Comments on Draft final proposal

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

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

Consistent with our comments on previous DAME proposals, Bonneville believes the current proposal fails to adequately incentivize suppliers to offer the imbalance reserve product and risks inadvertently increasing cost to load.  Specific aspects of DAME proposals that weaken participation incentives include:

• Reducing procurement of Imbalance Reserves when prices rise
• Likely over-mitigation resulting from calculating potential market power based on artificial deployment scenarios rather than actual bid in demand
• Continued reliance on Resource Adequacy Real Time Must Offer Obligations to manage day-ahead/real time uncertainty
• Design to accommodate the rules of the California Public Utility Commission for resource specificity of import RA.  While it is not in the scope of the DAME initiative to seek to revise the CPUC rules, it would be helpful to note the elements of design that are driven by current CPUC definitions of resource specificity.  
• The arbitrary default availability bid, set at $55, despite CAISO’s acknowledged uncertainty regarding potential bid prices or market clearing prices of the Imbalance Reserve Product
• The eligibility price cap, set to ignore many high-priced market observations, that functions as pre-mitigation regardless of the potential of market power
• The Imbalance Reserve Must-Offer Obligation (IRMOO) for eligible Resource Adequacy capacity that is economically bid, an additional performance requirement that will almost certainly increase the price of Resource Adequacy supply

These measures demonstrate that suppliers like Bonneville must consider additional risks in offering products to the CAISO market, the effect of which is either decreased participation or higher offer prices.  Bonneville notes that in the case of the IRMOO, these measures may increase cost to load of bilateral agreements not fully confined to the IFM. 

CAISO clearly states that DAME is foundational to EDAM, which already has committed participants.  It is therefore troubling that some stakeholders signal a lack of support for requiring joint approval of the DAME initiative by the ISO Board of Governors and the WEIM Governing Body.  Bonneville strongly believes that the DAME initiative interacts with the functions of the EDAM  to a considerable extent and therefore should be classified as a decision under joint authority.  The EDAM initiative is proposed to be subject to joint authority. As a foundational component of EDAM, DAME should fall into the same decisional classification.

Based on the trajectory of successive DAME proposals which continue to introduce new measures to disadvantage suppliers, Bonneville neither supports nor opposes the DAME draft final proposal. 

[1] Bonneville is a federal Power Marketing Administration within the U.S. Department of Energy that markets electric power from 31 federal hydroelectric projects and some non-federal projects in the Pacific Northwest with a nameplate capacity of 22,500 MW. Bonneville currently supplies around 30 percent of the power consumed in the Pacific 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 Pacific Northwest municipalities, public utility districts, cooperatives and then other regional entities prior to selling power out of the region.

2. Please provide your organization’s overall position on the DAME draft final proposal:

No additional comment

3. Please provide a summary of your organization’s comments on the summary of changes and responses to stakeholder feedback from the fourth revised straw proposal, as described in Section 1:

See question 1

4. Please provide your organization’s comments on the proposed resource adequacy day-ahead must-offer obligation for imbalance reserves as described in Section 3.2:

See question 1

5. Please provide your organization’s comments on the proposal to establish default bids for mitigation of imbalance reserve and reliability capacity, as described in Sections 3.2 and 3.4.

See question 1

6. Please provide your organization’s comments on the proposal to establish eligibility criteria to provide IRU based on a resource’s day-ahead energy offer price, as described in Section 4.3:

See question 1

7. Please provide your organization’s comments on the proposed transitional measures for CAISO load-serving entities as described in Section 5, in context of the removal of inter-SC trading of imbalance reserves and the removal of the reverse settlement of reliability capacity revenue for RA capacity from the proposal:

See question 1

8. Please provide your organization’s comments on the proposed WEIM Governing Body Role, as described in Section 7:

See question 1

9. Please provide any additional comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

See question 1

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

The California Community Choice Association (CalCCA) appreciates the opportunity to comment on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal. CalCCA opposes the DAME draft final proposal subject to resolution of the issue of double payments to generators providing Resource Adequacy (RA) capacity. Under the DAME proposal, generators providing RA will be paid to be available to the real-time market once through the RA contact and again through the imbalance reserve (IR) or reliability capacity (RC) payment. Many RA contracts require the generator to transfer availability payments from the California Independent System Operator Corporation (CAISO) market to its load serving entity (LSE) counterparty. In today’s market, RA resources bid zero dollars for their Residual Unit Commitment (RUC) availability bids and get paid zero dollars for their RUC awards. As such, many RA counterparties do not have the systems and processes in place to facilitate the transfer of such payments. Once DAME goes into effect and generators will be paid for their IR and RC payments, a settlement process must be in place to allow for the transfer of these payments from RA resources to LSEs.

To resolve this issue, the CAISO should allow inter-scheduling coordinator trades (ISTs), as proposed in the Fourth Revised Straw Proposal, for both IR and RC payments to allow RA counterparties to transfer IR and RC revenues consistent with their RA contracts. An IST Is a settlement service already offered by the CAISO to effectuate bilateral transactions between scheduling coordinators (SCs). The CAISO currently offers ISTs for energy, ancillary services, and unit commitment.[1] To enable ISTs when a resource sells only a portion of its capacity as RA to an LSE, the CAISO should allow the counterparties to set a percentage of its capacity that would be traded through the IST (rather than a specific megawatt (MW) amount). The CAISO will also need to differentiate the portions of the capacity payments that are attributable to the availability payments versus opportunity cost payments. While this may seem like it adds significant complexity, the CAISO will need to do this differentiation regardless, because under the draft final proposal, the CAISO proposes to provide the information necessary for counterparties to work out the transfer of revenues among themselves. This information necessarily includes the portions of the payments that are attributable to availability payments versus opportunity cost payments.

Allowing ISTs for IR and RC would not result in the CAISO getting involved in dictating the allocation of capacity payments between counterparties because ISTs are an optional service. Both counterparties would need to agree to the IST and have matching ISTs for the CAISO to process the IST. Therefore, the CAISO would simply provide the settlement mechanism to facilitate what parties have already agreed to bilaterally.

In summary, the CAISO should adopt the IST functionality for IR and RC products to facilitate the settlement of revenues in a manner consistent with the RA contracts between generators and LSEs.

[1]             http://www.caiso.com/Documents/SIBRInter-SCTrades_IST_Tutorial.pdf.

2. Please provide your organization’s overall position on the DAME draft final proposal:

For the reasons described above, CalCCA opposes the draft final proposal subject to resolution of the double payment issue.

3. Please provide a summary of your organization’s comments on the summary of changes and responses to stakeholder feedback from the fourth revised straw proposal, as described in Section 1:

See response to question 1 above.  

4. Please provide your organization’s comments on the proposed resource adequacy day-ahead must-offer obligation for imbalance reserves as described in Section 3.2:

CalCCA supports the RA resources having a must offer obligation for imbalance reserves for the portion of their RA capacity that is not self-scheduled.

5. Please provide your organization’s comments on the proposal to establish default bids for mitigation of imbalance reserve and reliability capacity, as described in Sections 3.2 and 3.4.

CalCCA has no comments at this time.

6. Please provide your organization’s comments on the proposal to establish eligibility criteria to provide IRU based on a resource’s day-ahead energy offer price, as described in Section 4.3:

CalCCA has no comments at this time.

7. Please provide your organization’s comments on the proposed transitional measures for CAISO load-serving entities as described in Section 5, in context of the removal of inter-SC trading of imbalance reserves and the removal of the reverse settlement of reliability capacity revenue for RA capacity from the proposal:

As described in response to question 1, CalCCA opposes removing the ability for counterparties to use ISTs to transfer capacity payments from one counterparty to another from the proposal. The CAISO should allow ISTs for IR and RC to enable counterparties to effectuate the terms of their contracts with respect to how capacity payments from the CAISO market are allocated between the parties.

8. Please provide your organization’s comments on the proposed WEIM Governing Body Role, as described in Section 7:

CalCCA has no comments at this time.

9. Please provide any additional comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

CalCCA has no comments at this time.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

See attached file.

2. Please provide your organization’s overall position on the DAME draft final proposal:

See attached file.

3. Please provide a summary of your organization’s comments on the summary of changes and responses to stakeholder feedback from the fourth revised straw proposal, as described in Section 1:

See attached file.

4. Please provide your organization’s comments on the proposed resource adequacy day-ahead must-offer obligation for imbalance reserves as described in Section 3.2:

See attached file.

5. Please provide your organization’s comments on the proposal to establish default bids for mitigation of imbalance reserve and reliability capacity, as described in Sections 3.2 and 3.4.

See attached file.

6. Please provide your organization’s comments on the proposal to establish eligibility criteria to provide IRU based on a resource’s day-ahead energy offer price, as described in Section 4.3:

See attached file.

7. Please provide your organization’s comments on the proposed transitional measures for CAISO load-serving entities as described in Section 5, in context of the removal of inter-SC trading of imbalance reserves and the removal of the reverse settlement of reliability capacity revenue for RA capacity from the proposal:

See attached file.

8. Please provide your organization’s comments on the proposed WEIM Governing Body Role, as described in Section 7:

See attached file.

9. Please provide any additional comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

See attached file.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

The California Energy Storage Alliance (CESA) appreciates the opportunity to provide comments on the DAME Draft Final Proposal (DFP) put forth by the California Independent System Operator’s (CAISO) staff. Throughout DAME’s stakeholder process, CESA has been supportive of the CAISO’s intent to enhance the day-ahead market by creating novel products that can address the reliability changes of California’s rapidly evolving grid. In general, adoption of the Imbalance Reserve (IR) and Reliability Capacity (RC) products will strengthen CAISO’s market, efficiently finding reliable outcomes and minimizing the need for out-of-market actions that hinder operations and adversely impact ratepayers. This being said, CESA is concerned with several elements of the DFP that have the potential to dilute the goals of DAME by limiting the supply of IR or making the product otherwise unviable. Furthermore, CESA remains convinced that there is a fundamental disagreement regarding the role of IR within the CAISO market and in the context of the Resource Adequacy (RA) framework. As such, CESA’s comments can be summarized as follows:

• CESA urges the CAISO to eliminate the local market power mitigation provisions relative to the IR and RC products
• While the removal of the RT bid cap is welcome, the eligibility criteria introduced in the DFP are unclear and have the potential to lower the supply of IR, hindering reliability and adversely affecting ratepayers?
• While CESA welcomes the elimination of RA settlement provisions, a fundamental disagreement regarding the role of RC and IR remains?
  • CESA is of the position that IR is neither part of RA, nor an “RA successor” product?

2. Please provide your organization’s overall position on the DAME draft final proposal:

Support with caveats. 

3. Please provide a summary of your organization’s comments on the summary of changes and responses to stakeholder feedback from the fourth revised straw proposal, as described in Section 1:

See CESA’s answer to Question 1.  

4. Please provide your organization’s comments on the proposed resource adequacy day-ahead must-offer obligation for imbalance reserves as described in Section 3.2:

CESA offers no comment at this time.   

5. Please provide your organization’s comments on the proposal to establish default bids for mitigation of imbalance reserve and reliability capacity, as described in Sections 3.2 and 3.4.

CESA remains unconvinced that local market power mitigation mechanisms for the IR and RC products are warranted, particularly considering the fact that a bid cap for both of these products is also included in the DFP. Implementing local market power mitigation for IR and RC would introduce unwarranted complexities since it is unlikely that uncompetitive conditions will exist for these products, especially considering that energy market power mitigation will remain in place. For these reasons, CESA urges the CAISO to eliminate the local market power mitigation provisions relative to the IR and RC products.

6. Please provide your organization’s comments on the proposal to establish eligibility criteria to provide IRU based on a resource’s day-ahead energy offer price, as described in Section 4.3:

In prior comments within this initiative, CESA argued for the removal of the real-time (RT) energy bid cap associated with the IR product. While the removal of the RT bid cap is welcome, the eligibility criteria introduced in the DFP is unclear and has the potential to lower the supply of IR, hindering reliability and adversely affecting ratepayers.? As such, CESA does not support its application.

The potential supply for the IR product is already limited by the eligibility requirements set forth in Section 3.1 of the DFP. By virtue of the 15-minute dispatchability requirement, CESA anticipates that energy storage will play a critical role in the provision of IR. Considering this, CESA is concerned with the ISO’s intent to limit the potential pool of IR-providing resources a priori based on energy bids. This is particularly concerning for storage resources since their energy bids are more complex than those of other assets given the need to consider the opportunity costs of any given dispatch. As a result, a methodology that seeks to approximate energy bids by looking at past behavior while potentially useful for conventional assets, provides limited information with regards to energy storage since the bids of these assets not only reflect the direct marginal costs of dispatching, but also the economic costs of dispatching a given interval as opposed to other, more profitable, ones. This purely economic nature of storage makes it especially responsive to price signals, signals that the proposal discussed herein would hinder. 

7. Please provide your organization’s comments on the proposed transitional measures for CAISO load-serving entities as described in Section 5, in context of the removal of inter-SC trading of imbalance reserves and the removal of the reverse settlement of reliability capacity revenue for RA capacity from the proposal:

Previously, CESA advocated for the complete removal of any features of the IR product that would claw back revenues from facilities with existing RA contracts, as well as of any form of cost allocation for RC as it applies to RA assets. CESA continues to hold this position. As a result, we welcome the CAISO’s modifications in the DFP; these matters are already addressed in RA contracts and the development of CAISO mechanisms is unwarranted. This being said, there seems to be a fundamental disagreement regarding the role of RC and IR within the RA construct that merits clarification.

CESA is of the opinion that the RC product is a necessary material enhancement to the current Residual Unit Commitment (RUC) process. Today, the interplay of RA and RUC requires RA resources to submit $0 bids in RUC, resulting in inefficient dispatch that affects ratepayers and hinders California’s environmental goals. The establishment of RC will mitigate these issues. As a result, RC is an enhanced RUC product. IR, on the other hand, is completely new and unrelated to anything that currently exists in the RA framework. IR is by no means a part of RA, nor is it an “RA successor” product and the DFP should reflect such a clarification.

8. Please provide your organization’s comments on the proposed WEIM Governing Body Role, as described in Section 7:

CESA offers no comment at this time.  

9. Please provide any additional comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

CESA offers no comment at this time.  

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

Please see attached comments.

2. Please provide your organization’s overall position on the DAME draft final proposal:

Please see attached comments.

3. Please provide a summary of your organization’s comments on the summary of changes and responses to stakeholder feedback from the fourth revised straw proposal, as described in Section 1:

Please see attached comments.

4. Please provide your organization’s comments on the proposed resource adequacy day-ahead must-offer obligation for imbalance reserves as described in Section 3.2:

Please see attached comments.

5. Please provide your organization’s comments on the proposal to establish default bids for mitigation of imbalance reserve and reliability capacity, as described in Sections 3.2 and 3.4.

Please see attached comments.

6. Please provide your organization’s comments on the proposal to establish eligibility criteria to provide IRU based on a resource’s day-ahead energy offer price, as described in Section 4.3:

Please see attached comments.

7. Please provide your organization’s comments on the proposed transitional measures for CAISO load-serving entities as described in Section 5, in context of the removal of inter-SC trading of imbalance reserves and the removal of the reverse settlement of reliability capacity revenue for RA capacity from the proposal:

Please see attached comments.

8. Please provide your organization’s comments on the proposed WEIM Governing Body Role, as described in Section 7:

Please see attached comments.

9. Please provide any additional comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

Please see attached comments.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

The Public Advocates Office at the California Public Utilities Commission (Cal Advocates) recommends modifications to the current DAME proposal.  The creation and design of the Imbalance Reserve (IR) and Reliability Capacity (RC) products introduces new costs for load-serving entities (LSEs) to comply with the California Public Utilities Commission (CPUC) RA program.  The CAISO has not provided the costs and benefits associated with the IR and RC products.  IR and RC products will provide services that the CAISO currently accesses through existing RA must-offer obligations.  Monetizing the IR and RC products will result in RA double-payments since the cost of providing these services is recovered by generators in RA contract rates.  The CAISO proposes that contracting parties perform their own contract renegotiations to address the double-payment issues.  The CAISO fails to recognize that contract renegotiations would create a significant cost burden for California’s LSEs.  Cal Advocates recommends the following:

• The CAISO’s Final Proposal should provide estimates of the average hourly procurement volumes and prices of IR and RC.  Volume and price estimates of the IR and RC costs would help LSE and generator planning.  The estimates would also provide basic insights into the IR and RC costs in the context of the Extended Day Ahead Market (EDAM); and
• In the Final Proposal, the CAISO should state whether it considers IR and RC to be Residual Unit Commitment (RUC) successor products and whether IR and RC revenues are considered to be RUC Availability Payments.  Such a statement would be a reasonable compromise given the lack of a market solution to handle RA double-payments.  A statement would also assist contract renegotiations and could clarify whether existing contracts would create double-payment issues.

2. Please provide your organization’s overall position on the DAME draft final proposal:

See Cal Advocates' response above.

3. Please provide a summary of your organization’s comments on the summary of changes and responses to stakeholder feedback from the fourth revised straw proposal, as described in Section 1:

The CAISO should provide estimates of the annual average hourly price of IR and RC products and estimates of the annual average hourly volume of procurement of those products.  Since the inception of the DAME initiative, the CAISO has not provided clarity on the potential costs of IR and RC if implemented.  The Draft Final Proposal includes descriptions of how IR and RC procurement may create market efficiencies and price formation improvements; however, the Draft Final Proposal does not estimate the price, volume,[1] or overall costs of IR and RC procurement.[2]  During the December 7 stakeholder meeting, the CAISO estimated average IR procurement requirements of 1,800 megawatts (MW) and discussed a hypothetical price range of $4-$9/MWh.[3]  The CAISO’s procurement and price estimates were based on historical data and bids of similar products.[4]  The CAISO should refine its estimates to express estimated IR and RC specific volumes and prices in the context of EDAM.[5]

CAISO price and volume estimates of IR and RC would allow stakeholders to understand the potential total CAISO Balancing Authority Area (BAA) cost for IR and RC procurement.  Such estimates would also allow LSEs and generation owners to estimate costs and revenues of IR and RC respectively.  Cal Advocates recognizes that the true value of IR and RC is difficult to estimate since IR and RC services are generally procured today at no cost and valuations of EDAM costs and benefits are difficult to perform at this stage of EDAM development.  However, even basic estimates of the price and volume of IR and RC procurement can establish a range of expected costs and revenues for the IR and RC products.[6]  The costs of IR and RC are also a necessary input to calculating the net benefits provided by EDAM to California and its ratepayers, which the California Public Utilities Code requires to be considered if implemented.[7]

The CAISO should provide these estimates in the Final Proposal of the DAME initiative.[8]  Volume estimates should consider historical procurement volumes of capacity to meet net load forecast differences for IR and RC.[9]  Pricing estimates should consider historical bidding behavior of similar products as appropriate[10]  Volume and price estimates should consider expected procurement requirements of the EDAM Resource Sufficiency Evaluation (RSE) for the CAISO BAA.

[1] The CAISO’s Day-Ahead Market Enhancements Draft Final Proposal (Draft Final Proposal) includes two graphs showing monthly trends of day-ahead net load imbalances and adjustments to the RUC forecast, which IR and RC will be designed to address, respectively.  However, it is unclear whether the figures are average hourly procurement expectations.  Establishing the cost of IR and RC requires clarity on expected volumes of IR and RC procurement by the CAISO BAA, in addition to estimated prices.  (Draft Final Proposal at 9-10.)

[2] Draft Final Proposal at 8-14.

[3] DAME December 7, 2022, Stakeholder Meeting (DAME Stakeholder Meeting) at 10:04 and 24:29.  Available at: https://youtu.be/ysglmbn8dDQ.

[4] DAME Stakeholder Meeting at 10:04 and 24:29.  Available at: https://youtu.be/ysglmbn8dDQ.

[5] The proposed EDAM design includes IR and RC showing requirements in a Resource Sufficiency Evaluation.  (Draft Final Proposal at 13, and 56.) 

See also CAISO, EDAM Final Proposal, December 7, 2022 at 62-63.  Available at: http://www.caiso.com/InitiativeDocuments/FinalProposal-ExtendedDay-AheadMarket.pdf.

[6] For example, the RUC forecast was adjusted by over 10,000 MW on some days during the September 2022 heatwave.  IR and/or RC would likely have been procured to address that adjustment.  It is impossible to determine the potential cost of that procurement and how it would have compared to typical procurement volumes and prices since there are no estimates of IR and RC prices and volumes.  Estimated prices and volumes of IR and RC would provide a basic understanding of the costs of IR and RC procurement and how many resources may be needed during future RA scarcity events.  CAISO Summer Market Performance Report: September 2022, November 2, 2022 at 62.  Available at: http://www.caiso.com/Documents/SummerMarketPerformanceReportforSeptember2022.pdf.

[7] California Public Utilities Code Section 345.5(b)(2):

… the Independent System Operator shall manage the transmission grid and related energy markets in a manner [consistent with] [r]educing, to the extend possible, overall economic cost to the state’s consumers.

California Public Utilities Code Section 359.5(a):

… the transformation [of the CAISO into a regional organization] should only occur where it is in the best interests of California and its ratepayers.

[8] The Draft Final Proposal’s DAME stakeholder engagement plan does not include a final proposal milestone date.  However, the CAISO clarified that it plans to create a final proposal.  (See the December 14, 2022, CAISO Market Performance and Planning Forum workshop recording.) 

[9] IR is intended to account for net load forecast uncertainties and interval differences between the day-ahead and fifteen-minute market time frames, as well as the uncertainty of day-ahead load and Variable Energy Resource (VER) production.  RC is intended to provide upward and downward dispatches in the RUC to account for differences between bid-in load and the CAISO Forecast of CAISO Demand (CFCD), as well as any backfill of virtual supply.  (Draft Final Proposal at 5, 16, 18-19, 28, and 37-38.)

[10] During the DAME Stakeholder Meeting, the CAISO estimated IR costs to be $4-$9/MWh based on similar products including non-spin ancillary services.  (DAME Stakeholder Meeting at 10:04-11:01.)

4. Please provide your organization’s comments on the proposed resource adequacy day-ahead must-offer obligation for imbalance reserves as described in Section 3.2:

Cal Advocates does not provide a response to this question at this time.

5. Please provide your organization’s comments on the proposal to establish default bids for mitigation of imbalance reserve and reliability capacity, as described in Sections 3.2 and 3.4.

Cal Advocates does not provide a response to this question at this time.

6. Please provide your organization’s comments on the proposal to establish eligibility criteria to provide IRU based on a resource’s day-ahead energy offer price, as described in Section 4.3:

Cal Advocates does not provide a response to this question at this time.

7. Please provide your organization’s comments on the proposed transitional measures for CAISO load-serving entities as described in Section 5, in context of the removal of inter-SC trading of imbalance reserves and the removal of the reverse settlement of reliability capacity revenue for RA capacity from the proposal:

The addition of IR and RC products will result in double-payments for contracted RA resources since the services IR and RC would provide are currently accessed by the CAISO through the RA must-offer obligation, a key provision in RA contracts.[1]  RA contracts are priced to cover generation costs and the opportunity costs of providing the must-offer obligation.[2]  The CAISO previously proposed Inter-Scheduling Coordinator trading (IST) and reverse settlement mechanisms as solutions to avoid double-payments of IR and RC to contracted RA resources.[3]  In the Draft Final Proposal, the CAISO removed those proposed mechanisms and instead proposed that parties perform contract renegotiations to avoid double payments.[4] 

The CAISO claims that “many stakeholders argued it would be more efficient and effective to let counterparties handle settlement of imbalance reserve revenues bilaterally than to use the CAISO’s inter-SC trading mechanism.”[5]  This description generally summarizes the comments of five resource owners or representatives of resource owners.[6]  However, six stakeholders representing LSEs or ratepayers commented that mechanisms must be developed to avoid IR and RC double-payments for contracted RA resources.[7]  CalCCA, PG&E, and SDG&E stated that some contracts may have existing provisions that can avoid some double-counting concerns, but ultimately recommended that the CAISO maintain or modify IST and/or implement reverse settlement mechanisms, or develop alternative mechanisms to address double-payments.  SCE recommended that the CAISO use IST on a short-term basis and develop changes to CAISO’s settlement process to correct double-payments.  Six Cities sought modification to reverse settlement and requested clarity on how IST could be implemented.  Cal Advocates recommended that IST be made mandatory and enforceable.[8] 

Stakeholders noted that some contracts may include “Residual Unit Commitment (RUC) Availability Payments” language that would avoid contract double-payments.[9]  Some contracts may also include “RUC Successor” provisions that require counterparties to meet in good faith to amend a contract when new CAISO market products are created.[10]  Although not all contracts may include these provisions, RUC payments and RUC successor terminology may obviate the need for contract renegotiations or at least expedite contract renegotiations for those contracts that do include these provisions. 

In order to help facilitate contract renegotiations between LSEs and resource owners if IR and RC are adopted, the CAISO should provide a statement addressing RUC successor and payment provisions in the DAME Final Proposal.  The CAISO statement should address three issues: (1) whether the CAISO intends to consider IR and/or RC as “RUC Successor Products,” (2) whether RUC Availability Payments will be made after IR and RC is implemented, and (3) whether the CAISO would consider IR and/or RC payments to be RUC Availability Payments.   

The CAISO has expressed a reluctance to be involved with contracting issues.[11]  However, given the significant cost impacts of implementing IR and RC, the CAISO must clarify  whether IR and RC products are RUC successors or qualify for RUC availability payments.  

A CAISO statement in the Final Proposal specifying how IR and RC align or don’t align with existing contract provisions would assist contract renegotiation and help to avoid costly litigation concerning contract interpretation.  Contract renegotiations may lead to significant administrative costs given the volume of recent Integrated Resource Plan (IRP) procurement.[12]  Renegotiations also may not be feasible if a counterparty is not compelled to modify a contract when new market products are introduced.  Lastly, a CAISO statement could clarify whether existing RUC payment and successor language removes the double-payment issue altogether;[13]  existing contracted RUC payment provisions could enable IR and RC payments to flow to specified counterparties in the same manner as RUC payments are handled today.[14]  Since the CAISO has removed its proposed solutions for RA double-payments, it should at least provide this clarifying statement to help avoid the additional ratepayer costs resulting from  the introduction of IR and RC.

[1] CAISO, Day-Ahead Market Enhancements Stakeholder Workshop, September 14, 2022 at 7.  Available at: http://www.caiso.com/InitiativeDocuments/Presentation-Day-AheadMarketEnhancements-Sep14-2022.pdf.

[2] See IST and reverse settlement summaries.  CAISO, Day-Ahead Market Enhancements Fourth Revised Straw Proposal, October 26, 2022 (DAME Fourth Revised Straw Proposal) at 11-12.  Available at: http://www.caiso.com/InitiativeDocuments/FourthRevisedStrawProposal-Day-AheadMarketEnhancements.pdf.

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

[4] The CAISO would also provide information to facilitate renegotiations and establish a 3-year transitional period if parties agree to a 50-50 split of IR and/or RC revenues.  (Draft Final Proposal at 7-8, and 54-55.)

[5] Draft Final Proposal at 7.

[6] See the November 15, 2022, party comments on the DAME Fourth Revised Straw Proposal: California Energy Storage Alliance (CESA), Independent Energy Producers Association (IEP), Middle River Power (MRP), Rev Renewables, and Wellhead Electric Company (Wellhead).  Available at: https://stakeholdercenter.caiso.com/Comments/AllComments/2da0b776-8a88-48cf-a87f-8424ed85477f.

[7] See the November 15, 2022, stakeholder comments on the DAME Fourth Revised Straw Proposal: California Community Choice Association (CalCCA), Cal Advocates, Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE), San Diego Gas & Electric Company (SDG&E), and Six Cities.

[8] Cal Advocates comments on the DAME Fourth Revised Straw Proposal.  Available at: https://stakeholdercenter.caiso.com/Comments/AllComments/2da0b776-8a88-48cf-a87f-8424ed85477f#org-e4198ff8-cfa7-4251-b1b7-74987bf28b17.

[9] SDG&E describes RUC Availability Payment contract language as possibly avoiding double-payment issues. SDG&E requests that the CAISO clarify whether IR revenue would qualify as a RUC Availability Payment.  (Comments of SDG&E on Draft Final Proposal at Response 4.)  CalCCA also describes RUC payment contract provision but notes the possibility that not all contracts contain that provision.  (Comments of CalCCA on Draft Final Proposal at Response 2.)

[10] During the DAME Stakeholder Meeting, SCE sought clarity on whether the CAISO considers IR and RC to be “RUC Successor Products.”  The CAISO responded that it did not consider IR to be a RUC Successor Product and that the CAISO preferred to not participate in contract issues.  (Dame Stakeholder Meeting at 1:38:59 to 1:44:17.)

[11] DAME Stakeholder Meeting at 1:38:59 to 1:44:17.

[12] Decision (D.) 19-11-016 and D.21-06-035 require 14,800 MW net qualifying capacity (NQC) of resources to come online by 2026, most of which is required to have a contract of ten years or more.  6,700 MW NQC from 200 projects are estimated to come online between 2022 and 2023.  CPUC, Tracking Energy Development, May 20, 2022 at 6, filed in Rulemaking (R.) 20-05-003, Order Instituting Rulemaking to Continue Electric Integrated Resource Planning and Related Procurement Processes.  Available at: https://www.cpuc.ca.gov/-/media/cpuc-website/divisions/energy-division/documents/summer-2021-reliability/tracking-energy-development/cec-may-reliability-workshop-tracking-energy-development-may-2022.pdf.

[13] SDG&E requested that the CAISO clarify whether the new product payments would count as RUC Availability Payments, and that specification could help address the double payment issue.  (Comments of SDG&E on the Fourth Revised Straw Proposal.  Available at: https://stakeholdercenter.caiso.com/Comments/AllComments/2da0b776-8a88-48cf-a87f-8424ed85477f#org-33b965a5-c86a-4c0e-8322-0c76794cbd64.)

[14] However, as noted by SCE, a portion of IR payments may be appropriately split between counterparties.  (Comments of SCE on Draft Final Proposal.)

8. Please provide your organization’s comments on the proposed WEIM Governing Body Role, as described in Section 7:

Cal Advocates does not provide a response to this question at this time.

9. Please provide any additional comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

Cal Advocates has no additional comments.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

Calpine appreciates the opportunity to provide comments on CAISO’s DAME proposal.

Calpine supports the main elements of this proposal including an offer cap, however, we do not support the proposal to apply deployment-based mitigation to the new reserve products.

Calpine believes that the introduction of new reserve products to prepare for uncertainty and variability is a step in the right direction during this energy transformation.  As proposed, it should help maintain next-day reliable operations and avoid excessive out-of-market operator actions (i.e. load biasing) that distort market outcomes.  In theory, this will allow proper compensation for resources’ upward and downward flexibility.

As proposed, an offer cap like existing AS (reserve) products should be sufficient to avoid market power concerns. Our concerns with the energy deployment-based mitigation proposal are two-fold.  First, in simulations it was shown that the mitigation could result in adjusted bids below cost and present negative effects on CRR value. Unless and until those unintended consequences are addressed, Calpine opposes the deployment-based mitigation.  As part of CAISO’s ongoing evaluation of evolving markets, perhaps apply bid mitigation if after implementation, the exercise of unilateral market power threatens system reliability and competitive market pricing.    

Second, conceptually we support co-optimized nodal procurement of these products.  This would ensure product deliverability by accounting for local transmission and operating constraints.  However, as the CAISO is well aware, the nodal implementation of FRP has been delayed several times, most recently due to apparently failing “internal readiness criteria”.  We believe that complexity of the nodal procurement and deployment-based mitigation measures could equally curse DAME implementation.  Ideally, CAISO will compete a review of lessons learned in implementing FRP and apply those to DAME.  If it appears that the co-optimization logic becomes too complex or hits run-time limitations, the CAISO should consider a phased implementation initially employing zonal procurement of IR and RC products. 

2. Please provide your organization’s overall position on the DAME draft final proposal:

See above

3. Please provide a summary of your organization’s comments on the summary of changes and responses to stakeholder feedback from the fourth revised straw proposal, as described in Section 1:

See above

4. Please provide your organization’s comments on the proposed resource adequacy day-ahead must-offer obligation for imbalance reserves as described in Section 3.2:

See above

5. Please provide your organization’s comments on the proposal to establish default bids for mitigation of imbalance reserve and reliability capacity, as described in Sections 3.2 and 3.4.

See above

6. Please provide your organization’s comments on the proposal to establish eligibility criteria to provide IRU based on a resource’s day-ahead energy offer price, as described in Section 4.3:

See above

7. Please provide your organization’s comments on the proposed transitional measures for CAISO load-serving entities as described in Section 5, in context of the removal of inter-SC trading of imbalance reserves and the removal of the reverse settlement of reliability capacity revenue for RA capacity from the proposal:

See above

8. Please provide your organization’s comments on the proposed WEIM Governing Body Role, as described in Section 7:

See above

9. Please provide any additional comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

See above

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

MRP’s comments on the DAME Draft Final Proposal (“DFP”):

• Express concern about the proposal to apply local market power mitigation to what are system capacity products;
• Express concern about how the CAISO’s proposal to establish eligibility criteria might interact with the proposed must-offer obligation for imbalance reserves; 
• Support the proposal to eliminate the settlement claw-back reversal and the Inter-SC trade mechanism and to allow market participants to address the possibility of double payment through their bilateral agreements; 
• Respectfully urge the CAISO to codify, with details, the process for setting the imbalance reserve requirements in the CAISO Tariff; and
• Encourage the CAISO to prepare a detailed and thorough report on the performance of the proposed new products a year from their deployment. 

2. Please provide your organization’s overall position on the DAME draft final proposal:

MRP supports the proposal, with caveats.   

3. Please provide a summary of your organization’s comments on the summary of changes and responses to stakeholder feedback from the fourth revised straw proposal, as described in Section 1:

MRP appreciates that the CAISO has proposed changes in the design based on stakeholder feedback.  MRP largely supports the changes the CAISO made following the Revised Straw Proposal, though MRP has some lingering concerns about the proposed eilgibility criteria, as noted in the response to question 6.  MRP remains opposed to certain aspects of the design that did not change between the Revised Straw Proposal and the Draft Final Proposal, namely, the proposed local market power mitigation.  

4. Please provide your organization’s comments on the proposed resource adequacy day-ahead must-offer obligation for imbalance reserves as described in Section 3.2:

MRP supports this aspect of the initiative.   

5. Please provide your organization’s comments on the proposal to establish default bids for mitigation of imbalance reserve and reliability capacity, as described in Sections 3.2 and 3.4.

For reasons articulated in prior comments, MRP continues to oppose the proposed application of local market power mitigation to system capacity products.

6. Please provide your organization’s comments on the proposal to establish eligibility criteria to provide IRU based on a resource’s day-ahead energy offer price, as described in Section 4.3:

MRP appreciates that the CAISO has proposed to eliminate the real-time energy offer cap for imbalance reserves. In its place, the CAISO proposes to establish eligibility criteria for day-ahead energy bids – essentially, the same energy offer cap that was originally proposed for real-time energy bids associated with imbalance reserve up is now applied to day-ahead ahead energy bids associated with imbalance reserve up capacity. 

The mechanism that the CAISO has proposed to set the eligibility criteria – a linear quantile regression at the 90^th percentile using FMM LMPs and next-day natural gas prices with a 20% adder – seems like a reasonable approach.  The CAISO offers that the resulting regression-derived price represents the expected real-time energy price if all energy was dispatched from the procured imbalance reserve up capacity. 

In the DFP, the CAISO also proposes that all RA capacity would be subject to a must-offer obligation that includes imbalance reserves.[1] MRP does not oppose this requirement, but requests the CAISO clarify what would happen if a resource complying with this must-offer obligation submits an energy bid above the eligibility criteria threshold.   Gas price dislocations can happen suddenly, and in highly dynamic conditions the CAISO’s regression to establish the eligibility criteria may not reflect a suppliers’ expectation of what it will cost to procure gas in the intra-day market, not the next-day market, to provide energy from the imbalance reserve up.  While MRP agrees that it is more likely that a supplier will have to provide energy from imbalance reserves than energy from spinning or non-spinning reserve capacity, it is not guaranteed that suppliers will be called on to generate energy from the imbalance reserves, and procuring day-ahead gas in anticipation of having to deliver energy that is never called upon leaves suppliers exposed to costs they cannot recover. 

[1] DFP at page 23. 

7. Please provide your organization’s comments on the proposed transitional measures for CAISO load-serving entities as described in Section 5, in context of the removal of inter-SC trading of imbalance reserves and the removal of the reverse settlement of reliability capacity revenue for RA capacity from the proposal:

MRP supports the CAISO’s proposal to allow contract counterparties to ultimately decide between themselves how to treat any imbalance reserve and reliability capacity revenue.  MRP also supports the CAISO’s proposal for a transition period that would include (1) CAISO working with counterparties to understand the information needed to facilitate contractual settlement provisions and provide this information to the relevant parties in a regularly issued settlement report, and (2) CAISO facilitating a three-year settlement transitional period for any contracting parties who mutually agree to a 50/50 split of imbalance reserve revenue.[1]

[1] DFP at page 55.

8. Please provide your organization’s comments on the proposed WEIM Governing Body Role, as described in Section 7:

MRP supports the WEIM Governing Body having joint authority over the entire DAME design, as suggested on DFP page 58.

9. Please provide any additional comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

Penalty Prices.  In the DFP, the CAISO seeks further stakeholder discussion on the imbalance reserve penalty price, including these two specific questions:

1. At what cost should the imbalance reserve requirement start to relax (i.e., procure less than the full requirement)?
2. At what cost should the full imbalance reserve requirement relax (i.e., procure no imbalance reserves in favor of other market schedules)?[1]

Throughout this initiative, the CAISO has emphasized the need for the imbalance reserve product as an alternative to out-of-market operator imbalance conformance to provide the CAISO operators with an envelope of operating capability to account for load and variable resource uncertainty.  To that end, imbalance reserves represent an important operational product, the requirement for which should not be relaxed casually. That said, given that the CAISO is proposing to procure imbalance reserves to cover a significant range of uncertainty – from the 2.5 percentile to the 97.5 percentile – modestly relaxing the imbalance reserve requirement under “normal” operating conditions should not pose a significant risk to the CAISO retaining sufficient operating flexibility to cover a fairly wide range of operating uncertainty.  Relaxing the entire imbalance reserve requirement, however, (as premised in the second question) would leave CAISO operators without the envelope of operating flexibility they deem prudent to cover load and resource uncertainty, and the answer to the second question should be “at very high cost”.   Additionally, under stressed system conditions during the September heat waves, the CAISO operators applied a huge amount of imbalance conformance.  While it is not clear if they did that because they were only expecting to receive a modest fraction of the response they were seeking, it is reasonable to consider whether the cost of not being able to secure imbalance reserves under stressed conditions should impose a higher price than not being able to secure imbalance reserves under “normal” conditions.  In other words, the relaxation penalty prices could and perhaps should be a function of operating conditions (i.e., the higher the operating stress, the higher the relaxation penalty price).  At this time, MRP does not have specific dollar answers to the two questions posed by the CAISO but looks forward to the discussion about the appropriate penalty prices.  

Configurable procurement parameters.  On page 29, the CAISO proposes that the percentiles used in the quantile regression (e.g., 2.5% and 97.5%) would be “configurable” so that the CAISO can adjust those parameters after gaining operational experience.  MRP believes these percentiles are instrumental to setting the procurement requirements and, by extension, the prices for these products.  As such, MRP does not support making these parameters configurable so that they can be changed by the CAISO unilaterally without conferring with stakeholders and going through the regulatory process appropriate for market parameters that affect the rates, terms and conditions of services provided under the CAISO Tariff.  MRP believes that the process for setting the imbalance reserve and reliability capacity products should be detailed in the CAISO Tariff. 

Post-deployment reporting.  While MRP supports the proposed nodal imbalance reserve and reliability capacity products and the general direction of this initiative, these capacity products – which are procured nodally primarily to ensure that the energy from these products can be delivered to load - are significantly more complicated than the CAISO’s current capacity ancillary services.  The CAISO has still not yet successfully deployed the market modifications (i.e., deployment scenarios) needed to support these new nodal capacity products.  Given the singificant paradigm change these products represent, while MRP supports these products to provide the CAISO with greater operating flexibility through market products rather than through operator load biasing, MRP also would like the CAISO to commit to providing a thorough report on these products one year after their deployment.  This report should include metrics such as: (1) where load, solar and wind uncertainty actually materialized relative to where the CAISO forecast it to materialize; (2) how these capacity products were actually dispersed; (3) the impact these products had on operator load biasing; (4) how the costs of these products were allocated, and (5) other information that will help the CAISO and market participants assess the success of these products and the need for future modifications. 

[1] DFP at pages 7 and 29.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

NV Energy appreciates the opportunity to comment on the CAISO’s draft final proposal for the Day Ahead Market Enhancement (“DAME”) initiative. NV Energy reiterates our concerns -- that neither blanket statements of potential benefits nor a high-level study with unexplained and unsupported assumptions provide enough support about the need for the Imbalance Reserve Product. Major enhancements should not be introduced without sufficient quantitative analysis to illustrate the need and the impact they would likely have on the market and the customers that the market serves. It is important to note that the Flexible Ramping Product, the real-time flexible ramping version of the Imbalance Reserve, was implemented on November 1, 2016, and has not reduced the CAISO’s load bias or operated as intended since implementation. Therefore, it is very important that the CAISO and stakeholders carefully consider major market enhancements so that they provide value and benefits to customers and do not create any unintended consequences or issues. The original schedule for this initiative was to introduce the imbalance reserve into the CAISO day-ahead market well before the commencement of the Extended Day Ahead Market (“EDAM”). Implementing a new market product at the same time of EDAM will present additional complications. All the more reason to clearly demonstrate the anticipated quantitative savings so that actual results can be monitored and corrected.

2. Please provide your organization’s overall position on the DAME draft final proposal:

No additional comment. 

3. Please provide a summary of your organization’s comments on the summary of changes and responses to stakeholder feedback from the fourth revised straw proposal, as described in Section 1:

To date, CAISO has stated the Imbalance Reserve Product is an important component of EDAM and that the product increases the benefits of EDAM. However, CAISO has not stated specific reasons why this imbalance reserve increases the benefits for all EDAM Entities or why it is necessary to include it in the EDAM market design over alternatives, such as a must offer requirement. NV Energy understands this could benefit some EDAM Entities by providing additional revenue, however, it isn’t clear that this product provides a benefit for all potential EDAM Entities.? NV Energy further understands that CAISO has conducted a sensitivity analysis within its recently-released EDAM benefit study to determine the potential benefits of the Imbalance Reserve Product. While the study had significant overall limitations including the assumed footprint, the primary concern for purposes of this initiative, is the lack of a breakout of the potential benefit by each individual Balancing Authority Area rather than only showing footprint wide study results. In addition, CAISO’s study only broke out the potential overall benefits without consideration of the potential costs to the future participants located inside and outside of California. Since the study footprint contained regions that will not be participating in this market and did not include the costs, NV Energy does not believe that this sensitivity is relevant in considering the impact of the Imbalance Reserve Product to the customers inside the state of Nevada.

CAISO has stated that the Imbalance Reserve Product would have been very beneficial during the heat wave and during stressed system conditions. NV Energy agrees that it would be important to have a market product that could procure additional supply for future heat waves or during west wide stressed system conditions, but this doesn’t mean that the market should procure supply for this uncertainty during all times of the year. Accordingly, NV Energy cannot support the level of uncertainty that CAISO has proposed to procure for this product. CAISO has proposed to procure the full Imbalance Reserve requirement rather than utilize a demand curve, which would procure Imbalance Reserves based on the probability the capacity is needed in real-time. This proposed change could have a significant impact on the Day-Ahead prices of this product and may result in over-procurement in capacity for a large portion of the year, which could also have an impact to the real-time market prices. Therefore, NV Energy reiterates a request that CAISO explain the rationale for procuring up to the 97.5 percentile of uncertainty. Moreover, in the EDAM initiative, CAISO has proposed to give its operators the ability to dynamically increase this threshold while recognizing this would reduce EDAM benefits. Ensuring that the Imbalance Reserve is only procured when needed based on system conditions with a regional diversity benefit is vital to achieving benefits from potential EDAM participation. Additionally, it is NV Energy’s understanding that this product is designed to procure capacity to reduce instances of operator load conformance and to establish a price for capacity that might otherwise be procured outside the market. However, it is unclear whether this product would procure too much capacity. In other words, is it necessary to procure capacity in the Day Ahead Market to cure almost 100 percent of the uncertainty that could arise in real time.

During the Market Surveillance Committee stakeholder call on December 12, 2022, CAISO proposed the idea to utilize a demand curve as the stepped constraint penalty price for the Imbalance Reserve product as a willingness of load to pay for a certain percent of the product requirement. NV Energy is supportive of this hybrid bidding and demand curve approach and recommends that the CAISO move forward with this proposal in its next iteration of the draft final proposal. Additionally, NV Energy recommends that this demand curve be updated following at least one year of imbalance reserve product performance analysis to propose new levels for procurement. Ideally, this stakeholder process should also contain this analysis to establish the initial levels; however, in this expedited timeline that is not possible. NV Energy proposes that CAISO start conservatively and initially set the demand curve at 97.5 percent for $10/MWh with more steps at the lower end of the curve gently relaxing the product until it reaches 75 percent of the upward product requirement. The upper end of the demand curve should be set at $500/MWh which is double the bidding cap for  0 percent of the upward product requirement. The demand curve presented by CAISO illustrated a top bound at $1000/MWh for a 0 percent requirement. NV Energy does not support this level of scarcity pricing for the product because the bid caps will be set at $247/MWh. The penalty prices selected should maintain the current levels of priority for other market products, reflect the loads willingness to pay for the capacity, and ensure the product clears enough supply to meet the expected uncertainty that is not available in Real-time.

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

4. Please provide your organization’s comments on the proposed resource adequacy day-ahead must-offer obligation for imbalance reserves as described in Section 3.2:

No comment. 

5. Please provide your organization’s comments on the proposal to establish default bids for mitigation of imbalance reserve and reliability capacity, as described in Sections 3.2 and 3.4.

CAISO has proposed to cap the bids for the Imbalance Reserve Product at $247/MWh and at $250/MWh for Reliability Capacity. Then any supply that has been determined to have market power will be mitigated to a proposed value of $55/MWh for both products. NV Energy understands the importance of mechanisms to protect load; however, there also should be mechanisms in place to protect generation. The draft final proposal explains the bidding requirements and must offer obligations for EDAM:

“As part of EDAM, all resources offering energy bids in the IFM (and thus included in the EDAM resource sufficiency evaluation) must submit bids for reliability capacity up at the same quantity as their energy bid plus ancillary service self-provision. This ensures all resources shown in the EDAM RSE are fully available for use in RUC, including excess supply that participants offered above their RSE requirements.”[1]

Since CAISO is proposing must offer rules for the two capacity products, the market design should ensure there are mechanisms in place to allow for a generator to recover costs if it exceeds the proposed mitigated price. NV Energy would be supportive of an after the fact cost recovery process if proposed by CAISO, but NV Energy will not support any proposal to mitigate bids until a cost recovery process has been developed. Additionally, this cost recovery process should include and consider the changes in gas procurement that is needed in order to meet the capacity awards.

[1] CAISO. December 1, 2022. “Day Ahead Market Enhancements: Draft Final Proposal”. DraftFinalProposal-Day-AheadMarketEnhancements.pdf (caiso.com).

6. Please provide your organization’s comments on the proposal to establish eligibility criteria to provide IRU based on a resource’s day-ahead energy offer price, as described in Section 4.3:

No comment. 

7. Please provide your organization’s comments on the proposed transitional measures for CAISO load-serving entities as described in Section 5, in context of the removal of inter-SC trading of imbalance reserves and the removal of the reverse settlement of reliability capacity revenue for RA capacity from the proposal:

No comment. 

8. Please provide your organization’s comments on the proposed WEIM Governing Body Role, as described in Section 7:

The proposed market enhancements within this initiative will lay the foundation for EDAM. Therefore, NV Energy strongly supports the proposed change to the classification of this initiative to joint authority subject to Board approval.

9. Please provide any additional comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

In previous comments, NV Energy proposed for CAISO to consider a RUC run with the transfers locked between each Balancing Authority while counting the transfers that occurred in the IFM. NV Energy believes this proposal might also be beneficial considering the CAISO Balancing Authority will be the only area that includes convergence bidding. NV Energy is concerned that the Nevada resource adequacy supply could be used to meet the needs for another Entity. An unacceptable outcome of EDAM would be the use of Nevada’s resource adequacy supply to fill in the physical supply that was not procured in the IFM or to meet another Entities Reliability needs at a suppressed market price.  

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

PG&E appreciates the CAISO for leading an open stakeholder process that reflects input from the various stakeholders. The following is a summary of our comments:

• PG&E agrees with the decision to remove the inter-SC trade solution but the issue of contracted resources receiving duplicative payments remains.
  • The inter-SC trade and reverse settlement solution does not resolve the duplicative payment issue.
  • PG&E believes that with sufficient information an after-market settlement process can address the duplicative payment issue.
• PG&E opposes the CAISO’s approach that prevents awarding imbalance reserve (IR) to resources with higher underlying energy bids.  
  • The approach would disqualify bids and restrict participation of California Resource Adequacy (“RA”) resources in IR.
  • We support the elimination of any price cap or any other additional restrictions and suggest monitoring the market for any inappropriate bidding behavior.
• PG&E remains concerned that the deviation settlement for Imbalance Reserves is overly complex and results in unequal treatment for WEIM-only entities and EDAM participating entities in the Real-Time market.

2. Please provide your organization’s overall position on the DAME draft final proposal:

PG&E supports the concepts of developing the two products (i.e., Imbalance Reserves and Reliability Capacities) for the objectives identified for this initiative. However, PG&E remains concerned with a few technical issues that we commented on in the Fourth Revised Straw Proposal [1] and believes the success of DAME largely depends on the implementation of the two products related to those issues:

• PG&E believes that the proposed deviation settlement for Imbalance Reserves is problematic because it creates different values of flexible ramping product (FRP) for those entities who are only in WEIM (but not E-DAM) than those who are in EDAM. PG&E has shared with the CAISO a simplified design. PG&E requests further examination of the settlement process before implementation (e.g., evaluation of interactions between and/or reversal of Imbalance Reserve awards under different Real-Time Energy and Flexible Ramping award scenarios).
• PG&E requests the CAISO share DAME’s implementation plan with stakeholders in a timely manner. It is important to address those technical issues along the course of BRS, then test and adjust the approach based on the market performance and settlement results.  For example, for a Fall 2023 implementation, PG&E requests the CAISO provide an implementation plan at the time of the February 2023 CAISO Board meeting. This would provide PG&E at least six months to update internal software systems and perform market simulation testing.

[1] PG&E comments to the Forth Revised Straw Proposal of Day-Ahead Market Enhancements, Listed under the Section of Other Issues, https://stakeholdercenter.caiso.com/Comments/AllComments/2da0b776-8a88-48cf-a87f-8424ed85477f#org-0072cd0e-06fb-475a-9aad-65a8fdbd17b3

3. Please provide a summary of your organization’s comments on the summary of changes and responses to stakeholder feedback from the fourth revised straw proposal, as described in Section 1:

See comments under Section 1.

4. Please provide your organization’s comments on the proposed resource adequacy day-ahead must-offer obligation for imbalance reserves as described in Section 3.2:

PG&E supports the proposed changes of Resource Adequacy (RA) day-ahead must offer obligation for Imbalance Reserves, for the reasons argued in our last comments[1].  PG&E appreciates the CAISO’s responsiveness to stakeholders’ feedback.

[1] I.d., n1.

5. Please provide your organization’s comments on the proposal to establish default bids for mitigation of imbalance reserve and reliability capacity, as described in Sections 3.2 and 3.4.

PG&E recommends the CAISO take a simplified approach to implementing the two proposed products (Imbalance Reserves and Reliability Capacities), and not apply Market Power Mitigation (and related default bids) in the initial stages of implementing DAME.

• As stated in our last comments[1], PG&E believes mitigating the two products is questionable and requires an integrated treatment with resources’ energy bids.
• Market power mitigation increases computation requirements and complicates price formation.  This added complexity will impact ability to monitor and analyze the market’s response to the introduction of the two new products.
• The CAISO should monitor the actual price impact and exercising of market power. After these two products are introduced, it can be determined whether market power mitigation for the two products is necessary. This would also allow the CAISO an opportunity to identify a simplified and effective mitigation approach, if needed, for the products’ implementation in E-DAM.

[1] I.d., n1.

6. Please provide your organization’s comments on the proposal to establish eligibility criteria to provide IRU based on a resource’s day-ahead energy offer price, as described in Section 4.3:

PG&E opposes implementing the proposed disqualification process for Imbalance Reserves bids. The bid disqualification process is proposed to address the issue of awarding Imbalance Reserves to bids with high underlying energy cost. While PG&E fully appreciates the complexity of this problem, the proposed solutions so far (i.e., the real-time energy bid offer cap in the revised proposals, and the bid disqualification process in the draft final proposal) would result in undesirable consequences:[1]

• Artificially reduce supply: Disqualifying Imbalance Reserve bids will reduce the capacity available and potentially cause a BAA to falsely fail day-ahead RSE in the E-DAM context.
• Weakening the RA MOO: The disqualification process greatly weakens the benefits of RA’s Must Offer Obligations (MOO) for Imbalance Reserves in the day-ahead market. Under the proposed disqualification process, capacity with legitimately high costs could be eliminated and low cost units could avoid the MOO by submitting high energy bids.

PG&E requests the CAISO simplify the design without imposing any bid restrictions in the beginning of DAME’s implementation; but instead monitor the market response to better understand the problem scale and identify proper solutions.

[1] PG&E commented on the issues of applying real-time energy offer cap in its last comments. I.d., n1.

7. Please provide your organization’s comments on the proposed transitional measures for CAISO load-serving entities as described in Section 5, in context of the removal of inter-SC trading of imbalance reserves and the removal of the reverse settlement of reliability capacity revenue for RA capacity from the proposal:

PG&E offered reasons for rejecting the inter-SC trading of Imbalance Reserves and the reverse settlement of reliability capacity in our last set of comments[1]. PG&E believes that a robust and transparent process for addressing RA’s duplicative cost is important for introducing Imbalance Reserves and Reliability capacity and requests that the CAISO continue working with the stakeholders to identify and provide the data necessary to establish such a process.

[1] I.d., 1.

8. Please provide your organization’s comments on the proposed WEIM Governing Body Role, as described in Section 7:

CAISO included language in the Draft Final Proposal “Regardless, CAISO management believes it would be appropriate to consider a possible adjustment of this classification.”  PG&E has previously expressed concern about Joint Authority for the DAME initiative given the initiatives’ history and market context. However, given the unique circumstances and timing of events, PG&E understands CAISO management’s reflection on governance now.  Moving forward it is important to recognize changing decisional authority late in an initiative is not ideal and must be avoided prospectively.

9. Please provide any additional comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

None. 

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

PacifiCorp appreciates the opportunity to comment on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal. PacifiCorp commends the CAISO’s hard work on the DAME initiative and believes this approach is an important step towards increased confidence in the development of the extended day-ahead market (EDAM) and reliability. Although PacifiCorp is supportive of the imbalance reserve and reliability capacity products, PacifiCorp shares the same concerns brought forth by stakeholders that mitigation, bid caps and price caps may over-constrain the imbalance reserve product to extent that causes resources to provide imbalance reserves uneconomically.

It is PacifiCorp’s opinion that the Final Proposal should lay the foundation for a day-ahead market that fosters participation from an array of resources that are able to provide imbalance reserves. Since market participants don’t have experience with a day-ahead flexible reserve product like the imbalance reserve product, PacifiCorp requests the CAISO start with a high eligibility price cap until market participants have more experience with the new market products and there is clear evidence to support further constraining the product. PacifiCorp would also like to see more analysis and discussion on the graduated penalty price structure for imbalance reserves. At this point, it is unclear how the market should prioritize imbalance reserve procurement in a way that is aligned with system needs for flexible capacity. With that, PacifiCorp requests that the CAISO re-evaluate the demand curve for imbalance reserves as part of this effort as PacifiCorp believes a demand curve could be operable for the CAISO while also reducing the risk to market participants of over-constraining the imbalance reserve product with a default availability bid cap and eligibility price cap. Furthermore, a demand curve would require less stringent mitigation of imbalance reserves, thereby reducing the risk of resources being mitigated such that their imbalance reserve bids are uneconomic. PacifiCorp acknowledges that the CAISO and stakeholders have a difficult task to enhance the market with the industry needs, give the right incentives for resources to provide flexibility in a day-ahead timeframe, and create guardrails to ensure the cost of the flexibility does not place unforeseen burdens on consumers.  As such, PacifiCorp requests there be more discussion, potentially in the format of a narrowly focused workshop, on the eligibility price cap, graduated penalty prices, and procuring imbalance reserves using a demand curve before the Final Proposal.

2. Please provide your organization’s overall position on the DAME draft final proposal:

PacifiCorp generally supports the Draft Final Proposal with caveats. There are many aspects of the Draft Final Proposal that will contribute to an effective day-ahead market. The imbalance reserve product is intended to provide the right incentives for more development of flexible capacity on the system, which will be needed as more VERs become interconnected while the reliability capacity products help ensure there is enough capacity in the market to cover each BAA’s forecasted demand. However, with this initiative tying directly into the newly proposed EDAM, there are some key details of the imbalance reserve product that still need more work before EDAM is implemented. Imbalance reserves are an important component of the EDAM design. As such, any constraints developed throughout this initiative should not disincentivize resources from providing the needed capacity that would have otherwise bid into the market. More discussion is needed to determine if the eligibility price cap will hinder participants from carrying insufficient amount of imbalance reserves that are dispatchable in real-time.

3. Please provide a summary of your organization’s comments on the summary of changes and responses to stakeholder feedback from the fourth revised straw proposal, as described in Section 1:

PacifiCorp appreciates the changes made to Draft Final Proposal. The updates and clarifications have been helpful to better understand the CAISO’s motivation and vision for this initiative. PacifiCorp agrees with the CAISO’s reasoning as to why imbalance reserves should be procured nodally as this provides a mechanism to ensure deliverability. PacifiCorp concurs with the change in the proposal to not require VERs to provide HSL but are open to exploring the need for this requirement in the future. Lastly, PacifiCorp supports the DAME initiative being under joint authority and believe it will foster more trust between future EDAM members and the CAISO.

4. Please provide your organization’s comments on the proposed resource adequacy day-ahead must-offer obligation for imbalance reserves as described in Section 3.2:

No comment.

5. Please provide your organization’s comments on the proposal to establish default bids for mitigation of imbalance reserve and reliability capacity, as described in Sections 3.2 and 3.4.

PacifiCorp has no immediate concerns with a default bid of $55/MWh. However, PacifiCorp recommends this value be re-evaluated following the first year of operation of the EDAM as more data is realized and entities gain more operational experience with imbalance reserves and reliability capacity products. If the data analysis should indicate that resources are disincentivized for bidding imbalance reserves and reliability capacity because they are being mitigated below their willingness to provide, PacifiCorp would expect the CAISO to initiate a process of adjusting the default energy bid as appropriate.

6. Please provide your organization’s comments on the proposal to establish eligibility criteria to provide IRU based on a resource’s day-ahead energy offer price, as described in Section 4.3:

PacifiCorp understands the problem the CAISO is facing when considering the possibility of resources with very high energy bids being dispatched for imbalance reserve up and reliability capacity up. PacifiCorp agrees that the possibility exists for resources and entities to take advantage of this opportunity, and that there should be safeguards in place. PacifiCorp believes the eligibility price cap can be the solution but has concerns with how this cap will be set. The presentation to the Market Surveillance Committee on December 12^th was helpful, however, the analysis showed that large outliers do occur, most likely during tight system conditions. PacifiCorp has concerns about the possibility of the calculated eligibility price cap being lower than the prices that materialize in real-time, which would potentially cause resources to be disallowed from bidding for imbalance reserve up and reliability capacity up. Without any market experience with the proposed imbalance reserve and reliability products, the prospect of resources being dismissed from providing imbalance reserves and reliability capacity is worrisome. PacifiCorp recommends the CAISO originally adopt a methodology that sets a high eligibility price cap as to not preclude resources from providing imbalance reserves and reliability capacity. Once market participants gain a better understanding of how much imbalance reserve and reliability capacity there is available, then it would be prudent to re-evaluate the eligibility price cap calculation. In PacifiCorp’s opinion, it would be best to have too many resources bidding for imbalance reserves and reliability capacity than not enough while EDAM entities and CAISO operators are gaining experience with these changes. Notwithstanding, PacifiCorp requests the CAISO include information regarding a process of collecting and analyzing the needed data to inform any adjustment after product launch in the Final Proposal

PacifiCorp also requests more details from the CAISO on when the eligibility price cap will be communicated to EDAM participants. PacifiCorp would advocate for the price cap to be communicated to market participants well before the EDAM RSE due to the nature of gas procurement and storage market participants will need to be confident that their resources will be allowed to bid in the EDAM. In general, communicating the eligibility price cap in advance of the EDAM RSE will give market participants an opportunity to bid the most optimal resources for imbalance reserves.

Lastly, there was an additional consideration made at the December 12^th Market Surveillance Committee meeting for possibly suspending the eligibility price cap during tight system conditions. PacifiCorp would support this functionality and believes it would be a good feature to go along with the proposed method for calculating the eligibility price cap. There would need to be more discussion on this consideration, but PacifiCorp is hopeful some language of the suspension of the eligibility price cap can be added to the Final Proposal.

7. Please provide your organization’s comments on the proposed transitional measures for CAISO load-serving entities as described in Section 5, in context of the removal of inter-SC trading of imbalance reserves and the removal of the reverse settlement of reliability capacity revenue for RA capacity from the proposal:

No comment.

8. Please provide your organization’s comments on the proposed WEIM Governing Body Role, as described in Section 7:

Section 7 of the Draft Final Proposal states: (1) this initiative would fall mostly outside the authority of the WEIM Governing Body because it focuses on the day-ahead market; (2) the changes to the settlement of flexible ramping product to remove the double payment of forecasted movement (proposal 1) would be “applicable to EIM Entity balancing authority areas, EIM Entities, or other market participants within EIM Entity balancing authority areas, in their capacity as participants in EIM.”; (3) proposals 2 through 4, to the extent they change rules of the real-time market, would not be applicable to WEIM Entities in their capacity as participants in WEIM and fall outside the scope of joint authority, but do fall within the WEIM Governing Body’s advisory role; and (4) the CAISO management recommends an adjustment to the classification to allow the entire initiative to fall under the joint authority. PacifiCorp supports the initiative being considered under the joint authority of the Board and the WEIM Governing Body.  Such an approach would be reasonable particularly given the potential interaction between the initiative and the EDAM, which would also be considered under joint authority.

9. Please provide any additional comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

Regarding the CAISO’s request for stakeholders to comment on the graduated penalty price structure for the imbalance reserve product, PacifiCorp supports the CAISO’s goal to develop a framework in such a way that prices for the product don’t spike if a percentage of the imbalance reserves are not able to be procured. PacifiCorp would like to see further discussions and analysis around an adequate pricing structure to better understand the impacts to the EDAM.

After hearing more discussion at the Market Surveillance Committee meeting on December 12^th, PacifiCorp would like CAISO staff to reconsider using a demand curve to procure imbalance reserves. To be clear, PacifiCorp is not opposed to the frameworks in the Draft Final Proposal, but believes at the onset of EDAM, utilizing a stepped demand curve may provide a good balance of reliability and comfortability for market participants since there is familiarity with this approach and that this would also reduce the need for mitigation and eligibility price caps. It is PacifiCorp’s view that creating a market foundation that is implementable in concert with EDAM provided that market participants are comfortable. Using a demand curve would also require less stringent mitigation of resources, which will reduce the risk of resources being mitigated below their willingness to provide. PacifiCorp realizes that there would also need to be more analysis and discussion on a demand curve and how it will be formulated but at this point it seems like there may be more support for this approach.

PacifiCorp would like to thank the CAISO for their hard work throughout this initiative and agrees with the CAISO’s vision for new flexible products in a day-ahead market. PacifiCorp requests the CAISO provide an opportunity for further discussion on the eligibility price cap, price relaxation structure for imbalance reserves, and the merits of procuring imbalance reserves using a demand curve before the Final Proposal. It is PacifiCorp’s opinion that these issues have not been fully resolved and are not convinced they will be resolved in the Final Proposal without more stakeholder input.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

PGP, like other stakeholders, supports the need for DAME including the objective of significantly reducing or eliminating the need for market operator actions (“load bias”) to manage uncertainty between the DA and RT markets. PGP appreciates the immense efforts of CAISO staff and stakeholders to create the appropriate product to do so. While PGP supports the need for the IR and the goals of the DAME initiative, this proposal feels very far from final. As discussed in the December 12^th MSC meeting, the imbalance reserve product should be aligned more clearly with the EDAM design, including the RSE diversity benefit and failure penalty structure, and requires more discussion.

Given the number of very high-level philosophical questions regarding the basic design fundamentals that are outstanding in the discussion, PGP supports the potential for exploration of how like products are designed in other markets, as introduced by Vistra in their comments on the Fourth Revised Straw proposal. Other markets may have new and simplifying design ideas that may still make implementation possible in time for EDAM. Of particular interest is the zonal product in the ISO NE. PGP recommends the current process used in the Price Formation Enhancement initiative of bringing in a neutral and independent market expert to review the approach in other markets to stimulate further discussion on the topic.

As it stands, PGP mostly has concerns about the potential for over mitigation of the products introduced in this initiative. If this risk was removed, the proposal would be closer to a workable path forward.

2. Please provide your organization’s overall position on the DAME draft final proposal:

This proposal includes a significant risk of over mitigation. PGP supports BPA’s comment on market power mitigation from the EDAM Draft Final proposal and application of this approach to the products introduced through DAME. For reference, BPA’s response to the EDAM comments Question 13 on Market Power Mitigation in the EDAM Draft Final Proposal states:

 “As noted in our prior response, CAISO’s approach of mitigating bids based on the mere potential of market power serves as a disincentive for supply to participate in multiple energy-related products.

Bonneville reiterates our concern that over-mitigation endangers our ability to reliably meet load obligations without over-reliance on market purchases. We request, again, the ability for entities to have their bids removed from the market run rather than be mitigated resulting in sub-optimal system dispatch.”

PGP echoes these concerns as they pertain to the DAME initiative.

3. Please provide a summary of your organization’s comments on the summary of changes and responses to stakeholder feedback from the fourth revised straw proposal, as described in Section 1:

PGP appreciates the ongoing progress on this initiative, and recommends further discussion as explored in the questions below.

4. Please provide your organization’s comments on the proposed resource adequacy day-ahead must-offer obligation for imbalance reserves as described in Section 3.2:

PGP supports a must offer requirement for the IR but the section on Reliability Capacity needs to clarify how this applies in regions without virtual participation, as it appears to only reference the CAISO structure, while many potential EDAM entities have indicated they may not include virtuals upon initial market entry. This RC requirement needs to be clearly separated by BA to account for the differences in convergence bidding across the market footprint.

PGP supports that the must-offer requirement for resources in EDAM that are used to pass the RSE wonders if this naturally mitigates the concerns of the uncompetitive resources being incentivized to provide imbalance reserves. Clarification on how the diversity benefit of the system is calculated using the Quantile regression approach vs independent calculations would enhance participants understanding of the expected IR requirements by BA.

PGP also observes that given only a subset of resources in the market can provide the flexibility needed to integrate the significant volume of VERs that are anticipated on the system, it is perfectly reasonable to expect that some resources that could provide an ancillary service product such as imbalance reserves are displaced by lower energy cost resources in the market. This does not indicate that incentives for flexibility are going to the “wrong resources” but that until such a time that a resource exists that can effectively provide flexibility while meeting environmental objectives, this payment of different resources for different services may be unavoidable and appropriate in some cases.

5. Please provide your organization’s comments on the proposal to establish default bids for mitigation of imbalance reserve and reliability capacity, as described in Sections 3.2 and 3.4.

PGP does not support the default bids based on the 80^th percentile of spinning reserve prices. This does not provide adequate confidence that resources can participate in providing the imbalance reserve product without being under-compensated in the market. PGP supports exploration of a scaling based on gas price to see if it gives more appropriate coverage.

PGP supports removal of the RT bid cap. PGP supports the comments by WPTF on the stakeholder call on December 7^th, that a more logical approach is to eliminate the cap entirely and just monitor for the potential inappropriate behavior characterized by PG&E on the stakeholder call.

6. Please provide your organization’s comments on the proposal to establish eligibility criteria to provide IRU based on a resource’s day-ahead energy offer price, as described in Section 4.3:

PGP appreciates the analysis and exploration of different methodologies for establishing a participation threshold included with the Draft Final proposal, but alternative representation of the data in support of the link to EDAM design would enhance the discussion and proposal, including:

• Given that the proposed “methodology 11” for the eligibility threshold with the 1.2 scaling factor had a diminishing coverage and an increasing difference to price under extreme system conditions, this did not seem to be the appropriate method. To align with the EDAM design, minimum coverage should arguably align with the de minimis threshold established in the EDAM RSE penalty structure.
• PGP supports further analysis of how system conditions could be defined that would enable turning off the eligibility threshold and alignment of those conditions with the EDAM design. Given this would be an important part of the proposal, it seems unreasonable to introduce it as a “Final Proposal” without further room for comment.
• Analysis of known pockets that require nodal allocation due to system constraints would improve the justification the nodal procurement and mitigation framework. The required alignment with the EDAM RSE seems to indicate that a BA-level target and mitigation framework is more appropriate, and no proof has been provided that there is a legitimate concern of undeliverable resources clearing to provide this product.

As discussed at the MSC on December 12, if mitigation is truly required, it should be “loose” and monitored over time to prove the necessity of this exercise. The methodologies for the mitigated floor and bid participation threshold proposed herein represents the potential for over mitigation.

7. Please provide your organization’s comments on the proposed transitional measures for CAISO load-serving entities as described in Section 5, in context of the removal of inter-SC trading of imbalance reserves and the removal of the reverse settlement of reliability capacity revenue for RA capacity from the proposal:

No comment.

8. Please provide your organization’s comments on the proposed WEIM Governing Body Role, as described in Section 7:

 PGP supports application of joint authority over this initiative.

9. Please provide any additional comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

PGP would like to see more analysis showing how the quantile regression translates to a diversity benefit. The proposal states that the IR would be calculated by BAA based on historical data, without reference to any combined data set or analysis of the IR requirement for the EDAM market as a whole. Given the diversity benefit is expected to be a substantive part of the operational benefits of EDAM, there should be a clearly established calculation and allocation mechanism built into this proposal. PGP would appreciate further analysis in support of the direct linkage of the IR product to the RSE including:

• Analysis directly showing the procurement targets for the CAISO and EDAM entities separately and together, showing the implied diversity benefit allocation per BA
• More detail regarding how this uncertainty (forecast error) differs under different system conditions.

PGP appreciates the additional documentation of the RUC interaction in the draft Final proposal, but has concerns about how little discussion has been focused on the potential issues that may be introduced with having one BA (the CAISO) incorporating virtual supply and demand, and other BA’s likely not at least when they join EDAM. This indicates potentially significant differences in the way RUC is used and even the need for RUC in the CAISO vs other areas, that has not been addressed openly in the proposal. Neighboring BAs should not be obligated to provide reliability capacity transfers to support this CAISO-specific issue in RUC, particularly if those offers can be heavily mitigated. To encourage operational savings through the EDAM, non-CAISO participants need to be able to confidently participate in imbalance markets at their true opportunity cost without the risk of over-mitigation.  

PGP thanks the CAISO for the opportunity to comment on the initiative, and recommends an additional comment window after then next version is posted given the substantive design changes that may be included in the next proposal. Considering the current version the “Draft Final” with so many outstanding stakeholder concerns does not feel like an accurate representation of the status of the initiative.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

REV Renewables (REV) continues to support the need for a new Imbalance Reserve (IR) product, particularly as it can reduce the manual out-of-market actions CAISO takes today to increase supply through the residual unit commitment (RUC) process. CAISO’s frequent use of load biasing in RUC is creating hidden system costs and inefficient market outcomes that follows through to the fifteen minute and real-time markets.

However, REV opposes (with caveats) the current DAME proposal given the restrictions being proposed for the IR product that are likely to effect product availability and efficient price formation. It is critical to have a viable IR product in which CAISO operators will trust and resources will participate. Rather than creating product restrictions proactively for fear of worst case scenarios, CAISO should simplify the IR and RC products, closely monitor implementation, and if improper or inefficient market outcomes emerge then CAISO would have the data to address the issue as needed.

REV offers the following comments in an effort to make IR and RC effective market products. In particular, REV has the following concerns:

• Local Market Power Mitigation (MPM) for IR is Not Justified and the Default Availability Bid Could Create Inefficient Dispatch for Storage Resources – CAISO has not provided sufficient detail and analysis to justify why local MPM for IR and RC bids are necessary. IR and RC bid caps should be sufficient mitigation against procuring high cost resources, particularly at the outset of this new IR product. Proactively creating local MPM adds significantly more complexity, and CAISO’s proposed solution of default availability bid is a novel approach with unknown results. Imposing this default price across resources for all intervals could lead to sub-optimal dispatch for storage resources in particular, as CAISO illustrated in its recently approved proposal for changing day-ahead default energy bids in the Energy Storage Enhancements.
• Real Time (RT) Eligibility Criteria Should Be Withdrawn - REV appreciates CAISO withdrawing the RT energy bid cap, but does not think the RT eligibility criteria is necessary. CAISO has not provided sufficient analysis to justify the need for this approach. Further, CAISO’s methodology for the RT eligibility price cap includes historic prices as a key input, which may not be a good indicator of current market events and create limits on the pool of IR resources when they are needed. REV suggests that, rather than artificially limit the pool of resources eligible for IR for fear of resources gaming the product or high energy cost resources being chosen, CAISO monitor implementation and address any potential IR clearing of high priced RT energy resources at that time.
• CAISO Should Be Clear that Reliability Capacity (RC) is a RUC Successor but IR is Not – REV appreciates CAISO removing the inter-SC and reverse settlement processes for RC and IR and agrees with CAISO that revenue generated from new market products should be settled between the counterparties. However, it would be helpful for CAISO to be clear on whether they think IR is a RUC successor product or not.  As CAISO stated in the December 7 stakeholder workshop and describes in the draft final proposal, CAISO operators manually increase the RUC forecast because they need to procure capacity in addition to the supply scheduled in the IFM to address the high net load uncertainty. However, CAISO also notes this is an out-of-market action and not what RUC was designed for. The RUC process allows CAISO to procure incremental supply to meet the positive difference between the load forecast and cleared physical supply. CAISO is currently also using RUC to meet the uncertainty requirement, which is not its purpose. CAISO is appropriately trying to move this out-of-market action in RUC into a new product (IR), and as such this new IR product should not be considered a RUC successor product.

2. Please provide your organization’s overall position on the DAME draft final proposal:

As noted in #1, REV opposes the complicated restrictions being put on the IR product that could lead to inefficient market outcomes. REV supports an IR product that would reduce the out-of-market load bias occurring today in RUC, but suggests CAISO simplify the product to enable effective market supply and results.

3. Please provide a summary of your organization’s comments on the summary of changes and responses to stakeholder feedback from the fourth revised straw proposal, as described in Section 1:

While REV appreciates some of the changes made, including removing the real-time energy offer cap and the Inter-SC trading, these incremental changes are not enough to resolve our concerns on the IR product complexity. See #1.

4. Please provide your organization’s comments on the proposed resource adequacy day-ahead must-offer obligation for imbalance reserves as described in Section 3.2:

REV does not oppose the RA day-ahead must-offer obligation for imbalance reserves. However, if IR is being co-optimized in the Integrated Forward Market, a resource should be indifferent to receiving an incremental energy schedule or IR award (as stated on page 10 of the proposal). CAISO’s current proposal for IR makes it a riskier product to provide given the MPM and eligibility criteria, which may impact supply availability, price formation, and efficient market outcomes. 

5. Please provide your organization’s comments on the proposal to establish default bids for mitigation of imbalance reserve and reliability capacity, as described in Sections 3.2 and 3.4.

CAISO has not justified the need to extend local MPM to IR and RC bids, and has not shown why local MPM for energy is not sufficient mitigation. CAISO proposes that IR and RC both have a bid cap, which is an appropriate guardrail against high cost resources that stakeholders have not opposed. This price cap should be sufficient mitigation against procuring high energy cost resources. Additionally, energy, not capacity, provides counter flow to non-competitive transmission constraints. The CAISO does not need to procure IR and RC to have access to mitigated energy to manage non-competitive transmission constraints. The CAISO already has access to mitigated energy through its energy markets. If the CAISO does not have a sufficient supply of mitigated energy to manage flow on these non-competitive constraints, that deficiency signals a failure of the RA program, not a need to apply local market power mitigation to system capacity products.

CAISO also proposes to mitigate IR offers to the higher of the competitive locational marginal price or a new default availability bid. This default availability bid would be the same price for all resources across all intervals, set using a high percentile value of historical spinning reserve bids. While REV appreciates the idea of a non-zero bid floor, CAISO has not shown that spin reserve price is a good indication of an IR price. As WPTF notes in November 15 comments, “spinning reserves are only dispatched if a contingency event occurs in real-time; whereas the CAISO has always characterized the imbalance product as being a reserve capacity that has a higher likelihood of being converted to energy in real-time. Thus the cost profile of spinning reserves and the imbalance product are drastically different as one has to consider several other costs, risks, and market opportunities when offering to provide imbalance reserves that do not have to be considered for spinning reserves.” Additionally, for energy storage resources, CAISO’s recent final proposal in the Energy Storage Enhancements initiative shows how setting one default bid across all intervals can lead to inefficient market results particularly for energy storage resources. CAISO should address this issue for storage to avoid dispatch during sub-optimal hours.

6. Please provide your organization’s comments on the proposal to establish eligibility criteria to provide IRU based on a resource’s day-ahead energy offer price, as described in Section 4.3:

REV appreciates CAISO withdrawing the RT energy bid cap, but does not think the RT eligibility criteria is necessary. CAISO has not provided sufficient analysis to justify this proposal. Further, CAISO’s methodology for the RT eligibility criteria is a novel solution with unknown market outcomes. One of the key inputs for the eligibility criteria is historic prices, though California has experienced recent extreme weather events showing that historic events are not necessarily a good indicator of the future. This RT eligibility criteria analysis could end up limiting the pool of IR resources in a way that creates artificial scarcity and skews price formation of the product.  REV suggests that, rather than limit the pool of resources eligible for IR for fear of resources gaming the product or high energy cost resources being chosen, CAISO monitor implementation and address any potential IR clearing of high priced RT energy resources at that time.

7. Please provide your organization’s comments on the proposed transitional measures for CAISO load-serving entities as described in Section 5, in context of the removal of inter-SC trading of imbalance reserves and the removal of the reverse settlement of reliability capacity revenue for RA capacity from the proposal:

As discussed in #1, REV appreciates CAISO removing the inter-SC and reverse settlement processes for RC and IR and agrees with CAISO that revenue generated from new market products should be settled between the counterparties. However, it would be helpful for CAISO to be clear on whether they think IR is a RUC successor product or not. As CAISO stated in the December 7 stakeholder workshop and describes in the draft final proposal, CAISO operators manually increase the RUC forecast because they need to procure capacity in addition to the supply scheduled in the IFM to address the high net load uncertainty. However, CAISO also notes this is an out-of-market action and not what RUC was designed for. The RUC process allows CAISO to procure incremental supply to meet the positive difference between the load forecast and cleared physical supply. CAISO is currently also using RUC to meet the uncertainty requirement, which is not its purpose. CAISO is appropriately trying to move this out-of-market action in RUC into a new product (IR), and as such this new IR product should not be considered a RUC successor product.

8. Please provide your organization’s comments on the proposed WEIM Governing Body Role, as described in Section 7:

 REV has no comments at this time.

9. Please provide any additional comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

 REV has no further comments at this time.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

Salt River Project Agricultural Improvement and Power District (SRP) appreciates the opportunity to submit the following comments on the DAME draft final proposal. SRP appreciates the continued discussions of DAME, including the relationship between DAME and the Extended Day Ahead Market (EDAM) initiative.

2. Please provide your organization’s overall position on the DAME draft final proposal:

No comments at this time.

3. Please provide a summary of your organization’s comments on the summary of changes and responses to stakeholder feedback from the fourth revised straw proposal, as described in Section 1:

SRP appreciates the CAISO presenting changes from the revised straw proposal and responses to stakeholder feedback. SRP encourages that approach for other initiatives.

As described in comment 9, SRP supports the CAISO’s consideration of joint authority for all aspects of this initiative.

4. Please provide your organization’s comments on the proposed resource adequacy day-ahead must-offer obligation for imbalance reserves as described in Section 3.2:

No comments at this time.

5. Please provide your organization’s comments on the proposal to establish default bids for mitigation of imbalance reserve and reliability capacity, as described in Sections 3.2 and 3.4.

SRP understands the CAISO intends to use spinning reserve bids as reasonable approximation of a resource’s cost to provide reserves and will determine whether spinning reserve bid prices are related to prevailing gas prices to potentially make the default bid scalable by gas prices. SRP encourages to the CAISO to provide clarification if an imbalance reserve is awarded to a gas resource with a must offer obligation, whether the imbalance reserve bid will cover the cost associated with gas that is procured but not utilized. Further, SRP encourages clarification if a resource would receive additional compensation in the event the resource pays more for gas than estimated in an imbalance reserve bid.   

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

6. Please provide your organization’s comments on the proposal to establish eligibility criteria to provide IRU based on a resource’s day-ahead energy offer price, as described in Section 4.3:

No comments at this time,

7. Please provide your organization’s comments on the proposed transitional measures for CAISO load-serving entities as described in Section 5, in context of the removal of inter-SC trading of imbalance reserves and the removal of the reverse settlement of reliability capacity revenue for RA capacity from the proposal:

No comments at this time,

8. Please provide your organization’s comments on the proposed WEIM Governing Body Role, as described in Section 7:

SRP advocates for joint authority over all aspects of the DAME proposal because of the direct impact and interdependency between DAME and EDAM for day ahead market operations. SRP appreciates the CAISO’s consideration of this adjustment and recognition that DAME is foundational to EDAM.

9. Please provide any additional comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

SRP appreciates the CAISO facilitating a benefit study for the DAME imbalance reserve product. SRP encourages further discussions of the study that will allow stakeholders the opportunity to review and obtain further understanding of the key assumptions leveraged in the study.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

SDG&E appreciates the opportunity to comment and encourages CAISO to consider the feedback on the following topics of the proposal: 

Graduated Penalty Prices 

SDG&E believes the penalty price to protect Imbalance Reserves Up (IRU) should fall between the protection of native load, i.e., the Power Balance Constraint (PBC) and the penalty price for Low Priority (LPT) exports. 

Imbalance Reserve Procurement Estimate 

SDG&E urges CAISO to publish some estimate of how much Imbalance Reserve it expects would be needed on some representative days. 

Double Payment of Imbalance Reserves and Reliability Capacity 

SDG&E agrees with CAISO’s decision to stay out of the double payment issues for Imbalance Reserves (IR) and Reliability Capacity (RC), but in exchange SDG&E has specific requirements for the data that CAISO must provide in order to facilitate individual parties resolving this issue with our counterparties. 

Joint Authority 

SDG&E agrees with CAISO’s proposal for partial joint authority but believes there should be a contingency plan should the Extended Day-Ahead Market (EDAM) not move forward. 

2. Please provide your organization’s overall position on the DAME draft final proposal:

SDG&E supports the proposal, but does have some concerns, and caveats, regarding certain aspects of the proposal as discussed in the corresponding questions and below: 

Graduated Penalty Prices 

In theory the graduated penalty price structure seems to make sense.  However, it is more important for the penalty price for IRU to fall within an appropriate range. Specifically, the penalty price ought to be less than the penalty price for PBC and greater than the penalty price for LPT. This reflects SDG&E’s view that IR is primarily a backup to reliability and therefore it ought to be protected less than the cost of actually serving native load.  This means that the IR constraint should be relaxed before the PBC such that, in a potential scarcity condition, the Integrated Forward Market (IFM) should set energy schedules to ensure demand is met before it tries to procure IR. Secondly, IFM should procure IR before it clears LPT exports. This reflects the principle that native load should take priority in scheduling before LPT exports. Since IR is a backup to help guarantee reliability, IR should therefore be procured before the IFM tries to clear LPT exports. 

Imbalance Reserve Procurement Estimate 

SDG&E reiterates its call for CAISO to produce estimates on how much IR it expects would be procured for the CAISO BA. CAISO BA entities need an estimate of the IR requirement the CAISO would procure across a given year from a sample of days, e.g., high heat days such as the week of September 6, 2022. Many stakeholders have been calling for this data since the start of DAME and it would help stakeholders better understand the DAME proposal and its impacts to have this information. 

3. Please provide a summary of your organization’s comments on the summary of changes and responses to stakeholder feedback from the fourth revised straw proposal, as described in Section 1:

No comments at this time. 

4. Please provide your organization’s comments on the proposed resource adequacy day-ahead must-offer obligation for imbalance reserves as described in Section 3.2:

No comments at this time. 

5. Please provide your organization’s comments on the proposal to establish default bids for mitigation of imbalance reserve and reliability capacity, as described in Sections 3.2 and 3.4.

No comments at this time. 

6. Please provide your organization’s comments on the proposal to establish eligibility criteria to provide IRU based on a resource’s day-ahead energy offer price, as described in Section 4.3:

No comments at this time. 

7. Please provide your organization’s comments on the proposed transitional measures for CAISO load-serving entities as described in Section 5, in context of the removal of inter-SC trading of imbalance reserves and the removal of the reverse settlement of reliability capacity revenue for RA capacity from the proposal:

Double Payment of Imbalance Reserves and Reliability Capacity 

When SDG&E refers to the double payment of IR and RC issue, what it means is the idea that Load Serving Entities (LSEs) could be forced to pay twice for the same capacity. LSEs pay for capacity once through our Resource Adequacy (RA) contracts. These contracts come with Must Offer Obligations (MOO), which means that these units are supposed to be available to the market to meet our reliability needs. But DAME is creating new revenue streams both through IR and RC that LSEs will also have to pay for in the market. Thus, LSEs could get stuck paying for RA units once through our RA contracts, and again in the market through IR and RC. 

This issue comes up primarily with respect to RA-only contracts, where the seller retains the rights to energy payments from the CAISO market. SDG&E is less concerned about Power Purchase Agreements (PPAs) where the buyer is also the scheduling coordinator, which would mean that the buyer gets the rights to any payments from the CAISO market. Under the RA-only contract, there is a clause that already guarantees Residual Unit Commitment (RUC) payments will flow to the buyer, thus avoiding the double payment issue with respect to RC revenues. 

It is, however, less clear that IR payments would also flow to the buyer under the RA-only contracts. SDG&E has had some preliminary discussions with various parties, both buyers and sellers of RA in order to understand this issue better.  What we have found is that there is likely to be disagreement among buyers and sellers over this issue, and therefore any settlement mechanism that CAISO implements will likely put it in the middle of something that needs to be litigated and/or settled between counterparties. 

SDG&E therefore agrees with CAISO’s proposal to leave both the IR and RC double payments issues alone. However, if CAISO is going to take the “hands-off” approach to this issue, then it needs to provide certain data to facilitate a resolution to this issue. Specifically, for each RA unit: 

• CAISO must provide data to the RA rights holder(s) specifying how much was paid to that unit for IR. 

• CAISO must provide a reasonable estimate as to that unit’s total opportunity cost for that same period of time, and 

• CAISO should provide a transparent explanation of its calculation of each unit’s opportunity cost. 

8. Please provide your organization’s comments on the proposed WEIM Governing Body Role, as described in Section 7:

Joint Authority 

SDG&E agrees with CAISO’s proposal for joint authority over certain aspects of the DAME proposal, insofar as they have direct implications for EDAM. But SDG&E believes that there should be a backup plan in case EDAM does not move forward, for whatever reason. If that happens, then CAISO should plan on reengaging the stakeholder process to work out the aspects of DAME that were modified to work with EDAM.  SDG&E would still be supportive of the proposal overall but recognizes that DAME would require further modification if it were to go forward without EDAM. 

9. Please provide any additional comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

No additional comments.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

Shell Energy North America (US), L.P. (“Shell Energy”) appreciates the opportunity to submit comments on the CAISO’s Day Ahead Market Enhancements (“DAME”) draft final proposal.  In a nutshell, Shell Energy supports the evolution of market products to support reliable decarbonization and maintain market signals during the transition.  The resources interconnected to CAISO are changing, thus bringing the need for new products to adapt to these changing conditions.  Shell Energy has supported the stated goals of DAME, ostensibly to reduce manual, out-of-market, distortionary interventions in the market and setup the market for greater uncertainty and ramping needs between Day Ahead (“DA”) to Realtime (“RT”).  But over the past year, the result of DAME to-date appears to significantly increase the complexity of CAISO’s market—the most widespread changes since Market Redesign and Technology Upgrades (“MRTU”) more than a decade ago—without a clear line of sight to improving the symptoms of issues DAME was designed to address.  As a result, Shell Energy opposes DAME as designed.

2. Please provide your organization’s overall position on the DAME draft final proposal:

Oppose, with caveats.  See question #3 for details.  

3. Please provide a summary of your organization’s comments on the summary of changes and responses to stakeholder feedback from the fourth revised straw proposal, as described in Section 1:

Shell Energy offers the following observations and feedback on elements of DAME:

• Nodal procurement of imbalance reserves – the complexity involved with nodal procurement of a new “flexibility” essentially ancillary service product (imbalance reserves) is unwarranted.  Shell Energy notes the CAISO has struggled to deploy the Flexible Ramping Product (“FRP”) due to complexities associated with nodal procurement.  Ancillary services remain zonally procured—the increased complexity and risks of over-mitigation outweigh de minimis benefits nodal procurement of imbalance reserves bring to markets.  Potential imbalance reserves market power concerns can be mitigated effectively by extension due to the nodal procurement of energy which is subject to local market power mitigation.  In addition, the DMM continually monitors markets for performance or conduct concerns, this remains applicable with or without imbalance reserves being nodally procured.  

• Default bids for imbalance reserves -- Calculating a default bid for imbalance reserves, i.e., capacity products will be extremely nebulous; utilizing historical spinning reserve offers to set the default price is not applicable to this product nor the changing realities of system conditions today.  Since imbalance reserves are analogous to ancillary services, the existing $247 bid cap for ancillary services is applicable, with procurement of imbalance reserves following a graduated demand curve.   

• Downward products – it remains unclear based upon data provided if downward flexibility products—imbalance reserve down and reliability capacity down are warranted based upon near or medium-term expectations.  These products would likely result in near term complexity to the market without a clearly defined need.

• Imbalance reserve offer caps – Shell Energy appreciates the linkage that energy and imbalance reserves have upon one another.   Should the CAISO move forward with an eligibility offer cap methodology for imbalance reserves, the CAISO should allow eligible resources the choice to either participate in imbalance reserves/reliability capacity or not particpated.  This would allow certain resources the ability to continue offering only energy and/or ancillary services to the market.

• Manual market interventions – one of the stated goals of DAME has been to reduce reliance upon manual, out of market actions which is laudable; however, the current market design does not commit the CAISO to actually reducing the magnitude and frequency of manual actions but rather relies on the hope that DAME 's products will result in less manual interventions in markets.  Rather, the CAISO should commit to sunsetting the use of manual out of market actions unless the CAISO is experiencing a declared contingency, or a contingency is imminent or likely.  This would signal trust in the new products to address the stated objectives of DAME.  

• Given the repeated failures of the nodally procured FRP, the CAISO should commit to a longer period of testing of market functionality of DAME.  Software glitches and settlement issues need to be thoroughly vetted in market simulations before deploying to financially binding markets.  The planned deployment date of Fall 2023 seems far-fetched with this in mind. 

• Joint authority with the WEIM Governing Body remains crucial for DAME. 

4. Please provide your organization’s comments on the proposed resource adequacy day-ahead must-offer obligation for imbalance reserves as described in Section 3.2:

See #3

5. Please provide your organization’s comments on the proposal to establish default bids for mitigation of imbalance reserve and reliability capacity, as described in Sections 3.2 and 3.4.

See #3

6. Please provide your organization’s comments on the proposal to establish eligibility criteria to provide IRU based on a resource’s day-ahead energy offer price, as described in Section 4.3:

See #3

7. Please provide your organization’s comments on the proposed transitional measures for CAISO load-serving entities as described in Section 5, in context of the removal of inter-SC trading of imbalance reserves and the removal of the reverse settlement of reliability capacity revenue for RA capacity from the proposal:

See #3

8. Please provide your organization’s comments on the proposed WEIM Governing Body Role, as described in Section 7:

See #3

9. Please provide any additional comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

See #3

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

At this time, the Six Cities do not support implementation of the market design revisions in the DAME Draft Final Proposal unless and until implementation of the Extended Day-Ahead Market (“EDAM”) moves forward.  The CAISO has not presented any estimate of benefits to the CAISO Balancing Authority Area (“BAA”), absent implementation of the EDAM, sufficient to outweigh the costs of implementing the DAME revisions and the increased complexities in design.  If implemented as part of the EDAM, the Six Cities support or do not oppose most of the elements of the proposed day-ahead design as discussed below, but the Six Cities do continue to have concerns and do not support the Draft Final Proposal with respect to the allocation of revenues for imbalance reserves (“IR”) and reliability capacity (“RC”) supplied by resource adequacy (“RA”) resources, as discussed in Item 7 below.  As described in Item 8, the DAME revisions should be subject to the primary authority of the CAISO Board of Governors (with advisory input from the WEIM Governing Body) if the DAME proposal is considered separately from the EDAM.  The Six Cities request further explanation regarding the proposed penalty for failure to satisfy an award for reliability capacity up (“RCU”) as described in Item 9.

2. Please provide your organization’s overall position on the DAME draft final proposal:

At this time, the Six Cities take no position, either in support of or in opposition to, the CAISO’s Draft Final Proposal.  As the Six Cities have discussed elsewhere, the CAISO has not demonstrated benefits to the CAISO BAA resulting from implementation of the proposals in this initiative apart from benefits derived from the EDAM.  In the absence of reasonably estimated benefits for California load-serving entities that outweigh the costs, not just to the CAISO itself, but in time and effort incurred by CAISO LSEs to implement the CAISO’s proposals, the Six Cities are unable to take a position in support of this proposal on a stand-alone basis.  As stated in response to Item 7, the Six Cities do not support removal of the previously-proposed settlement options for IR and RC capacity supplied by RA resources.

3. Please provide a summary of your organization’s comments on the summary of changes and responses to stakeholder feedback from the fourth revised straw proposal, as described in Section 1:

The Six Cities acknowledge the changes included in Section 1 of the Draft Final Proposal.  The Six Cities concur in the CAISO’s proposed approach to the day-ahead must-offer obligation for resource adequacy (“RA”) resources and support, do not oppose, or take no position on most of the other changes identified by the CAISO, as outlined below.  The Six Cities do not support the CAISO’s decision to remove the options for allocation of revenues associated with IR and RC capacity supplied by RA resources.

4. Please provide your organization’s comments on the proposed resource adequacy day-ahead must-offer obligation for imbalance reserves as described in Section 3.2:

The Six Cities do not oppose this element of the Draft Final Proposal.  As currently proposed, the Six Cities understand that the ability of RA resources to continue to engage in self-scheduling is preserved, with any IR-eligible capacity not self-scheduled to be economically bid.  (See Draft Final Proposal at 22-23.)  The Six Cities specifically support the proposal elements that are intended to accommodate self-scheduling, and they also support the proposal’s exception from RA Availability Incentive Mechanism (“RAAIM”) penalties for the IR must-offer obligation as discussed on page 23 of the Draft Final Proposal. 

5. Please provide your organization’s comments on the proposal to establish default bids for mitigation of imbalance reserve and reliability capacity, as described in Sections 3.2 and 3.4.

The Six Cities do not oppose this element of the Draft Final Proposal.  The CAISO’s proposal to revisit the initial approach to default bids following a review after the DAME initiative is implemented appears to be reasonable, as does the CAISO’s proposal to include in the Final Proposal a negotiated option, as discussed during the December 7^th stakeholder meeting. 

6. Please provide your organization’s comments on the proposal to establish eligibility criteria to provide IRU based on a resource’s day-ahead energy offer price, as described in Section 4.3:

The Six Cities have not identified areas of concern with this element of the Draft Final Proposal, and they continue to support the objective of assuring that resources awarded IRU are those that are expected to be economic to provide imbalance energy in real-time.  At the same time, the Six Cities observe that the methodology descripted in the Draft Final Proposal is complex and includes elements of judgment that may need to be refined as the CAISO gains experience with implementing IR.  As with other elements of the Draft Final Proposal, the Six Cities support monitoring the results produced by application of the eligibility criteria to ensure that the criteria are working as intended and are not producing unexpected or adverse outcomes. 

7. Please provide your organization’s comments on the proposed transitional measures for CAISO load-serving entities as described in Section 5, in context of the removal of inter-SC trading of imbalance reserves and the removal of the reverse settlement of reliability capacity revenue for RA capacity from the proposal:

The Six Cities do not support the CAISO’s removal of the prior proposals for inter-Scheduling Coordinator (“SC”) trading of IR and reverse settlements of RC revenue associated with RA capacity.  According to the CAISO, it has “concerns” about “getting into the middle of procurement contracts.”  (See Draft Final Proposal at 55.)  While the Six Cities agree that the CAISO intervening in procurement contracts is undesirable, the CAISO is itself creating contract interpretation and renegotiation burdens for its LSEs and their suppliers through the formation of these new products.  The CAISO’s proposals to “work with” counterparties to facilitate mutually agreed-upon settlement arrangements and to implement a split of IR revenues (see id. at 55) are not adequate to address the significant concerns of the Six Cities and other CAISO load-serving entities regarding the potential for duplicative or double-payments to RA capacity under existing contracts. 

The Six Cities request that the CAISO develop mechanisms to allocate the revenues resulting from IR and RC capacity supplied by RA resources under existing contracts to the procuring LSEs directly.  As discussed in the Pacific Gas and Electric Company (“PG&E”) and Southern California Edison Company (“SCE”) comments on the Fourth Revised Straw Proposal, implementation of a durable settlement option to prevent RA resources from receiving duplicative capacity payments is preferable and ought to remain the CAISO’s long-term objective. 

As to the previous proposal to use inter-SC trades to mitigate the potential for double-payments resulting from an RA resource’s supply of IR, as described by PG&E and as noted in the Six Cities’ earlier comments, there are potential timing issues associated with the use of the inter-SC trade option.  However, as suggested by SCE, this approach could provide an acceptable interim measure, and the CAISO should retain it as an electable option for use by LSEs to implement the terms of their RA contracts.  As to the previous proposal for a reverse settlement for RC, the Six Cities request that the CAISO reinstate that option in its next proposal and, as the Six Cities previously requested, allocate the reversed payments to the entities that paid for the RA capacity (as opposed to metered demand).

8. Please provide your organization’s comments on the proposed WEIM Governing Body Role, as described in Section 7:

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

That having been said, the Six Cities are concerned that repeated discretionary delegations of approval authority by the CAISO Board of Governors for proposals that do not meet the applicable criteria for joint authority set a concerning precedent.  Case-by-case exceptions to the joint authority rules should not become the norm.  Repeated waivers of primary authority by the Board based on general assertions of stakeholder interest would undermine the efforts of the Governance Review Committee and stakeholders in crafting clear and durable delineations of authority for the Board of Governors and the EIM Governing Body.  EIM entities and other external parties may have interests in many CAISO initiatives that are within the CAISO Board of Governors’ primary authority, and these parties remain free to communicate their views in CAISO stakeholder proceedings and to the Board of Governors directly. 

In the event the CAISO moves forward with implementing a special exception to the joint authority rules for this initiative, then, to the extent that EDAM does not move forward, the DAME proposals must be re-evaluated by the Board of Governors under its primary authority.  The Six Cities request that the CAISO include in its Final Proposal a contingency plan for addressing the approval of DAME by the Board in the event that EDAM does not advance or otherwise will not be implemented.

9. Please provide any additional comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

The Six Cities request further explanation regarding the proposed penalty for failure to satisfy an award for RCU as described at page 41 of the Draft Final Proposal.  The Draft Final Proposal states that “[a] stronger incentive than a no-pay mechanism is needed to ensure resources follow through on their must-offer obligations.”  However, the proposed penalty for failure to perform on an RCU award is to charge the RCU price, which appears equivalent to a simple no-pay consequence.  The Cities request further explanation for why that creates sufficient incentive for performance of RCU awards. 

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

see attached

2. Please provide your organization’s overall position on the DAME draft final proposal:

see attached

3. Please provide a summary of your organization’s comments on the summary of changes and responses to stakeholder feedback from the fourth revised straw proposal, as described in Section 1:

see attached

4. Please provide your organization’s comments on the proposed resource adequacy day-ahead must-offer obligation for imbalance reserves as described in Section 3.2:

see attached

5. Please provide your organization’s comments on the proposal to establish default bids for mitigation of imbalance reserve and reliability capacity, as described in Sections 3.2 and 3.4.

see attached

6. Please provide your organization’s comments on the proposal to establish eligibility criteria to provide IRU based on a resource’s day-ahead energy offer price, as described in Section 4.3:

see attached

7. Please provide your organization’s comments on the proposed transitional measures for CAISO load-serving entities as described in Section 5, in context of the removal of inter-SC trading of imbalance reserves and the removal of the reverse settlement of reliability capacity revenue for RA capacity from the proposal:

see attached

8. Please provide your organization’s comments on the proposed WEIM Governing Body Role, as described in Section 7:

see attached

9. Please provide any additional comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

Vistra intellectually supports the need for an upward uncertainty zonal product in the day-ahead market, but strongly opposes the nodal design proposed and all the accompanying challenges to market operations that the nodal approach brings. Vistra strongly opposes all other elements of the Day-Ahead Market Enhancements (DAME) initiative including the proposed downward uncertainty product and all proposed changes to Residual Unit Commitment (RUC). Vistra has actively engaged through this process largely by participating in virtual stakeholder meetings and by drafting and submitting written comments on the Fourth Revised Straw Proposal. Vistra incorporates by reference and reasserts its prior comments here. In addition to our comments, Vistra noted other stakeholders raised similar concerns with the CAISO’s proposal.

The DAME Draft Final Proposal largely dismisses or ignores Vistra’s and other stakeholders’ feedback and pushes forward with the CAISO’s preferred design. The limited exception to this is that the CAISO has rightfully revised its proposal to remove any clawback mechanisms because it is more appropriate for the buyer and seller of Resource Adequacy contracts to address any double payment concerns as a contractual matter.

Vistra endeavored to work with CAISO and other stakeholders to try to shape a workable proposal that would focus on an upward imbalance reserve product, and leave behind the remaining troublesome aspects of this proposal that will likely raise challenges for the Federal Energy Regulatory Commission (FERC) to approve it. The proposal as it currently stands without the necessary changes to a workable design will likely result in a FERC finding that the DAME proposal is unduly discriminatory and preferential, and not just and reasonable.

2. Please provide your organization’s overall position on the DAME draft final proposal:

See above.

3. Please provide a summary of your organization’s comments on the summary of changes and responses to stakeholder feedback from the fourth revised straw proposal, as described in Section 1:

See above.

4. Please provide your organization’s comments on the proposed resource adequacy day-ahead must-offer obligation for imbalance reserves as described in Section 3.2:

See above.

5. Please provide your organization’s comments on the proposal to establish default bids for mitigation of imbalance reserve and reliability capacity, as described in Sections 3.2 and 3.4.

See above.

6. Please provide your organization’s comments on the proposal to establish eligibility criteria to provide IRU based on a resource’s day-ahead energy offer price, as described in Section 4.3:

See above.

7. Please provide your organization’s comments on the proposed transitional measures for CAISO load-serving entities as described in Section 5, in context of the removal of inter-SC trading of imbalance reserves and the removal of the reverse settlement of reliability capacity revenue for RA capacity from the proposal:

See above.

8. Please provide your organization’s comments on the proposed WEIM Governing Body Role, as described in Section 7:

See above.

9. Please provide any additional comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

See above.

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

Wellhead appreciates the opportunity to provide these comments on the CAISO’s Day-ahead Market Enhancements (DAME) Fourth Revised Straw Proposal. Wellhead has been generally supportive of the concept to introduce new day-ahead products – especially the imbalance reserve up and down.

Wellhead continues to strongly support the Imbalance Reserve Product and supports the implementation at the earliest opportunity so that the CAISO can work to end the practice of obtaining the required flexibility through out-of-market operator adjustments to the RUC,and RT (HASP, FMM) demand forecasts.

2. Please provide your organization’s overall position on the DAME draft final proposal:

Wellhead supports the DAME draft final proposal

3. Please provide a summary of your organization’s comments on the summary of changes and responses to stakeholder feedback from the fourth revised straw proposal, as described in Section 1:

Wellhead continues to support the overall proposal and is appreciative of the changes that CAISO has made to the proposal. We remain concerned about potential cap that is contemplated by the proposal due to the new and continued issues the cap could cause.  

4. Please provide your organization’s comments on the proposed resource adequacy day-ahead must-offer obligation for imbalance reserves as described in Section 3.2:

No additional comments at this time.

5. Please provide your organization’s comments on the proposal to establish default bids for mitigation of imbalance reserve and reliability capacity, as described in Sections 3.2 and 3.4.

No additional comments at this time.

6. Please provide your organization’s comments on the proposal to establish eligibility criteria to provide IRU based on a resource’s day-ahead energy offer price, as described in Section 4.3:

Reiterating our prior comment about the Real Time Bid cap as the current proposal to use a Eligibility Price Cap seems to be the case of 6 of one, half dozen of another.

Both suggestions seem to approach the issue from what feels like solving the effect of a problem instead of the problem itself. The primary concern the cap (RT or Eligibility) is attempting to resolve is the potential that resources who are expensive to transition from a reserve type product to an energy type product, are receiving the award when the resource has a near zero percent chance to be transitioned on a regular basis.

While the fundamental goal of this proposal is sound, the approach seems likely to create issues while limiting instead of resolving the problems discussed. A full Bid Cap on RT Energy would (in one way) resolve the fundamental problem. However, it would also introduce a number of market issues and concerns as many noted in the prior proposal. The current proposal addresses some of those market concerns, but in doing so brings the fundamental issue back in on a somewhat limited basis. The more the buffer addresses the award issue the more likely it is to create market scarcity or run head long into the exact same issues brought up with the RT Bid cap. If the buffer is relaxed or outright removed (during tight conditions) then why have it.

Ultimately, this product (IRU) is clearly needed sooner rather than later, and yet the concern contemplated by this proposal is justifiable. That said, implementing the product and monitoring for the concerned behavior would allow for the market to benefit, while confirming the need for contemplated proposals.

From Prior Comment Period:

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

7. Please provide your organization’s comments on the proposed transitional measures for CAISO load-serving entities as described in Section 5, in context of the removal of inter-SC trading of imbalance reserves and the removal of the reverse settlement of reliability capacity revenue for RA capacity from the proposal:

No additional comments at this time

8. Please provide your organization’s comments on the proposed WEIM Governing Body Role, as described in Section 7:

No additional comments at this time

9. Please provide any additional comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

No additional comments at this time

1. Please provide a summary of your organization’s comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

WPTF appreciates the opportunity to provide these comments on the CAISO’s Day-ahead Market Enhancements (DAME) Draft Final Proposal. Since the beginning of this 5 year-long effort, WPTF supported the idea of developing a day-ahead biddable product that would decrease RUC biasing and lead to an overall more efficient market outcome and accurate price signals. However, as both the proposal and system needs have evolved over time, WPTF no longer supports the proposal as currently designed. The proposal has become unnecessarily complex, introduces significant market risk and distortions, and finally, has not evolved with the system needs.  

WPTF respectfully requests that the CAISO start with a basic and simplified approach and then increase complexity as needed. The EDAM Benefits study discussed with stakeholders on November 18, 2022 showed imbalance reserve benefits that are not dependent on a nodal procurement design, but only the existence of the imbalance product. It is important to recognize that most of the complexity of the DAME proposal is due to the desire to procure imbalance reserves at the nodal level. This desire creates a significantly more complex product that may distort bidding incentives and distort the day-ahead market price signal. We are also concerned, frankly, that this level of complexity is beyond what is feasible from an implementation perspective. We are extremely concerned that even if a nodal design is eventually able to be implemented it will be accompanied by increased market errors, market solve delays, obscure day-ahead awards, and ultimately high volumes of CIDI tickets and settlement disputes. 

While we understand the benefits of testing for deliverability when procuring the real-time flexible ramping product (FRP), the congestion patterns in day-ahead are not necessarily expected to be consistent in real-time. A day-ahead deliverability test does not guarantee deliverability in real-time.  It is entirely possible that changes between the day-ahead and real-time market will make the imbalance reserve deployment scenarios even more challenging to perform than nodal FRP, and even less predictive given the likelihood of congestion pattern changes between day-ahead and real-time.

We must acknowledge that the CAISO has been trying to implement nodal FRP in real-time for two years, but continues to delay implementation due to optimization challenges and is having to overcome these challenges by making significant compromises on the nodal design. It is likely these challenges will be even more significant in the day-ahead market and CAISO has not yet demonstrated that the nodal FRP can be implemented in real-time and yield rational market prices. Even some members of the CAISO staff have routinely acknowledged the challenges with a nodal framework – for example they have declined to consider nodal ancillary service procurement due to its complexity, They have also openly acknowledged the outstanding questions on how to appropriately mitigate a market capacity product.

All together WPTF finds it baffling that the reasonable simplified alternative of a well-designed zonal imbalance reserves, stronger eligibility requirements, and manual operator blocking  was not seriously considered within this initiative. To be very clear – we are not proposing a system-wide imbalance product like the current FRP design. Instead, we are asking the CAISO to assess how well the ancillary service zones perform and determine whether these can be used or enhanced for imbalance product procurement.

Finally, we remind the CAISO they do not have to always reinvent the wheel or create a spaceship. We feel in many initiatives there are practical, low hanging fruit changes that are ignored in favor of high technological effort, low economic benefit ideas. In this case, really the imbalance product is simply non-contingent spinning reserves that are measured over fifteen-minutes of ramping capability instead of ten-minutes of ramping capability. If the CAISO wanted to, they could under the existing market functionality increase the spinning reserve requirement and allow non-contingent spinning reserves to flow through to the real-time. This would allow them and stakeholders to evaluate whether there are deliverability issues that would necessitate a nodal design and whether in fact procuring additional reserves in day-ahead led to reductions in operator biasing. (Non-contingent spinning reserves, unlike contingency-only reserves, are released in real-time when economic for energy just like the proposed imbalance product.)  The CAISO at times already increases the spinning reserve requirement based on solar production and this would be a small further enhancement. Another simple change that WPTF has suggested in prior comments is that the CAISO could require wind and solar RA resources to offer into the day-ahead market. This would directly lower the need for additional RUC procurement and would immediately decrease the day-ahead energy price. We have previously provided data on the improvements in wind and solar forecasting since their initial exemption was put in place and offered that even a requirement to bid in 90% of their forecast would be an easy low-hanging fruit market improvement.

The comments below elaborate our specific positions and provide additional color on WPTF’s likely FERC position.

2. Please provide your organization’s overall position on the DAME draft final proposal:

As discussed in more detail below (question #3), the following changes must be made for WPTF to fully support the proposal.

1. 1. Zonal instead of nodal procurement
   2. Eliminate applying local market power mitigation (LMPM), retain the $247/MWh bid cap, and implement a stepped demand curve
   3. Eliminate the eligibility criteria based on day-ahead energy offer price
   4. Eliminate all downward products unless the CAISO adds some justification for their purpose
   5. Eliminate the Resource Adequacy (RA) must offer obligation

The CAISO and DMM already monitor market performance and market participant behavior issues, thus can continue to do so with these new products in place. In the event an issue consistently arises, the CAISO at that time can re-engage stakeholders to consider adding complexity incrementally as analysis supports doing so.

3. Please provide a summary of your organization’s comments on the summary of changes and responses to stakeholder feedback from the fourth revised straw proposal, as described in Section 1:

The latest EDAM Benefits study highlighted a significant amount of market benefits arising from imbalance reserves, which assumed zonal procurement. Thus, as we stated in our prior comments, the initial design should procure the system wide requirement of imbalance reserves zonally. This eliminates the need to have deployment scenarios and to apply LMPM for mitigating imbalance reserves. Market power mitigation concerns can be addressed by retaining the $247/MWh bid cap, using a stepped demand curve, and recalling that the existing LMPM applied to energy offers indirectly mitigates for imbalance reserves when it is operationalized into energy. Operators can also monitor for and block resources that consistently end up behind a transmission constraint just as they currently do for ancillary services.

WPTF would also like to note that using a local market power mitigation design for a reserve product introduces outcomes that are inconsistent with market fundamentals. The issues arise because the CAISO’s mitigation design uses the deployment scenarios to identify uncompetitive transmission constraints to test for uncompetitive conditions when those transmission constraints are binding as a result of the congestion resulting from energy and IRU schedules. The mitigation design will actually mitigate IRU offers to a price based on only the energy offer prices of other resources, called the competitive LMP.  If the intent of the competitive LMP for mitigation purposes is to determine a competitive offer price for a certain product, it makes no sense to then have a design that sets the competitive offer price for a different product (IRU) based on offer prices of other products from other resources (energy offers).

While WPTF appreciates the CAISO removing the real-time energy bid cap, replacing that proposal element with the application of a day-ahead energy offer eligibility criteria continues to introduce unwarranted market inefficiencies and cross-product market distortions. Not only does the day-ahead energy offer criteria allow for strategic market bidding behavior, it provides no market or reliability benefit. First, as discussed during the Dec 12 Market Surveillance Committee call, a resource not wanting to provide IRU can simply bid the last MWh above the eligibility criteria offer cap and now will not be allowed to provide any amount of imbalance reserves. Second, it provides no benefit because resources awarded imbalance reserves with lower day-ahead energy offers can simply re-bid the underlying energy in real-time. 

As mentioned previously, the system needs have evolved since the onset of this effort but yet the market products proposed have not. At this point, WPTF does not believe there is any need or benefit provided from including downward products – both imbalance reserve down and reliability capacity down. The CAISO continues to fall short in providing data that demonstrates these products are still needed and provide value to the market.

4. Please provide your organization’s comments on the proposed resource adequacy day-ahead must-offer obligation for imbalance reserves as described in Section 3.2:

See above.

5. Please provide your organization’s comments on the proposal to establish default bids for mitigation of imbalance reserve and reliability capacity, as described in Sections 3.2 and 3.4.

See above. 

6. Please provide your organization’s comments on the proposal to establish eligibility criteria to provide IRU based on a resource’s day-ahead energy offer price, as described in Section 4.3:

WPTF opposes this element of the proposal as discussed in our response to question #3.

7. Please provide your organization’s comments on the proposed transitional measures for CAISO load-serving entities as described in Section 5, in context of the removal of inter-SC trading of imbalance reserves and the removal of the reverse settlement of reliability capacity revenue for RA capacity from the proposal:

WPTF appreciates the CAISO opting to remove all elements of the proposal related to the double payment concerns arising from RA resources receiving revenues from imbalance reserves and reliability capacity. As we have noted numerous times during calls, the bilateral contracts ultimately determine where the revenues will flow; thus anything the CAISO proposes is essentially moot.  

8. Please provide your organization’s comments on the proposed WEIM Governing Body Role, as described in Section 7:

During the stakeholder call it was noted that the paper indicates DAME will move forward with or without EDAM, but the CAISO seemed to convey that is no longer the plan. In the event EDAM is not approved, the CAISO will re-engage stakeholders in a subsequent policy process to reconsider the DAME design. This was provided as the reason for re-classifying the WEIM Governing Body Role. WPTF would first like the CAISO to confirm that the plan is to re-engage stakeholders on DAME if EDAM is not approved. Assuming that is confirmed, WPTF seeks clarification on if the CAISO envisions re-engaging stakeholders on the DAME design in its entirety or only certain element(s) that warrant changes under a non-EDAM paradigm.  

9. Please provide any additional comments on the Day-Ahead Market Enhancements (DAME) Draft Final Proposal and the December 7, 2022 stakeholder call discussion:

As noted in prior comments and reiterated here, WPTF is extremely concerned with including a proposal element that will knowingly increase CRR shortfall. Per the CAISO’s current proposal, the deployment scenarios will contribute congestion costs that are reflected in the day-ahead marginal congestion components, thus impacting CRR payments. The CAISO has also noted they will not be collecting congestion costs on flows associated with the deployment scenarios. In other words, the current market design is knowingly implementing an element that will increase CRR shortfalls which will then flow back to CRR holders. WPTF does not believe this aligns with cost causation principals and that the shortfall created due to the deployment scenarios and the way the CAISO has opted to price the new products should harm CRR holders.  

WPTF believes that the CAISO should prioritize investing resources today to ensure RUC is operating properly and efficiently, especially as it relates to storage resources. To the extent needed changes are identified, those changes should be made prior to moving forward with any other significant RUC modifications, or at a minimum, included with any other RUC changes that arise from this effort. It is our understanding that capacity from storage resources has not been properly accounted for within the RUC process. As we look towards having over 10,000 MWh of storage capacity online in the next few years, the CAISO should ensure it is properly accounting for storage capacity in the RUC process ahead of the influx of storage capacity. Excluding such capacity results in higher overall market costs, potentially unwarranted RUC infeasibilities during undersupply conditions, and ignoring the downward capability of storage during oversupply conditions. Thus, WPTF respectfully requests that the CAISO prioritize ensuring that the existing RUC design and optimization is functioning as intended.