Comments on draft final proposal

1. Please provide a summary of your organization’s comments on the Variable Operations and Maintenance Cost Review 2023 stakeholder meeting.

The Salt River Project Agricultural Improvement and Power District (SRP) appreciates the opportunity to comment on the CAISO’s triennial review process. Given the change in the inflationary environment including future expectations observed over the past few years, updates to the Variable Operations and Maintenance Costs should be looked at, discussed, and updated.

SRP appreciates the CAISO’s efforts to keep costs current and hopes that the CAISO can consider these process improvements as fundamental to ensuring the operational health of the asset owners participating in its markets.

2. Please provide your feedback on the CAISO’s determination that an update to the currently effective default variable operations and maintenance adder values is appropriate.

 SRP agrees that there should be an update to the VOM default values.

3. Please provide your feedback on the CAISO’s proposed default variable and operations maintenance adder values.

SRP encourages the CAISO to make this review process annual, as opposed to triennial, to increase the VOMs in-line with the rising costs asset owners face.

• The current triennial review means that each year the asset owners electing for default values are taking a discount to their true costs since the default values are calculated every three years. As each year passes, the gap in cost grows.
• SRP would prefer the CAISO to have a forward-looking forecast where the CAISO inflates values proactively.

Since the current review is lagging, SRP requests that the CAISO consider taking the latest available inflation data based on the chosen inflation metric and inflating these costs uniformly by that amount. For example, the Q2 2023 data was just released, so the preference would be to escalate all the costs by that amount rather than using a year-ending 2022 value to go into effect at a later date. This process modification would assist in minimizing the duration of under-recovery for asset owners.

SRP notices that the CAISO has not applied a flat percentage to the increase for all asset types and requests that the CAISO applies a uniform percentage to escalate all the costs by 16%. See FIGURE 1

For the Coal assets, SRP has observed that the CAISO is using year-ending 2018 dollars for the VOM adder at 2.69. SRP recommends it should be adjusted for a longer term.

• Using the BEA’s GDP Deflator from Q4 2018 @ 111.132 and Q2 2023 @ 131.518, the percentage increase for Coal assets should be closer to 18.34% versus the current 15.99%.
• SRP requests that the CAISO confirm that no other cost elements in CAISO's Stakeholder Conference in January 2020 (FIGURE 2) are of the December 2018 vintage and to make appropriate adjustments.

SRP appreciates the CAISO’s efforts to keep costs current and hopes that the CAISO can consider these process improvements as fundamental to ensuring the operational health of the asset owners participating in its markets.