Comments on Working group 8

1. Please provide your organization’s feedback on Working Group Session 8 (covering SH requested data analysis, overview of the BAA grouping concept, and draft problem statements) and the general direction of the BAA-Level MPM discussion.

The California Community Choice Association (CalCCA) appreciates the opportunity to comment on the Price Formation Enhancements Working Group 8 on Balancing Authority Area-Level Market Power Mitigation (WG). During the WG, the Department of Market Monitoring (DMM) provided insightful analysis on how often supply is subject to mitigation, how often supply is mitigated, and how much supply is potentially increased due to mitigation.

Following DMM’s presentation of analysis, the California Independent System Operator Corporation (CAISO) presented the balancing authority areas (BAA) Grouping market power mitigation (MPM) concept. Subject to further details to be worked out in the proposal development phase, CalCCA supports the BAA Grouping MPM concept. The BAA Grouping MPM concept presented by the CAISO treats the CAISO BAA like any other BAA, meaning the CAISO would not assume the CAISO BAA to be competitive and the CAISO would evaluate the CAISO BAA for competitiveness in the grouping methodology like all other BAAs. CalCCA supports this treatment. The DMM’s annual report consistently shows there are hours when the CAISO market is not structurally competitive.[1] If there are hours that are not structurally competitive, the CAISO should have a mechanism to mitigate against the exercise of market power. MPM is set up to mitigate only those uncompetitive hours, not every hour, so there is little risk of over-mitigation by including the CAISO in BAA-level MPM. It also only mitigates bids that are above the resources’ default energy bids (DEB) or the competitive locational marginal price (LMP).  DEBs ensure that the mitigated resources still recover their costs. At worst, the mitigated bid will cover all costs of providing the energy in the market and if the market clearing price is higher, the resources will still receive the market rents. For these reasons, the CAISO should include the CAISO BAA in the BAA-level MPM approach developed in this initiative.

The CAISO asks stakeholders to weigh in on questions related to the BAA-level MPM design, including:  

• Intertie bids are not subject to mitigation. Should the CAISO include supply counterflow (SCF) from intertie resources in pivotal supply determination?
  • CalCCA Response: Yes, the CAISO should include SCF from intertie resources in the pivotal supplier determination. Import supply has the potential to exert market power if it is pivotal, just like internal supply can. All potential pivotal suppliers should be included in the calculation.
• Should the CAISO include SCF only from supply in excess of scheduled load for scheduling coordinator (SC) affiliates in pivotal supply determination?
  • CalCCA Response: Yes, it is reasonable to assume entities would use their own supply to serve their load first before offering it to the market and, therefore, it is likely only the net supply that would be subject to the potential exertion of market power.
• Should the CAISO only mitigate bids from pivotal suppliers? 
  • CalCCA Response: The CAISO should evaluate whether only mitigating bids from pivotal suppliers will result in a market power mitigation mechanism that ensures competitive outcomes. If the CAISO only mitigates pivotal suppliers, could the CAISO risk creating additional pivotal suppliers that go unmitigated? This will depend on how competitive the market is beyond the three pivotal suppliers (or the three highest pivotal suppliers and any supplier replacing the 3rd while RSI<1). The CAISO should explore further whether only mitigating bids from pivotal suppliers will ensure just and reasonable rates.

[1]             2022 Annual Report on Market Issues and Performance at 55: http://www.caiso.com/Documents/2022-Annual-Report-on-Market-Issues-and-Performance-Jul-11-2023.pdf.

2. Does your organization have any technical feedback on the topics discussed in the WG Session 8?

CalCCA has no comments at this time.

3. Is there additional information that would be helpful for your organization to understand the topic/issues better?

CalCCA has no comments at this time.

4. Please provide any additional feedback.

CalCCA has no comments at this time.

1. Please provide your organization’s feedback on Working Group Session 8 (covering SH requested data analysis, overview of the BAA grouping concept, and draft problem statements) and the general direction of the BAA-Level MPM discussion.

Please see the linked comments from the Department of Market Monitoring.

2. Does your organization have any technical feedback on the topics discussed in the WG Session 8?

Please see the linked comments from the Department of Market Monitoring.

3. Is there additional information that would be helpful for your organization to understand the topic/issues better?

Please see the linked comments from the Department of Market Monitoring.

4. Please provide any additional feedback.

Please see the linked comments from the Department of Market Monitoring.

1. Please provide your organization’s feedback on Working Group Session 8 (covering SH requested data analysis, overview of the BAA grouping concept, and draft problem statements) and the general direction of the BAA-Level MPM discussion.

Middle RIver Power LLC ("MRP") appreciated WG8's discussion of BAA-level system market power mitigation.  The revelation that much BAA-level market power mitigation takes place when BAAs are transfer-capability constrained because they are importing large amounts of economy energy under low load conditions raises concerns, as does the revelation that BAAs would likely test as uncompetitive under such conditions.  Triggering system market power mitigation under such conditions does not seem consistent with the purpose of system market power mitigation, which MRP understood was to protect against the effect of market power shen loads are high and supply is tight.  

MRP respectfully encourages the CAISO to consider a "conduct and impact" form of system-level market power mitigation to ensure that market power mitigation is not triggered under low-load, high-import, low-=price conditions.  While MRP understands that such conduct and impact mitigation requires a certain level of subjectivity (to assess the threshold level of impact), such an approach would seem more reasonable than triggering system market power mitigation under low load, high import, low price conditions.  

2. Does your organization have any technical feedback on the topics discussed in the WG Session 8?

No.

3. Is there additional information that would be helpful for your organization to understand the topic/issues better?

No.  MRP apprecates the information the CAISO provided during the WG8 discussion.  

4. Please provide any additional feedback.

MRP has no other feedback.

1. Please provide your organization’s feedback on Working Group Session 8 (covering SH requested data analysis, overview of the BAA grouping concept, and draft problem statements) and the general direction of the BAA-Level MPM discussion.

PG&E agrees it is reasonable to address the identified issues for BAA Market Power Mitigation (BAA MPM) in the WEIM markets, which are summarized by CAISO in two problem statements:

PS#5: The Dynamic Competitive Path Assessment (DCPA) tests BAAs in isolation, neglecting external available supply.

PS#6: The CAISO BAA is consistently considered as “competitive,” exempting it from DCPA evaluation.

PG&E acknowledges CAISO’s efforts in addressing PS#5 and PS#6 through the BAA grouping concept. However, PG&E considers it premature to propose a solution without stakeholder alignment on PS#5 and PS#6. PG&E recommends to add a new problem statement, incorporating the CAISO’s proposed BAA grouping concept and analyses. PG&E urges CAISO to provide additional information regarding how the BAA grouping concept can (1) fully account for external transfers and (2) fairly test market competitiveness for all BAAs to address PS#5 and PS#6. In support of defining the new problem statement, PG&E believes a unified definition of Market Power in the DCPA formulation in BAA-MPM is key to resolving these challenges, which is detailed in Question 2 below:    

PG&E requests CAISO to clarify expectations of Price Formation working group outcomes, including BAA-MPM, and how that work will progress through the policy phase and implementation in alignment with E-DAM launch (and WEIM modifications) or a different time.

2. Does your organization have any technical feedback on the topics discussed in the WG Session 8?

• PG&E recommends CAISO adopt a different naming convention for BAA MPM, instead of DCPA, which overlaps with the use of DCPA within LMPM. Differentiating will help ensure we have a consistent discussion about the approach at different Market Power Mitigation levels.
• The BAA-MPM approach produces inconsistent market power conclusions resulting from different constraints between trigger conditions and the RSI test. Alternatively, the Local Market Power Mitigation (LMPM) consistently relies on transmission constraints for both trigger conditions and RSI tests.
  • The problem with BAA-Level MPM using distinct constraints is further explained below:

1. 1. The triggering condition for BAA-Level MPM is the bindingness of import constraints connected to a BAA.
   2.  The RSI tests are conducted with the supply and demand of a BAA, and the competitive LMP is calculated using the BAA’s Power Balance Constraints (PBC).

These distinct constraints produce different shadow prices, indicating different types of price separation and market power:

1. Import constraints induce market power through congestion, preventing cheaper supply flowing to a BAA.
2. The market power induced from BAA PBC is due to native supply is insufficient to meet native load and this gap has to be met with additional cost,

which is predicted to result in mitigation applying at incorrect target (e.g., over mitigating resources) or reducing bids to incorrect value (i.e., miscalculating the competitive LMP due to using wrong shadow prices).  PG&E requests the CAISO to carefully consider what type of price separation and induced market power they intend to address in the BAA-Level MPM.

PG&E believes a solution, as mentioned in Question #1, lies in a unified definition of Market Power through applying the same constraints for triggering conditions and RSI tests in the BAA-MPM formulation.

3. Is there additional information that would be helpful for your organization to understand the topic/issues better?

PG&E continues to request the CAISO build a technical descriptions library of the existing MPM approach, including the formulations of BAA-Level MPM and LMPM. This will facilitate stakeholders’ understanding of the problem statements and assist in establishing a common understanding.

PG&E requests the formulations relating to the following questions:

• For BAA-MPM:
  1. How is BAA PBC modeled? Does it consider transfers?
  2. Does the BAA-MPM RSI tests consider transfers in pivotal suppliers and demand?
  3. How are transfer constraints, utilized for MPM triggering conditions, modeled? Does the triggering condition assess a single constraint or multiple constraints?
  4. The shadow prices of all BAA PBC should always be positive or zero. PG&E requests the CAISO to confirm that this understanding is correct.
  5. After mitigation, the competitive LMP for a BAA is the system lambda.  
• For LMPM (at the nodal level),
  1. The reference bus used in MPM is the same reference bus in market dispatch. Therefore, the price at the reference bus (or distributed buses) are always competitive. PG&E requests the CAISO to confirm this understanding is correct.     

After review of the library material, PG&E believes analysis of price competitiveness and structural market power would be required to address the appropriate market power mitigation conditions in both EDAM and WEIM.

• What is the clear justification for implementing BAA-level Market Power Mitigation in WEIM and E-DAM? What are the specific conditions and targets for mitigation that need to be identified in this context?
• PG&E requests CAISO and DMM to conduct studies on price competitiveness and structural market power at the BAA level in WEIM and E-DAM. In particular, PG&E is interested in learning about CAISO’s findings regarding (1) the role of transfers, (2) storage including consideration of their opportunity costs, and (3) the dynamics during stressed system conditions.

4. Please provide any additional feedback.

1. Please provide your organization’s feedback on Working Group Session 8 (covering SH requested data analysis, overview of the BAA grouping concept, and draft problem statements) and the general direction of the BAA-Level MPM discussion.

PacifiCorp thanks the CAISO Department of Market Monitoring (DMM) for providing the data analysis that was requested on BAA-Level market power mitigation (MPM). The presentation clarified where and when BAAs are subject to mitigation for BAA-Level MPM. The DMM’s analysis showed that BAAs are often subject to mitigation during high solar hours when cheaper energy is available for the WEIM footprint. PacifiCorp believes the usage of the CAISO’s marginal energy cost (MEC), as the reference for determining if a WEIM BAA is import constrained, is likely causing some BAAs to be subject to mitigation when the opportunity to exert market power does not exist. As such, PacifiCorp agrees with the problem statement, “The Dynamic Competitive Path Assessment tests BAAs in isolation and does not consider external available supply.” 

PacifiCorp also thanks the CAISO staff for presenting on MPM and the proposed grouping methodology. The explanation and walkthrough of the grouping methodology was helpful and highlighted the benefits of enhancing the methodology. PacifiCorp believes further discussion on the implications of the grouping methodology in a future workshop is warranted. PacifiCorp requests clarification on the following: 

• If the grouping methodology will affect the market clearing time of the EDAM and WEIM. 
• What downsides might exist to the grouping methodology compared to the BAA-level MPM used today in the WEIM. 
• Whether there is the possibility of a BAA being mitigated in the enhanced grouping methodology, when that BAA would have not been if the CAISO continued to use the current method.  

After the CAISO DMM’s presentation on BAA-level MPM, PacifiCorp attempted to analyze why mitigation was happening and the impact it had on PacifiCorp’s resource bids. PacifiCorp found it was not able to determine which constraints were causing the PacifiCorp East and West BAAs to be deemed import constrained, triggering the mitigation process. PacifiCorp is strongly interested in any information available on this issue. If there are reports already available that show this, PacifiCorp asks that the CAISO staff highlight these reports to stakeholders in a future workshop. If the reports are not available to WEIM BAAs, PacifiCorp offers the following problem statement for consideration: 

• WEIM BAAs do not have an efficient way to see why resource bids are mitigated for both BAA-level MPM and local MPM. More detailed reports are needed as to why MPM is being triggered, which will help BAAs manage the risks of being mitigated.  

2. Does your organization have any technical feedback on the topics discussed in the WG Session 8?

No comment.

3. Is there additional information that would be helpful for your organization to understand the topic/issues better?

See comment section 1.

4. Please provide any additional feedback.

1. Please provide your organization’s feedback on Working Group Session 8 (covering SH requested data analysis, overview of the BAA grouping concept, and draft problem statements) and the general direction of the BAA-Level MPM discussion.

PSE appreciates the opportunity to provide comments on this working group session. PSE is generally aligned with the set of problem statements identified though the analysis of market power mitigation performance in the EIM. It is surprising and counterintuitive that the Pacific Northwest is subject to mitigation in over 40% of midday hours, however this makes sense given the use of power balance constraint shadow prices to identify import constrained BAA’s. It seems likely that surplus solar and wind production are contributing to these constraints binding, and when entities are tested for competitiveness on an individual basis they are much more likely to fail, despite not necessarily possessing market power. PSE is concerned that potential over-mitigation during these intervals may be leading to inaccurate price formation and reduced market efficiency.

PSE supports the proposed grouping methodology in principle as it will likely lend itself to improved market power mitigation accuracy, however it would be good to get more insight regarding the extent to which this may reduce over-mitigation. For the functioning of the grouping approach and to promote equal treatment, PSE supports applying BAA-level market power mitigation to all entities.

2. Does your organization have any technical feedback on the topics discussed in the WG Session 8?

3. Is there additional information that would be helpful for your organization to understand the topic/issues better?

PSE would find it valuable if the CAISO could provide an in-depth analysis (case study) of a selection of days or intervals in which market power mitigation was prevalent in the Pacific Northwest and/or Mountain Northwest. The analysis should specifically focus on how market power mitigation is performing when certain tie limits bind, and the extent to which those resources or BAA’s offer bids are being mitigated. This analysis may allow stakeholders to build a better understanding of the drivers and overall performance of the current market power mitigation framework. The CAISO should consider making this a publicly accessible metric to help track and assess the performance of market power mitigation in the EIM.

Furthermore, a regional assessment of total dollar value of offers implicated (delta between offer price and mitigated price) may be a valuable supplement to the volume of offers impacted.

4. Please provide any additional feedback.

1. Please provide your organization’s feedback on Working Group Session 8 (covering SH requested data analysis, overview of the BAA grouping concept, and draft problem statements) and the general direction of the BAA-Level MPM discussion.

Analysis Provided 

 The Public Generating Pool appreciates the data and analysis shared by the CAISO staff regarding the level of MPM, the timing of the mitigation, and the potential impact on dispatch in different BAs and regions. The analysis was generally responsive to the requests for additional information shared in prior comments.

PGP requests that a caveat be noted on the presentation materials with respect to the manner in which the Bonneville Power Administration (BPA) provides transmission to the WEIM.  Notably, BPA as a transmission provider does not provide Available Transmission Capacity (ATC) to the market in the same manner that other WEIM Entities provide ATC to the market, in part because BPA is not vertically-integrated like so many WEIM Entities, and in part due to the inability to direct WEIM transfer revenues to the appropriate transmission holders.  While no analysis has been completed on this question, PGP is concerned that this difference may relate to the level of MPM experienced in the EIM, and would differ from the transmission used in EDAM should the BPA BAA join. PGP is concerned that the data could be over-interpreted and therefore recommends that a note be added to the presentation materials to explain the unique manner in which BPA contributes transmission to the WEIM and any known or potential impacts on the ability to interpret the analysis.

In addition to the analysis shared for current levels of MPM in the WEIM, information from the DMM’s prior analysis on the competitiveness of the CAISO BA could be added to this presentation (converted to like metrics for ease of comparison) for completeness and to address the additional questions around the competitiveness of the CAISO BA relating to Problem Statement 6 that were raised at the end of the meeting.

BA Grouping Approach

The walkthrough of the BAA grouping approach was informative and appears to align with the goals of addressing the issues related to structural market power testing that have been discussed. PGP looks forward to seeing the detailed responses to follow up dialogue that may occur related to questions on the role of counterflow in the Dynamic Competitive Path Assessment and Residual Supply Index formulation raised at the end of the overview section, and we are supportive of the goal of clarification of terminology that was requested by some stakeholders in the meeting. In general, PGP is supportive of the direction of the discussion and continuing with the addition of further detailed examples (perhaps numerical may help) to further the understanding of the group as we get into the design phase.

Problem Statements

The problem statements are generally headed in the right direction, but the impact statements could be modified for clarity’s sake and to better align with the principles of the initiative. PGP sees problem statement 5 as drafted as representative of the concepts that need to be addressed with any policy in this area, but agrees with this higher-level concepts raised in the meeting by CAISO Staff that the principled objective is not necessarily to reduce MPM, but instead to improve the accuracy of mitigation to align with when the potential for market power actually exists. This may result in increased mitigation in some (likely rare?) cases, particularly if additional testing of the CAISO is deemed reasonable and a priority based on the analysis in this area. This said, a general reduction of frequency of mitigation appears to be a reasonable check to see if the grouping approach is having the intended effect, which is to increase the competitive supply considered in the BA-level test.

Problem Statement #6, while worthy of consideration, particularly as it relates to the broader design topic of the BA-Grouping approach, appears inconsistent with data provided in recent DMM reports, which indicate that that CAISO has competitive conditions in the majority of intervals. If there is a  standard across other markets for what a reasonable threshold for when a region can be considered by default to meet competitive standards, it would be meaningful to reference for an objective perspective on the materiality of a small percentage of intervals demonstrating non-competetive conditions. More information could also be provided to address the feasibility questions relating to the simplification that could be added to the grouping approach should the CAISO continue to be deemed competitive and the need for policy in this area given recent analysis. While recognizing that conditions are changing and a forward-looking perspective may add value, PGP would also be supportive of further analysis using existing data to explore the metrics (or hypothetical thereof) that were shared for the other WEIM BAAs for the CAISO as a starting place.

General Direction

PGP is supportive of the direction of the conversation and we appreciate the efforts of the CAISO to provide relevant information to enable stakeholders to move forward in the dialogue with with a shared understanding of the issues at hand.

2. Does your organization have any technical feedback on the topics discussed in the WG Session 8?

PGP noted that the hours subject to mitigation were most heavily concentrated in the WEIM import periods and shoulder season periods when some areas may have surplus supply. The role of hydro storage and the disconnects between the bilateral and EIM pricing are clearly related to this, and part of the education that may be necessary to fully understand this phenomenon could include exploration of the role of bilateral prices in the hydro DEBs, and an exploration of if/how this construct is likely to be perpetuated in the EDAM. While out of scope at this time, it is a worthwhile consideration as participants look to interpret WEIM data in the framework of a potential Extended Day Ahead Market.

PGP is also curious to understand whether the manner in which BPA provides transmission to the WEIM is impacting the frequency of mitigation, and whether the number of potential market participants within the BPA BAA warrants unique consideration in the analysis, when compared with other vertically integrated or small Balancing Authorities. While the transmission available to WEIM in the BPA BAA is based upon a policy construct that is likely unique to BPA, this issue, by design, could not apply in the EDAM. Additional narrative for how/when these concepts and this data is relevant to interpret in the EDAM context would be extremely helpful.

3. Is there additional information that would be helpful for your organization to understand the topic/issues better?

Regarding the detailed walkthrough and scope questions introduced by CAISO staff, it seems that mitigating the pivotal supplier only, rather than the entire group, could minimize the category of resources that have a dispatch that could be impacted by the mitigation, and may help to minimize the complexity and number of resources subject to mitigation. Further examples that explore the impacts of this approach would be helpful for improving the interpretation of the existing analysis. 

The deep dives on the role of intertie bidding was helpful, but PGP has concerns about the interaction with the RA “must flow” from the CAISO BAA Participation policy impacting liquidity and competition at the interties. Further analysis of this new policy and how it relates to the BA Mitigation rules would be helpful context.

Additional deep dives on the competitiveness of the CAISO BA and any implications on the feasibility of the grouping approach when using this as a baseline assumption would also be helpful in addition to some of the education that could be provided in response to question 2.

4. Please provide any additional feedback.

PGP appreciates the additional information that was provided for what to expect in upcoming meetings, and is supportive of the approach of rotating through topics, to provide sufficient time to digest and respond to analysis provided in the meetings. PGP looks forward to seeing further technical examples of the grouping approach as we get into the policy development phase, and sees this broader initiative as comprehensively addressing the objectives and core topics identified by stakeholders. We look forward to continuing to participate.  

1. Please provide your organization’s feedback on Working Group Session 8 (covering SH requested data analysis, overview of the BAA grouping concept, and draft problem statements) and the general direction of the BAA-Level MPM discussion.

The Salt River Project Agricultural Improvement & Power District (SRP) appreciates the opportunity to comment on the Price Formation Enhancements Working Group (WG) discussions. The data and analysis presented during WG Session 8 was very informative to better understand the frequency and magnitude of BAA-Level MPM. SRP generally agrees with the direction of the MPM discussion and with the proposed problem statements. SRP encourages CAISO to continue to ensure proposed changes align with broader market objectives and diverse operational realities of different market participants.

2. Does your organization have any technical feedback on the topics discussed in the WG Session 8?

SRP appreciates the CAISO’s detailed description of the proposed group methodology for BAA-level MPM. However, the design's complexity seems to have increased compared to the current framework. SRP encourages the CAISO to ensure the benefits of the new design outweigh the complexity, particularly in after-the-fact review or validation.

3. Is there additional information that would be helpful for your organization to understand the topic/issues better?

No comment at this time.

4. Please provide any additional feedback.

No additional feedback at this time.

1. Please provide your organization’s feedback on Working Group Session 8 (covering SH requested data analysis, overview of the BAA grouping concept, and draft problem statements) and the general direction of the BAA-Level MPM discussion.

The Six Cities appreciate the information and examples provided during working group session #8.  At this time, the Six Cities support consideration of potential refinements to the existing market power mitigation process, with the overarching objective of ensuring that applicable tests for market power accurately capture conditions when market power is present and impose mitigation accordingly (and do not result in overmitigation or mitigation in inappropriate circumstances).  The Six Cities continue to evaluate the grouping concept discussed at the meeting. 

With respect to proposed Problem Statement #5, the Six Cities agree with the inclusion of this problem statement for now, with the recognition that this problem statement does not presume any particular outcome, including any specific methodology of grouping.  The Six Cities note that the CAISO Department of Market Monitoring has provided comments suggesting that a modification to this problem statement may be needed to remove or revise the portion of the language related to consideration of external available supply. 

The Six Cities support Problem Statement #6.  The assumption that the CAISO is always structurally competitive may lead to a failure to identify instances when market power is present within the CAISO and result in under-mitigation or a failure to mitigate in circumstances when mitigation is appropriate.

2. Does your organization have any technical feedback on the topics discussed in the WG Session 8?

The Six Cities do not currently have any technical feedback on the topics discussed during this working group session. 

3. Is there additional information that would be helpful for your organization to understand the topic/issues better?

The Six Cities have not identified additional information that is required at this time.

4. Please provide any additional feedback.

The Six Cities have no additional comments.

1. Please provide your organization’s feedback on Working Group Session 8 (covering SH requested data analysis, overview of the BAA grouping concept, and draft problem statements) and the general direction of the BAA-Level MPM discussion.

SCE requests that the CAISO facilitate stakeholder understanding toward more thoroughness. Particularly, SCE has concerns that several stakeholders expressed confusion over the logic behind how various BAA groups are mitigated. Providing an algorithm and the underlying algebra that determines the mitigation may be more helpful than individual examples. Individual examples represent one of many possible scenarios, thus, using examples to provide a comprehensive picture of a complicated new approach toward mitigation may not result in full stakeholder appreciation of the details.

To further serve clarity of understanding, the CAISO should also focus on appropriately defining various terminology. For example, PG&E’s concern over current DCPA vs proposed DCPA for BAA level mitigation, can have serious repercussions if two different procedures are confused to have the same treatment.

It is SCE’s understanding that the BAA MPM grouping concept will also be applied to EDAM.  SCE requests more information on how the concept will work in EDAM if there are no BAAs with a direct transfer connection and if all BAAs fail the Residual Supply Index 3 (RSI-3) test.  How will the competitive LMP be set?  Furthermore, it is not clear how LMP is set for the entire EDAM footprint if all BAAs that are connected fail the RSI-3 test as a group.

Lastly, SCE requests more information on the interaction between scarcity pricing and MPM.  How will MPM be utilized during events that may lead up to scarcity pricing?  It is important that CAISO and stakeholders discuss the interplay between these two topics to reduce the likelihood of withheld supply that can cause scarcity conditions.

2. Does your organization have any technical feedback on the topics discussed in the WG Session 8?

3. Is there additional information that would be helpful for your organization to understand the topic/issues better?

4. Please provide any additional feedback.

1. Please provide your organization’s feedback on Working Group Session 8 (covering SH requested data analysis, overview of the BAA grouping concept, and draft problem statements) and the general direction of the BAA-Level MPM discussion.

WPTF appreciates the data analysis conducted and presented by the CAISO at the latest working group session. Being able to substantiate and quantify potential issues is an invaluable step in the market design process. Furthermore, as the analysis presented during this working group session demonstrates, oftentimes the data may present unforeseen issues that warrant further evaluation and discussion.

WPTF was surprised to see that the data analysis shows the current BAA level market power mitigation approach seems to be triggering market power mitigation most frequently in shoulder months and off-peak hours – which are the hours and months one would least expect there to be market power concerns at the BAA/system level.  This makes one question why the current design is triggering market power mitigation during those periods. WPTF suspects that it’s the high levels of inexpensive renewable generation being transferred from one BAA to other BAAs that results in the transfer limits binding. In other words, it is the abundance of cheap energy trying to economically serve load in another BAA that is causing the other BAA to be tested for BAA-level market power mitigation. The reason being is that the trigger used to test for BAA-level uncompetitive conditions is flow-based binding constraints. The existing approach seems to be using a local market power trigger to trigger when to test for BAA-level structural un-competitiveness, which are two completely different conditions of un-competitiveness and thus should not be utilizing similar triggers. WPTF agrees with the CAISO in that the purpose of this effort isn’t necessarily to reduce mitigation but rather improve its accuracy. This apparent flaw in the current design is a key element that may be triggering mitigation inaccurately and warrants further discussion.

Thus, WPTF recommends that the CAISO include an additional problem statement:

The existing BAA-level market power mitigation utilizes a transfer constraint-based trigger to test for structural uncompetitivess, resulting in market power mitigation being triggered most frequently in hours inconsistent with when one would expect the need to test for market power (e.g.,high renewable and low load conditions).

2. Does your organization have any technical feedback on the topics discussed in the WG Session 8?

Clearly the CAISO has spent significant amount of time and effort thinking through the BAA-level grouping approach. While WPTF understands the general benefit of testing BAAs together when there is remaining transfer capability amongst the group, we are extremely concerned with the amount of time given to discussing solutions at this point in the policy process. For example, the data analysis was extremely informative and per our discussion in response to #1 above, may have actually identified a more fundamental issue with the existing approach that would remain unchanged under the grouping approach. If we were to continue moving forward without any additional evaluation and discussion regarding the latest issue, we could end up with another design that still permeates a fundamental flaw with how any structural/BAA-level market power mitigation process should be conducted. Thus, as a stakeholder community, we should ensure that our time is spent first fully evaluating and understanding the issues with the existing approach.

3. Is there additional information that would be helpful for your organization to understand the topic/issues better?

WPTF does not support applying system/BAA-level market power mitigation on a BAA absent analysis showing the ability to exercise market power is predictable, persistent, and profitable.

Thus, WPTF continues to ask for the CAISO to conduct a forward looking study that evaluates the magnitude of potential BAA-level market power. The study would ideally consider the additional supply available at the time the market design policy would potentially be implemented such that as a stakeholder community we can understand the magnitude of the issue we are trying to address. The DMM’s annual analysis has shown that the frequency of uncompetitive conditions in the CAISO BAA has been decreasing over time; if one were to also look at the planned additional capacity coming online over the next few years its reasonable to conclude that potentially structural uncompetitive conditions may not be prevalent at that point in time. Furthermore, this analysis should also include the system conditions consistent with the conditions during which the current BAA-level market power mitigation is most frequently triggered such that we can evaluate how well the existing trigger would identify hours during which the study would also identify potential for BAA-level market power.

4. Please provide any additional feedback.