s activities that occur in advance of EDAM (e.g., forward contracts and/or day-ahead bilateral transactions). The EIM Entities believe a reasonable approach for defining transmission requirements for RS supply is to:

1. Allow each EIM Entity to maintain discretion over the transmission service it is willing to rely on to self-schedule resources to meet its own load, provided that the EIM Entity believes the transmission identified in its RS plan is consistent with the objective of ensuring that RS supply is truly deliverable and not at a material risk of curtailment, and that the transmission is identified on a day-ahead e-Tag. 

2. Include a monitoring and penalty structure that would hold EIM Entities accountable for curtailments to any Non-Firm point-to-point (PTP) transmission that is used to deliver self-scheduled RS supply. This may include an increase to uncertainty requirements for repeat and/or large curtailments to Non-Firm PTP transmission products (and potentially a restriction of the use of Non-Firm transmission on certain paths that are identified as particularly problematic).

2.  EDAM Optimizable Transmission Requirements

The second category is the transmission that is directly made available to EDAM for market optimization. This transmission has generally been categorized into three “buckets”:

• Bucket 1: Transmission that is identified in an EIM Entity’s RS plan as being available for market optimization;

• Bucket 2: Additional Firm PTP transmission voluntarily provided to the market by transmission customers (beyond RS requirements); and
• Bucket 3: Unsold (or unreserved) Firm Available Transfer Capability (ATC) on the EDAM pathways (interconnection points) may be offered to the market by the TSP. It is anticipated that any unsold and/or unreserved Firm ATC would be made available to the EDAM under pre-determined conditions that would ensure the TSP cannot arbitrarily withhold ATC. Any Firm ATC the EDAM does not elect to optimize during the market run will be made available by the TSP for additional OATT bilateral business opportunities.

Furthermore, curtailments to market transfers can result in disruptions to the market solution, adding new costs and/or reliability risks on market participants. To avoid these potentially harmful outcomes, the EIM Entities believe that EDAM transmission that is used to enable market optimization should be limited to Firm PTP and NITS (7-F, 7-FN), Conditional Firm (6-CF), and Secondary NITS (6-NN) transmission products. These products are generally deemed by the EIM Entities to be highly reliable and consistent with the objectives of providing a robust market solution.

5.1 Principles

In general, the EIM Entities believe that the CAISO’s proposed principles are in alignment with the principles provided by the EIM Entities throughout this stakeholder initiative.  The CAISO’s straw proposal does a good job of recognizing some of the unique challenges of attempting to schedule an OATT-based transmission network within the construct of an organized market wherein all transmission is traditionally available to the market (i.e., placed under the operational control of the market operator by a participating transmission owner (PTO) in return for a guaranteed recovery by the PTO of its revenue requirement).  The CAISO’s first principle of maintaining fair and open access while maximizing the transmission system usage and respecting scheduling rights and other contractual arrangements is an excellent example of the alignment of the EIM Entities’ goals in the provisioning of transmission in the EDAM.  The one caveat is that, as described in its first principle, the CAISO’s reliance on “long-term” scheduling rights is misplaced. As was clarified in the February workshop, it is important that all Firm transmission rights holders are respected, including customers that have purchased hourly, daily, weekly, or monthly transmission reservations.  This is a fundamental aspect of how the OATT framework functions, and an EDAM design that does not respect all Firm transmission rights holders is less likely to be approved by the Federal Energy Regulatory Commission (FERC).  In other words, “Firm is Firm” regardless of the duration of the transmission reservation timeframe.

5.2 Internal transmission limits

The EIM has been an evolving market with the multitude of participants and systems that have required the CAISO to be flexible and creative in the way its model optimizes each of the unique EIM Entities’ BAA.  The CAISO created new tools, such as automated matching of import/export schedules, automated mirror system resources at CAISO intertie scheduling points, and, more recently, accommodating separate scheduling and settlement procedures under the Public Service Company of Colorado EIM Entity to facilitate internal sub-entity relationships.  Similarly, the EIM Entities believe that the CAISO’s approach to internal transmission will require it to work separately with each BA to model its internal system as needed to accommodate internal EDAM transfers. 

The CAISO acknowledges that in its own history it had experience with existing transmission customers whose rights were held out from market optimization. Similarly, in EDAM, there will be transmission providers or transmission customers that may not choose to allow their transmission capacity to be included in the EDAM optimization for a variety of reasons. While perhaps not the most efficient for the EDAM market overall, there is precedent for this voluntary approach to transmission utilization. Failure to permit this election by the transmission provider may be a barrier to participation and therefore lower overall transmission market availability. Simply stated, it is a reality that will need to be accommodated. However, the EIM Entities expect that over time there could be a transition as market benefits provide incentives for EIM Entity transmission customers to participate in EDAM (thereby enhancing the transmission available for optimization rather than self-schedules). Furthermore, with time and experience, the EIM Entities expect that the CAISO’s market model will have the capability to manage more accurately some of the unique complexities and challenges that each BA may have. 

The approach that the CAISO proposed, self-scheduling of PTP transmission in the day-ahead market to represent use after the day-ahead market, is not a feasible approach for several EIM Entity BAAs given the multitude of third party customers and the ability of these customers to exercise their rights beyond simply specific paths or PTP designations. While the EIM Entities believe that there is a path forward to make as much internal transmission available as feasible through individual coordination with the CAISO, it must be done with consideration of the scheduling flexibility of third-party transmission customers and associated financial impacts. Any changes to existing rights or practices of TSPs and transmission customers must be justified to FERC as just and reasonable. The EIM Entities are concerned that the approach proposed by CAISO may be seen as impacting the existing rights of third-party entities without sufficient justification.

5.3 Transmission to enable EDAM transfers

The EIM Entities support the CAISO’s proposal relative to the three buckets of transmission identified by the CAISO to enable EDAM transfers. 

Bucket 1:

With regard to Bucket 1 transmission, or RS transmission, the CAISO has correctly identified that this transmission is required in order to count an external resource towards a BA’s day-ahead RS evaluation and as well for bilateral transactions or bid range transactions. 

For clarification, the transmission that is procured from the source BAA to the sink BAA may have been reserved by multiple transmission customers. In addition, these reservations may be on multiple TSP systems across multiple BAAs. It is this scenario that will likely add additional complexity to a model that is designed more for a flow-based model versus a scheduling model that is the current OATT construct used in much of the Western interconnection. Also there may be path-specific Bucket 1 transmission that relates to designated paths across an Energy Transfer System Resource (ETSR), which will require more complexity in the modeling of those intertie resources to take into account the multitude of sources and sinks within a BA that correspond with the underlying transmission rights. 

Bucket 2:

Bucket 2 transmission, or non-resource sufficiency evaluation transmission, is either Firm PTP (7-F) or Conditional Firm PTP (6-CF) transmission service previously-reserved by a transmission customer (Conditional Firm Transmission Service is a type of Long-Term Firm transmission service for which there is a specified Number of Hours per year or specified System Condition in which the TSP can curtail the reservation prior to curtailing other Long-Term Firm service.), which is not needed to pass the RS evaluation, or otherwise scheduled, and can be made available to the EDAM in return for what CAISO is calling “transfer revenues”. The CAISO proposed that the transfer revenue will be received under the appropriate CAISO or TSP OATT rules from which it has purchased the transmission.  This will require further discussion with the CAISO.

Bucket 3: 

The definition CAISO provided for Bucket 3 transmission as TSPs making incremental export unsold transmission available to support EDAM transfers requires additional clarification.  To be clear, the proposal is only to provide a charge for Bucket 3 utilization in the export direction.  Consistent with the prior discussion of internal transmission, the expectation is that Firm import ATC can be made available for optimization, as both import and export transmission is necessary for market connectivity.  While a usage fee is only being proposed for export Bucket 3 transmission, a usage fee may also need to be considered for import Bucket 3 transmission.  Some transmission customers use PTP transmission to bring imports into the BA and may be incented to no longer purchase that PTP transmission and instead rely on Bucket 3 transmission and the EDAM to import that energy into the BA.  If there is no usage fee for import Bucket 3 transmission, there may be inappropriate cost-shifting among transmission customers inconsistent with traditional cost causation principles and a free-rider issue may be created. This topic may need additional discussion and analysis by individual TSPs.

The CAISO’s proposal relative to the usage charge stated that the usage fee will be set by each BA according to its OATT. For clarification, the usage fee may be TSP specific within each BA as appropriate.  Also, for purposes of transparency, the EIM Entities recommend establishing a specific charge code or pricing element relative to the usage fee rather than combining it with the transfer revenue.  Having this pricing element as a separate charge will aid in the distribution of the revenue to the appropriate TSP within a given BAA and provide greater transparency into the revenue collected for the Bucket 3 transmission, as opposed to revenue for other reasons included in the transfer revenue charge code.

Lastly, the CAISO has stated that the TSP will receive any transfer revenue associated with the transmission it makes available, which may exceed the usage fee. To be clear and for consistency, the EIM Entities are recommending that incremental transfer revenue that is above the usage fee should be split 50/50 with the adjacent BAA, similar to Bucket 1 and Bucket 2 transmission. This proposal is further clarified in the Transfer and Congestion Revenue Distribution section of these comments. 

5.6 Regional transmission charge

The CAISO has proposed to address a “regional transmission charge” for spot imports and exports with external BAAs as part of the EDAM Bundle 3 topics.   The EIM Entities agree and will be prepared to discuss this at that time.

5.7 EIM Wheeling Charge

The CAISO proposed that the usage charge for Bucket 3 transmission could potentially be used in the EIM in the form of an EIM wheeling charge. During the workshop, the CAISO clarified that there was a concern that without a commensurate wheeling fee in the real-time market there may be changes in energy schedules due simply to the absence of a usage fee. However, given that Bucket 3 transmission is unsold (or unreserved) Firm (7-F) ATC, the amount of Bucket 3 transmission that is available in the day-ahead market is relatively small compared to the amount of EIM transmission (Non-Firm, 0-NX transmission) that may be available due to counter-flow scheduling, Non-Firm ATC, unscheduled transmission capacity that was unavailable day-ahead, etc. Moreover, the RS test and long-term resource adequacy requirements should counteract any “waiting” for the EIM. 

With this being the case, a concern of the EIM Entities is that implementing a hurdle rate in the EIM may result in reduced EIM benefits and transfers, as well as increased prices. Therefore, the EIM Entities respectfully request that the CAISO remove this topic from Bundle 1 and address it in Bundle 3 to allow time for further analysis to be conducted on the impacts.

3.  Additional transmission topics for discussion

1. Intra-Day Schedule Changes from Existing Transmission Customers

Today, Transmission Customers under the OATTs of EIM Entities must provide balanced schedules at T-57 that become financially binding in the EIM, with additional schedule changes being permitted down to T-20. In the next proposal, the EIM Entities request that the CAISO explain how the scheduling rights of customers with Firm transmission service, both participating and non-participating, will be respected for the following examples:

1. 1. A non-participating NITS customer submits a day-ahead schedule of 100 MW from an internal Designated Network Resource to Network Load. If the customer increases its balanced schedule to 110 MW at T-57, today, there would be no additional transmission-related charges for this modified balanced schedule going into the EIM.
   2. A non-participating NITS customer submits day-ahead schedule of 100 MW from an external Designated Network Resources to Network Load. If the customer increases its balanced schedule to 110 MW at T-57, today, there would be no additional transmission-related charge for this modified balanced schedule going into the EIM.
   3. For the same two scenarios above but with the schedule change occurring at T-20, today, this would create an EIM settlement.
   4. A non-participating customer with 120 MW of PTP export rights submits a day-ahead schedule of 100 MW.  The customer increases the schedule to 110 MW at T-57.  Today, there would be no additional transmission-related charge for this modified balanced schedule going into the EIM.
   5. A non-participating customer with 120 MW of grandfathered PTP rights submits a day-ahead schedule of 100 MW.  The customer increases the schedule to 110 MW at T-20.  Today, there would be no additional transmission-related charge for this modified balanced schedule going into the EIM.

1. Losses

The EIM Entities’ OATTs utilize fixed average system losses.  Transmission customers have relied on this approach in establishing their commercial arrangements. In the next proposal, the EIM Entities request CAISO articulate how losses will be handled in EDAM and what, if any, changes would be required of the EIM Entities’ OATTs.

5. Provide detailed comments including examples on the Transfer and Congestion Revenue Distribution topic:

The EIM Entities’ Proposed Principles

The EIM Entities have developed a set of high-level, foundational principles that they believe should guide the development of market rules regarding congestion rents in the EDAM.  These principles include:

1. All transmission (Buckets 1-3) made available to EDAM should be eligible for congestion and/or transfer revenues.  This includes transmission internal to an EIM Entity BAA or at interchanges (seams).
2. EDAM congestion and transfer payments should go from the CAISO as the market operator to the EIM Entity and then be sub-allocated to transmission customers. The exception to this principle is congestion revenue rights (CRR), which will be settled directly between the CAISO and the CRR holder.
3. EDAM design should preserve the rights of  non-participating OATT transmission right holders in regard to congestion and transfer rents charged through market mechanisms. EDAM design should instead allow each Transmission Service Provider to maintain its authority, through its tariff and business practices, to determine the appropriate approach to allocate any applicable EDAM congestion costs and revenues to its transmission customers.
4. The allocation of congestion and transfer revenues associated with BAA transfers, including the CAISO BAA, should be fairly and equitably shared between the exporting and importing areas. For Bucket 3 transmission, any hurdle rate should go 100% to the exporting BAA, and all incremental revenues above the hurdle rate should be equitably allocated between the importing and exporting BAAs.

The CAISO’s Proposed Principles

The EIM Entities generally support with caveats the CAISO’s proposed principles regarding transfer and congestion revenue distribution.  The EIM Entities suggest the following regarding the principles.

1. References to “long-term” rights in Principle Nos. 1 and 4 should be removed. The EDAM should respect all OATT-based firm transmission rights, regardless of duration.  Both long- and short-term firm rights pay the costs of the transmission system. Since the current EDAM market design can utilize both long- and short-term firm rights for the market optimization, both types should be eligible for the allocation of transfer and congestion revenues. 
2. In the absence of an explanation in the proposal, the EIM Entities are unclear as to how or why the distribution of transfer and congestion revenues would incent long-term forward procurement of transmission for the resource sufficiency evaluation as set forth in Principle No. 3. As discussed in subsection (a) above, the EIM Entities believe that the distribution of transfer and congestion revenues should apply to both long- and short-term transmission. 
3. Similarly, the meaning of the word “respect” in Principle No. 4 requires some definition.  The EIM Entities’ understand it to mean a transmission customer’s ability to utilize its OATT rights (reserve, schedule, redirect, reassign, designate/undesignate resources, acquire secondary resources, etc., depending on the type of customer) as well as hold the OATT customer financially harmless for the use of those rights to the maximum extent practicable. In future proposals and discussions, the CAISO should elaborate on the meaning and application of these principles.

Transfer Revenues

At this time, the EIM Entities take no position on the CAISO’s proposal regarding the concept of transfer revenues. Today, in the EIM, when an Energy Transfer System Resource (ETSR) binds, the associated “congestion” is reflected in the marginal congestion cost component of the source (exporting) BAA’s locational marginal price. The EIM Entities’ interpretation of the CAISO’s proposal is that it would “reclassify” this congestion as transfer revenue and reflect it as a change to the marginal energy component instead of the congestion component of the locational marginal price (LMP). What is not clear in the CAISO’s proposal is whether using the marginal energy component as proposed has any other consequences in the market.  For example, does changing the energy component of the LMP within a BAA also impact how the GHG shadow price is included in the LMP for that area? Likewise, would marginal losses be calculated with reference to each BAA’s energy price?  If transfer revenues are separated from congestion revenues, are there mechanisms to ensure that sufficient revenues are collected and allocated for both? This aspect of the CAISO’s proposal needs more examples, analysis, and discussions before the EIM Entities can fully support the proposal.    

Allocation of Transfer Revenues

The EIM Entities support in part and oppose in part the CAISO’s proposal regarding the allocation of transfer revenues. The EIM Entities support the CAISO’s proposal to split transfer revenues 50/50 between the importing and exporting BAAs for EDAM transmission Buckets 1 and 2. The EIM Entities believe this split is consistent with the current approach in the EIM and generally represents an equitable and predictable outcome that provides the proper incentive to customers to donate both import and export transmission.

The proposal to allocate 100% of the transfer revenues to the exporting BAA for transmission Bucket 3 appears inconsistent with the rationale and reasoning of the CAISO’s proposal regarding transfer revenues associated with transmission Buckets 1 and 2. Rather, the EIM Entities believe it would only be appropriate for 100% of the transfer revenues associated with Bucket 3 to be allocated to the exporting BAA to pay the usage fee. Once the export usage fee has been paid, then the importing and exporting BAAs should equitably split any transfer revenue above the usage fee. The EIM Entities believe more work is necessary to consider the interaction between a usage fee and the resulting transfer revenues before a specific split ratio (e.g., 50/50) is determined. For example, one of the EIM Entities’ concerns is that the inclusion of a relatively high hurdle rate for Bucket 3 export transmission could result in less transfer revenue being available for any Bucket 1 or Bucket 2 transmission made available on the importing side of the transfer path. This could result in a disincentive for transmission customers to make that import transmission available.

Allocation of Transfer Revenues and Intertie Congestion Revenues

The method to allocate congestion rents created by transfers between an EIM Entity BAA and the CAISO BAA is fundamental to the EDAM design, particularly as it relates to the Pacific AC and Pacific DC interties that connect the Northwest to California.  These major pathways are heavily used, often congested, and present significant drivers of potential EDAM benefits.  While these major transmission lines enable close to 8,000 MW of transfer capability to deliver energy between the Northwest and California, they are also exposed to significant risk of “seams” issues: both the AC and DC interties are effectively split horizontally (and sometimes vertically), with different Transmission Service Providers (TSPs) offering service to different rights holders on the upstream/northern and downstream/southern segments of the transfer paths.

This complexity means that a well-designed EDAM provides a significant opportunity to ensure that the entities that fund these facilities (both in the Northwest and California) are able to receive an equitable share of the significant economic value of inter-regional trade that these facilities can enable in EDAM.  However, the reverse is also true: a poor design can increase the risk of seams issues, creating the potential for inequitable outcomes that will discourage entities from making their intertie transmission available to EDAM.

The EIM Entities believe that it is important that an equitable approach for congestion rent allocation on these paths (and others in which rights are split between upstream and downstream segments) is developed and agreed upon in advance, thereby ensuring a durable and predictable allocation of the economic value of transmission through EDAM. 

 It is important to clearly articulate and understand how and when transfer and congestion revenues would apply in the EDAM.  The following graphic generally illustrates how the CAISO manages and allocates congestion at CAISO interties in the EIM and contrasts that to the EIM Entities’ proposal for EDAM:

In the EIM, if an ETSR connected to the CAISO BAA becomes fully scheduled and thus “binds” first, the congestion is classified as ETSR congestion (or “transfer revenue” under CAISO’s EDAM proposal) and allocated 100% to the EIM Entity BAA.  If the CAISO’s intertie scheduling point binds first, the congestion is instead classified as intertie congestion (ITC) and allocated 100% to the CAISO BAA.  This means that whichever side “fills first” can often recover 100% of the economic value in a particular hour, and the other segment may not receive any of the economic benefits associated with the transmission it made available to support the transfer.  

The EIM Entities have concerns that the CAISO’s current intertie congestion allocation construct may be unworkable for the EDAM for several reasons: 

1. Inequitable:  An allocation paradigm in which only a subset of rights holders on a particular EDAM transfer path are entitled to 100% of the congestion value appears inequitable to the EIM Entities, as it does not recognize the contribution of the other transmission segments that are necessary to enable the transfer. 
2. Unpredictable: The allocation results would be unpredictable from one hour to the next, with no way to anticipate whether a rights holder on a particular segment of a transfer path would recover any congestion value at all.  As such, customers seeking to donate transmission would have to conjecture regarding the value of their potential transmission donation.  This unpredictability will likely discourage entities from making transmission available if they believe that the economic value of those rights will not be fairly recovered.  A preliminary review of the results from the recent heat wave events supports the EIM Entities’ view that the current approach for calculating congestion on the major pathways can result in highly unpredictable outcomes and that a more predictable solution is necessary for EDAM.
3. Lacks durability: The outcomes associated with using the CAISO’s current congestion rent allocation approach would depend heavily on Entity-specific business practices and operating procedures on either side of an interface and cause shifts in revenue that are not related to basic drivers of congestion on a particular path.  This concern could be related to both CAISO and other path operator practices.  This exposes the resulting congestion rent allocation to seams issues and the potential for unintended consequences as the specific mechanics and procedures used for scheduling EDAM transfers evolve over time.

The EIM Entities believe that a potential simple and effective approach to address these concerns is to split the congestion revenue collected across the entire EDAM transfer path (i.e., the sum of the Transfer Revenues and ITC congestion) equally between the importing and exporting BAAs (including the CAISO BAA).  A 50/50 split appears reasonable and ensures a stable and equitable outcome where the contributions to the transmission needed to enable the transfer are appropriately recognized, ensuring all entities contributing transmission to enable EDAM benefits are able to recover a fair, predictable, and durable allocation of EDAM benefits.  This, in turn, may incentivize transmission customers to donate more transmission to the market for transfers, which is one of the foundational principles to market design that the CAISO should be focused on.  The EIM Entities look forward to further dialogue on the proposed allocation approach.

It is also important to clarify that the EIM Entities are not proposing to share congestion value associated with non-EDAM transactions (e.g., congestion resulting from intertie bidding).  Congestion associated with (or attributable to) non-EDAM bids through the intertie bidding framework would remain 100% with the CAISO BAA, as would transmission paths entirely within the CAISO BAA (e.g., to internal hubs such as NP-15). 

Congestion Revenue Rights

The EIM Entities support with caveats the CAISO’s proposal regarding monthly congestion revenue rights.  The EIM Entities support the optionality of using congestion revenue rights but not making them a mandatory market requirement.  The EIM Entities also support the concept of a monthly plan for load service in their respective BAAs upon which congestion revenue rights are allocated, if they determine to utilize that approach.

However, the EIM Entities seek clarification regarding how certain classes of OATT transmission customers would be treated for purposes of congestion revenue rights.  While the proposal is generally clear regarding how load serving entities and external entities serving load in a BAA would be treated, the treatment of wheeling transmission customers or independent power producers using transmission to export energy is not clear.  The EIM Entities seek clarity from the CAISO regarding these types of customers.  Conceptually, it would seem that any transmission customer that has rights of a month or longer should be eligible for CRRs, as they have paid for the transmission for that time period.  Certainly, all transmission customers that have made long-term investments in a transmission system should be eligible for CRRs. 

Transfer and Congestion Revenue Settlements

The CAISO seeks input on how transfer and congestion revenues should be settled.  The EIM Entities support settlements between the CAISO and EIM Entities.  The EIM Entities would then sub-allocate those revenues to the appropriate customer(s).  This ensures a proper and reasonable continuity between the CAISO as the market operator, an EIM Entity, and the EIM Entity’s transmission customers.

A multi-party settlement paradigm that involves the CAISO, EIM Entities, and transmission customers would add unnecessary complexity and potential uncertainty to an already complex settlement process.  Moreover, any settlements directly between the CAISO and transmission customers would require additional contracts and would convolute the contractual relationships between the CAISO, EIM Entity, and EIM Entity transmission customers.

6. Additional comments on the bundle 1 straw proposal or EDAM initiative:

EDAM must be voluntary to participate

The EIM Entities continue to believe that to gain broad support, the EDAM must be voluntary in policy and in practice. This can only be achieved by extending the voluntary approach that has been successful in attracting EIM participation, and by implementing a flexible EDAM design that can co-exist with existing market frameworks and the open-access transmission tariff (OATT) framework that is broadly used outside of the CAISO BAA. The EIM Entities recognize that participating in EDAM will include a commitment to certain obligations (such as meeting upfront day-ahead Resource Sufficiency requirements and ensuring sufficient supply is available in real-time to support day-ahead market awards) and are supportive of more discussion to further define such obligations. The EIM Entities emphasize, however, that ensuring that EDAM participation is voluntary on an on-going basis is vital to support the continued autonomy of utilities outside of California to maintain reliability of their BAAs, to maintain operational control of their resources and transmission systems, and to continue to rely on existing market frameworks to achieve reliable operation and economic efficiencies for their customers.

The Interaction of an EDAM and Other Market Opportunities Requires Greater Discussion

The EIM Entities believe that CAISO should reconsider its proposal to eliminate entities within an EDAM BAA’s ability to participate in the CAISO’s existing intertie bidding framework and should instead seek tailored solutions to address its concerns. Some EIM Entities view such a restriction on access to the CAISO’s existing intertie bidding framework as inconsistent with the voluntary principle of EDAM, and believe it will also lead to harmful consequences for OATT transmission customers and other non-participating third parties that have resources and loads within an EDAM BAA. The EIM Entities are fully supportive of modelling enhancements, appropriate market rules, and other improvements as needed to ensure the two frameworks (EDAM and intertie bidding) can co-exist accurately and efficiently. The EIM Entities look forward to further discussion to understand the CAISO’s concerns and to find solutions that can allow CAISO-operated markets to function efficiently while supporting continued participation in EDAM and the CAISO’s intertie bidding framework.

Decisional Framework

The EIM Entities support the proposed decisional framework whereby EDAM would proceed under a “joint authority” model in which formal approval would be required of both the EIM Governing Board and the CAISO Board of Governors prior to moving forward with tariff amendments to support the market design.  Moreover, given the complexity of the EDAM, it may be prudent for management to return to the format of seeking conceptual approval of the design from EIM Governing Board and the CAISO Board of Governors before embarking on detailed tariff development.

Fuel Limited Resources (Natural Gas, Hydro, etc.)

As presented at the February EDAM workshop, the EIM Entities believe that the EDAM solution must respect fuel limited resources (natural gas, hydro, etc.) when solving for unit commitment and unit dispatch based on limitations submitted by the EIM Entity.  Including fuel limitations as part of the expectation under a broader resource sufficiency standard may reasonably work in a real-time voluntary market like EIM, but it presents significant challenges when attempting to solve for a day-ahead plan if it is modeled similarly to EIM.  Specifically, the day ahead market optimization may profoundly change the overall dispatch of a specific resource, building dependencies across balancing areas and unintentionally creating reliability risks if a resource is ultimately unable to dispatch consistent with fuel limitations.  Ideally, these limitations would be configurable across a portfolio of similar resources (that may be as small as a single generator, or as large as an EIM Entity’s resource fleet) in order to provide for as much dispatch flexibility as possible that may result through market optimization, while limiting unintended reliability and economic impacts to participating entities.

Such limitations will need to be considered as part of the market run in order to ensure a reliable, physically deliverable solution for EDAM.  As previously commented, market rules today allow for this to occur for emissions limited resources but need to be revised in order to address fuel limitations.  The EIM Entities request that CAISO include an indication that fuel limited resources will be an entity configurable restriction of the market solution.

1. Please provide your organization’s overall position on the EDAM bundle 1 straw proposal:

2. Provide summary of your organization’s comments on this proposal:

NCPA believes that, while extending the day-ahead market to EIM Entities has potential benefits for the entire region, CAISO should take care to not disrupt the existing CAISO markets and to ensure that resources outside of the CAISO footprint are treated equivalently to resources inside the CAISO footprint. Doing so will require resolving several difficult issues, including how transmission charges will be allocated, how EDAM participating resources will comply with California’s greenhouse gas costs, and how to ensure flexible resources will be available and deliverable when needed. These issues are not only technically complex, but also implicate larger policy issues. NCPA therefore urges CAISO to not rush the stakeholder process and to allocate adequate time to resolving the issues. NCPA believes that neither the transmission allocation issue nor, to a lesser extent, the Resource Sufficiency Evaluation have been properly addressed in the Bucket 1 straw proposal.  

3. Provide detailed comments including examples on the Resource Sufficiency Evaluation topic:

NCPA believes that the EDAM Resource Sufficiency Evaluation requirements must meet the same standards as Resource Adequacy requirements as they pertain to imports. Thus far there has been no proposal to require specificity of the source of the import such as an aggregated system of resources or BAA when counting imports towards Resource Sufficiency Evaluations. NCPA is concerned this limitation may lead to double counting of imports, unintentional or otherwise, in RA showings and Resource Sufficiency Evaluations. 

4. Provide detailed comments including examples on the Transmission Provision topic:

NCPA’s primary concern with the EDAM initiative is that it does not sufficiently address transmission cost allocation and essentially skirts the issue by designating most costs as sunk. This is not acceptable for NCPA. The CAISO controls one of the most advanced grids in the world. That fact along with other factors result in it being one of the most expensive as well. In 2021 alone the estimated combined Transmission Revenue Requirement for the IOUs is $4.8 billion. EDAM does not work without the CAISO controlled grid thus all EDAM participants must pay their fair share of the CAISO controlled grid regardless of their own transmission costs if they wish to collect the immense cost savings benefits EDAM is expected to provide. NCPA supports the general concept that costs associated with the transmission network should be allocated to those entities who receive direct benefits for using the transmission network. With that said, NCPA also believes that any process or methodology that is used to determine what entities or region(s) receive benefits from use of the transmission network should be based on measurable factors, rather than based on theoretical benefits.

NCPA considers the following factors to be of highest priority:

What is the purpose of the project:

• Does the project support or improve specific regional reliability?
• Does the project increase transfer capability between regions?
• Is the project needed to enable interconnection of new generation assets within a region?
• Does the project only provide economic benefits to the region in which it is located?

What is the geographic scope of the project:

• High voltage projects that are located in one region should not by default be assumed to provide benefits to another region.

What are the facility’s electrical characteristics:

• Certain transmission facilities, regardless of size, may have been built (or may be built) for the purpose of serving specific geographic load and/or interconnecting generation, and by default should not be assumed to provide network benefits across regions.

Each of these factors directly relate back to the question of costs and benefits. The revised bucket 1 straw proposal must address this, otherwise NCPA will likely not support any aspect of this initiative.

5. Provide detailed comments including examples on the Transfer and Congestion Revenue Distribution topic:

No comments at this time.

6. Additional comments on the bundle 1 straw proposal or EDAM initiative:

What is the estimated cost of implementing EDAM and how will that be allocated?

1. Please provide your organization’s overall position on the EDAM bundle 1 straw proposal:

2. Provide summary of your organization’s comments on this proposal:

Pacific Gas and Electric Company (PG&E) appreciated the thought and effort the California Independent System Operator’s (CAISO) has put into its Bundle 1 Straw Proposal for the Extended Day-Ahead Market (EDAM).[1]  We realize the importance of the Day-Ahead market and the difficulty of trying to align the Open Access Transmission Tariff (OATT) world with that of a voluntary organized market. 

PG&E agrees that the expansion of the day-ahead market can have real benefits associated with expanded optimization over a broader region. However, the voluntary nature and immense scope of EDAM creates known and unknown risks that could eat away at those benefits quickly.  The EIM benefits have been between $200-$300MM[2] a year and the estimate of EDAM benefits are between $119-$227MM for the entire EDAM footprint.[3] California’s share of the EIM benefits average about $30MM a year.[4]  These gains can easily be erased by market design flaws or holes, similar to past events:

• The Energy Crisis – incredible sums of money lost
• CRR deficiencies -- $130MM a year from 2012 – 2018[5]
• Convergence bidding on the interties -- $40+MM in 2011[6]

A market design flaw of similar magnitude to any of these would significantly reduce or eliminate EDAM’s benefit to California.

While PG&E supports the goals of an extended day ahead market, we remain concerned that market inefficiencies and negative net-benefits to California customers could result from any one of several unresolved high-level issues:

• The EDAM RSE’s firm transmission requirements, along with the Straw Proposal’s daily voluntary transmission provision, may allow market power and further tightening of California’s Resource Adequacy program without offsetting reliability benefits.
• The Straw Proposal’s definition ‘voluntary’, with no commitment to provide generation or transmission past day-ahead, may lead to the exercise of market power through generation and transmission.
• The lack of transparency of EIM participants transactions in the bilateral market may be used as a form of withholding.
• The complexity of CAISO’s allocation proposal for congestion and transfer revenues may reduce transparency and monitoring.
• The CAISO’s scope of the market redesign given the overlapping and fluid nature of the EDAM, RA Enhancements, and DAME initiatives, increases the risk of mistakes and unintending consequences that will have real costs to customers.  

Before PG&E could support the EDAM proposal, PG&E would like to see the following improvements:

1. Further alignment with the California RA program
2. Non-Recallability / equivalent load curtailment priorities across WECC or the EDAM footprint
3. The addition of a ‘bucket 4’ for reporting firm transmission that is committed through the bilateral market
4. BAA’s requirement to commit to providing a minimum amount of transmission well before day-ahead in order to eliminate/minimize the potential for the exercise of transmission market power
5. A push by CAISO to simplify the design for increased transparency, monitoring, and market power mitigation

[1] http://www.caiso.com/InitiativeDocuments/StrawProposal-ExtendedDay-AheadMarket-BundleOneTopics.pdf

[2] Recent years 2018 ($276MM), 2019 ($296MM), and 2020 (will likely be above $300M) https://www.westerneim.com/Pages/About/QuarterlyBenefits.aspx

[3] Slide 18, Extended Day-Ahead Market: Feasibility Assessment Update from EIM Entities -- http://www.caiso.com/InitiativeDocuments/Presentation-ExtendedDay-AheadMarketFeasibilityAssessmentUpdate-EIMEntities-Oct3-2019.pdf

[4]  Average of the complete years 2014 through 2019 is just under $32MM a year https://www.westerneim.com/Pages/About/QuarterlyBenefits.aspx

[5] http://www.caiso.com/Documents/Presentation-CongestionRevenueRightsAuctionEfficiencyTrack1B.pdf

[6] See Convergence Bidding section of the 2011 DMM Annual Report. http://www.caiso.com/Documents/2011AnnualReport-MarketIssues-Performance.pdf

3. Provide detailed comments including examples on the Resource Sufficiency Evaluation topic:

PG&E supports the concept of a Resource Sufficiency Evaluation with the goal of disincentivizing inappropriate leaning particularly if the leaning could lead to reliability issues for BAAs who bring sufficient resources to meet their demand. However, PG&E is still concerned with a number of aspects of the RSE with respect to our previously mentioned EDAM concerns:

• The EDAM RSE’s firm transmission requirements, along with the Straw Proposal’s daily voluntary transmission provision, may allow market power and further tightening of California’s Resource Adequacy program without offsetting reliability benefits.
• The Straw Proposal’s definition ‘voluntary’, with no commitment to provide generation or transmission past day-ahead, may lead to the exercise of market power through generation.
• The lack of transparency of EIM participants transactions in the bilateral market may be used as a form of withholding.

EDAM and Resource Adequacy

PG&E’s first concern at the nexus of EDAM and RA is the firm transmission requirement for all imports and how this requirement in the RSE may lead to market power for firm transmission.[1] PG&E has stated our concerns in the RA proceedings at the CPUC, in our RA Enhancement initiative comments, and in the EDAM initiative. PG&E requests that CAISO consider ways in which BAAs can pass their RSE without requiring 100% of the transmission being forward-procured firm transmission.  For example, if some amount of firm transmission were to be released or committed to the EDAM earlier than day-ahead, then it could be possible for CAISO and BAAs to count on that transmission without specific procurement of that transmission. In the transmission provision portion of these comments, PG&E does put forward a suggestion on how to do this.

PG&E’s second concern is that the sufficiency test could create a third compliance paradigm that California LSEs will have to meet; i.e., CPUC RA requirements, CAISO RA requirements, and CAISO EDAM RSE requirements. California’s compliance paradigm for RA is already challenging and adding a third set of constraints or targets could result in additional costs and risks to California customers.

PG&E also requests CAISO provide examples of how the resource sufficiency evaluation would work if one or multiple BAs were deficient in the Day-Ahead and Real-Time markets. For example if the CAISO BA were meeting the Resource Sufficiency Evaluation using a some imported generation from an EIM BA but that particular BA failed one or more of the tests in the Resource Sufficiency Evaluation:

• Could the BA recall the energy in the sufficiency test?  
• If not, and the deficient BA was cut off in the DA market process, could it simply recall the energy in real time?
• Could the export into California still be scheduled in Day-Ahead and flow in real-time?
• Would this cause California to fail the RSE in either Day-Ahead or Real-time?

PG&E would like to see the CAISO push for a WECC wide (or at least EDAM-wide) mutual non-recallability standard to ensure that procured capacity cannot be recalled when critically needed.

Voluntary Nature of EDAM in the RSE

“Voluntary” can have a range of meanings in terms of the following commitment after one volunteers.  As one person quipped in the February (2020) workshop, “marriage is voluntary”, and it comes with a long commitment.  The current EDAM proposal is closer to speed dating  as the Straw Proposal allows participants to opt into or out of the market at the last minute and comes with no lasting commitment.

With respect to the resource sufficiency evaluation, the EDAM proposal does not specify any commitment after voluntarily submitting a set of resources into the RSE.  CAISO highlights that “the emphasis will be to incentivize (rather than mandate) participation with resources and transmission in the market so that the EDAM can optimize the largest pool of resources over the largest possible area.”[2]

PG&E is concerned that not specifying the commitment (that transitions from volunteering to market actions) opens EDAM up for the exercise of market power.  For example: assuming a BA passes the RSE, the proposal is not clear if the BAA has to bid in the set of resources that passed the RSE; or to what extent substitutions can be made to that set. One could imagine an entity with market power submitting bids for all but one of their critical assets after passing its RSE using all of its assets.  This, to our knowledge, is permissible under the proposed RSE as the passing set of resources (from the RSE) do not have a must-offer obligation or any restrictions on their bids.  Similarly, it would be easy to construct examples where an entity could optimize both the amount of transmission and generation made available on a daily basis, creating significant inefficiencies through such withholding.

Scope

When the Bundle 1 Straw proposal was written, the Day-Ahead Market Enhancements proposal was in a very different state.  Given the changes to DAME since the publication of the Bundle 1 Straw proposal, PG&E would appreciate additional discussions regarding how these two initiatives relate. Additionally, PG&E requests that the CAISO update the section and the equations of the RSE to make sure DAME and EDAM are in alignment.

Summary of PG&E’s stance on the RSE

Before PG&E could support the EDAM proposal, PG&E would like to see the following improvements:

1. Further alignment with the California RA program
2. Non-Recallability / equivalent load curtailment priorities across WECC or the EDAM footprint
3. A push by CAISO to simplify the design for increased transparency, monitoring, and market power mitigation
4. Examples of how the RSE will work in practice for California under different tight scenarios

[1] E.g., Morgan Stanley Capital Group’s analysis of available transmission is highly constrained, see their comments in the RA Enhancements initiative on 10/01/2020. https://stakeholdercenter.caiso.com/StakeholderInitiatives/AllComments/e0efc91f-6c4e-44be-a701-85039cefc61a#org-bfdb92f2-b836-416c-bf77-6b3accd1cc50

[2] See Section 2: Discussion of Voluntary Participation, page 6 of the Bundle 1 Straw Proposal for the Extended Day-Ahead Market

http://www.caiso.com/InitiativeDocuments/StrawProposal-ExtendedDay-AheadMarket-BundleOneTopics.pdf

4. Provide detailed comments including examples on the Transmission Provision topic:

In our previous comments,[1]^,[2] PG&E expressed concerns with the potential exercise of market power in the EDAM.  PG&E highlighted that overly accommodating rules for voluntary participation in the extended Day-Ahead Market further adds to this risk of market power being exercised. For example, a BAA might be able to receive more revenue by bi-laterally selling previously offered firm transmission, which might reduce the available transmission capability in EDAM and result in higher congestion revenue.  In this hypothetical, the BAA would recover the cost of the portion sold bi-laterally via its OATT and receive greater revenues on the portion offered into EDAM.  If BAAs were allowed to offer different amounts of transmission into EDAM every day, they would have a very quick feedback loop from which to “optimize” their position and exert market power over transmission.  The CAISO should be very careful in choosing the timeline for voluntary transmission participation to limit this potential for discriminatory behavior.

In an effort to be constructive in our critiques, PG&E provides here two proposals to improve the transmission provision portion of Bundle 1:

1. Create a bucket 4 for transmission that is equal to the capacity previously committed through other obligations (e.g., ETCs, TORs)
2. Create a forward commitment of transmission based on a percentage of available firm transmission

Bucket 4

The EDAM proposal parses the available transfer capability (ATC) of transmission into three buckets of firm transmission:

1. Transmission to meet the RSE (bucket 1)
2. Voluntary 3^rd party transmission (bucket 2)
3. Voluntary 1^st party transmission (bucket 3)

This accounts for all the transmission that will be made available to CAISO for optimization. However, it does not provide any transparency to how much of the ATC has been previously contracted. This is particularly important given the daily voluntary nature of the EDAM proposal.  A transmission owner with local transmission market power, could effectively withhold transmission capacity from the CAISO market through uneconomic bilateral trades in order to maximize the total portfolio’s revenues. Creating a bucket 4 (contracted ATC) transmission will provide transparency to the CAISO and stakeholders as to how participants are balancing their participation between the bilateral and CAISO markets.   We would recommend an additional requirement that all available firm transmission would be made available, possibly with a hurdle rate to reflect opportunity costs of selling in the bilateral markets and allowing for proper cost recovery.

Forward Commitment of Transmission

Under the proposal, generation would be bid in the day before power flows; this is how it is done today and isn’t much of a change.  But Californian IOUs essentially have committed our transmission to the CAISO in advance for the next decade.  The EDAM Bundle 1 straw proposal would allow EDAM BAA’s to offer in transmission the day before power flows. This is a big disparity between participants.

PG&E is proposing a framework for transmission provision that reduces this disparity and meets critical criteria:

1. Creates a voluntary forward commitment of transmission into EDAM
2. Respects uncertainties in firm transmission that only resolve close to real-time

BUT

3. Limits discretion of the transmission rights owner in order to limit exercise of market power  
4. Provides periodic adjustments to allow participants flexibility over time but does so far enough in advance that a participant cannot use sensitive market data for the purposes of market manipulation or withholding.

The key concept is that the commitment would be to a formula, not a specific megawatt value.

Such a formula could take a number of forms and PG&E is open to discussing these in detail. For illustrative purposes, and to kick off the discussion, imagine that the transmission rights owner (either the BAA or 3^rd party) committed to offering a minimum amount of transmission based on a fixed percentage of an intertie’s ATC, net of contracted or other committed capacity (to network customers…etc.) three months in advance.  A commitment to a formula months ahead, would provide the forward commitment on which CAISO and stakeholders could count on; would respect uncertainties in ATC associated with firm transmission availability, limit day-ahead discretion that might lead to withholding or other inappropriate behavior, while providing transmission rights holders the flexibility to periodically adjust their strategy going forward.

Summary of PG&E’s position on Transmission

Before PG&E could fully support this section of the EDAM proposal, PG&E would like to see the following improvements:

1. The inclusion of a ‘bucket 4’ that provides transparency to bilateral transmission
2. Modifications to the proposal that requires each volunteering BAA to commit to a minimum amount of transmission well before day-ahead in order to eliminate/minimize the potential for the exercise of transmission market power
3. A push by CAISO to simplify the design for increased transparency, monitoring, and market power mitigation

[1] http://www.caiso.com/InitiativeDocuments/PG-EComments-ExtendedDay-AheadMarket-IssuePaper.pdf

[2] http://www.caiso.com/InitiativeDocuments/PG-EComments-ExtendedDayAheadMarketTechnicalWorkshop-Feb11-12-2020.pdf

5. Provide detailed comments including examples on the Transfer and Congestion Revenue Distribution topic:

PG&E is still analyzing options for the distribution of congestion and transfer revenue and appreciates the spreadsheet examples CAISO has provided.  However, PG&E would request that CAISO reconsider the complexity of this part of the EDAM proposal.  Increased complexity makes it difficult to understand, monitor, and enforce. In particular, PG&E would like to suggest that the CAISO eliminate any ability for BAAs to vary the market design between BAAs (i.e., to use CRRs or not).  PG&E is concerned that providing a bespoke market design to each EIM participant might result in many different market designs requiring intimate knowledge of each BAA.  The rules should be as simple and consistent as possible while allowing for participation in the day-ahead market.  At a minimum PG&E requests CAISO to hold working group meetings to discuss the examples to make sure the incentives to make transmission available are compatible, do not result in gaming opportunities for transmission or generation, and result in fair cost allocation.

6. Additional comments on the bundle 1 straw proposal or EDAM initiative:

1. Please provide your organization’s overall position on the EDAM bundle 1 straw proposal:

Pattern Energy (Pattern) is one of the world’s largest privately-owned developers and operators of wind, solar, transmission, and energy storage projects. Its operational portfolio includes 28 renewable energy facilities that use proven, best-in-class technology with an operating capacity of 4.4 GW in the United States, Canada and Japan. Pattern is headquartered in San Francisco, California and is guided by a long-term commitment to serve customers, protect the environment, and strengthen communities.

Pattern opposes the EDAM Bundle 1 proposal as contemplated. The CAISO must address the fatal flaws that undercut existing and future Renewables Portfolio Standard (RPS) contracts. Before CAISO continues with EDAM development it must fix the unfeasible fatal flaws in the EDAM proposal. Namely, the proposed elimination of intertie bidding and self-scheduling at CAISO interties to or from EDAM Balancing Authority Areas (BAAs) will render illegible for the RPS more than 2,500 MW of existing out-of-state long-term generation contracts currently serving RPS requirements for California load serving entities. Pattern is also expressing support for the thoughtful and constructive comments that the American Wind Energy Association of California (AWEA) that will be submitted.
 

2. Provide summary of your organization’s comments on this proposal:

3. Provide detailed comments including examples on the Resource Sufficiency Evaluation topic:

Pattern is actively developing Out of State (OOS) wind in New Mexico is serving the California market.  At least 4,500 MW of New Mexico wind reliant on new-build transmission will be serving California Load Serving Entities (LSEs) before 2025. Pattern Energy is responsible for more than 4.5 GW of OOS wind available to California. 544 MW of OOS New Mexico wind came online last year for California LSEs; 1,050 MW will be operational by next year available to serve California LSEs, and 3,000 MW are in development for service prior to 2025, and will be available to serve California LSEs at full PTC pricing as PCC1 RPS products.  However, under the proposed EDAM Bundle 1 as contemplated, none of those operating facilities or development projects would qualify for the California RPS, placing particular burden on CAISO LSEs which have executed CPUC-approved long-term contracts for PCC1 RPS wind reliant on dynamic scheduling.

As an example of the commercial viability of these development projects, Los Angeles Department of Water and Power (LADWP), which in essence operates as its own grid operator, procurer of generation, and approval authority, has approved last month 331 MW of Pattern Energy’s OOS Wind from New Mexico, with an all-in power purchase agreement (PPA) that includes the cost of a new high voltage transmission line to deliver the power. The OOS Wind + transmission price won a competitive solicitation which included over 105 renewable energy proposals, and was selected over technologies like solar + storage, in part due to the low price, the reliability, and the low-risk certainty of the project achieving commercial operation by 2021. 

These contracts rely on qualifying as Portfolio Content Category (PCC) 1 under California’s current Renewable Portfolio Standard (RPS) rules. Therefore, as pointed out in the AWEA comments, unless a substitute RPS compliance mechanism is developed and implemented, CAISO’s EDAM proposal will leave California’s RPS highly vulnerable to a dormant commerce clause challenge. Discussion with CAISO staff have indicated that this fatal flaw could be resolved through future legislative changes to the California RPS rules. This is an unreasonable risk to market contracts that have been faithfully fulfilling their contract terms for more than a decade with multiple decades of contract terms ahead or are under construction with PPAs.

A second significant concern relates to the compliance with the California Air Resources Board (CARB) GHG regulations creating even greater uncertainty on how these resources would be treated. The California cap and trade program is the linch pin to achieving GHG targets and the green economy and climate cannot afford well intended regulation that undermines its programs. At a minimum, the CAISO should pause and coordinate with the CARB and determine any unintended consequences. 

At a time when Governor Newsom has declared that California needs to accelerate compliance with its climate goals, this proposal will undermine the sanctity of existing RPS contracts and the cap and trade program setting California further behind than it already is. We are committed to working with the CAISO to develop a set of rules that can help achieve its objectives without introducing chaos at a critical juncture in our clean energy future. Thank you for the opportunity to submit these comments.
 

4. Provide detailed comments including examples on the Transmission Provision topic:

5. Provide detailed comments including examples on the Transfer and Congestion Revenue Distribution topic:

6. Additional comments on the bundle 1 straw proposal or EDAM initiative:

1. Please provide your organization’s overall position on the EDAM bundle 1 straw proposal:

2. Provide summary of your organization’s comments on this proposal:

The Public Advocates Office at the California Public Utilities Commission (Cal Advocates) is California’s independent consumer advocate with a mandate to obtain the lowest possible rates for utility services, consistent with safe and reliable service levels, and the state’s environmental goals.^[1]  Cal Advocates submits the following comments and recommendations on “Bundle One Straw Proposal” (Bundle 1) of the California Independent System Operator’s (CAISO) Extended Day-Ahead Market (EDAM) initiative, which was published on July 20, 2020.^[2]  Comments on the Bundle 1 Straw Proposal are due November 12.

Background

As part of its EDAM initiative, the CAISO is proposing to extend the day-ahead market (DAM) functionalities to the energy imbalance market (EIM) participants.  The CAISO’s stated purpose for the EDAM initiative is to “more effectively integrate renewable resources by optimizing day-ahead unit commitment, producing hourly schedules, and improving transmission utilization across a larger footprint.”^[3]

Bundle 1 is one of three planned bundles that the CAISO proposes for the EDAM initiative and covers topics related to “resource sufficiency evaluation, transmission provision, and the distribution of revenues related to congestion and enforcement of transfer constraints.”^[4]

The EDAM initiative currently neither requires EIM entities to become participating transmission owners (PTOs) nor participants in another regional transmission operator’s (RTO) balancing authority area (BAA) to participate in other than their own BAA.  As proposed, participation in the EDAM is entirely voluntary and open to all entities that already participate in the EIM.^[5]  The EDAM will retain the current EIM rules, with “low-entry cost, no exit fees, and retention of balancing authorities’ operational control over their resources and transmission.”^[6]  The CAISO anticipates that some entities that would participate in the EDAM may elect to only participate in the real-time market (RTM), as is the current practice, while others may elect to participate in both the RTM and DAM through the EDAM process.

Summary of Cal Advocates’ Recommendations

In its EDAM proposal, the CAISO should:

1. Clarify why vertically integrated load serving entities (LSEs) need to receive a hedge, given their lack of exposure to energy price shocks in the integrated forward market.^[7]
2. Clarify what the specific settlement options are for congestion revenue and transfer revenue.
3. Clarify which entities the CAISO considers to be out-of-balancing-authority-area load-serving entities (OBAALSEs) and how the OBAALSEs will pay for their EDAM transmission component.
4.  Clarify how the CAISO plans to map nodes throughout the greater CAISO system.

[1]  Cal. Pub. Util. Code § 309.5. 

[2] Bundle One Straw Proposal, Extended Day Ahead Market, California Independent System Operator, July 20, 2020 available at https://stakeholdercenter.caiso.com/StakeholderInitiatives/Extended-day-ahead-market [hereafter “EDAM Straw Proposal].

[3] EDAM Straw Proposal, p. 5

[4] EDAM Straw Proposal, p. 5.

[5] EDAM Straw Proposal, p. 5.

[6] EDAM Straw Proposal, p. 5.

[7] The CAISO’s integrated forward market (IFM) is the second step in the CAISO’s day-ahead market, where the CAISO adjusts the generation needed to meet the forecasted energy demand. (See California ISO, Market Processes and Products available at http://www.caiso.com/market/Pages/MarketProcesses.aspx last accessed Oct. 23, 2020.)

3. Provide detailed comments including examples on the Resource Sufficiency Evaluation topic:

Cal Advocates has no response to this topic at this time.

4. Provide detailed comments including examples on the Transmission Provision topic:

Cal Advocates has no response to this topic at this time.

5. Provide detailed comments including examples on the Transfer and Congestion Revenue Distribution topic:

The CAISO’s Proposal for Congestion Revenue and Transfer Revenue

As proposed, the EDAM will identify the BAA that represents each individual entity that is participating in the EDAM.  However, many of the BAAs surrounding the CAISO have bilateral markets that are not subject to wholesale contracting, which is similar to the CAISO’s market.  To account for the difference in marginal energy costs between BAAs, the CAISO proposes creating an entirely new concept called transfer revenue “since there will be multiple balancing authority areas in the EDAM.”^[1]  “The transfer revenue concept proposes the calculation of each balancing authority area’s specific marginal energy cost.”^[2]  When these costs differ, the transfer capability will is binding between BAAs under the new transfer revenue concept.^[3]

Specifically, the CAISO claims LSEs will need to hedge^[4] when the price changes between what the generator pays and what the load aggregation point (LAP) charges.^[5]  To support hedging, the CAISO proposes to include two hedging products:^[6] congestion revenue rights (CRRs) and transfer revenue (a new concept introduced in the EDAM).  Currently CRRs,^[7] and congestion revenue, more specifically, result from price differences between imports and exports within a BAA, and transfer revenue will account for price differences between BAAs.^[8]

Though the proposed EDAM is voluntary, the CAISO recommends that EIM entities participating in EDAM utilize the CRR OBAALSE model^[9] to provide congestion hedges at intertie points between BAAs,^[10] so long as the entity pays the Wheeling Access Charge (WAC).  If the EIM entity participating in EDAM chooses to award CRRs to transmission customers, the CAISO will award the congestion revenue to the CRR holder directly.  In the EDAM proposal, the CAISO states that offering a monthly allocated CRR will provide consistent treatment across BAAs and all OBAALSEs, as well as offer clarity regarding how much transmission capacity is available for the DAM.^[11]

Should the EIM entity participating in EDAM choose not to award CRRs, the CAISO requires that the EIM entity demonstrate how it will award congestion revenue directly to transmission customers for participation in the EDAM.^[12]  This is because the EIM entity must sub-allocate congestion revenue within its own BAA.  In the absence of an individual BAA’s CRR framework, the CAISO states that all CRRs will flow to the congestion revenue balancing account.^[13]

The CAISO Must Clarify Multiple Aspects of its CRR Proposal Prior to Adoption of EDAM

The CAISO is a wholesale independent system operator that is bound by an open access transmission tariff (OATT) that is approved and regulated by the Federal Energy Regulatory Commission (FERC).^[14]  While the CAISO utilizes CRRs to allow the financial equivalent of point-to-point transmission service to comply with its OATT,^[15] it is unclear if BAAs surrounding California, which are often participants in bilateral markets, would need to offer a CRR-like hedge to comply with their own OATTs.

For example, currently many of the utilities participating in bilateral markets^[16] are traditional, vertically integrated utilities.^[17]  These vertically integrated utilities do not have to compete for generation contracts within their own service territories because the utilities own the generators and are not subject to the internal competition for generator contracts.  The CAISO should clarify why such vertically integrated LSEs would need to receive a hedge, given their lack of exposure to energy price shocks in the integrated forward market. 

Moreover, these LSEs would theoretically use the EDAM to schedule electricity into California but would not utilize the EDAM to schedule energy capacity between BAAs outside of California, where the electricity does not eventually reach California.  Given this potential direction of energy flow, it is unclear why the transfer revenue concept is necessary to hedge between BAAs if a majority of BAAs are vertically integrated and only face price competition from generators in wholesale markets (e.g. CAISO).  The CAISO should clarify this point.

Furthermore, the EDAM proposed settlement options for congestion and transfer revenues are unclear.  For instance, the CAISO states that each individual BAA will receive a day-ahead congestion revenue balancing account,^[18] and that in the absence of CRRs, all congestion revenue will flow to a CRR balancing account.^[19]  However, the CAISO does not state whether such congestion revenues will flow to the general CAISO CRR balancing account or to each individual BAA congestion revenue account.  Additionally, the CAISO does not explain how much access the individual BAAs will have to such accounts.  Finally, the CAISO states in its proposal that if an EIM entity participating in EDAM chooses to award CRRs, the CAISO will compensate the CRR holder directly.^[20]  However, the CAISO did not explain how it will compensate the CRR holder. Specifically, the CAISO should specify whether it will utilize individual congestion revenue balancing accounts, the CAISO congestion revenue balancing account, or the transmission access charge (TAC) funds to compensate CRR holders.  This information has significant implications for CAISO ratepayers, given that the CAISO’s ratepayers currently pay into the TAC.  The CAISO should clarify how congestion revenue account(s) will be held, what level of access BAAs will have to such accounts, and whether or not the CAISO will manage these accounts on behalf of each BAA.

The CAISO also should clarify who it considers to be OBAALSEs and how OBAALSEs will pay for their transmission component in the EDAM system.  Currently, OBAALSEs are LSEs located outside of the CAISO’s BAA that participate in CAISO markets. For allocated CRRs,^[21] LSEs currently apply for CRRs they prefer to access based on factors such as historic load and anticipated load obligations.  If selected, the CAISO allocates CRRs to the LSEs at no additional fee.^[22]  OBAALSEs may also apply for CRRs if they prepay the monthly WAC.^[23]  In the EDAM proposal, the CAISO will allow EIM entities participating in EDAM to award allocated CRRs to OBAALSEs as means of distributing congestion revenue.^[24]

However, the CAISO fails to clarify several points in the EDAM proposal.  First, it is unclear which entities the CAISO considers OBAALSEs.  The CAISO should clarify whether it is suggesting that each  BAA participating in EDAM award CRRs to LSEs that are outside of its BAA, or whether it is proposing to treat any LSE outside of the CAISO’s BAA as an OBAALSE. 

Second, it is unclear how the CAISO will determine whether each OBAALSE participating in EDAM paid its fair share of transmission costs.  For example, currently OBAALSEs that prepay the monthly WAC can receive CRRs.^[25]  However, in the EDAM proposal, it is unclear which financial mechanism each OBAALSE participating in the EDAM will use to pay its transmission charge, such as the WAC, the EIM Wheeling Charge, or the proposed EDAM usage fee/hurdle rate.^[26]  It is important that the CAISO clarify this point because it affects how revenue is distributed to the CAISO’s ratepayers and other EIM participants participating in EDAM.  In the future, these two groups may not always be the same.

Finally, the CAISO should clarify how the BAAs participating in EDAM will be incorporated in the CAISO system map.  The CAISO service territory is a nodal system where CRRs represent the congestion component of the difference in locational marginal price (LMP)^[27] between internal supply nodes and internal demand nodes.^[28]  In the EDAM proposal, the CAISO recommends creating a transfer revenue concept to settle price differences between BAAs participating in EDAM.^[29]  The CAISO also plans to create a congestion revenue balancing account for each BAA participating in the EDAM.  However, the CAISO has not yet specified how these BAAs will be incorporated into the CAISO system map.  How the BAAs are mapped is important for explaining the necessity of the transfer revenue concept. 

Specifically, if each BAA participating in the EDAM is aggregated under one node in the CAISO’s nodal system, then congestion revenue and transfer revenue will both essentially be tracking the price differences between BAAs.  This example could lead to a situation where each individual OBAALSE participating in EDAM are allocated CRRs, but not all OBAALSEs are represented by the same node in the BAA participating in EDAM.  This example also does not explain why each OBAALSE requires a CRR hedge.

[1] EDAM Straw Proposal, p. 9.

[2] EDAM Straw Proposal, p. 9.

[3] EDAM Straw Proposal, p. 9.

[4] A hedge is an investment an investor purchases to protect their investment from potential future price changes in a market.  An example is purchasing earthquake insurance if you live in an earthquake-prone area. (See Hedge, Investopedia, available at https://www.investopedia.com/terms/h/hedge.asp.)

[5] EDAM Straw Proposal, p. 30.

[6] EDAM Straw Proposal, p. 31.

[7] On a monthly basis, the CAISO allocates CRRs to LSEs that nominate source/sink pairs based on their historic load. The CAISO is not proposing to include auctioned CRRs in the EDAM. EDAM Straw Proposal, p. 34.

[8] EDAM Straw Proposal, p. 30.

[9] Under the current CRR allocation system, OBAALSEs that pay the WAC may apply for allocated CRRs, based on the quantity of its load that is served on the CAISO-controlled grid. (See Cal ISO, Business Practice Manual for CRRs, Sections 5.2 and 12 available at https://bpmcm.caiso.com/Pages/BPMDetails.aspx?BPM=Congestion%20Revenue%20Rights.)

[10] EDAM Straw Proposal, pp. 32-33.

[11] EDAM Straw Proposal, p. 34.

[12] EDAM Straw Proposal, p. 35.

[13] EDAM Straw Proposal, p. 35.

[14] See Cal ISO, Diligent Oversight Ensures a Competitive Market available at http://www.caiso.com/rules/Pages/Regulatory/Default.aspx last accessed Oct. 23, 2020.

[15] Congestion Revenue Rights Auction Efficiency Track 1B Draft Final Proposal Addendum, CAISO, May 25, 2018, pp.14-15. 

[16] When utilities are in a non-deregulated market, they operate in a traditional power market. In a traditional power market, utilities are regulated and vertically integrated, operating as a regulated monopoly on transmission and distribution in their service territories. In traditional power markets, when vertically integrated utilities contract with another utility to share electricity, they sign bilateral contracts (re: between two utilities). See: https://www.rff.org/publications/explainers/us-electricity-markets-101/

[17] “A utility that owns and controls generation, transmission and distribution components.” Harvard Electricity Policy Group, Vertically Integrated Utility available at https://hepg.hks.harvard.edu/faq/vertically-integrated-utility.

[18] EDAM Straw Proposal, p. 33.

[19] EDAM Straw Proposal, p. 34.

[20] EDAM Straw Proposal, p. 33.

[21] The CAISO is not recommending the CRR auction model for the EDAM, and at this time is focused only on allocating CRRs. (EDAM Straw Proposal, p. 34.)

[22] Congestion Revenue Rights Auction Efficiency Track 1 Draft Final Proposal, CAISO, February 8, 2018, p. 15.

[23] EDAM Straw Proposal, p. 32.

[24] EDAM Straw Proposal, p. 34.

[25] EDAM Straw Proposal, p. 32.

[26] “Transmission providers will be allowed to make available transfer capability at usage fee. The usage fee or hurdle rate will be included in the market optimization, which will result in transfer revenue collected, which can then compensate the transmission provider.” (EDAM Straw Proposal, p. 10.)

[27] Locational marginal pricing “is the calculation of electricity prices at thousands of pricing points, or nodes, within California’s electricity grid. It provides price signals that account for the additional costs of electricity caused by transmission congestion and line loss at various points on the electricity grid. LMPs allow CAISO to efficiently determine the interaction of energy supply and energy demand.” Locational Marginal Pricing, California Public Utilities Commission. See: https://www.cpuc.ca.gov/general.aspx?id=4429 .

[28] EDAM Straw Proposal, p. 32.

[29] EDAM Straw Proposal, p. 30.

6. Additional comments on the bundle 1 straw proposal or EDAM initiative:

Cal Advocates has no response to this topic at this time.

CONCLUSION

The CAISO should clarify which entities it considers OBAALSEs, how it plans to map new nodes in the greater CAISO system, , how it will settle congestion funds and compensate CRR holders, and why it must require participating BAAs to offer a congestion hedge product.

1. Please provide your organization’s overall position on the EDAM bundle 1 straw proposal:

2. Provide summary of your organization’s comments on this proposal:

3. Provide detailed comments including examples on the Resource Sufficiency Evaluation topic:

4. Provide detailed comments including examples on the Transmission Provision topic:

5. Provide detailed comments including examples on the Transfer and Congestion Revenue Distribution topic:

6. Additional comments on the bundle 1 straw proposal or EDAM initiative:

1. Please provide your organization’s overall position on the EDAM bundle 1 straw proposal:

PIOs support the EDAM process and Bundle 1 straw proposal with caveats. These caveats are provided in greater detail below.

2. Provide summary of your organization’s comments on this proposal:

The following Public Interest Organizations (collectively, “PIOs”) - Western Resource Advocates (“WRA”), Western Grid Group (“WGG”), Center for Energy Efficiencies and Renewable Technologies (“CEERT”), Union of Concerned Scientists (“UCS”), Renewable Northwest (“RNW”), Northwest Energy Coalition (“NWEC”),  Environmental Defense Fund (“EDF”), Interwest Alliance, Environmental Defense Fund (“EDF”) - appreciate the opportunity to provide comments on the EDAM stakeholder initiative. PIOs consider the EDAM initiative to be an essential incremental step towards broader electricity market expansion in the West. In response to the CAISO’s Bundle 1 Straw Proposal, PIOs begin by offering a general position, followed by specific comments on the individual topic areas in the subsequent sections.

As noted in comments to the February 2020 workshops, PIOs support CAISO’s use of the following guiding principles when designing the Extended Day-Ahead Market:

• Enable the growth of real-time markets that are centralized to facilitate automated and optimal dispatch of energy.
• Ensure all market transactions are transparent and accessible.
• Promote optimal and efficient resource and transmission scheduling.
• Flexibility to promote diversity of resources and allow for ease of entry for newer market participants, without compromising reliability.
• Governance should incorporate processes that allow for meaningful representation of a variety of stakeholder voices in order to effectively inform the market design and implementation.

At the outset, PIOs also wish to acknowledge the unprecedented nature of California’s August rotating outages, which drove the extension of the deadline for comments on the EDAM Bundle 1 Straw Proposal. PIOs support efforts by CAISO, EIM Entities and CAISO’s Department of Market Monitoring to thoroughly investigate the outage events and to consider potential changes to EDAM’s market design that would help prevent these events in the future. Specific suggestions and considerations in light of the August outage events are addressed throughout these comments. 

While understanding of the latest extension in the EDAM stakeholder process, PIOs are also concerned with the repeated delays in the process and EDAM’s “go-live” date being pushed out to Spring 2024. As noted in previous comments, PIOs believe that EDAM presents a real opportunity for consumer and environmental benefits, and any further delays to EDAM implementation delay these benefits, imposing avoidable costs to consumers (including direct and opportunity costs stemming from limited access to a wider set of resources).In order to provide certainty to policymakers and clean energy developers and to ensure benefits are able to accrue to consumers as quickly as possible, PIOs support efforts to prioritize and expedite EDAM’s implementation.

PIOs’ comments in the subsequent sections are either supportive of the proposed market design elements or raise concerns and offer suggestions for additional detail that should be included in future versions of the Bundle 1 proposal.

3. Provide detailed comments including examples on the Resource Sufficiency Evaluation topic:

PIOs recognize the importance of the Resource Sufficiency Evaluation (“RSE”) in EDAM’s design and make the following recommendations regarding the RSE in the Bundle 1 Straw Proposal:

• Additional clarity is needed to better understand the implications of restricting bidding and self-schedules at the CAISO interties.
• Additional details are needed regarding the role the CAISO should play in facilitating intra-Balancing Authority Area (“BAA”) RSE.
• The role and definition of “BAA” and “LSE” should be delineated in a future version of the proposal.
• RSE and load forecasting considerations in light of the August 2020 outages must be addressed.
• Demand-side resources should be considered in the RSE.
• Additional considerations should be made when designing an effective and responsive RSE for EDAM.

Additional clarity is needed to better understand the implications of restricting bidding and self-schedules at the CAISO interties

On pages 16-17 of the Straw Proposal, as well as page 24 of the July 27-29 stakeholder presentation, the CAISO states that resource bids and self-schedules for imports and exports at ISO interties would not be permitted from or to EDAM BAAs. PIOs are concerned about the potential implications of this proposal and request that the CAISO provide clarity on this element of EDAM in the next version of the Straw Proposal.

Specifically, CAISO should clarify this restriction and the underlying intent. PIOs seek certainty on whether the restriction would apply only for the RSE in EDAM, or if it applies in a broader context to include the elimination of intertie bidding and self-scheduling of resources at the CAISO interties in the day-ahead market optimization. CAISO should provide additional clarity on how schedules across the interties between CAISO and EDAM BAAs will be treated and honored under the proposed EDAM structure. PIOs are interested in understanding whether this proposed restriction is motivated primarily by the need to avoid the double-counting of resources in EDAM or if there are other concerns driving this proposal. If there are other concerns, CAISO should clearly articulate those so that stakeholders can better understand CAISO’s reasoning for this provision of the proposal. Additional details will also be necessary in order to better understand the broader implications of this portion of the RSE, including any potential impact on GHG accounting and resources delivering to California under California’s RPS law (as discussed later in these comments). Examples would be highly valuable in elaborating on this proposal and its impacts on resource counting, GHG accounting, RPS accounting, etc.

PIOs request details regarding the role the CAISO should play in facilitating intra-BAA RSE

On page 23 of the Straw Proposal, as well as page 37 of the July 26-29 stakeholder presentation, CAISO proposes to offer sub-area load aggregation points and separate resource IDs to allow BAAs to administer more granular RSE compliance within their area. PIOs are supportive of any market design that reduces transaction costs across and within EDAM participating BAAs. However, PIOs question whether CAISO is the more appropriate entity to facilitate these transactions. If CAISO were to directly facilitate intra-BAA RSE compliance, PIOs suspect it would provide a number of benefits. For instance, it could centralize the RSE compliance processes, create consistency for all BAAs’ RSE compliance processes, and provide efficiencies through reduced RSE compliance errors that would result from centralized management of RSE testing.

The role and definition of “BAA” and “LSE” should be delineated in a future version of the proposal

The Straw Proposal appears to use the terms Load-Serving Entity (“LSE”) and “BAA” interchangeably in some instances, making it difficult to discern the proposed RSE approach for an LSE that lies within a BAA as compared to a BAA that is also an LSE.  PIOs recommend that a future version of the proposal specify the roles for LSEs and BAAs and address how RSE would be implemented when these two footprints are not the same. Additionally, future proposals should clarify what roles and responsibilities are specifically envisioned for BAAs versus what roles and responsibilities are envisioned for LSEs.

RSE and load forecasting considerations in light of the August 2020 outages

PIOs recognize that a preliminary multi-agency investigation into California’s August rotating outages (i.e., the Preliminary Root Cause Analysis) has been completed by CAISO and California agencies and that a final version is currently underway. We also understand that WECC (with support from NERC) is conducting an assessment of the August blackouts and broader Western energy emergencies and other events that occurred in the West in August 2020.  While we do not yet have final results from these assessments, PIOs recommend that the CAISO consider the lessons learned from the August events in the context of EDAM to determine whether any changes to EDAM design should be considered.

Further, PIOs understand that the preliminary Root Cause Analysis points to certain day-ahead market practices that exacerbated supply challenges – notably, that during the event, under scheduling of demand in the day-ahead market was not appropriately addressed in the Residual Unit Commitment (“RUC”) process. While we understand the problem with RUC has since been corrected, we urge CAISO to conduct a further evaluation of load forecasting and load bidding in the context of EDAM. PIOs do not believe that under-scheduling and stressed conditions are one-time issues, especially as there are reports that the Pacific Northwest may be at risk of experiencing similar future system-wide capacity concerns (which will require support from neighboring utilities with diverse resources). The recent California outages and potential for additional outages elsewhere in the West underscore the need for solid load forecasting methodologies and a thorough consideration of load bidding in the context of EDAM. 

Demand Response resources should be considered in the RSE

PIOs recommend that Demand Response (“DR”) be incorporated into the EDAM RSE and that in the next iteration of the Straw Proposal, that CAISO specify how DR will be incorporated.  It is well established that DR has the capability to reduce electric demand (and therefore load), resulting in flexibility to meet resource sufficiency needs. PIOs consider DR to be an integral component of the RSE framework.

The August 2020 rolling outages in the CAISO footprint provide an illustrative example of the critical role that DR can play to maintain a reliable grid. According to the Preliminary Root Cause Analysis, over the net demand peak hours on August 14 and 15, dispatched DR increased to approximately 80% and 50%, respectively.[1] Further, CAISO’s dispatch of non-IOU demand response (in response to bids) was significantly higher during the 6-7 pm peak hour periods. This contribution of DR to assist in peak load drop with appropriate economic price signals justifies the larger unlocked potential of dispatched DR.

PIOs believe that that the August 2020 outage event demonstrates the value proposition for DR to be deployed with accurate and responsive price signals before initiating Stage 3 rotating blackouts. Further, EDAM provides an opportunity for DR and other demand-side resources to play an important role in maintaining a reliable electric system in the West. In the next version of the Straw Proposal, CAISO should specify how DR will be incorporated into the RSE and should further ensure the EDAM market design can take advantage of available and responsive DR through price signals.

General comments for an effective and responsive RSE

PIOs additionally recommend the consideration of the below key characteristics when designing an effective and responsive RS evaluation:

• RSE reasonableness and transparency: PIOs recommend that CAISO design the RSE to be reasonable and transparent by setting clear definitions of RS requirements and what is required for resources to be counted towards those requirements.
• Freezing OATT bilateral transmission sales: PIOs support additional discussion and thorough consideration of the proposal to freeze OATT transmission bilateral sales during the RSE phase. The freezing of bilateral sales should allow for consistent accounting and visibility into the degree and type of transmission available for resources that may make EDAM resource bids. However, the freezing of OATT bilateral sales (and, consequently, the redirecting of OATT transmission rights) should be considered in the context of its implications for entities that may not be participating in EDAM. While there are likely to be impacts to many transmission systems as a result of a bilateral OATT sale freeze during the RSE, it seems likely the most significant impacts may occur to transactions that occur across BPA’s transmission system and, thus, exploring impacts of a bilateral OATT sales freeze in the context of BPA would be particularly useful. For instance, we understand that “redirects” of transmission service are frequently used on the BPA system and it would be helpful for CAISO to explore (in conjunction with other entities that transact across BPA) how a freeze of bilateral OATT sales would impact redirects across the BPA system. It would be helpful to understand the impacts of a freeze under two different scenarios: one where BPA is participating in EDAM and another where BPA is not participating in the EDAM.
• BAA-led and BAA-level RSE tests: PIOs recognize the needs for EDAM to be operational and facilitated at the BAA level. However, PIOs are concerned about the possibility of RSE tests being inconsistent across BAAs, resulting in a higher degree of accuracy of RSE test results in some BAAs and poorer quality evaluations by others. CAISO should clarify that the RSE tests will be consistently applied to all participating EDAM BAAs. An additional concern for PIOs are, the risks of uneven compliance processes created between a BAA and the multiple LSEs within the specific BAA. To address this potential uncertainty, PIOs reiterate our request made earlier in this section that CAISO should play a key role in administering intra-BAA (or LSE-level) RSE tests and in designing the requirements for these intra-BAA tests.

[1] Page 54, CAISO Preliminary Root Cause Analyses Rotating Outages-August 2020 (“CAISO August 2020 RCA”).

4. Provide detailed comments including examples on the Transmission Provision topic:

PIOs recognize the importance of, and challenges associated with, appropriately designing transmission provision rules for EDAM and appreciate CAISO’s efforts to outline transmission provision design in the Straw Proposal. PIOs’ primary concerns regarding EDAM’s transmission provision in the Bundle 1 Straw Proposal include:

• The tension between contract path transmission rights and optimized market flows;
• Potential impacts to renewable resources delivering to California;
• Transmission provision’s impact on resource procurement and support for further consideration of elimination of rate pancaking in EDAM’s optimization; and
• The need for transparency in the transmission provision framework.
• Transmission availability under stressed system conditions

Tension between contract path transmission rights and optimized market flows

CAISO seeks for the transmission provision of EDAM to provide fair and open access while maximizing transmission system use and respecting long-term scheduling and other contractual rights. To encourage optimal dispatch and use of available clean energy resources, including renewables, storage and demand response, to the greatest extent possible, PIOs support the EDAM utilizing the physical capabilities of the transmission system. However, given that EDAM will need to “co-exist” with the existing OATT contractual transmission paths and rights in the West, it is likely not possible for EDAM to fully optimize use of the transmission system without creating adverse impacts on long-term scheduling and contractual rights. This tension will continue to be at the heart of EDAM and its appropriate resolution is key to EDAM’s successful development and operation.

One critical area where this tension became evident is on pages 16-17 of the Bundle 1 Straw Proposal, which would not allow for intertie bidding or self-scheduling at the CAISO interties where the CAISO intertie adjoins to a BAA participating in EDAM. PIOs acknowledge that this element of the proposal may help to incent more efficient EDAM dispatch and use of the CAISO interties. However, as pointed out by some stakeholders during the late July stakeholder calls, this element of the proposal also raises significant concerns about the value of long-term transmission rights connecting to CAISO if EDAM is successfully implemented. If CAISO intertie bidding and self-scheduling is ultimately eliminated, there may be little, if any, value to a Transmission Customer that has purchased transmission rights to deliver to CAISO via an EDAM BAA, since the current value of those rights is primarily tied to intertie bidding into CAISO.  The elimination of intertie bidding to and from EDAM BAAs may, therefore, diminish the incentives for procuring long-term transmission rights through EDAM BAAs to CAISO. This, in turn, may cause current transmission customers to forego future investments in these long-term transmission rights, negatively impacting transmission providers that rely on those revenues to meet their transmission revenue requirements. EDAM’s transmission provision and compensation proposal does not currently appear to include a mechanism to provide revenue sufficiency to mitigate these types of concerns.[1]

PIOs encourage CAISO and the EIM Entities to consider whether direct payments between transmission providers in EDAM might offer a solution to this issue, while still allowing EDAM to maximize transfers between BAAs. Alternatively, PIOs suggest that CAISO work closely with entities that own transmission rights impacted by this element of the proposal to help identify a solution that protects those investments, while also addressing CAISO’s market pricing, modeling and other concerns that may have driven the proposal to eliminate intertie bidding and self-scheduling through EDAM BAAs.

Finally, PIOs have concerns that the potential for transmission limitations contributing to the August 2020 blackouts could have ripple effects in EDAM. While it may be premature to determine the extent to which transmission availability was a factor in these events, results from pending analyses may reinforce PIOs’ concerns about restricting intertie bidding in EDAM, as such limitations would have the potential to exacerbate outages in the future. PIOs suggest that the next iteration of the Straw Proposal address transmission availability under stressed system conditions, both for EDAM and for the EIM, and include proposals for the design of appropriate and flexible incentives to ensure outages are prevented while not undermining long-term transmission rights.

Potential impacts on renewable resources delivering to California

Another unintended consequence of not allowing intertie bids or self-schedules at the CAISO interties is that it could have negative impacts on renewable resources that are located outside of CAISO, but that are used to meet California’s RPS law. These resources utilize their transmission rights and accepted bids or self-schedules into CAISO to demonstrate “delivery” to a California BAA for purposes of meeting the requirements of Portfolio Content Category 1 under the law. By eliminating the ability for transactions that flow through EDAM BAAs to submit CAISO intertie bids or self-schedules, it is unclear how existing or potential future resources outside of CAISO could demonstrate “delivery” to the CAISO, especially since CAISO has not provided details on whether or how e-Tags would be used under EDAM, and whether they could be resource-specific. This unfortunate unintended consequence would likely discourage entities in CAISO from contracting with a renewable generation provider that is not located inside of the CAISO BAA.

As noted earlier in these comments, one of PIOs’ key EDAM principles is for the market to enable more diverse renewable resources on the system and to encourage, rather than discourage, entities from engaging in more diverse renewable procurement. In the absence of intertie bidding and self-scheduling at CAISO interties that adjoin to EDAM BAAs, PIOs request that CAISO consider the implications for diverse resource procurement that might result from challenges with out-of-state resources qualifying as Portfolio Content Category 1 resources under California’s RPS law.

Transmission provision impact on resource procurement and support for further consideration of elimination of rate pancaking in EDAM’s optimization

EDAM has the potential to offer significant benefits across the West, but PIOs and other stakeholders recognize that, while EDAM can offer benefits, it is not a  Regional Transmission Organization (“RTO”). Therefore, EDAM’s design does not contemplate the development of a transmission cost allocation framework that would allow for sharing of either existing or future transmission investment costs across the footprint without necessitating transmission service. Instead, under an EDAM framework, participants would continue to recover the costs necessary to meet their transmission revenue requirements primarily through selling transmission under their OATT (with the potential for additional transmission revenues from Bucket 3 transmission transactions under EDAM and from EDAM transfer revenues).

Because the transmission cost recovery framework effectively remains the same under EDAM, it does not offer substantial cost savings benefits to LSEs that procure renewable and other clean resources that are remote from their loads. Under the EDAM construct, these entities would need to continue to purchase OATT transmission service from the location where the resource is located and through all intervening BAAs in order for the characteristics of the resource to be counted towards the RS obligations of the BAA where the LSE resides. This practice will result in continued rate pancaking in the context of long-term resource procurement. While it may not be possible for EDAM to remove this type of long-term rate pancaking, the current Straw Proposal would generally allow removal of “sunk” transmission costs in commitment and dispatch in the day-ahead timeframe (when EDAM transfers are facilitated by Bucket 1 & 2 transmissions). However, as currently proposed, Bucket 3 transmission would result in a hurdle rate added to the optimized dispatch of resources (akin to the operational rate pancaking that exists in the West today). While PIOs view the removal of hurdle rates for most day-ahead commitment and dispatch decisions (via Bucket 1 and 2 transmission provision) as positive, we would like to understand if any additional efforts have been made (or could still be made) to reduce or eliminate the commitment and dispatch transmission rate pancaking that will occur via Bucket 3 transmission provision. We urge CAISO to design the EDAM such that transmission owners receive reasonable compensation, while also avoiding the negative impacts of rate pancaking.

Additionally, PIOs have concerns that if compensation for transmission rights and congestion cost allocation is not properly designed, EDAM could actually serve to create further barriers to diverse and remote renewable procurement in the West. (PIOs further expand on this in the below section on Congestion Revenue Rights.) The importance of accessing these diverse resources and further, the ability to efficiently move those resources across BAAs, was underscored by the events that occurred in the August 2020 rotating outages event.

Need for transparency in the transmission provision framework

The EDAM Bundle 1 Straw Proposal raises a number of concerns related to accessibility and transparency on how much transmission is made available for each of the “buckets” of transmission envisioned in the proposal. From PIOs’ perspective, these issues are a key EDAM principle that will be critical for enabling efficient market outcomes and eliminating or at least minimizing, market power concerns that center around the voluntary provision of transmission to EDAM. We also anticipate that accessibility and transparency details will be important to other entities that are dependent on the CAISO market.

Under the current Straw Proposal, when Bucket 1 transmission (required for the RSE) and Bucket 2 transmission (made available by transmission customers) effectively runs out, EDAM will turn to Bucket 3 transmission (made available for a usage fee by transmission providers). When this happens, there may be significant pricing impacts across the EDAM footprint as energy prices adjust to reflect the transmission cost component of Bucket 3 transmission. Additionally, the amount of Bucket 1 and 2 transmissions made available in EDAM will impact the Marginal Cost of Energy (“MCE”) in each BAA, which in turn will impact the amount of transfer revenue between BAAs. For these reasons, it is critical for CAISO to provide additional transparency on how much transmission is available under each individual bucket of transmission and to what the required hurdle rate is for Bucket 3 (for each EDAM BAA or transmission provider). Specifically, PIOs recommend that the CAISO consider a mechanism for improving the transparency and accessibility of information made available on how much transmission is allocated in EDAM for use between BAAs. Information clearly identifying the entity providing transmission and the quantity provided for each bucket for each hour of the day should be posted to CAISO’s publicly available portion of Open Access Same Time Information System (“OASIS”) and should be updated at least daily.

Another transparency and accessibility concern relates to the Straw Proposal’s framework for determining internal transmission limits within each EDAM BAA. In its July 29^th meeting to review the Straw Proposal, CAISO indicated that each EDAM BAA would have discretion in determining how much of its transmission system is optimized through EDAM. CAISO further indicated that within the EIM construct, internal transmission constraints vary for each BAA, but that generally all transmission within the BAA is released for EIM use. To reduce potential skepticism of the EDAM proposal, additional details are needed on what limitations EIM BAAs currently place on their own internal transmission and, upon EDAM implementation, CAISO should provide information about how much transmission individual BAAs make available for use by EDAM within their own systems. Availability of this type of data may also help address concerns about how the availability of transmission (including that within an EDAM BAA) might affect market prices, market efficiency, and market power.

Transmission Availability under Stressed System Conditions

Finally, PIOs have concerns that the potential for transmission limitations contributing to the August 2020 blackouts could have ripple effects in EDAM. While it may be premature to determine the extent to which transmission availability was a factor in these events, results from pending analyses may reinforce PIOs’ concerns regarding transmission limitations in EDAM, as such limitations would have the potential to exacerbate outages in the future. PIOs suggest that the next iteration of the Straw Proposal address transmission availability under stressed system conditions, both for EDAM and for the EIM, and include proposals for the design of appropriate and flexible incentives to ensure outages are prevented while not undermining long-term transmission rights.

[1] While some revenue may be accrued via transfer revenues and usage fees, it is not clear that these will be sufficient to fully address transmission revenue concerns.

5. Provide detailed comments including examples on the Transfer and Congestion Revenue Distribution topic:

PIOs recognize that EDAM congestion revenue and transfer revenue distribution proposals must address the need to provide revenues to support transmission providers’ investments while also allowing transmission users to pay for their transmission use and efficiently hedge their risk. PIOs also recognize the motivation for CAISO to propose a transfer charge that allows for price differentials to be compensated between BAAs that facilitate transfers from a generation source BAA to a sink BAA. However, PIOs offer the following comments and concerns regarding transfer and congestion revenue distribution:

• PIOs support a 50/50 split for Bucket 1 and Bucket 2 transfers between EDAM entities but have concerns with respect to Bucket 3 transfers.
• PIOs believe additional clarity is needed regarding the use of e-Tags in EDAM.
• PIOs raise concerns with the potential for inconsistent distribution of congestion revenue rights under the current framework.

PIOs support a 50/50 split for Bucket 1 and Bucket 2 transfers between EDAM entities but have concerns with respect to Bucket 3 transfers

PIOs recognize the use of transfer revenue as an innovative first-time revenue product to be implemented in the day-ahead and (potentially) real-time markets. Therefore, any market design elements that define these charges should be as simple and easy to implement as possible. At a high-level, PIOs support a 50/50 split for EDAM Bucket 1 and 2 when transfers are EDAM-to-EDAM entity transactions. This approach helps ensure a balance of incentives and equitable sharing of benefits of EDAM transfer revenues. However, transfer charges for Bucket 3 transfers will create rate pancaking that limit the efficient dispatch of generation resources and, as discussed earlier in the transmission provision section, PIOs urge CAISO to evaluate whether there are alternatives that could eliminate the transmission rate pancaking that will occur when the market utilizes Bucket 3 transmission. Additionally, it is unclear from the current Straw Proposal if the CAISO will be managing and settling transfer revenue charges in the EDAM, or rather, if each BAA will manage this process. This aspect of the current proposal should be clarified.

Need for clarity and consistency on the use of e-Tags in EDAM

In the next version of the Straw Proposal, CAISO should provide additional details on how it plans to use e-Tags within EDAM and further, should ensure that there is consistency in how e-Tags are used in EDAM. The PIOs are not clear whether e-Tags will be used for external resource participants only for settling revenues (congestion rent or transfer fees) or if they will be also used as part of the accounting for energy transfers between BAAs and further, whether e-Tags will be source-specific or not.  PIOs also raise concerns about inconsistency (i.e., unevenness) of e-Tag use between EDAM versus third-party participating entities. This inconsistency would create varying levels of visibility into the nature of the transactions and could possibly result in higher administrative costs for smaller external participants. PIOs recommend a more uniform approach to e-Tag usage across the EDAM footprint.

Concerns with the potential for inconsistent distribution of congestion revenue rights

In the Straw Proposal, CAISO has left open the option for each EDAM Entity to determine how to treat internal congestion revenue right distribution through its own OATT. This leaves open the possibility that each EDAM Entity could have a different approach to congestion revenue right distribution, especially since many potential future EDAM Entities are not FERC-jurisdictional. The risks of different transmission and congestion revenue distribution approaches across EDAM BAAs may actually create additional disincentives for LSEs to procure remote renewable resources that must be transferred across multiple BAAs under an EDAM framework. Today, these entities can procure remote resources at a defined PPA price and procure necessary transmission rights to deliver to their load. As we move to EDAM, many transmission rights will be converted into congestion revenue rights (i.e., financial rights). If each EDAM Entity has a potentially different mechanism for distributing congestion revenue rights, it will substantially increase the risk of remote resource procurement and reduce the value of the replacement financial hedge. Stated another way, with differing congestion revenue distributions in EDAM, LSEs seeking remote renewable resources would have fewer assurances than they do today that they would be able to secure an effective financial hedge for procurement of those resources.

Therefore, PIOs recommend a consistent approach for the distribution of congestion revenue rights across the EDAM footprint, as well as transparent and periodic reporting (e.g., quarterly) of congestion revenue rights. A consistent revenue rights distribution framework may be accomplished through the development of a pro forma approach that would apply to each EDAM BAA. Ultimately, PIOs encourage the CAISO to consider various mechanisms for congestion revenue distribution that will support consistency and incentivize more diverse resource procurement.

6. Additional comments on the bundle 1 straw proposal or EDAM initiative:

1. Please provide your organization’s overall position on the EDAM bundle 1 straw proposal:

2. Provide summary of your organization’s comments on this proposal:

PPC represents the interests of nearly 100 publicly owned utilities in the Northwest.  Our members are interested in the potential development of an EDAM from several different perspectives:

• as load serving entities in the potential EDAM footprint;
• as current, planned or potential EIM participants;
• as possible EDAM participants – either as EDAM Entities, owners of participating generation, or both;
• as active participants (both as buyers and sellers) in Western bilateral markets which will be impacted by an EDAM; and
• and as BPA preference customers and key stakeholders in the agency’s consideration of whether to participate in regional markets.  PPC works closely with BPA and will be making recommendations in the agency’s decision-making processes pertaining to EDAM and other market opportunities. [1]

PPC appreciates the opportunity to comment on the CAISO’s Extended Day Ahead Market Bundle 1 Straw Proposal.  The potential for expansion of the CAISO’s Day Ahead Market stands to significantly change the energy landscape for entities across the West.  We appreciate the hard work that CAISO staff has already put into this proposal as well as the efforts of the EIM Entities who introduced many of the aspects of the potential day-ahead framework in early 2020.  If the EDAM effort is to be successful, it will be essential that entities across the West have confidence in the design, operations, and oversight of the EDAM as well as confidence in the structure of the governance overseeing the market, which is being addressed through a separate initiative.

There are significant potential benefits to be gained from a centralized day-ahead market in the West and PPC continues to support exploration of a West-wide day-ahead market.  It will be crucial that the market design fairly compensates resources for the attributes they provide, that benefits of the market are equitably allocated among market participants, and that maintaining reliable service across the EDAM footprint is the top priority.  PPC supports many aspects of the EDAM Bundle 1 Straw Proposal and supports the proposed framework as a strong foundation on which to continue building a day-ahead market for the West; however, there are sufficient outstanding questions that PPC is not prepared to offer full support for the proposal at this time.  Again, the proposal sets forth a strong foundation for future discussions and we look forward to working with the CAISO, the EIM Entities, and other stakeholders to build upon this framework in the coming months and to continue to refine the straw proposal to ensure that the principles related to day-ahead market design identified by Northwest Public Power[2], CAISO[3], and the EIM Entities[4] are all met.

[1] Today, BPA depends on public power to fund almost 80% of its power operation, and, including power and transmission, Northwest public power pays for nearly 70% of the agency’s overall costs.

[2] Northwest Public Power Day-Ahead Market Design Interests, https://www.ppcpdx.org/wp-content/uploads/NW-Public-Power-DRAFT-Day-Ahead-Market-Interests-11-12-19.pdf

[3] As identified in the CAISO Extended Day-Ahead Market Bundle One Straw Proposal, pgs. 12, 26 and 30.

[4] As identified in the February 11-12 EIM Entity Presentations on: Resource Sufficiency, pg. 9, Transmission Provision, pg. 6, and Congestion Rents, pg. 7.

3. Provide detailed comments including examples on the Resource Sufficiency Evaluation topic:

PPC strongly supports the proposal to establish a Resource Sufficiency (RS) Evaluation in EDAM.  This evaluation should be designed to ensure that entities are not able to “lean” on one another or rely on capacity supplied by other participating Balancing Authority Areas (BAAs) without proper compensation.  PPC supports several aspects of the current proposal to meet this objective, requests clarifying information on additional areas of the EDAM RS proposal, and has concerns with some aspects of the proposal that either do not do enough to deter “leaning” or are overly restrictive and may cause unduly limit resources’ ability to participate in the market.

EIM RS Tests Should Be Reviewed Before They Are Used as a Starting Point

While the framework for the RS evaluation used in the EIM could serve as the basis for an EDAM RS evaluation, PPC has questions about whether the existing EIM RS tests sufficiently deter leaning.  We request that CAISO work with stakeholders to conduct a review of the current EIM RS tests to better understand how these tests are functioning and whether they are achieving their intended outcomes.  This review should include an assessment of the EIM RS tests during recent periods where the CAISO BAA was in an EEA-3 as an example to help better understand the impacts of the current EIM RS tests under tight grid conditions.  The review with stakeholders should address both questions of whether the outcome of the RS tests was as expected (we understand this to be CAISO’s perspective after initial review) and whether those outcomes are appropriate and consistent with the objective of the tests.  This review will be important information that will help improve the design of the proposed RS tests in the day-ahead market and should be completed in advance of the finalization of market design for the EDAM Bundle 1 topics.

Support for Aspects of CAISO’s EDAM RS Straw Proposal

As stated above, there are several areas of CAISO’s straw proposal on EDAM RS that PPC strongly supports.  First, PPC strongly supports the need for an RS evaluation in EDAM, particularly given the lack of a consistent Resource Adequacy program/requirement for entities within the potential EDAM footprint.  The RS evaluation is an important tool to ensure equity and prevent leaning in this scenario.  Further we support the objectives of the RS evaluation as identified in the CAISO’s straw proposal.

PPC supports the proposal to apply the RS evaluation at a BAA level but asks that the CAISO work with EDAM entities to identify and develop additional tools for EDAM entities related to the RS evaluation.  These tools could help provide better visibility to EDAM Entity BAAs on contributions of load serving entities and resource owners within the BAA to meeting the RS tests and could potentially facilitate allocation of obligations related to passing RS tests within the BAA.  Any such allocation should still be done at the discretion of and administered by the EDAM Entity BAA.

We also support the concept of allowing bid range trading to maximize the benefits created through EDAM.  While we support this concept, additional discussions clarifying exactly how this process would work would be helpful at the next stakeholder meeting.

Many aspects of the proposed RS evaluation timeline appear to be reasonable.  In particular, PPC supports setting the final targets for the RS tests at 5 A.M.  Setting these targets earlier in the day and creating binding RS obligations will allow EDAM entities enough time to address any potential shortages bilaterally in advance of the RS evaluation.  This additional time will be particularly important for entities like BPA who have diverse ownership of generation and multiple load-serving entities within their BAA, which will create additional challenges when working to address potential RS test failures. 

PPC supports CAISO’s proposal to conduct regular reviews of the RS tests’ performance.  As part of these reviews, CAISO should not only report out on metrics related to the application of the RS evaluation, but also work with stakeholders to determine whether the RS evaluation is achieving the desired objectives established by the CAISO and stakeholders.  Modifications to the RS evaluation may need to be made after the EDAM goes live.  The potential need for a real-time RS evaluation may be one area for example, where additional information will be gained once EDAM begins operation could further inform an improved market design.

Recommendations for Improvement

Again, PPC supports the general framework proposed for developing a day-ahead RS evaluation.  We offer several recommendations to improve upon the current proposal and ensure the objectives of the RS evaluation are met.

In order to deter leaning, it is likely that more stringent failure consequences are needed.  CAISO proposes “freezing” an EDAM Entity’s transfers if it fails either the capacity up or capacity down test for an hour, similar to the penalty currently applied if an entity fails the flex ramp test in the EIM today.  Freezing transfers is certainly an appropriate first step and helps limit the amount that any participant is able to lean on other participants for capacity.  However, this is not an adequate penalty to deter leaning, particularly in times of tight supply.  CAISO should explore also instituting a financial penalty associated with failing the capacity up or capacity down test in EDAM.  The magnitude of such a penalty and the specific conditions under which it would apply should be further discussed with stakeholders.  Creating such a financial penalty would help deter entities regularly failing the capacity up or capacity down test and continuing to rely on a high level of frozen imports.

As part of a comprehensive review of the existing EIM RS evaluation, consideration should also be given to whether transfers should be further restricted when an entity fails the RS flex ramp (or day-ahead capacity up/down) test.  This should be considered because while freezing imports or exports at their current level limits the amount of leaning that is able to occur, it still allows an entity that is short of the capacity or flexibility needed to reliably serve their BAA to rely on capacity and flexibility supplied by others without adequate compensation.  We look forward to further discussion on the best combination of failure consequences related to RS evaluations in the EIM and EDAM.

At the stakeholder meeting on EDAM Bundle 1 topics, CAISO introduced the idea of daily energy limits which would be applied to energy limited resources in the RS test.  The level of detail provided in the presentation makes it difficult to comment on the specifics of the proposal, particularly as it is not addressed in the CAISO’s straw proposal.  Based on the information provided, PPC is concerned that these proposed daily energy limits would unnecessarily reduce the assumed output of energy limited resources, including hydro generation, at key hours of the day in a manner that does not reflect realistic limitations of that generation.  This could result in increased failure of the RS evaluation for EDAM Entities when they would, in reality, be capable of meeting the capacity, flexibility and energy needs in their BAA.  This, in turn, would reduce the benefits for all EDAM participants.  CAISO should provide additional information about this proposal, how it would be applied to various types of generation, and anticipated impacts.

PPC Opposes Elimination of the Intertie Bidding Framework

PPC is strongly opposed to the elimination of the Intertie Bidding Framework for EDAM Entities as proposed in the Bundle 1 Straw Proposal.  Retention of this framework is important to maintaining voluntary participation in EDAM (discussed in more detail below).  Without this framework, the CAISO would essentially force any potential bidder within an EDAM Entity BAA to utilize the EDAM to export to the CAISO BAA.  This is not consistent with voluntary participation.  PPC looks forward to more discussion on this issue and potential solutions that preserve the voluntary nature of EDAM, a principle that is paramount to PPC members.

Areas for Additional Consideration

There are several areas that PPC would like to highlight for additional consideration.  Some of these are directly related to the CAISO’s RS proposal and others are issues that are being addressed through separate initiatives, but are nonetheless important for PPC and our members in understanding the potential impacts of the expansion of the CAISO’s day-ahead market.

First, in order to ensure equity among all participants, it is critical that the RS evaluation is applied consistently among all EDAM (and EIM) participants.  More information is needed on whether the current RS tests in the EIM are equitably applied to all participants including the CAISO BAA.  Ideally as part of a larger review of the EIM RS evaluation, there should be an assessment of whether the EIM RS tests – particularly the balancing test – are consistently applied among BAAs.  The consistent application of the RS evaluation will become even more important in EDAM where entities are committing resources based on market outcomes to ensure fair compensation for resources and to ensure reliability.

Additionally, PPC notes that while a strong Resource Sufficiency test is required to reduce concerns about leaning and reliability, it alone is not enough to completely allay these concerns.  PPC supports the CAISO’s objective to achieve the identified principles related to RS while “retaining state and local control over integrated resource planning.”[1]  However, we also note that the resource adequacy and integrated resource planning programs within the EDAM footprint must be robust enough to ensure that entities are properly procuring sufficient resources in the longer term to support a reliable day-ahead and real time market.  Thus, a Resource Sufficiency evaluation is necessary, but alone is not sufficient.  This has become of particular concern given the recent supply shortages faced by the CAISO BAA and some of the problems with the CAISO’s current Resource Adequacy program identified as drivers for these shortages.  CAISO continues to work with stakeholders – as well as the California Public Utility Commission and California Energy Commission – on improvements to current Resource Adequacy policies.  These improvements and others will be critical to support expansion of the day-ahead market and should be pursued as quickly as possible.

Areas for Additional Clarification

PPC requests additional information and discussion on the following areas related to Resource Sufficiency in EDAM:

Crediting of Diversity Benefits – PPC would like to have more discussion with CAISO and stakeholders on whether it may be appropriate to revisit the allocation of diversity benefits in both the EIM and EDAM.  The composition of the EIM has changed significantly since its inception and a review of this allocation would help ensure that benefits are being equitably allocated to all participants.  Beyond the way that the benefits are distributed, additional information on the planned calculation of these benefits in EDAM would also be helpful.

Effectiveness of Current RS Test and Failure Consequences – Above we raise several issues related to the current EIM RS Evaluation.  We reiterate the importance of looking into these issues and using those findings to further inform the development of the EDAM RS evaluation to ensure it is effective as possible in meeting its objectives – particularly in discouraging leaning.

[1] CAISO Extended Day Ahead Market Bundle One Straw Proposal, pg. 12

4. Provide detailed comments including examples on the Transmission Provision topic:

The three-bucket framework for transmission provision appears promising and we look forward to further developing this proposal in future iterations.  There are several aspects of the proposal which PPC supports and others where additional information is needed to assess the CAISO’s proposed approach. 

Key Considerations as Transmission Provision Proposal Develops

Transmission Provider Defined Limits – Consistent with the CAISO’s proposal, it is critical that transmission is “determined and offered at the discretion of each EDAM  BAA.”[1]  The transmission provider cannot be “forced” to make transmission available to EDAM, nor can the EDAM utilize any transmission in excess of what has been made available to the market by the Transmission Provider and its customer through donations.  This is addressed further below in our comments on “Voluntary Participation.”

Transmission Made Available to EDAM and Bilateral Market on Equal Terms – EDAM should not have preferential access to available transmission in EDAM Entity BAAs.  Any transmission made available for EDAM dispatches must be made available to bilateral entities on equal terms.  This includes the price at which the Transmission Provider is compensated for otherwise unused transmission, the quality of the product (service that would be considered “non-firm” in the bilateral market should not be treated as “firm” if it is related to EDAM dispatches), and the timing at which the service is made available.  We understand that this last issue may present some specific challenges given the time needed to perform the EDAM market optimization.  Stakeholders and CAISO should work together to address this concern in future iterations of the proposal.

EDAM should rely on “reliable and high quality” transmission ­– In the EIM Entities’ presentation on Transmission Provision from February 11-12, 2020 they set forth the principle that transmission used for EDAM must be “reliable and ‘high quality.’”[2]  PPC agrees with this principle.  It will be crucial that participants in EDAM have a high confidence that resources receiving day-ahead awards through EDAM will be deliverable in real-time.  Relying on non-firm transmission or transmission that can be displaced by a transmission rights holder who decides after the day-ahead optimization to utilize their long-term transmission rights, does not provide that confidence.  It was unclear based on CAISO’s Straw Proposal and accompanying presentation whether CAISO intended to only allow firm and near-firm transmission products for use in EDAM or whether non-firm transmission will be allowable.  CAISO should clarify its position in the next iteration of its proposal and address how its proposal is consistent with the principle on reliable transmission identified above.

Efficiency and Cost Shifts Are Balanced – Reducing hurdle rates increases efficiency and will result in increased benefits to the EDAM footprint as a whole.  However, this interest must be balanced with the potential for shifting costs to other entities in the West.  Eliminating charges for the use of EDAM Entity transmission entirely could significantly shift costs to entities that receive little or no benefit from EDAM dispatches.  These interests must be balanced as the design for transmission provision is formed.  The CAISO proposal attempts to address these concerns and we look forward to more discussion on the details of this proposal to ensure these interests are adequately balanced in the final EDAM market design.

Areas for Additional Clarification

A previous presentation on transmission provision given by the EIM Entities included a draft timeline indicating when transmission required for EDAM would be procured, including a potential “OASIS processing hold” while the day-ahead market optimization was run.[3]  This proposal has the potential to significantly impact bilateral access to transmission during certain periods and is an important detail in determining how bilateral markets may be impacted by an EDAM.  PPC requests that CAISO work with stakeholders to develop a proposed timeline related to EDAM transmission provision in its next proposal with a particular focus on working with EDAM Entities to understand impacts to their existing OATT transmission framework.

[1] CAISO Extended Day-Ahead Market (EDAM) Bundle 1 Straw Proposal Presentation, pg. 45

[2] [2] EIM Entities Presentation on Transmission Elements of EDAM Design, Feb 11-12, 2020, pg. 17

[3] EIM Entities Presentation on Transmission Elements of EDAM Design, Feb 11-12, 2020, pg. 27

5. Provide detailed comments including examples on the Transfer and Congestion Revenue Distribution topic:

There are aspects of the CAISO’s straw proposal on Transfer and Congestion Revenue Distribution that PPC supports and other areas where more information is needed to assess the proposal.  We look forward to discussing these issues in future iterations of the EDAM proposal.

Support for Aspects of CAISO’s EDAM Transfer and Congestion Revenue Straw Proposal

PPC supports the principles set forth related to the allocation of transfer and congestion revenue in the straw proposal.  In particular, ensuring that transfer and congestion revenues are allocated to the parties making transmission available is important to incent continued long-term investment in transmission on EDAM Entities’ transmission systems and allow for stable cost recovery.  More discussion on the particulars of the proposal put forth by the CAISO will be helpful, but PPC provisionally supports the proposed general framework proposed as workable for allocating transfer and congestion rents.

In concept, PPC supports the proposal to split transfer revenues 50/50 between the two EDAM Entities between which the transfer is flowing.  This appears to be an equitable approach to allocating the revenues.  In the CAISO proposal, this 50/50 split would only be applied to Bucket 1 and Bucket 2 transmission with 100% of Bucket 3 transmission being allocated to the transmission provider which makes the otherwise unused transmission available to EDAM.  PPC recommends that it would be more equitable to first compensate the Bucket 3 transmission provider for the “hurdle rate” associated with Bucket 3 transmission (to ensure cost recovery) and then split any remaining transfer revenues 50/50 between source and sink BAAs, similar to the treatment of Bucket 1 and 2 transmission.  While this is PPC’s preliminary position, additional discussion is needed to ensure the proposed 50/50 split would not result in any unintended consequences.

In the straw proposal CAISO offered four options for how to allocate transfer and congestion revenues on paths where intertie scheduling limits may be binding (ITC congestion) or transfer limits between BAAs may be binding (transfer congestion).  Based on current the information provided, it appears most equitable if both the ITC congestion and transfer congestion is split 50/50 between the source and sink BAAs in these instances.  This also seems to limit the opportunity for “gaming.”  Otherwise there may be incentives to drive either the ITC or transfer limits between BAAs to bind in order to receive a greater share of the revenues resulting from congestion.  While more discussion is needed to ensure there are not unintended consequences of this proposal, PPC conceptually supports this 50/50 approach.  This would also be more consistent with the 50/50 approach being applied to transfer revenues between BAAs in other instances.  It is PPC’s understanding that this 50/50 approach is not currently applied in the EIM.  We recommend that CAISO and stakeholders discuss extending this policy to the EIM as well as EDAM to enhance equity in the existing market. 

Areas for Additional Clarification

Transfer Revenues - The proposal to create a new category of “transfer revenues” appears to be a potentially useful tool to help CAISO and EDAM Entities better track revenues resulting from congestion in the market.  While PPC is likely to support the creation of the new “transfer revenues” we request more discussion, including additional examples, to ensure that there would not be unintended consequences from treating some revenues resulting from binding constraints as “congestion revenues” while others are treated as “transfer revenues.”

Administration - PPC also seeks additional clarification on how the distribution of congestion and transfer revenues to participants would be administered.  While the best option is likely having the CAISO allocate the revenues to each EDAM Entity who would then allocate to entities within its BAA, we are interested in exploring, at least in concept, other tools that might be available.  For instance, we would like more information on how the CAISO might facilitate at CRR program across the EDAM footprint if that option were pursued.  And if each EDAM Entity is responsible for distributing these revenues within its BAA, we are interested in what additional tools or information the CAISO could provide to facilitate that distribution.  It is our understanding that there is little visibility into the congestion offsets allocated to each EIM Entity in the EIM, and thus most, if not all, EIM Entities allocate this out by metered demand.  This is not ideal in the EIM and likely unworkable in the EDAM.  PPC encourages CAISO to explore with potential EDAM participants what tools may be created to facilitate appropriate allocation of congestion and transfer revenues within each EDAM Entity BAA.  We anticipate this discussion may result in tools that would be helpful to improve the allocation of congestion within the EIM as well.

6. Additional comments on the bundle 1 straw proposal or EDAM initiative:

PPC offers these additional comments for consideration as CAISO staff develops its next iteration of this proposal and in the interest of continuing to improve and expand to a West-wide day-ahead market.

Voluntary Nature of EDAM is Critical

PPC will be assessing any EDAM proposal as a package including the proposed market design and proposed governance.  While the Governance Review Committee has made great strides in constructing a proposal that addresses many of the concerns from entities outside of the CAISO BAA, the fact remains that there are some limitations to amount of “regionalization” that can be achieved under the current framework.  Thus, the voluntary nature of EDAM will be critical for PPC and its members in considering both their own participation in EDAM and whether to support BPA’s potential participation in an extension of the CAISO day-ahead market.  To truly make EDAM voluntary, the market must be designed in a manner that still allows for entities to participate in bilateral markets.  This will include EDAM timelines that do not interfere with bilateral trading and retention of policies that facilitate bilateral trades (such as the intertie bidding framework as discussed above). 

PPC has heard other stakeholders raise concerns about making EDAM a voluntary market and would like to further explore these concerns in future discussions.  For instance, what additional risk do these entities see in a voluntary EDAM compared to a continuation of the current day-ahead framework?  What, if any, remedies may be available to address these concerns while still maintaining the voluntary aspect of the market for EDAM participants?  We are open to further exploring potential solutions, but the voluntary nature of EDAM is a requirement for PPC and its members.

Better Understanding of the Current Market Dynamics is Key to EDAM Success

The recent capacity shortage and frequency excursion events this summer have drawn attention to some areas that need improvement in CAISO’s markets.  The Preliminary Root Cause Analysis begins to identify next steps to resolve these issues, but particularly when it comes to the EIM is insufficient.  There has also been no review of the events in September which, while not resulting in outages, are also concerning, and should be analyzed.  PPC is sympathetic to the resource constraints faced by the CAISO, which is staffing not only the many ongoing stakeholder initiatives, but also additional review and analysis of these events.  Nonetheless, a more thorough review of the CAISO market during these events is necessary to better understand how the real-time and day-ahead rules functioned under these conditions and how participants were impacted.  This review should be conducted soon to inform EDAM market development. 

Appointing an External, Independent Market Expert Would Be Beneficial

PPC continues to support the appointment of an external, independent market expert as proposed by the Governance Review Committee.  The external, independent market expert could help supplement the existing resources available from CAISO staff, DMM, and the MSC to help conduct the analysis requested above in a timely manner.  This additional resource could not only help address staffing constraints, but also allow for a study with a particular focus on the operation of the EIM during these events. 

Appointment of an external, independent market expert would not only be beneficial from this perspective but could also allow that expert to provide analysis on specific aspects of the EDAM proposal.  PPC continues to support access to additional expertise and supports appointment of an external, independent market expert as soon as possible.

Day-Ahead Co-optimization of Products is an Important Element of EDAM

Recently CAISO announced its intention to revise its Day Ahead Market Enhancements (DAME) proposal to focus more narrowly on creating new imbalance reserve products.  PPC supports the creation of these products as an important improvement to the day-ahead market but is concerned about CAISO’s decision to deprioritize the co-optimization of capacity and energy by maintaining separate IFM and RUC processes.  If CAISO continues ahead with this revised version of the DAME proposal, it should add the day-ahead co-optimization of capacity, energy, and flexible capacity products (such as the new imbalance reserves) to one of the early EDAM issue bundles.  This co-optimization will significantly improve the efficiency of the market and send better price signals leading to benefits for all participants.  This improvement will be an important foundation for an EDAM and should continue to be explored as quickly as possible.

Proposed “Joint Authority” is Appropriate for Approving EDAM Market Design

If EDAM is to move forward it would significantly impact both EIM Entities and those within the CAISO BAA.  PPC strongly supports the proposal for joint authority of the EIM Governing Body and the CAISO Board of Governors on EDAM matters.  We encourage the CAISO to seek the CAISO Board of Governors’ approval of this departure from the decisional classification rules as soon as possible to provide decision-makers and stakeholders certainty regarding the EIM Governing Body’s role in this decision. 

1. Please provide your organization’s overall position on the EDAM bundle 1 straw proposal:

SDG&E supports the overall EDAM proposal and believes the bundle 1 straw proposal provides a solid foundation for developing a workable proposal that will benefit consumers across the entire western interconnection.  While there may be opportunities to improve upon the current proposal – and stakeholder recommendations for such improvements should be diligently investigated by the CAISO – SDG&E believes additional participation in the day-ahead market is almost certain to provide customer benefits that will far exceed the cost of developing and implementing the EDAM proposal.   

SDG&E understands that the EDAM will allow certain entities to participate in the CAISO’s day-ahead market on terms that are different than entities that participate in the CAISO’s existing day-ahead market.  Entities that have already turned over their transmission entitlements for CAISO day-ahead market purposes, are effectively required to continue doing so.  Under EDAM other entities with transmission entitlements will have the opportunity, but not the obligation, to do so.  This feature is key to the CAISO’s proposal:  voluntary participation in the CAISO’s day-ahead market will attract more transmission capacity than will continuation of the current structure.  The current structure, which requires an entity holding transmission entitlements to commit all of it for day-ahead and real-time market purposes, and which requires entities to submit to the CAISO’s Transmission Planning Process, has attracted relatively limited new participation since initial CAISO formation.   Several municipal utilities and a handful of non-utility transmission owners have joined the CAISO since CAISO formation. 

Voluntary participation, with relatively low entry and exit costs, allows entities with transmission entitlements to test the benefits of day-ahead market participation against the alternative of maintaining the existing contract path fictions.   In the Energy Imbalance Market (EIM) individual balancing authority area imbalances are combined and real-time prices determined on the basis of price/quantity offers and centralized, transmission constrained, dispatch.  The EIM has produced significant benefits for its participants.  As with the EIM, SDG&E believes entities will quickly learn that large customer benefits will flow from centralized unit commitment where day-ahead prices are determined on the basis of price/quantity offers/bids from sellers/buyers, subject to generator operating limits and transmission constraints. 

So, while entities will have the option to not include transmission entitlements in the CAISO’s day-ahead market, SDG&E believes most entities will find that participation provides more benefits than not participating.  This has certainly been the case for the California Investor Owned Utilities (IOUs) where the CAISO’s centralized day-ahead and real-time markets have provided consumer benefits measured in the billions of dollars as compared to maintaining the earlier, contract-path based, balancing authority area operations.   Outside of possible market power considerations, SDG&E does not believe a credible case can be made that consumers will be harmed by the CAISO’s proposed EDAM.  Generally, market power will exist regardless of the market structure in which it is exercised.  If anything, the EDAM will provide a more transparent structure under which market power, if it exists, can be identified and addressed.  

2. Provide summary of your organization’s comments on this proposal:

SDG&E’s overall position on the CAISO’s proposed EDAM is provided in response to question 1 above.  However, it is important that the CAISO finalize its Day Ahead Market Enhancement (DAME) proposal first, as those elements will necessarily be part of the CAISO’s EDAM proposal.

3. Provide detailed comments including examples on the Resource Sufficiency Evaluation topic:

The CAISO’s EDAM proposal goes to great length to avoid what some stakeholders consider to be unacceptable “leaning.”  The CAISO proposes to prevent such “leaning” by limiting the amount of load that a balancing authority area can supply through the day-ahead market to the amount of supply shown by the balancing authority area just prior to the operation of the day-ahead market.  SDG&E understands that this feature is necessary to obtain the support for the EDAM proposal.  However, SDG&E believes it is likely that there will be situations where one or more balancing authorities would be happy to be “leaned on.” 

The CAISO’s July 20, 2020 Extended Day-Ahead Market, Bundle One, Straw Proposal contains an example where balancing authority area #1 has forecast demand of 10,000 MW and shown supply of 8,000 MW.[1]  To prevent “leaning,” the EDAM proposal would limit the amount of load that balancing authority area #1 is allowed to serve through the day-ahead market to 8,000 MW.  However, if balancing authority area #2 has forecast load of 4,000 MW and shown resources of 5,500 MW, balancing authority area #2 may be willing to allow itself to be “leaned” on.  In such event, the amount of load that balancing authority area #1 would be allowed to serve through the day-ahead market without the need for short-term bilateral contracting would be increased to 9,500 MW [8,000 MW + (5,500 MW – 4,000 MW)]. 

SDG&E recommends that the CAISO explore the possibility of implementing a mechanism that would allow balancing authorities to make a daily election as to whether they are willing to be “leaned” on.  SDG&E understands that in the above example, the expectation is that balancing authority area #1 would “bilaterally forward contract prior to the start of the day-ahead market for the 2,000 MW of short-term supply, either as energy capacity or imbalance reserves, to transfer the bid range obligation from the selling balancing authority.”[2]  SDG&E’s recommendation would provide balancing authorities with additional flexibility, reduce the challenges of trying to find additional supply on short notice, and allow for greater price transparency since more load (13,500 MW[3] vs. 12,000 MW[4]) would be served directly through the EDAM with a reduced need for bilateral contracting (500 MW[5] vs. 2,000 MW[6]).

[1] CAISO at p. 12-13.

[2] CAISO at p. 13.

[3] 9,500 MW of load for balancing authority area #1 plus 4,000 MW of load for balancing authority area # 2.

[4] 8,000 MW of load for balancing authority area #1 plus 4,000 MW of load for balancing authority area #2.

[5] 10,000 MW of load for balancing authority area #1 less 8,000 MW of supply for balancing authority area #1 less 1,500 MW of supply from balancing authority area #2.

[6] 10,000 MW of load for balancing authority area #1 less 8,000 MW of supply for balancing authority area #1.

4. Provide detailed comments including examples on the Transmission Provision topic:

The CAISO indicates that it is “seeking feedback how physical transmission capability internal to an EDAM balancing authority area should be considered in the EDAM model and optimization while honoring non-participating rights on internal transmission.”[1]  While not ideal, SDG&E recommends excluding transmission capability subject to recall up until real-time, from the day-ahead market optimization.  If this transmission capability is not used by the start of the real-time market, the day-ahead market solution may have been sub-optimal.  However, the alternative of entering point-to-point schedules in the day-ahead market to reserve this transmission capability will also result in a sub-optimal day-ahead market solution to the extent those schedules do not actually materialize.  SDG&E believes more day-head market distortion is introduced by assuming the point-to-point flows will in fact materialize by the start of the real-time market than would be introduced by simply removing the subject transmission capability from the day-ahead market.

The CAISO notes that transmission capacity which connects balancing authority areas (called “transfer capability”) which a transmission provider does not sell to a transmission customer prior to the day-ahead market, could be made available to the day-ahead market.  However, absent a payment for this transfer capability, the transmission provider has limited incentives to make it available.  Accordingly, the CAISO’s EDAM proposal permits a transmission provider to include its unsold transfer capability in the day-ahead market subject to a usage fee (also called a “hurdle rate”) specified by the transmission provider.[2]  In this way, the transmission provider can be compensated for providing the day-ahead market with unsold transfer capability.  SDG&E supports the usage fee/transfer revenue concept and believes it is an efficient mechanism for attracting transmission capability into the EDAM. That being said, SDGE requests CAISO to provide examples showing how the balancing authority area-specific marginal energy costs are determined, how the usage fee is applied in the optimization and how the transfer revenues are calculated.

Some stakeholders are concerned that the ability of non-CAISO transmission providers and transmission customers to voluntarily participate in the EDAM means it will be more difficult to forward procure transmission rights and easier for these holders of transmission entitlements to exercise market power by withholding transmission capability from the EDAM (which would arguably generate lucrative congestion revenues on the reduced amount of transmission capacity which is included in the EDAM).  As SDG&E notes above, the ability to exercise market power exists regardless of the market structure that is in place.  SDG&E believes it is more difficult to detect and remedy market power in forward bilateral markets than it is in centralized spot markets such as the EDAM.  SDG&E is concerned that suggestions to modify EDAM such that transmission rights holders would be obligated on a forward basis (e.g., a year ahead and/or a month ahead) to commit a certain of amount of transmission capability to the EDAM, will discourage participation and actually reduce the amount of transmission capability available to the EDAM.

The CAISO indicates that “for the CAISO balancing authority area, the CAISO proposes a usage fee equal to the variable portion of its wheeling access charge proposed for future implementation as part it Transmission Access Charge Structure Enhancements initiative.”?   As SDG&E has argued since the development of the CAISO, all CAISO transmission costs should be treated as sunk and therefore not influence CAISO market outcomes.  The EDAM presents an opportunity to improve the efficiency of the CAISO day-ahead market by removing the Transmission Access Charge (TAC) based export fee; i.e., by setting the CAISO’s usage fee to zero. 

The result will be a small increase in transmission costs paid by Load Serving Entities (LSEs) within the CAISO. [3] However, SDG&E believes the resulting increased market efficiency will provide customer benefits which more than offset the increase in transmission costs currently borne by CAISO LSEs.[4]   

[1] CAISO at p. 26-27.

[2] “Under the EDAM construct, when transfer limits are binding this will result in a different marginal cost of energy for the source balancing authority area and the sink balancing authority area.  There will no longer be a single system-wide marginal cost of energy, as each balancing authority area’s marginal cost of energy will be determined by its power balance constraint shadow price.  This removes the price differential between balancing authority areas from the marginal cost of congestion.” 

“As a result, transfer revenue is the difference between the power balance constraint shadow price between the source and sink balancing authority area.  If a balancing authority area’s import capability is binding, the marginal cost of energy in its balancing authority area will be higher than balancing authority areas exporting to that balancing authority area.  The difference results in transfer revenue.”  (CAISO at p. 31-32)

  “Transmission providers will be allowed to make available transfer capability at usage fee.  The usage fee or hurdle rate will be included in the market optimization, which will result in transfer revenue collected, which can then compensate the transmission provider.” (CAISO at p. 10) 

[3] Currently a relatively small amount of transmission revenue is generated through the TAC-based export fee which is applied to all exports from the CAISO balancing authority.

[4] The current $12/MWh TAC-based export fee acts as a significant deterrent for external balancing authorities that would otherwise be happy to gobble-up California’s frequent excess of renewable energy.  The export fee is contributing to significant levels of renewable curtailment.

5. Provide detailed comments including examples on the Transfer and Congestion Revenue Distribution topic:

The CAISO states that “for transmission revenue from bucket 1 and bucket 2 transmission there are two options:  50%/50% between source/sink balancing authority areas and 100% to the source balancing authority area.” SDG&E is unclear as to why there are only these two options.  Since the transmission customer is paying for the transmission in buckets 1 and 2, another option would seem to be 100% to the transmission customer.  SDG&E requires more explanation for the CAISO’s proposal. 

6. Additional comments on the bundle 1 straw proposal or EDAM initiative:

1. Please provide your organization’s overall position on the EDAM bundle 1 straw proposal:

2. Provide summary of your organization’s comments on this proposal:

SVP agrees that there needs to be a Resource Sufficiency standard, but is concerned that the current proposal fails to adequately address the seams between the CAISO organized market transmission availability and cost recovery, and that of the surrounding OATT systems.

SVP asserts that each EDAM BAA needs to contribute its transfer capability, and each should fund the embedded costs of its own transmission system.

SVP agrees with the proposed 50/50 split of EDAM transfer revenues.  Only to the extent that there is scheduling over non-EDAM transmission at the interties would there be a need to allocate ITC revenues, and SVP supports the proposed allocation of 100% to the sink BAAs. 

SVP urges the CAISO to perform a study to demonstrate the respective benefits and burdens of the proposed approach on existing LSEs in CAISO, and possibly for external EDAM participants as well.

SVP reiterates its request that CAISO implement, as soon as possible, the hybrid TAC structure included in the September 17, 2018 Draft Final Proposal in CAISO’s TAC Structure Enhancements’ initiative, ahead of the completion of this EDAM initiative.

3. Provide detailed comments including examples on the Resource Sufficiency Evaluation topic:

SVP agrees with general objectives of the Resource Sufficiency Evaluation of preventing leaning, ensuring the reliability of day-ahead awards for EDAM transfers of capacity and energy, and sharing in diversity benefits.  SVP has some concerns, however, about the asymmetry of access to transmission and cost allocation for transmission from external BAAs that would participate in the EDAM to entities within the CAISO, compared with access and cost for transmission from the CAISO for entities within the external BAAs.  The different access and cost allocation could adversely affect CAISO participants’ ability to obtain the transmission required to pass the Resource Sufficiency (RS) Evaluation, while forcing them to pay for transmission within and beyond the CAISO on a basis that is unreasonably burdensome.  As noted in Section 6, it is important that CAISO perform a study to demonstrate the respective benefits and burdens of the proposed approach on existing LSEs in CAISO, and possibly for external EDAM participants as well.

Specifically, the external BAA EDAM participants currently can obtain transmission for exports from CAISO on an hourly (or even more granular) basis and only pay the wheeling access charge and any congestion and losses between the CAISO source and the intertie scheduling point.  There is no mechanism nor obligation for the external BAA participants to obtain the type of Bucket 1 firm transmission rights that are being contemplated for CAISO participants to procure from external BAAs, through the external entities’ OATTs, to support their Resource Sufficiency obligations.  The only mechanism by which Out of Balancing Authority Area Load Serving Entities (OBAALSE) must make a forward commitment towards paying for the embedded cost of CAISO transmission is when those entities wish to obtain export CRRs.  Unless a Bucket 1 type mechanism were established for external EDAM participants that were relying on CAISO resources to meet their RS Evaluation, the external EDAM participant could get credit for CAISO RS resources and only have to pay for actual energy deliveries plus a limited portion of the embedded cost of the CAISO transmission system (in addition to the WAC being limited to the delivered quantity of energy, CAISO is proposing to pass through only the energy portion of the transmission revenue requirement for wheeling customers, which is approximately ½ of the embedded cost of the CAISO transmission system).

In contrast, a CAISO participant that wishes to rely on a resource in an external BAA EDAM participant’s system would be required to request and obtain long-term firm OATT transmission, potentially from multiple BAAs and/or multiple segments on the Bonneville Power Administration (“BPA”) system.  The CAISO participant would be obligated to pick up a significantly greater share of embedded transmission costs because the firm OATT transmission would reflect the transmission provider’s full embedded costs, and the reservation would not be limited to the period when energy is delivered.  The firm OATT transmission, if available, would likely need to be procured for long periods of time in order to preserve the OATT rights.  Thus, even if the RS resource in the external BAA EDAM participant’s system was only needed for a single month, the CAISO LSE might need to make a multi-year commitment to obtain, for example, BPA transmission because the OATT transmission is awarded on a priority basis to parties making longer term requests.  If BPA happens to have sufficient transmission available, the CAISO LSE might be able to obtain the transmission from BPA at cost-based rates.  But if such transmission is not available directly from BPA, the CAISO LSE would need to obtain the transmission from third parties who are not obligated to sell the transmission and are not required to offer it at cost-based rates. 

SVP is concerned that creating a Bucket 1 RS firm transmission requirement - without first addressing the potential transmission market power issues that would be created by the requirement - would harm California consumers.  The way that transmission market power is addressed under the Open Access Transmission Tariff (OATT) is by requiring unused long-term transmission rights to be released prior to real-time.  If CAISO requires RS resources to demonstrate firm transmission prior to real-time, CAISO will have voluntarily created a requirement that thwarts this critical market power mitigation tool.  CAISO has suggested in the RA Enhancements stakeholder initiative that market participants should raise concerns about market power under a transmission provider’s OATT.[1]  But that suggestion fails to address the potential seams issues and rules misalignment, including the possibility that the neighboring OATT transmission release rules would no longer protect CAISO market participants against the exercise of market power.

A CAISO participant with an RS resource located within BPA BAA would be required to secure transmission rights on two segments – BPA’s network segment, and its Southern Intertie segment, forcing them to pay pancaked rates if they can obtain the transmission.  Data from BPA’s Southern Intertie Data report, dated January 28, 2019, illustrates the paucity of long-term transmission that has been released by the parties holding expiring long-term firm transmission rights.[2]  Table 1.1 and Table 1.2 below, extracted from BPA’s report, provide a clear indication that parties that do not currently hold long-term rights on BPA’s Southern Intertie are not likely to be able to obtain expiring long-term firm transmission rights. Between 2012 and 2018, in five of the seven years none of the megawatts up for renewal were released.  In the two years that megawatts were released, only 20 MW and 148 MW, 4% and 31% of the expiring contract volumes, respectively, were released.  Put another way, Table 1.2 shows that typically 100% of Transmission Service Requests (TSRs) were renewed and in one case the TSR that was not renewed was replaced by a new original request from the same party that had the expiring TSR.  While some long-term firm transmission rights are not subject to renewal priority, these amounts are small in comparison to the potential RS Bucket 1 transmission amounts needed under the CAISO’s current EDAM proposal.  

The BPA data suggests that parties that do not currently hold BPA Southern Intertie long-term transmission rights are extremely unlikely to be able to obtain those rights from BPA at BPA’s cost-based tariff rates to support their Bucket 1 RS resource imports.  Instead, they will need to obtain the rights from the current holders, who have priority renewal rights and who are not required to release any unsold rights until just prior to real-time.  If the CAISO proceeds with its proposals, those existing rights holders will know there is demand for the transmission and potentially be able to exert market power over entities that need the transmission to meet their RS Evaluation.

Conversely, the LSEs from external BAA’s participating in EDAM will not need to make a similar long-term commitment towards paying the embedded cost of the CAISO transmission system, and while they properly will not be faced with the potential for CAISO participants to withhold transmission from them, they will be advantaged in comparison to CAISO LSEs.  The CAISO LSEs will effectively be subsidizing the non-CAISO LSEs’ use of the CAISO transmission system because the external BAA participants will be charged for only a fraction of the full embedded cost of the CAISO transmission and then only for intervals in which energy is actually delivered from the CAISO.

CAISO should consider an alternative approach whereby rather than requiring demonstration of rights to transmission to facilitate RS resource imports, it instead performs deliverability studies of the RS resources to ensure the available transmission capacity can support the deliveries of those resources.  As long as the shown RS resources are found to be deliverable, the parties providing the RS resources should be credited.

SVP agrees that bids and self-schedules for imports/exports at CAISO interties should not be permitted from or to EDAM BAAs.  Once a BAA has voluntarily chosen to become an EDAM participant, all of its intertie transmission capacity between EDAM BAAs should be made available for EDAM transactions.  If EDAM participants were allowed to bid at the interties while also bidding their resources within the EDAM market, they potentially could affect how the EDAM market clears and could affect the allocation of the EDAM transfer revenues.  Instead, EDAM participation should be at the resource level as noted by CAISO on Slide 24 of the Bundle 1 Presentation.  This approach ensures accurate modeling of physical flows and does not limit BAAs from providing RS resources to CAISO (or other EDAM) LSEs, If only some of the EDAM resources are modeled at their physical locations, while some transmission within the EDAM footprint is modeled as contractual path flows, CAISO will not have an accurate representation of the expected flows and consequently won’t have accurate market prices.  See the discussion below regarding Transfer and Congestion Revenue Distribution for more information about the importance of not allowing EDAM BAA intertie bidding/scheduling.

[1]       RA Enhancements Working Group presentation, Sept 15, 17, 2020, slide 84.

[2]       Southern Intertie Data as of FY 2018, Bonneville Power Administration, January 28, 2019

4. Provide detailed comments including examples on the Transmission Provision topic:

SVP has some concerns about the three bucket approach (Bucket 1: Resource Sufficiency evaluation transmission; Bucket 2: Non-Resource Sufficiency evaluation transmission in return for transfer revenue; Bucket 3: Non-Resource Sufficiency evaluation transmission from transmission provider).  As noted in our response to Item 3, above, the asymmetry between CAISO customer access to external BAA EDAM transmission service and external BAA EDAM participants’ access to CAISO transmission create equity issues.  A mechanism needs to be developed for external BAA EDAM participants that rely on use of CAISO transmission for their RS resources to pay for the full embedded cost of the CAISO transmission on a long-term forward basis, and CAISO LSEs need to have a reasonable opportunity to obtain OATT transmission for their RS resources located in external EDAM BAAs at cost-based rates (unless SVP’s above suggestion is adopted - of instead relying on deliverability studies for RS resource imports).  Alternatively, the embedded cost of each EDAM BAA’s transmission should be recovered exclusively from LSE’s within each EDAM BAA, and the transmission should be made available to all EDAM participants (as is done within the CAISO) at no charge other than the offsets obtained via EDAM transfer revenues and ITC congestion revenues.  There should be no Bucket 3 hurdle rate, since the underlying transmission already has been paid for by the LSEs within each EDAM BAA, and the EDAM BAA’s share of the transfer revenues will efficiently compensate the BAA for the value/use of the excess transmission.  As discussed in Section 5, removing a hurdle rate in bucket 3 will lead to more efficient dispatch, allowing use of the transmission funded by the respective LSEs through sunk costs.  While we note in section 3 that there is very little, if any, transfer capability available on the Southern Intertie, power is being transferred between the regions using the transmission system.  Adding a firm transmission requirement for Bucket 1 is unnecessary to maintain those transfers, and may in fact disrupt the existing transactions between the regions.

5. Provide detailed comments including examples on the Transfer and Congestion Revenue Distribution topic:

SVP supports the CAISO proposal to allocate EDAM transfer revenues 50/50 between the source and sink BAAs, based on the difference in the marginal cost of energy of the two BAAs as determined by the power balance constraint shadow price.  This approach appears to be a reasonable means of sharing the benefits of the EDAM transfers, since it reflects the marginal cost of serving load via the EDAM transfers.  Rather than allocating only the Bucket 1 and Bucket 2 transfer revenues via this approach, SVP suggests that Bucket 3 transfers also should be allocated in this fashion.  Doing so would result in a more efficient dispatch across the EDAM footprint by avoiding the Bucket 3 hurdle rate.  SVP understands that some parties are concerned that if there is no Bucket 3 hurdle rate, EDAM participants will not have an incentive to procure Bucket 1 or Bucket 2 transmission.  SVP believes this concern is misplaced.  The transmission that is available for the EDAM will consist of the Bucket 1 transmission required for RS resources, the Bucket 2 transmission contributed by parties that have acquired firm point-to-point transmission and designated it for EDAM use, and the remaining Bucket 3 transmission that otherwise would not be used by the EDAM BAA.  In all three cases, the value of the transmission is represented by the difference in the marginal cost of energy between the two BAAs.  The transmission itself is a sunk cost that ultimately must be paid by the load serving entities within each of the BAAs (either in the form of transmission payments or in the form of increased payments to resource suppliers).  If the value of the EDAM transfer is less than the embedded cost of the underlying transmission, parties will not procure and contribute the Bucket 2 transmission and it will be available to become Bucket 3 transmission.  If the EDAM transfer value exceeds the embedded cost of the Bucket 2 transmission, the Bucket 2 contributor will receive additional compensation.

If CAISO is intent on applying a hurdle rate for the Bucket 3 transmission, then the hurdle rate should be determined in a consistent manner for all EDAM BAAs.  That is, if the hurdle rate is determined based on the full embedded cost of a BAA’s transmission, CAISO’s hurdle rate should not be based on only a fraction of the embedded cost of the CAISO transmission system (that reflects that a portion of the transmission system cost is recovered based on demand charges).  Put another way, if CAISO’s hurdle rate is discounted to reflect that a portion of the transmission revenue requirement is recovered from LSEs independent from any export revenues, the hurdle rate for other EDAM BAAs also should be adjusted to recover only a portion of transmission cost.

To the extent there continue to be intertie schedules for non-EDAM transmission, SVP supports allocating the intertie constraint (“ITC”) congestion revenues 100% to the sink BAAs. This will enable CAISO to continue to allocate intertie CRRs to load serving entities that are paying the embedded cost of the CAISO transmission so that they potentially can obtain hedges for their import transactions.  If a portion of the ITC congestion revenue were to be allocated to the source BAA, the CAISO CRRs would no longer be fully funded and the congestion hedge would be diminished.

6. Additional comments on the bundle 1 straw proposal or EDAM initiative:

Prior to concluding the EDAM initiative, CAISO should conduct a comprehensive, independent assessment of the potential impact of the EDAM on both load serving entities and generators within each EDAM BAA (including the CAISO BAA).  The assessment should compare the allocation of costs and benefits under the proposed EDAM structure to both the status quo (i.e., organized CAISO day ahead market with EIM real-time market) and to a scenario in which the same entities in the EDAM footprint were to fully join the CAISO.  This assessment should consider not just the market operational costs, but also the allocation of transmission revenue requirements, since both are affected by the EDAM construct.  It is important that the CAISO conduct the study because it would be extremely difficult for individual entities within the EDAM BAAs (including existing CAISO participants) to perform such a study on their own.  If CAISO is not willing to perform such a study for non-CAISO BAAs, at a minimum CAISO should perform the study for the benefit of the existing LSEs within the CAISO BAA, since these entities could be profoundly affected by the proposed EDAM and are the entities that fund the CAISO operations and pay for the underlying transmission that would be used to facilitate the EDAM.

            Finally, SVP reiterates its prior comments on the February 11-12 EDAM workshops urging CAISO to implement, as soon as possible, the hybrid TAC structure included in the September 17, 2018 Draft Final Proposal in CAISO’s TAC Structure Enhancements’ initiative.  The justification for the hybrid TAC structure is valid whether or not the EDAM is implemented, the hybrid structure has been vetted through an extensive stakeholder process, and there is no good reason to further delay these important changes to CAISO’s transmission cost allocation while the EDAM is being developed.

1. Please provide your organization’s overall position on the EDAM bundle 1 straw proposal:

2. Provide summary of your organization’s comments on this proposal:

As indicated above, the Six Cities are unable to express an overall position with respect to the Bundle 1 Straw Proposal.  The most significant impediment to evaluating the Bundle 1 Straw Proposal is the on-going uncertainty with respect to the fundamental nature of voluntary participation in the EDAM.  As the Six Cities noted in their March 4, 2020 comments on the EDAM workshops held in February, the concept of voluntary participation in the EDAM encompasses a broad spectrum.  At one end of the spectrum, the threshold decision to participate in the EDAM would be the voluntary decision point, accompanied by a provision allowing withdrawal from EDAM participation with a reasonable notice period.  The determination to enter into and remain in the EDAM in anticipation of receiving benefits from such participation would entail a commitment to participate fully in all elements of the EDAM, on equal footing with CAISO entities that are required to schedule all of their load and resources through the CAISO’s market processes.  At the other end of the spectrum, voluntary participation in the EDAM could imply flexibility to decide on a day-to-day or even interval-by-interval basis, whether and to what extent to participate in the EDAM.  In between those two bookends, there could be multiple approaches to the notice expected for EDAM participation (e.g., season-ahead, month-ahead, day-ahead), the length for a commitment to participate (e.g., for a year, a season, a month, or a day), and the scope of participation (e.g., all load and resources within an EIM Balancing Authority Area (“BAA”), a pre-designated portion of load and resources within an EIM BAA, or a variable portion of load and resources within an EIM BAA). 

The choices among the potential parameters for voluntary participation are likely to have significant consequences.  Establishing requirements for commitments that are longer and/or broader in scope will promote stability and facilitate more consistent treatment of EDAM participants, but may be unacceptable to some potential EDAM participants and thereby reduce participation overall.  However, the degree of flexibility allowed for participation in the EDAM will affect the costs for the development and implementation of the EDAM, the magnitude of EDAM benefits, and the distribution of EDAM benefits.  Even more importantly, the degree of flexibility allowed for EDAM participation is likely to affect operational reliability in the CAISO BAA and potentially the BAAs of other EDAM participants.  Market participants within the CAISO BAA have no choice but to participate in the CAISO Day-Ahead Market.  If EDAM participants have the ability to opt-in or opt-out of the EDAM on a short-term basis, market participants within the CAISO BAA will bear the entire risk of increased costs or adverse reliability impacts arising from any EDAM dysfunctions.

In addition, the choices among the potential parameters for voluntary participation necessarily affect the development of market implementation rules, including both the methodology for Resource Sufficiency Evaluation (“RSE”) and commitment of and compensation for transmission.  The Bundle 1 Straw Proposal expressly acknowledges the critical interplay between the nature of voluntary participation and the development of individual EDAM design elements, stating at page 7:

. . . [D]ifferences between CAISO balancing authority area participants and EDAM balancing authority area participants may also affect what voluntary participation means with respect to certain EDAM design elements.  Understanding and appreciating these differences is important for the development of the associated EDAM design elements in a manner that allows for fair and comparable alignment of all participants’ interests.  Allowing voluntary day-ahead market participation by balancing authority areas other than the CAISO may be acceptable, but it will need consideration to ensure it strikes the correct balance.  Consideration of the relative voluntary nature of participation as we extend the day-ahead market to balancing authority areas outside the CAISO is essential for a successful outcome, and the EDAM design necessarily must consider and balance this inescapable duality among participants in terms of each market element in which it arises.

Despite these threshold observations, the Bundle 1 Straw Proposal does not include analysis of the impacts of different approaches to voluntary participation in the EDAM.  The discussion of individual design elements does not make clear what level of flexibility for voluntary participation is assumed, explain how a different approach to voluntary participation would affect each design element, or demonstrate that the proposed design elements are best suited to promote fairness and reliability in the context of a specific participation model. 

In short, the Bundle 1 Straw Proposal does not demonstrate that the proposed design elements “strike the correct balance” to ensure fairness between CAISO BAA participants and voluntary EDAM participants and to ensure reliability.  Subsequent iterations of the Bundle 1 Proposal should include clear explanations of the participation assumptions reflected in the Proposal.  The analysis of participation parameters should identify potential alternative approaches and explain, in as much detail as possible, the advantages and disadvantages, anticipated costs versus anticipated benefits, risks and potential risk mitigation measures, potential impacts on operational reliability, and potential differences in impacts for market participants within the CAISO BAA versus participants in other BAAs for each potential approach.  Such analyses should demonstrate that the design elements proposed coupled with participation assumptions will maintain reliability, will result in overall benefits, and will promote a reasonable distribution of benefits among all participants, including those within the CAISO BAA. 

3. Provide detailed comments including examples on the Resource Sufficiency Evaluation topic:

As described in response to Section 2, the design features of the EDAM must be compatible with the participation model adopted in the sense that the nature of the participation model must be taken into consideration in shaping design features to achieve stated objectives.  With respect to the RSE, the overall objectives are to maintain reliability for all BAAs participating in the EDAM and to distribute equitably the responsibility for doing so by ensuring that each participating BAA provides the resources to maintain reliability within its BAA.

The demonstration of resource sufficiency would appear to be more straightforward if EIM Entities participate in the EDAM comprehensively (i.e., incorporating all resources and load within the participating BAA).  It would seem more difficult to assess resource sufficiency if BAAs have the option of participating in the EDAM with respect to only a portion of their overall loads and resource portfolios.

The Bundle 1 Straw Proposal with respect to RSE does not discuss the potential impact of varying levels of participation on reliability.  Although the description of the RSE methodology at page 18 of the Bundle 1 Straw Proposal seems to contemplate that EDAM participation would encompass all load within a specified BAA and all resources identified as contributing to resource sufficiency, there is no explicitly stated assumption or requirement for that level of participation.  If more flexible or variable levels of participation are considered, it will be necessary to evaluate how a demonstration of resource sufficiency for only a portion of the total load within a BAA can ensure reliability for any portion of the load not covered by the RSE.

Similarly, it makes sense to share the diversity benefit for flexibility obligations pro rata based on the reduction between the summed individual BAA requirements and the EDAM footprint requirement, as described at page 13 of the Bundle 1 Straw Proposal, if EDAM participation incorporates all load within each participating BAA.  It would not seem equitable to share the diversity benefit pro rata, however, if participating BAAs have the option of including less than their entire loads.

Additional explanation is necessary with respect to other elements of the proposed RSE design.  Although the concept of trading bid range seems appealing, it is unclear how the outcome of such trades will be reflected in the RSE analysis.  For example, it is not clear how bid range trades to reduce ramping requirements as described at pages 15-16 of the Bundle 1 Straw Proposal will be captured in the overall ramping requirements for the EDAM footprint.

The CAISO’s proposal to disallow bids and self-schedules for imports and exports at CAISO intertie scheduling points to or from BAAs participating in the EDAM (Bundle 1 Straw Proposal at pages 16-17) is problematic if EDAM participation is variable or flexible.  If a BAA external to the CAISO can determine on a day-to-day basis whether to participate in the EDAM, will the disallowance of bids or self-schedules at the CAISO interties likewise apply or not apply on a daily basis?  If so, how will LSEs within the CAISO BAA that have resources located in an external BAA know how to schedule deliveries from such resources?

Finally, there appears to be no meaningful consequence for failing the RSE.  The Bundle 1 Straw Proposal states at page 22:

If a balancing authority area fails the day-ahead resource sufficiency evaluation, the expectation is the balancing authority area will seek to address its insufficiency following EDAM’s day-ahead process, prior to the real-time EIM Market submissions.

There appears to be no adverse consequence in terms of EDAM market participation if the stated expectation is not met.  Indeed, the final bullet on Slide 38 of the July 27, 2020 workshop presentation proposes that the CAISO would not even apply the EIM resource sufficiency test to an EDAM entity that failed the day-ahead RSE unless the EDAM footprint exhausted all imbalance reserve awards in real-time.  It appears, therefore, that the EDAM RSE undercuts the EIM sufficiency test rather than providing any incremental assurance that EDAM participants will bring their fair share of supply to the markets.  Slide 31 of the July 27, 2020 workshop presentation states that the purpose of the RSE is to “[e]nsure that each EDAM BAA submits physical schedules and bids with sufficient capacity and ramp capability to meet all its requirements.”  It is difficult to see how the proposed RSE will achieve the stated purpose if there is no consequence for failure, especially if the participation model allows for highly flexible and variable levels of participation.

4. Provide detailed comments including examples on the Transmission Provision topic:

As a general matter, the CAISO’s Bundle 1 Straw Proposal on transmission-related topics may provide a reasonable starting point for designing EDAM market rules around the use and availability of transmission and associated compensation issues.  However, the Six Cities have a high level concern that transmission-related topics are not receiving sufficient focus and attention as compared with the resource sufficiency evaluation and associated topics.  The CAISO’s Bundle 1 Straw Proposal on EDAM transmission is difficult to understand as a cohesive policy that carries out the various principles that the CAISO has identified for the EDAM in general and for EDAM transmission in particular.  Regrettably, the Bundle 1 Straw Proposal does not include examples or detailed discussion of the transmission proposals, and there is no description of how the CAISO will distill the proposed concepts into rules and requirements for its load serving entities, Participating Transmission Owners, and tariff customers.  These deficiencies unfortunately leave the Six Cities unable to comprehensively assess all of the elements of the CAISO’s proposals.  As a matter of process, the Six Cities urge the CAISO to host at least one standalone working group meeting to discuss the transmission-related portions of the Bundle 1 Straw Proposal in more detail.  Such a standalone meeting will facilitate focus on transmission topics by the CAISO and stakeholders. 

The Six Cities continue to support certain principles governing the availability and use of transmission within the EDAM, including that EDAM transmission should be both reliable and high quality (i.e., not recallable or subject to economic curtailment) and should accommodate existing rights, both internal and external to the CAISO.  At the same time, the CAISO should meaningfully evaluate the concerns that have been expressed by some stakeholders regarding the potential for market power in the availability of transmission rights.  The Six Cities share in the concern that CAISO load serving entities may have limited opportunities to access external transmission rights on reasonable terms and timelines, particularly if EDAM Balancing Authorities (other than the CAISO) retain the ability to recall transmission, while the CAISO provides wide access to its transmission system for other EDAM Balancing Authorities to use. 

In response to the CAISO’s Bundle 1 Straw Proposal and the ensuing discussions at the CAISO’s subsequent stakeholder and working group meetings, the Six Cities also urge the CAISO to consider additional principles for transmission availability and use within the EDAM.  In particular, the design of the EDAM should reflect principles of fairness and cost causation in the availability and use of transmission, and the EDAM design should ensure mitigation of conditions that may facilitate the potential for exercise of market power.

At a conceptual level, the discussion in Section 5.2 of the Bundle 1 Straw Proposal, which proposes that internal transmission limits should be determined by the EDAM Balancing Authority, appears to be reasonable.  To assure stakeholders that this element of the CAISO’s proposal is fair and equitable given the possibility of different practices among EDAM Balancing Authorities, the Six Cities request that the CAISO provided detailed examples that explain how EDAM Balancing Authorities and the CAISO might implement these concepts.  For example, how does the CAISO propose to establish such internal limits relative to other Balancing Authorities?  What are the consequences and which entities will pay for any associated uplift charges of redispatch to accommodate last minute use of transmission rights by customers holding those rights?  Are there consequences to CAISO transmission customers associated with the CAISO’s assertion that it should neither limit nor compensate for parallel use of internal transmission and the “perfect congestion hedge” that it proposes to provide?  Finally, the CAISO notes that its alternative suggested approach to accommodate use of scheduling rights following the close of the Day-Ahead market is a point to point transmission construct, which might affect settlements – what are the consequences of this approach?  

To summarize, the Six Cities urge the CAISO to provide assurances that the elements of its proposal described at Section 5.2 will not result in adverse outcomes for CAISO load serving entities relative to load serving entities in other EDAM Balancing Authority Areas. 

With respect to the bucketing concepts described in Section 5.3 of the Bundle 1 Straw Proposal, the Six Cities observe that the descriptions of the three buckets and the consequences of the different treatment and compensation for these buckets is extremely unclear.  For Bucket 1 transmission used to meet the resource sufficiency evaluation, is all Bucket 1 transmission to be made available to the EDAM?  Or will individual Balancing Authorities be permitted to select what quantity of transmission will be available to the EDAM, would they have options to withdraw such transmission, and will they have the discretion to choose not to provide any transmission to the EDAM?  Additionally, how much Bucket 1 transmission will the CAISO make available to the EDAM? 

The description of Bucket 3 transmission similarly requires further explanation and examples.  When the CAISO states that “[t]ransmission providers can make incremental export unsold transmission available,” what does the CAISO mean by “incremental”?  The CAISO asserts that a “usage fee” for this transmission will be set by the Balancing Authority, but it appears that setting a usage fee for transmission services is properly the function of a transmission service provider or owner/operator.  Although the CAISO suggests that its export direction usage fee will be assessed based on the variable portion of the Wheeling Access Charge, the CAISO does not discuss how it will decide what quantity of Bucket 3 transmission it will make available (relative to the other buckets). 

Buckets 2 and 3 both involve some degree of compensation through transfer revenues and, as to Bucket 3, the usage charge.  The CAISO’s description of these buckets and the associated compensation is not clear and needs additional explanation and examples so that stakeholders may meaningfully asses these proposals.  Relatedly, page 28 of the Bundle 1 Straw Proposal includes a discussion of how usage fees interrelate with load serving entity incentives for forward contracting.  This discussion is not understandable, and the Six Cities urge the CAISO to provide clarification in its next proposal. 

The remaining sub-topics relating to transmission, discussed at Sections 5.4 through 5.7 of the Bundle 1 Straw Proposal, would likewise benefit from further discussion and examples, including (1) a more detailed description of how the diversity benefit would be allocated given import and export transfer capabilities among EDAM Balancing Authorities; (2) an evaluation of the issues associated with adopting a regional transmission charge; and (3) possible adoption of an EIM wheeling charge. 

5. Provide detailed comments including examples on the Transfer and Congestion Revenue Distribution topic:

As with the CAISO’s Bundle 1 Straw Proposal for EDAM transmission, the CAISO’s proposals for transfer and congestion revenues would benefit from further amplification and more examples.  The CAISO’s proposals are also difficult to fully evaluate as a cohesive policy.  This topic within the Bundle 1 Straw Proposal also would benefit from a standalone working group meeting.

With respect to the differences between congestion revenue and transfer revenue, the CAISO should provide additional examples of how these revenues will be recovered (including for which transmission buckets), what the revenues are compensating for, which parties will receive such revenues, and what policy objectives the CAISO is attempting to reflect in its assessment and allocation of these revenues.  Additionally, is the expectation that transfer revenue will represent a new set of costs, or will transfer revenue to any extent displace congestion revenue? 

For congestion revenues, which are settled with Congestion Revenue Rights (“CRR”) holders for congestion within the CAISO Balancing Authority Area, does the CAISO intend to retain the requirement that non-CAISO entities may nominate CRR pairs, provided that the entity prepays wheeling access charges, as discussed on page 32 of the Bundle 1 Straw Proposal?  Or will EDAM participating entities be exempt from this requirement?

6. Additional comments on the bundle 1 straw proposal or EDAM initiative:

The Six Cities have no additional comments at this time.

1. Please provide your organization’s overall position on the EDAM bundle 1 straw proposal:

SCE appreciates the opportuity to comment on the straw proposal for Bundle 1 - revenue sufficiency evaluation, transmission provision and congestion revenue allocation. Given the incomplete stage of the market design, SCE is unable to commit to supporting or opposing the straw proposal at this time. 

2. Provide summary of your organization’s comments on this proposal:

?

SCE appreciates the efforts of CAISO staff in preparing and presenting this EDAM Bundle 1 straw proposal. While the proposal extends application of a number of mechanisms within the CAISO’s day-ahead market to the anticipated EDAM footprint, there are concerns that some ideas are unlikely to translate directly within the EDAM environment. For example, the proposal expresses that the concept of transfer revenue is defined as the difference between the power balance constraint shadow price between the sink and source EIM/EDAM balancing authority area. This definition overlooks the interplay between the marginal clearing prices for greenhouse gas (GHG) between the BAAs unless there is a uniform marginal GHG clearing price for the EDAM footprint. A second example of an incomplete market design within the proposal is the dedicated directional distribution of congestion and transfer revenues among BAAs absent any consideration of the contract path or actual path of the energy flows during the dispatch interval. Allocation mechanisms that are askew from the actual realization of flows in the market often result in asymmetric and distorted incentives in markets. Further evaluation is required, and the CAISO should demonstrate whatever the final proposal is, that proposal should satisfy revenue sufficiency as a key design principle. 

More broadly, the proposal is incomplete in relation to how the optimization of energy transfers between EDAM BAAs for the resource sufficiency evaluation mechanism preserves the value of transmission in an attractive manner to incent transmission contributions to the CAISO for EDAM operations given the proposed directional as well as the symmetric distribution options for the allocation of congestion revenue among the balancing authority areas.  

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3. Provide detailed comments including examples on the Resource Sufficiency Evaluation topic:

SCE supports the principle of no leaning among BAAs for their capacity and imbalance reserve requirements. While SCE is agreeable to the trading of bid range between BAAs, BAAs with sufficient resources to satisfy their load and imbalance reserve requirements but consistently benefit from transfers from neighboring BAAs will potentially benefit from lower cost generation external to its BAA while shifting transmission costs to the exporting BAA on account of the contemplated congestion revenue distribution mechanisms proposed within the straw proposal. Given this scenario, the proposed 50-50 distribution of congestion revenues in Buckets 1 and 2 is unlikely to incent the availability of transmission for EDAM such that the relative transmission contributions of the BAAs on a transfer path or intertie scheduling path become irrelevant to the allocation process. 

As an example, assume the export transfer limit is lower than the import transfer limit as specified by the exporting and importing BAAs, respectively, and the transfer limit is set at the minimum of the two transfer limits. Then the incremental use of transmission in the export direction to relieve congestion, thereby facilitating the importing BAA’s satisfaction of its resource sufficiency requirement and the decision to adopt a 50-50 split of the congestion revenue allows access to cheaper generation from the exporting BAA while introducing a subsidy for the cost of transmission for the sink BAA to access the lower cost generation. In this scenario, transmission customers are likely to hold on to their transmission rights either to bid up the value of the available transmission capacity rather than release the rights to the CAISO. If any transmission is sold from Bucket 3 that can be used as Bucket 1 transmission, then the transmission provider may be incented to set a usage fee or hurdle rate that accounts for the potential cost shift implied by a 50-50 split of the congestion revenue that will represent a cost shift from the importing to the exporting BAA. 

Finally, the straw proposal demonstrates the internal consistency of the constraints for the market optimization problem in relation to the capacity test and cumulative ramping test across dispatch intervals for the forward-looking horizon for which resource sufficiency is evaluated. Given the current status of the Day-Ahead Market Enhancement (DAME) initiative, the CAISO needs to address the integration of the proposed constraints within the day-ahead market clearing process given that the simultaneous optimization for DAME is an unlikely approach within DAME. Will the proposed equations be compatible with the existing day-ahead market software? 

4. Provide detailed comments including examples on the Transmission Provision topic:

The CAISO’s proposal for the classification of three bucket types of transmission is reasonable in relation to its focus on the resource sufficiency evaluation testing requirements. SCE supports the classification. However, the proposal fails to address the window within which market participants will know the quantity of transmission made available and whether there is a minimum availability period. For example, will the contributed transmission be available for a month as a minimum duration? The proposal addresses the potential recall time window for Bucket 2 transmission though market participants need some level of certainty if transmission from Buckets 1 and 2 are to be attractive to potential users. Daily communication of transmission availability in Buckets 1 and 2 will not reduce uncertainty for BAAs but rather increase the BAA’s uncertainty about its ability to pass the resource sufficiency evaluation. Such an environment will extract an uncertainty premium from the market. 

Rate pancaking is another concern that SCE has with the proposal. The CAISO’s ability to incent prudent behavior for the contribution of transmission to the identified buckets seems doubtful given the rate pancaking environment and the allocation mechanism proposed for congestion revenues among BAAs when the distribution mechanism is inconsistent with the realized flows on the transmission network. In particular, the combination of these market attributes may prove unattractive for BAAs that facilitate wheeling transactions particularly if these BAAs experience cost burdens for which their customers who pay for the transmission investment must shoulder while facilitating transfers between BAAs. 

Further, SCE expects that contributors of transmission to Bucket 2 who exercise the choice to recall transmission in real-time should be subjected to the forfeiture of their share of transfer/congestion revenue when transmission recall is exercised within the T-20 timeframe in real-time. Given that load will be exposed to the redispatch costs that ensue from the transmission recall, strengthening the incentive to make such transmission available is much more meaningful than recusing the transmission customer for exercising such right at short notice without any consequences for the heightened uncertainty introduced to the market. 

5. Provide detailed comments including examples on the Transfer and Congestion Revenue Distribution topic:

?SCE has questions about how the pricing effect of GHG is isolated such that the shadow price of the power balance constraint does not transmit the effects of different market clearing prices for GHG among the BAAs as the differences between the shadow prices for the source and sink BAAs are calculated.  

Further, the proposal offers various options for the distribution of congestion and transfer revenues. SCE is unable to agree to any options that do not align with the actual flows on the transmission network at this time. Supporting any such mechanism results in tacit agreement to redistribute the diversity benefits achieved from the energy transfers among the BAAs while undermining the incentives within the market. 

For example, the proposed option of allocating congestion and transfer revenues on the basis of a 50-50 split provides a subsidy at the importing or exporting node within the BAA and also a subsidy to the importing or exporting BAA while the actual flows on the path are deemed irrelevant to the settlement. Another example is the 100 percent allocation in the import direction for congestion revenue and 100% in the export direction for transfer revenue. This allocation mechanism when counter to the actual flows realized within the BAA and between BAAs, respectively, distorts the price signal among the nodes within the BAA and between the importing and exporting BAAs, respectively. An extreme interpretation of this allocation approach is the following: if internal congestion is in the export direction while congestion external to the BAA is also in the export direction then a subsidy is provided to the importing node within the BAA and the importing BAA. These interpretations can be reversed for the remaining alternatives. Implementation of any of the mechanisms that disregard the actuals flows on the network will distort the price outcomes in the market as well as the investment and retirement decisions later in the market. 

SCE is willing to support a congestion revenue mechanism that aligns with either the contract path or actual directional flows of transfers when congestion occurs. Any allocation mechanism that does otherwise undermines incentives in the market. SCE also notes that the congestion revenue distribution options will also affect wheeling transfers between BAAs such that the optimization of diversity benefits may be threatened. 

Finally, the proposal is unclear about the congestion revenue settlement approaches between the CAISO and participating and non-participating transmission customers. For example, if there are non-participating customers within an EDAM BAA and participating customers settle directly with the CAISO but non-participating customers settle with the EIM/EDAM BAA entity under the entity’s OATT. That approach introduces a two-tiered distribution mechanism within the BAA’s footprint which has the potential to undermine the incentives for contributing transmission to Buckets 1 and 2 for the facilitation of EDAM transfers in the day-ahead market. This approach is askew to the approach within the CAISO BAA such that the allocation mechanism will work at odds with the mechanism currently implemented within the CAISO BAA thereby undermining effective operation of the CAISO market. Given the early stages of the market design, the interaction with the CAISO’s resource adequacy program remains unclear at this juncture. 

6. Additional comments on the bundle 1 straw proposal or EDAM initiative:

1. Please provide your organization’s overall position on the EDAM bundle 1 straw proposal:

2. Provide summary of your organization’s comments on this proposal:

UAMPS has general concerns about how network customers of EDAM entities will be treated and how unintended consequences, like those seen in the early stages of EIM, can be alleviated through better communication and a more transparent process. Due to the nature of the current conversation around the EDAM construct, UAMPS is worried that only a few parties with the loudest voice and resources, are driving the conversation and market design.  

3. Provide detailed comments including examples on the Resource Sufficiency Evaluation topic:

Section 4.5 Timeline

UAMPS would ask the CAISO and potential EDAM entities to consider its transmission customers’ needs when constructing the market timelines for running the EDAM market. UAMPS would not want to be forced into a position where it either must over or under procure network or point to point transmission before the freeze of OATT transmission bilateral sales during the resource sufficiency evaluation and EDAM’s optimization process. This is mainly due to uncertainty of the source of long-term contracts that have flexible delivery points on a day ahead basis. We imagine there are other non-EDAM entity transmission customers with similar contracts.

4. Provide detailed comments including examples on the Transmission Provision topic:

Section 5.2 Internal Transmission limits determined by EDAM balancing authority  

The CAISO asks for feedback how physical transmission capability internal to an EDAM balancing authority area should be considered in the EDAM model and optimization while honoring non-participating rights on internal transmission. UAMPS would like to engage further with EIM/EDAM entities on this topic.

Section 5.3 Transmission to enable EDAM transfers

Can a transmission customer, within an EDAM BAA, offer bucket 2 or 3 transmission and receive transfer revenue for transmission it owns within a BAA, that is not an EDAM BAA, that can facilitate transfers between two EDAM entities?

5. Provide detailed comments including examples on the Transfer and Congestion Revenue Distribution topic:

Section 6.2 Congestion revenue

UAMPS, as a transmission customer, would prefer EDAM entities utilizing the ".....CAISO's congestion revenue rights design to distribute congestion revenue to its transmission customers that are participating in the EDAM, in which case the CRR holder will be compensated directly by the CAISO."

6. Additional comments on the bundle 1 straw proposal or EDAM initiative:

UAMPS encourages the CAISO to integrate its new initiative on the Western EIM Sub-Entity Scheduling Coordinator Role - Issue Paper/Straw Proposal with principles in the EDAM construct. 

1. Please provide your organization’s overall position on the EDAM bundle 1 straw proposal:

2. Provide summary of your organization’s comments on this proposal:

Western Area Power Administration (WAPA), a federal agency, appreciates the opportunity to submit comments on the CAISO’s Extended Day Ahead Market (EDAM) Bundle 1 Straw Proposal. WAPA supports the development of EDAM with caveats. The implementation of a well-designed day-ahead market has the potential for widespread economic benefits, improved efficiency, and bolstered reliability. However, there are specific items and general areas of concern in the straw proposal that WAPA believes merit modification.

Recognizing that energy imbalance transactions account for approximately 5 percent of energy transactions in the West and that day-ahead transactions are in the range of 75 percent to 90 percent of energy transactions, WAPA emphasizes the magnitude of the implications of a multi-Balancing Authority Area (BAA) day-ahead market and encourages the utmost diligence in market design to ensure the market is legitimately voluntary, equitable, and honors the transmission and generation rights of both market participants and non-market participants.

Hydropower, as a carbon-free resource that provides both capacity and energy, will become increasingly important and valuable as the industry moves toward a supply mix with increased variable generation. Although it is recognized that hydropower is exceptionally valuable in emergency situations, such as those experienced during the 2020 heatwaves, hydropower resources need to be appropriately valued and compensated in all hours of the year to protect the investment and the economic viability. As discussed in the comments below, WAPA believes that certain components of the proposed EDAM could operate in opposition to this principle and need to be modified.

WAPA is a federal entity with five distinct power marketing service areas in the West, three BAAs, and one sub-BAA. WAPA provides electricity to a service territory that includes 15 states, owns and operates over 17,000 miles of high-voltage transmission, provides close to 40 percent of the hydropower in the western and central U.S., and serves nearly 700 wholesale customers who in turn provide electricity to over 40 million end-use customers.

WAPA’s regions and BAAs have unique customer characteristics, power marketing agreements, and operational practices. WAPA has an affirmative obligation to represent customer interests and to efficiently dispatch federal hydropower in a manner that meets statutory responsibilities, supports system reliability, and is environmentally compliant. WAPA’s comments endeavor to provide a holistic overview of WAPA’s perspectives regarding EDAM while highlighting specific topics that are of unique relevance to its individual power marketing regions and BAAs.

• WAPA’s Sierra Nevada region is on track to join CAISO’s EIM in 2021. Currently, WAPA’s Sierra Nevada region provides 50 percent of its hydroelectric power output to its federal power customers within the CAISO footprint and is concerned that certain provisions of EDAM would limit WAPA’s ability to serve these customer loads.

• WAPA’s Desert Southwest region and Colorado River Storage Project serve loads in several CAISO EIM Entities’ BAAs and have a vested interest in ensuring the EDAM design does not undermine WAPA’s ability to efficiently and equitably serve its customers.

• WAPA’s Sierra Nevada region, Desert Southwest region, and Colorado River Storage Project provide emergency energy to the CAISO.

• WAPA’s power marketing activities across its entire footprint may be substantively affected by EDAM. Although reductions in bilateral trading liquidity are inherent in centralized market development, there are currently elements in the EDAM straw proposal that WAPA believes should be modified to ensure the market would not be unduly discriminatory to external supply resources.

• WAPA’s three BAAs are not CAISO EIM participants but are adjacent to and significantly intertwined with CAISO EIM Entities’ BAAs. The Western Area Colorado Missouri (WACM), Western Area Lower Colorado (WALC), and the Western Area Upper Great Plains West (WAUW) BAAs have transmission systems and operations that could be significantly affected by the development of EDAM.

• WACM and WAUW will be participating in the SPP Western Energy Imbalance Service beginning in 2021. There will be market and operational seams between the CAISO and SPP that will require diligent consideration and management.

Notwithstanding WAPA’s support with caveats of EDAM, WAPA opposes the proposed prohibition on self-schedules and bids at the interties:

“CAISO proposes that bids and self-schedules for imports and exports at CAISO intertie scheduling points would not be permitted from or to balancing authority areas participating in EDAM.” (Straw Proposal, pg. 16)

WAPA agrees with other stakeholders this provision has the potential to be highly problematic for several reasons and is in opposition to the objective of having the EDAM be voluntary.

Most importantly, WAPA’s resources cannot be precluded from fulfilling statutory and long-term contractual obligations to serve its customers, both inside and outside the CAISO footprint. The market must not interfere via prohibitions on self-scheduling with WAPA’s ability to deliver federal hydropower to our customers via federal transmission, existing transmission contracts, or other transmission arrangements.

Similarly, WAPA’s resources cannot be constrained by transmission deficiencies created by a loss of incentives for long-term transmission investment that would be a result of the proposed EDAM. The market, as currently designed, would disincentivize the purchase of long-term transmission rights, harm transmission owners that rely on long-term transmission sales, and ultimately dissuade continued use and investment in WAPA’s transmission assets. Furthermore, the loss of long-term transmission customers would reduce transmission revenues thereby causing cascading rate impacts to WAPA’s power and transmission customers.

The EDAM proposal is for the BAA level, which limits non-participating Load Serving Entities’ (LSEs) use of their transmission contracts and resources by effectively requiring transmission be turned over to EDAM to serve load inside the CAISO. This approach unreasonably discriminates against non-market participants and appears to violate open-access transmission requirements.

Furthermore, CAISO is proposing to use EDAM rules for imports and exports for EIM’s real-time resource sufficiency evaluation upon implementation of EDAM. WAPA does not support changing EIM rules upon implementation of EDAM.

CAISO is also proposing that “CAISO non-resource adequacy imports from non-EDAM balancing authority areas” may only be counted toward the resource sufficiency evaluation if they are self-scheduled (Section 4.6 Eligible Supply, pg. 19). WAPA is concerned that this requirement would decrease the value of its hydroelectric products.

3. Provide detailed comments including examples on the Resource Sufficiency Evaluation topic:

Prohibition on self-schedules and bidding at the CAISO interties

WAPA opposes the provisions in the straw proposal regarding prohibitions on self-schedules and bidding at the CAISO interties. The proposed prohibitions are in opposition to WAPA's statutory requirements, would severely impede its mission, and are in opposition to open-access principles. WAPA’s generation output is a product of Bureau of Reclamation and the Army Corps of Engineers statutes, environmental requirements, and water delivery obligations. The ability to manage water would be negatively impacted and the hydropower would be undervalued if forced to move under market price signals alone.

WAPA’s Sierra Nevada region provides 50 percent of its generation output, under contract, to its customers in the CAISO full-market footprint. The amount and timing of the generation is determined by Reclamation and Central Valley Project (CVP) water management statutes. As a sub-BAA under the Balancing Authority of Northern California (BANC) BAA, WAPA’s Sierra Nevada region has concerns with the EDAM proposal not permitting self-schedules for imports and exports at CAISO interties for scheduling points from or to BAAs participating in the EDAM. WAPA has statutory obligations to specifically provide power from the CVP to federal load inside CAISO’s footprint. There is potential for the market to force WAPA’s participation in EDAM and thus conflict with, or limit our ability, to meet our statutory obligations by restricting use of self-schedules. Also, it is unclear how the EDAM would allow WAPA’s Sierra Nevada region to manage its transmission allocations on the California Oregon Intertie, including WAPA’s rights on the Pacific Alternating Current Intertie (PACI) and the California-Oregon Transmission Project (COTP), and perform mitigation actions on intertie schedules.

WAPA’s Desert Southwest region similarly opposes the provisions in the straw proposal regarding self-schedules and bidding at the CAISO interties. WAPA’s Desert Southwest region provides more than 75 percent of its generation output under contract to EIM-participating customers. WAPA’s CRSP Management Center also makes deliveries to EIM-participating customers, including the CAISO.

Impacts to Transmission Rights and Transmission Development

WAPA believes the prohibition on self-schedules and bidding at the CAISO interties would harm both market participants and non-market participants that have purchased long-term transmission rights. Entities purchase long-term transmission to the CAISO interties to ensure transfer capability and avoid congestion costs. If entities cannot self-schedule or bid at the interties, and thereby became subject to congestion costs, the value of the transmission rights would be reduced dramatically.

The prohibition on self-schedules and bidding at the CAISO interties would disincentivize the purchase of long-term transmission rights, harm transmission owners that rely on long-term transmission sales to meet their revenue requirements, potentially affect the financial sustainability of transmission maintenance, and ultimately dissuade investment in transmission. This would exacerbate congestion issues and constrain the ability of entities to move energy into the generation-constrained CAISO footprint.

WAPA owns transmission facilities connected to the CAISO, such as the PACI and the COTP, along with facilities across the Arizona-Southern California Border. WAPA has numerous contracts with others for the use of its facilities. As one example, Sierra Nevada, CAISO, and Pacific Gas and Electric (PG&E) are parties to agreements for the operational control and use of the portion of PACI between Round Mountain Substation and Malin Substation. WAPA has concerns that the current EDAM design could impact the value of these facilities. This could create revenue problems and could impact WAPA's ability to operate and maintain these existing assets.

Additionally, WAPA’s Desert Southwest region provides transmission service to several entities who would be forced to participate in EDAM to deliver their resources to the CAISO should bidding at the interties be suspended. It is highly likely this would have significant negative impacts for WAPA’s long-term transmission sales.

The impact of the proposed prohibitions on self-schedules and interties bidding would likely be extreme for WAPA along with other transmission owners and transmission customers across the West.

Self-schedule of resource sufficiency from non-EDAM BAAs

Regarding eligible supply, the proposal includes “CAISO non-resource adequacy imports bid from non-EDAM BAAs…should not count toward resource sufficiency evaluations” (Section 4.6 Eligible Supply, pg. 19). To be counted towards the resource sufficiency evaluation, a resource would have to be a self-scheduled import (Section 4.6 Eligible Supply, pg. 18). WAPA schedules and delivers hydropower to its customers from, through and across multiple BAAs. This proposal would reduce the value of the hydropower and increase costs to WAPA’s customers. This approach unreasonably discriminates against non-market participants.

Diversity benefit

CAISO includes the newly defined concept of diversity benefit in the proposal. Described in the straw proposal as:

“The CAISO is proposing to calculate the diversity benefit for all EDAM participants. The CAISO would calculate the imbalance reserves requirements for each balancing authority area independently, as well as for the EDAM footprint as a whole.” (Straw proposal, pg. 13)

The diversity benefit to be allocated would be the difference between the imbalance reserves requirements for each BAA and the imbalance reserves requirements for the EDAM footprint as a whole.

“The CAISO would then distribute the diversity benefits pro-rata based on the reduction between the summed individual balancing authority area requirement and the EDAM footprint requirement.” (Straw proposal. pg. 13)

WAPA supports the use of a diversity benefit. However, there is a risk of leaning or unfair allocation of benefits if the diversity benefit provisions are not appropriately designed. WAPA believes the pro-rata approach proposed by the CAISO could potentially result in a disproportionate benefit to the CAISO. WAPA suggests the development of a strong set of parameters and safeguards to ensure proper accounting and equitable allocation of diversity benefits.

Forecasting

Regarding the CAISO’s request that stakeholders comment on the correct time and balance for fixing the forecast, WAPA’s Sierra Nevada region supports fixing the forecast at 8:00 am Pacific time.

4. Provide detailed comments including examples on the Transmission Provision topic:

The EDAM proposal is for the BAA level. Non-participating entities would be impacted by limiting use of their transmission contracts and resources and requiring transmission be turned over to EDAM to schedule resources to load inside the CAISO. WAPA believes this approach unreasonably discriminates against non-market participants and appears to go against open-access transmission requirements.

WAPA requests additional detail on how the CAISO intends to insulate transmission providers and transmission customers that do not participate in EDAM from the EDAM transmission usage fees and transfer fees.

For example, WAPA’s Sierra Nevada sub-BAA has many transmission customers on its transmission systems including the Central Valley Project, COTP, and PACI that may choose not to participate in EDAM but may be subject to transfer fees as currently described in the straw proposal.

However, WAPA’s Sierra Nevada region has statutory obligations to meet specific loads first before supplying energy to customers or markets, and it requires internal transmission to be held beyond the day ahead. Furthermore, WAPA’s Sierra Nevada region, as a net exporter with a small amount of non-statutory load, would be hampered and ineffective under E-2/E-3 conditions to curtail load at the same level as export schedules.

WAPA’s Sierra Nevada region is concerned with the inference that not using transmission prior to real-time market results in day-ahead market congestion. For years now, the day-ahead market has seen low-to-no congestion at the interties with CAISO.

WAPA opposes a freeze on transmission bilateral sales during the resource sufficiency evaluation and EDAM optimization process. This limits WAPA’s ability to conduct bilateral sales necessary to support WAPA’s statutory and operational requirements. Additionally, the provision would not align with WAPA’s current open-access transmission tariff (OATT).

WAPA supports assigning the same level of transmission “firmness” to energy, ancillary services, and the new products of reliability capacity and imbalance reserves. WAPA understands EDAM transfers would have the same curtailment priority as internal load, which aligns with the 2006 FERC decision conditionally approving Market Redesign and Technology Update tariff by requiring export schedules not supported by resource adequacy resources to have equal scheduling priority to CAISO internal demand (CAISO Issue Paper – Bidding Requirements for High Scheduling Priority Exports, 08/20/2007).

WAPA’s current OATT allows for resale of transmission, but WAPA may not support transmission customers with a bundled energy/transmission capacity product making transmission available exclusively to the market in return for transfer revenues (Bucket 2).

5. Provide detailed comments including examples on the Transfer and Congestion Revenue Distribution topic:

Regarding CAISO’s question: “Should EDAM transfer portion of intertie constraint common with EDAM transfer capability be considered for EDAM transfer revenue and shared as transfer revenue?”, WAPA’s Sierra Nevada region does not support considering the EDAM portion of intertie constraint for shared transfer revenues.

WAPA’s Sierra Nevada region supports the transfer revenue proposal with the caveat, stated previously, regarding Bucket 2 that WAPA may not allow transmission customers with a bundled energy/transmission capacity product to make transmission available exclusively to the market in return for transfer revenues.

Regarding potential approaches on distribution of congestion and transmission revenues between source and sink, WAPA’s Sierra Nevada region supports option one: “ITC congestion revenue 100% import direction, transfer revenue 100% export direction."

Regarding potential approaches on distributing transfer revenue and/or congestion revenue, WAPA supports the approach of having both participating and non-participating transmission customers settle transfer revenue with the EIM entity scheduling coordinator and both participating and non-participating transmission customers settle congestion revenue with the CAISO.

6. Additional comments on the bundle 1 straw proposal or EDAM initiative:

Federal hydropower assets are subject to myriad federal regulations, environmental restrictions, and OATT requirements. EDAM must not impede the ability of both participating and non-participating WAPA regions to dispatch resources in accordance with regulatory-driven operating parameters and must be consistent with WAPA’s statutory, operational, and OATT requirements. Additionally, WAPA’s assets should not be penalized by the market for operating in accordance with such requirements. In some cases, a “regulatory must run” designation may be necessary.

1. Please provide your organization’s overall position on the EDAM bundle 1 straw proposal:

2. Provide summary of your organization’s comments on this proposal:

WPTF supports full regionalization as there are market efficiencies that are naturally generated with increases in energy market diversity and the ability to plan for resource adequacy and transmission across a broader footprint. However, taking this incremental approach of first designing an extended energy market absent coordinated resource and transmission planning can significantly stunt the market efficiencies. As such, WPTF continues to ask that the CAISO and EIM Entities make public the EDAM Feasibility Assessment that ultimately led to the decision for the CAISO to move forward with designing an EDAM framework. Allowing all stakeholders to have a better understanding of the assumptions that went into the benefits study and the results will enable a more robust cost benefit analysis as each proposal element starts to take form.

WPTF appreciates the time and effort that went into addressing the complex issues and topics within EDAM Bucket #1. Designing an Extended Day-ahead Market is no simple feat, and it was clear that there was going to be several hurdles that must be addressed head on. Key for any well-functioning market is consistent and equitable treatment while still maintaining the voluntary nature of EIM. WPTF is extremely concerned with several facets of this Straw Proposal as it relates to applying consistent market rules across all BAAs, ensuring equitable treatment, aligning with the various OATTs, and striking that appropriate balance of respecting the voluntary nature. WPTF’s more detailed comments below focus on the theme of ensuring those elements of an Extended Day-ahead Market Design. As currently structured, WPTF cannot support any element of the Bundle #1 straw proposal.

3. Provide detailed comments including examples on the Resource Sufficiency Evaluation topic:

CAISO Must Retain the Ability for Intertie Bidding and Self-Scheduling to and from EDAM BAAs under the EDAM Market Design

The EDAM Bundle 1 Straw proposal would eliminate intertie-bidding and self-scheduling to and from EDAM BAAs. WPTF strongly opposes this particular provision of EDAM for a host of reasons. First, doing so will undermine the existing Open Access Transmission Tariff (OATT) framework by severely reducing the value of transmission rights to CAISO interties. The proposal effectively usurps the transmission rights held by non-participating transmission rights holders to CAISO and provides those rights to the EDAM market (or forces them to go unused). FERC recently rejected a similar proposal related to transmission use in SPP’s proposed Western Energy Imbalance Service (WEIS) and CAISO should avoid this same stumbling block. Second, eliminating CAISO intertie-bidding and self-scheduling to/from EDAM BAAs will prevent the Renewable Energy Credits (RECs) of most out-of-state renewable resources from qualifying as Portfolio Content Category (PCC) 1 under the current RPS rules and may further complicate the ability of GHG-free resources to be counted as such under CARB rules. And third, as stated during the stakeholder meetings, doing so would result in discriminatory treatment for generators based solely on their BAA as one generator in a non-EDAM BAA has access to intertie bidding whereas another one located on the “wrong side” of the boundary in an EDAM-BAA cannot access the intertie bidding framework. Therefore, CAISO must adjust the EDAM proposal to allow for simultaneous EDAM transfers and intertie bidding/self-scheduling at the CAISO interties.

Elimination of Intertie Bidding Devalues Transmission Rights to CAISO Interties, without Providing for a Sufficient Solution to Likely Loss of Transmission Revenue

EDAM is being designed to operate concurrently with the existing OATT framework in the West. Under the OATT framework, transmission providers sell transmission service via several different mechanisms, including Point-to-Point (PTP) transmission service. PTP transmission service is frequently sold to non-native load customers (i.e. third parties) and, in the West, PTP transmission service is frequently sold over the transmission systems of transmission providers adjacent to CAISO for the purpose of reaching CAISO interties.

Third parties have historically purchased much of this transmission (for instance over BPA’s Southern Intertie) in large part to provide access to CAISO intertie bidding framework. The third parties that own transmission on these paths can bid at the CAISO interties to deliver their resources to CAISO markets. But under the CAISO proposal, if adjoining BAAs are part of EDAM, third-parties owning this transmission would no longer have the benefit of bidding at the CAISO interties (and would instead need to bid at their resource location, if in an EDAM BAA, or at an EDAM intertie, if enabled as part of the market design).

Under this construct, WPTF sees little (if any) benefit to third parties from procuring long-term transmission over the transmission systems of adjacent transmission providers to reach CAISO interties. Though these third-parties may be able to receive some EDAM transfer revenue (if it is allocated to the Transmission Customer and not simply the BAA), transfer revenue is likely to be insufficient to cover the substantial costs of purchasing that transmission service. Without associated benefits from this transmission purchase, third parties are unlikely to renew their purchase of PTP transmission rights across the transmission systems of EDAM BAAs that adjoin to CAISO. This will result in a loss of substantial third-party transmission revenue for these transmission providers which, in turn, will increase the transmission costs to their native loads. Under an RTO framework these types of transmission cost issues could be addressed through transmission cost allocation design. But EDAM does not currently propose any mechanism to address these types of transmission revenue deficiencies and cost shifts.

Additionally, as a result of eliminating intertie bidding/self-scheduling, the owners of OATT transmission rights held to CAISO interties which do not wish to hand those rights over to EDAM will see the transmission rights they have purchased undermined by this design feature. As currently proposed, though the provision of transmission to EDAM is “voluntary”, the proposal will effectively allow EDAM to usurp those transmission rights held through an EDAM BAA to a CAISO intertie for use by EDAM by eliminating the other potential uses of those rights to deliver to CAISO (intertie bidding or self-scheduling). FERC recently rejected SPP’s proposed WEIS tariff in part because the proposal would have authorized the market to use non-participating entities’ transmission in a manner that was inconsistent with the requirement of Order Nos. 890 and 890-A. By eliminating intertie bidding and self-scheduling to and from EDAM BAAs, EDAM may also authorize the use of non-participants transmission rights by the market (or at a minimum would eliminate other valuable uses of those transmission rights). Thus, this element of the EDAM proposal appears likely to be rejected by FERC and should be reversed in the next version of the proposal.

Elimination of Intertie Bidding would Require Changes to Current Compliance Mechanisms for Resources Outside CAISO to Qualify for the RPS and may Complicate GHG Accounting

With respect to WPTF’s second concern related to the removal of intertie bidding and self-scheduling at CAISO interties, renewable resources and their associated RECs which are not directly connected to a California BAA can currently be counted as PCC1 under the California RPS. To do so, the resource owner or buyer must demonstrate, consistent with California RPS law, that the energy is scheduled to a California BAA on an hourly or sub-hourly basis without substituting electricity from another source.

The CPUC and CEC have developed guidebooks outlining how these types of resources, located outside a California BAA, can make this demonstration. Those mechanisms generally rely on e-Tags and meter data. To be classified as PCC1, the CPUC requires that the e-Tag include the name of the source facility and the load/sink point listed on the e-Tag must be a California BAA. Without intertie-bidding and self-scheduling at CAISO interties, this type of demonstration will likely not be possible under the current rules, leaving these renewable resources unable to qualify as PCC1 unless and until modifications to existing rules and regulations around the RPS are made. Though there may be solutions to demonstrating PCC1 compliance in EDAM without intertie bidding and associated source-specific e-Tag data, CAISO has not yet articulated plans for (let alone a commitment to) implement such source specific e-Tags to demonstrate schedules to CAISO under EDAM.

As a result of the elimination of intertie bidding and self-scheduling to CAISO (through EDAM BAAs), the offtakers for PCC1 transactions may no longer be able to utilize these RECs as PCC1 and may be at risk of not complying with the California RPS under the EDAM construct as currently proposed. There are probably dozens of existing long-term contracts that are designed specifically around scheduling energy to a California BA to achieve PCC1 and which demonstrate this, in part, through e-Tags. Eliminating intertie bidding and self-scheduling at CAISO interties to and from EDAM BAAs without proactively establishing a replacement method for demonstrating PCC1 at the relevant California agencies will undercut these contracts and the agreement that was made between parties for these resources. Given the contractual issues at stake, if the proposal is not modified there may be multiple FERC protests from the parties to these contracts.

In a similar vein, the elimination of intertie-bidding and self-scheduling may result in new GHG compliance obligations and GHG attribution even for non-GHG emitting sources that are delivered to CAISO through EDAM transfers. Currently, under CARB rules, source specific imports to California are assigned their applicable emissions rate. Thus, non-GHG emitting resources, that can demonstrate their source and delivery to California have no GHG allowance obligation under California’s cap-and-trade programs. On the other hand, non-source specific imports and EIM Transfers are assigned a GHG compliance obligation. Under the CAISO’s proposal, WPTF is concerned that the known mechanisms for demonstrating a source specific delivery to CAISO under CARB’s rules would be removed and all EDAM transfers could be assigned a GHG compliance obligation. CAISO should consider this possible impact to GHG accounting (which will be taken up in a later EDAM bundle) and should reinstate the ability for intertie bids to occur to and from EDAM BAAs.

To the extent CAISO is working, or plans to work, with other California agencies (CPUC, CEC and CARB) to address these carbons and RPS related rules and regulations to accommodate EDAM, CAISO must be transparent regarding those plans. CAISO should provide stakeholders a defined timeline for doing so and outline the public process for involvement in those discussions. CAISO may wish to pursue rule modifications for the RPS (and other regulations) to accommodate the “design feature” of EDAM, but eliminating intertie bidding/self-scheduling makes those rule changes a necessity of EDAM, rather than simply “desirable.” Therefore, EDAM should not be implemented until there is successful resolution of these two key issues. And, as discussed elsewhere in these comments, the elimination of intertie bidding raises other issues that will not be solved through modification to the RPS rules.

Other Resource Sufficiency and Resource Adequacy Questions

Lastly, WPTF would like to better understand the potential implications to resources providing California ISO resource adequacy capacity across interties. Today, resources outside of the California ISO BAA can provide resource specific RA capacity as dynamic transfers across interties either via dynamic schedules or pseudo-ties. Those resources make their resource adequacy capacity available to the California ISO markets by bidding or self-scheduling at intertie points; the resources backing the dynamic schedules and pseudo-ties can be located within an EIM BAA. WPTF would appreciate clarification on if and how those resources can continue to provide resource adequacy capacity to the CAISO. For example, will those resource still be able to bid and self-schedule at CAISO interties even though they are located within an EIM BAA? Or will those resources no longer be able to provide resource adequacy capacity to the CAISO because they are, per this proposal, unable to utilize the intertie bidding framework? Additionally, today resources providing California ISO resource adequacy capacity across interties must also have a Maximum Import Capacity (MIC) allocation to support its RA capacity. The current MIC design is entirely based on the intertie framework. Thus, WPTF would appreciate additional clarification and discussion around whether such resources will still need to have MIC.

4. Provide detailed comments including examples on the Transmission Provision topic:

WPTF previously commented that rules regarding transmission provision need to ensure that there is fair and equitable access to EDAM for all potential participants. The current proposal does not address any transmission requirements that may be placed on supply-side resources located inside of an EDAM BAA. As part of the next proposal, CAISO should specify whether any transmission requirements will be necessary for supply-side resources in EDAM BAAs to access the market. To the extent transmission requirements are placed on resources, the rules surrounding these requirements should be overseen by CAISO, should be consistent across the EDAM footprint, and should ensure fair and equitable market access is provided to all supply-side resources.

In comments regarding transmission provision that were submitted by WPTF earlier this year, we requested additional information on the market pricing implications that will result from having a quantity of transmission available for market optimization free of charge (buckets 1 and 2) and another quantity of transmission available for a cost (which also could vary from one BAA to another). This construct seems as though it is likely to lead to highly variable market prices when EDAM transfers are approaching the limits of the “free” transmission buckets. WPTF continues to urge CAISO to further explore these issues in subsequent technical workshops and/or stakeholder meetings. CAISO should also consider if there are any unintended consequences or incentives created with the quantity of transmission capacity market participants provide in each bucket.

WPTF also believes that additional discussion of the method for calculating the bucket 3 transmission rates in EDAM is necessary. It is unclear whether these rates would be the transmission providers’ hourly OATT rate or some other rate. WPTF also requests consideration of whether transmission providers may over collect their transmission revenue requirements through the combination of OATT transmission sales/provisions, bucket 3 transmission fees, and EDAM transfer revenues.

WPTF continues to highlight that consistency between the transmission provision and compensation rules that are established for EDAM and the construct that is utilized for EIM will be critical. If there are different transmission provision and compensation rules for the day-ahead and real-time markets, there will be market inefficiencies and market transactions may be “pushed” from one timeframe to another due to transmission cost or availability differences. Thus, it appears important that, if a transmission cost is applied to transfers that occur in EDAM, it should equally apply to the EIM. While the Straw Proposal notes that “the usage charge for bucket three transmission… could potentially be used to compensate for incremental transmission use in the EIM” the details on how this would work, and how it would ensure transactions aren’t pushed from EDAM to EIM, remain unclear. Additional discussion on this topic is necessary in the next version of the EDAM Bundle 1 proposal.

Finally, WPTF also believes there should be consistent treatment across the EDAM BAAs when it comes to reflecting the usage fees within the market optimization. It is WPTF’s understanding that the market optimization would include the usage fees for bucket 3 transmission, thus only that transmission would be utilized by the market if/when its economical to incur the usage fee. If this understanding is accurate, then WPTF would appreciate additional discussion regarding whether the CAISO’s export fee will now be reflected in the market optimization. Today, the export fee is not part of the costs reflected in the market, it’s a cost charged to entities exporting energy after the fact. Thus, WPTF questions the potential inconsistent transmission cost treatment between the CAISO BAA and the remaining EDAM BAAs.

5. Provide detailed comments including examples on the Transfer and Congestion Revenue Distribution topic:

As iterated throughout these comments, it’s imperative that the EDAM design ensures consistent and equitable treatment across all market elements. This is another element of the proposal that could result in inconsistent treatment and unintended consequences. The CAISO’s current proposal provides for each EDAM BAA to decide on their own (1) if they want to offer a market for hedging against congestion similar to the CAISO’s existing CRR market and (2) if they do want to offer such a market, how that market would function. By definition, this proposal element will result in differing CRR-like market designs across BAAs and, furthermore, some BAAs with the ability to hedge against congestion costs and others without that ability. Having access to a congestion hedging instrument is certainly going to be factored into developer’s decision as to where to site resources. This then creates a situation where rather than siting a resource at the most efficient and beneficial location, it may be sited at a suboptimal location simply because that EDAM BAA provides for a hedging instrument whereas the BAA with the optimal location does not.

CAISO must review the Straw Proposal with a keen eye towards the role of EDAM BAAs, Transmission Providers and Transmission Customers to ensure the appropriate entity is designated with the appropriate role. This is particularly important for distribution of congestion and transfer revenues in EDAM. For instance, some language in the proposal indicates that an EDAM BAA would be allocated transfer revenue, but in many instances it is likely to be a transmission customer (and a different entity than the BAA) that has provided the transmission capacity to enable the EDAM transfer and which should be allocated transfer revenues.

6. Additional comments on the bundle 1 straw proposal or EDAM initiative: