Comments on Draft final proposal

1. Please provide a summary of your organization’s general comments on the Draft Final Proposal and Tariff language and presentation for this initiative.

DC Energy supports the proposal to reduce the shift factor effectiveness threshold at Default Load Aggregation Points and Trading Hubs.  This should increase IFM congestion funding and improve price formation by settling flow contributions in the market optimization. We expect this will capture most of the unsettled flows at these locations; however, it will be important to confirm this expectation. We request the CAISO provide a post implementation assessment of its performance and use this to determine the merit of further reductions. The analysis should be shared in an open forum, such as the Market Planning and Performance Forum. We agree that any further changes to the effectiveness threshold should not require a Tariff revision. This would help streamline the process for implementing these relatively straightforward adjustments. 

We agree there is merit to reviewing the impact of reducing the shift factor effectiveness threshold at intertie locations. It is likely the unsettled flows at the large interties (e.g., Malin and Paloverde) are another significant source of CRR shortfall.  We request that the CAISO establish a plan to review this issue. It is important that it include a timeline for acquiring the market functionality and assessing the range of potential adjustments.  This would help ensure this straightforward issue is prioritized appropriately.  

We appreciate the CAISO’s plans to move forward with a targeted analysis of the drivers of CRR shortfall settlement.  The CRR Market Analysis Report published in May 2020 highlighted that day-ahead loop flow is a significant source of CRR shortfall. We believe this is one area that deserves more attention.  Today, the CAISO applies a global derate factor (GDF) to CRR auction capacity to account for unsettled loop flows in the day-ahead market.[1]  The problem is the GDF is not aligned with the CAISO’s ‘by constraint’ assignment of shortfall to CRR holders. For example, the GDF may cause overfunding on one constraint that is not impacted by prevailing direction loop flow while it may be insufficient to prevent underfunding on another constraint that is impacted; however, the surplus cannot be applied to shore up the inadequacy. This dynamic exposes CRR holders to shortfall.  We request that the CAISO open a stakeholder process to review this issue and all drivers of CRR shortfall.  This should include an assessment of the efficacy of the current market design and allocation with the intent of protecting CRR holders from certain shortfall risks that were not contemplated at the time of the Track 1B changes, including the contributions related to all current and future unsettled flow.[2]   DC Energy submits the following concepts to address this issue and the CRR allocation design more generally: 

1. Limit the source of CRR shortfall to the impact of transmission related derates between the CRR auction and the IFM.  This would ensure the artificial shortfall risk created by unsettled flow would not be assigned to CRR holders.  We believe this is in harmony with the spirit of the Track 1b shortfall allocation reform that was implemented in 2019.
2. An alternative proposal to the above is to establish a floor on CRR settlement so that the pro-rata allocation of shortfall cannot exceed a CRR’s notional value.
3. Allocate congestion funding surplus to CRR holders that remain short-paid at the end of each month.  The design would assign the surplus rents up to the notional value of the short paid CRRs before performing the current allocation to load. The first pass allocation to short paid CRR holders would be performed on a pro rata basis.

[1] CAISO’s CRR Market Analysis Report May 2020 at section 8.3.1 (http://www.caiso.com/initiativedocuments/congestionrevenuerightsmarketanalysisreport-may12-2020.pdf)

[2] The CAISO’s Day-Ahead Market Enhancement has design elements that introduce a new source of CRR shortfall. See Day-Ahead Market Enhancement Final Proposal at section 4.3 (http://www.caiso.com/InitiativeDocuments/FinalProposal-Day-AheadMarketEnhancements.pdf)

2. Please provide comments on the WEIM Governing Body classification.

No comment

3. Please provide any additional input not included above related to the Draft Final Proposal and Tariff language.

No further comment

1. Please provide a summary of your organization’s general comments on the Draft Final Proposal and Tariff language and presentation for this initiative.

Please see attachments. 

2. Please provide comments on the WEIM Governing Body classification.

3. Please provide any additional input not included above related to the Draft Final Proposal and Tariff language.

Please see attachments. 

1. Please provide a summary of your organization’s general comments on the Draft Final Proposal and Tariff language and presentation for this initiative.

Middle River Power LLC (“MRP”) offers these comments on the proposals within the CAISO’s January 19, 2023 Draft Final Proposal (“DFP”) to (1) modify the Shift Factor Threshold (“SFT”) for Trading Hubs (THs)”and Default Load Aggregation Points (“DLAPs”) and (2) implement tariff language to allow the CAISO to temporarily change scheduling run market parameters without first making a Federal Power Act Section 205 filing or notifying market participants.

Modifying SFT for THs and DLAPs

The CAISO proposes to reduce the SFT for THs and DLAPS from 2% to 0.2% while leaving the 2% SFT in place for all other nodes.  The CAISO asserts this change is necessary because the SFTs used in the CAISO market network model but not in the Congestion Revenue Rights (“CRR”) network model creates situations in which the differences between the two models results in CRR deficits, including situations in which some CRR settlements actually reverse – from the CRR paying out to the holder of the CRR having to pay – because of aggregated node flow effects that are not captured in the market network model because of the use of the 2% SFT for those aggregated nodes in the market network model.  The SFTs prevent the market model from inc-ing or dec-ing resources that have small impacts on the flow on network constraints, but also fail to account for meaningful flow impacts that result from large aggregations of resources (i.e., THs and DLAPs).  The CAISO does not want to lower the SFTs for non-aggregated nodes because it believes doing so would result in the network model inefficiently trying to move individual generators that have small flow impacts, affecting the solution time and unduly impacting nodal prices.   The CAISO views lowering the SFTs for THs and DLAPs but not for individual nodes as a compromise that helps address CRR deficits but does not degrade market solution times or unduly affect price formation. 

In its earlier comments, MRP suggested that, instead of changing SFTs for some but not all nodes in the market model, the CAISO implement a 2% SFT in the CRR model.  The CAISO responded that it cannot do that because of the way that aggregated pricing locations are represented in the CRR model (CRRs based on DLAPs and THs are represented in the CRR model by individual source-sink locations).[1].

For MRP, the problem the CAISO seeks to address arises because of differences between the CRR network model and the market network model.  The CAISO accepts differences between these models for things such as changes in topology that arise in the market network model in real time, but now wants to change SFTs for some but not all nodes to address CRR deficits that the CAISO says arise from the application of the SFTs in the market model. 

While the CAISO refers to this as a necessary compromise, MRP is not yet convinced that this non-uniform change to SFTs for some but not all nodes is not undue discrimination.  The CAISO offers that, based on analysis for a single, or, at most, two trade days, the impact of the proposed change on the marginal congestion component (“MCC”) is not significant.[2]   MRP disagrees.  The graphs in DFP Figures 15 and 17 show what MRP considers to be significant changes in the MCC for the DLAPs in some hours.  For example, the MCCs in the SDG&E DLAP appear to be $5-10/MWh different for hours 9-17 on April 19, 2022; to MRP, such price differences are not "not significant".  Moreover, this analysis is only for two trade days. From this relatively limited analysis, MRP cannot conclude that the proposed change in SFTs applied to some but not all nodes is not unduly discriminatory.  MRP respectfully urges the CAISO to conduct and present additional analysis, over a much wider set of pricing nodes and for more and different times, to support its conclusion that this change is neither significant nor unduly discriminatory. 

Implementing Tariff Provisions to Allow the CAISO to Temporarily Change Scheduling Run Market Parameters

The CAISO asserts that other ISOs have the authority to change scheduling run parameters without first filing at FERC or notifying market participants that the CAISO now seeks.  MRP has not independently verified that assertion, but requests that the CAISO point its market participants to the relevant governing documents that establish this authority for the other ISOs.

MRP appreciates that the CAISO has sought to build some “guardrails” in this tariff provisions providing the CAISO with the authority to change scheduling run parameters without filing at FERC or notifying market participants.  These parameters unquestionably affect CAISO market prices and any authority granted to the CAISO to change them without a Section 205 filing or without notice to market participants should be carefully and narrowly defined.  MRP believes, however, that the CAISO has not yet adequately defined the circumstances under which the CAISO can change scheduling run parameters without a FERC filing or without notifying market participants. 

The proposed tariff language is:

31.4.1 Temporary Changes to Scheduling Run Parameter Values

If the CAISO determines it is necessary to modify the scheduling run parameter values in sections 31.4, 34.12.1, or 34.12.2 to ensure the market clearing solution is feasible or avoid operational or reliability problems the resolution of which would otherwise require recurring operator intervention outside normal scheduling and market procedures, it may temporarily modify the value for a period up to ninety days, provided however CAISO will file such change with FERC under Section 205 of the Federal Power Act within thirty days of such modification. If circumstances reasonably allow, CAISO will consult with FERC and the CAISO’s Market Monitoring Unit before implementing such modification. In all circumstances, the CAISO will (i) consult with those entities as soon as reasonably possible after implementing a temporary modification, and (ii) notify Market Participants within three business days after the change of any temporary modification and explain the reasons for the change. This section does not authorize the CAISO to change the scheduling run parameter values in a manner that changes the relative scheduling run priorities specified in sections 31.4, 34.12.1, and 34.12.2.”

MRP is specifically concerned about two aspects of this language.

First, MRP in concerned that the phrase “to ensure the market clearing solution is feasible” is too ambiguous and does not sufficiently narrow the CAISO’s authority to make unnoticed and unfiled changes to scheduling run parameters.  MRP questions whether this proposed language could be applied to the current situation, in which the CAISO is changing SFTs because of CRR deficits.  These CRR deficits do not exist because the CAISO’s current market clearing solution is “infeasible”.  These deficits exist because of systemic differences between the CAISO CRR network model and the CAISO’s market network model.  The CAISO is proposing to correct some of these differences by making non-uniform changes to SFTs in its market model, but some of the differences, such as those due to unanticipated changes in network topology,cannot reasonably be corrected.  As a result, MRP is concerned that describing the market clearing solution as “infeasible” does not properly capture the nature of the problem that the CAISO is trying to correct with a change that MRP does not believe the CAISO has fully demonstrated to not be unduly discriminatory.  MRP encourages the CAISO to propose different, more precise language under which the CAISO can make unnoticed and unfiled changes to market parameters that better narrows and focuses the authority the CAISO is seeking.

Second, MRP believes that the CAISO can and should provide notice to the market of any parameter changes more quickly than within three business days.   The notice to the market of any changes need not be complex, and MRP believes this notice can and should be provided within a single business day. 

[1] DFP at pages 7-8.

[2] DFP at page 35. 

2. Please provide comments on the WEIM Governing Body classification.

MRP has no comment on the proposed WEIM Governing Body Classification. 

3. Please provide any additional input not included above related to the Draft Final Proposal and Tariff language.

MRP has no other comments.  MRP thanks the CAISO for this opportunity to provide these comments. 

1. Please provide a summary of your organization’s general comments on the Draft Final Proposal and Tariff language and presentation for this initiative.

PG&E appreciates the CAISO’s continued monitoring of shift factor impacts on the market and proposed enhancements.  After implementation of any changes to the shift factor parameters, PG&E requests the CAISO assess emerging impacts to the market and determine if there are any unintended effects in price formation.  PG&E requests the CAISO commit to including an assessment of shift factor change impacts in future market performance reporting.

2. Please provide comments on the WEIM Governing Body classification.

N/A

3. Please provide any additional input not included above related to the Draft Final Proposal and Tariff language.

N/A

1. Please provide a summary of your organization’s general comments on the Draft Final Proposal and Tariff language and presentation for this initiative.

PSE supports the comments filed by the Western Power Trading Forum (WPTF) with respect to the consideration and discussion of potential unintended market and pricing outcomes due to the application of this threshold change only to default load aggregation points (DLAPs), trading hubs (THs), and interties with significant total transfer capability (TTC). External load aggregation points (ELAPs) will have a higher threshold to meet to be considered effective in relieving a constraint even when they may have the capability to do so.   

2. Please provide comments on the WEIM Governing Body classification.

CAISO has classified the tariff amendment specifically relating to the modification of the shift factor thresholds as applying only to the CAISO balancing authority area, and therefore falling under sole Board of Governors authority. While that may be a reasonable assumption under the WEIM governance model, this amendment may have market or pricing implications for future EDAM participants and the decisional classification for this item should not be determined until CAISO provides, at minimum, draft tariff language for EDAM.

This amendment presents a timing issue that may be encountered again as CAISO transitions from a WEIM governance model to an EDAM governance model. In its WEIM Governance Review Initiative – Phase 3 – implementing governance for EDAM, joint authority is expanded to include “[…] a proposal to change or establish any tariff rule for the day-ahead or real-time markets that directly establishes or changes the formation of any locational marginal price(s) for a product that is common to the overall WEIM or EDAM market.” The EDAM governance final proposal goes on to enumerate the sections of the CAISO tariff that would fall under joint authority, specifically listing Section 27: CAISO Markets and Processes – the section at question in this amendment as “entirely or partially subject to joint authority.” It further provides a table of “Illustrative Joint Authority Designations”, stating that under EDAM, joint authority would also extend to the provisions in Section 27 that are applicable to both the Day-Ahead Market and EDAM. And that the new EDAM tariff Section 33 will identify those provisions. Because stakeholders are not privy to the language in Section 33 at this time, we do not have enough information to determine the appropriate decisional classification for this amendment at this time.

3. Please provide any additional input not included above related to the Draft Final Proposal and Tariff language.

No additional comments at this time.

1. Please provide a summary of your organization’s general comments on the Draft Final Proposal and Tariff language and presentation for this initiative.

WPTF appreciates the opportunity to provide comments on the CAISO’s Market Parameter Changes Enhancement Draft Final Proposal. WPTF is generally supportive of the CAISO’s proposed changes and provides these brief comments. We are also respectfully requesting that the CAISO continue to evaluate the drivers of CRR underfunding and commit to conducting a stakeholder process this year to discuss the findings and consider changes to the current allocation of CRR shortfalls and surplus based on the analysis.

At the beginning of the paper, the CAISO notes that the Tariff language will be flexible enough such that once additional analysis is complete and the CAISO finds it is able to reduce the shift factor threshold to some interties, it can do so relatively quickly (e.g., without another stakeholder process or Tariff filing).[1] While the proposed Tariff language in the paper does not seem to include that flexibility, it is our understanding the CAISO has two versions of the proposed Tariff language that it discussed during the stakeholder call and seeks stakeholder feedback as to which version should be filed.

WPTF is generally supportive of the Tariff language that includes the flexibility of the CAISO identifying intertie locations in the BPM at a later time. This policy effort was initially thought to be a relatively quick process but due to unforeseen circumstances has taken much longer than originally anticipated. Thus, we support the CAISO filing the language that will (1) enable the shift factors to be reduced at DLAPs and THs upon approval and (2) provide a quick pathway forward to reducing the shift factor threshold at some identified CAISO BAA intertie locations once additional analysis is completed without having to go through another formal process. WPTF also respectfully requests that the CAISO complete the evaluation of reducing the shift factor threshold at intertie locations, and discuss the findings with stakeholders, within 2-3 months. We feel this is a reasonable timeline and will enable any changes to be made prior to summer 2023.

It is WPTF’s understanding based on discussion during the stakeholder call that the CAISO is only planning at this point to evaluate and consider reducing the shift factor threshold at CAISO BAA intertie locations. We would appreciate the CAISO clarifying this in the next iteration of the proposal.

WPTF would also appreciate additional discussion around potential implications of reducing the threshold at CAISO BAA DLAPs and THs but not EIM/EDAM BAAs. For example, could the difference in thresholds applied to aggregated load points (DLAP vs ELAPs) and/or trading hub points across the footprint lead to unintended market outcomes (e.g., congestion management and/or pricing impacts). Additionally, are there any cases in which a constraint in the CAISO BAA could have flows attributable to an ELAP in real-time but with a shift factor of less than 2% such that the flows from the ELAP on a CAISO BAA constraint are not captured?

WPTF appreciates the CAISO committing to continual assessment of drivers that, due to the current shortfall allocation approach, result in reversal of CRR settlements. WPTF first asks that the CAISO consider expanding that analysis to identify drivers that, while they don’t necessarily result in a reversal of settlements, do result in significant shortfalls such that there is a difference between the notional and offset values. We believe it’s important to ensure that the drivers contributing to CRR shortfall allocations are those that were intended to be addressed through the 2019 CRR changes (i.e., differences in transmission capacity in the CRR model and day-ahead market). Secondly, WPTF respectfully requests that the CAISO kick off a stakeholder process this year with the first step being discussing the results of the above-mentioned analysis with stakeholders and subsequently consider exploring changes to how the CRR shortfalls and surpluses are allocated to CRR holders. If we recall the original intent of the 2019 CRR Shortfall Allocation changes was to address CRR revenue deficiencies due to differences in transmission made available between the CRR market and day-ahead market. After gained experience, we have come to find out that there are other factors contributing to deficiencies and thus being allocated via shortfall allocation process to CRR holders on a constraint by constraint basis that are not aligned with the original intent of the 2019 CRR changes. Thus, we ask that based on the analysis, the CAISO discuss potential changes to the current treatment of shortfalls and surpluses to better align the allocation process with the original intent of the 2019 policy changes through a new stakeholder process to begin this year.  

[1] See Pg 5 “The CAISO aims to file Tariff language which will give the flexibility to apply the proposed threshold to large intertie locations within in the scope of this filing.”

2. Please provide comments on the WEIM Governing Body classification.

3. Please provide any additional input not included above related to the Draft Final Proposal and Tariff language.