Comments on Phase 2 Straw Proposal

1. Provide a summary of your organization's comments on the phase 2 straw proposal:

California Community Choice Association (CalCCA) appreciates the opportunity to comment on the Resource Adequacy (RA) Enhancements Phase 2 Straw Proposal. In summary:

• CalCCA supports the California Independent System Operator’s (CAISO’s) clarification for eligible intermittent resources;
• The CAISO should work with stakeholders to address Investment Tax Credit (ITC) considerations prior to adopting a must offer obligation for the charge portion of storage resources;
• CalCCA recommends the CAISO maintain the real-time must offer obligation and zero-dollar imbalance reserve bidding requirement for RA resources; and
• CalCCA supports the CAISO’s proposal to modify the flexible resource adequacy program in three stages and offers a recommendation regarding exemptions to the economic bidding requirement.

2. Provide your organization’s feedback on the Must Offer Obligations and Bid Insertion topic as described in section 4.1:

Clarifications to the Eligible Intermittent Resource Must Offer Obligation

CalCCA supports the CAISO’s clarification for eligible intermittent resources that any energy above the resources’ net qualifying capacity (NQC) cannot be used to support an export from non-RA capacity and that the RA capacity under offer obligation to the CAISO is for all energy necessary to derive the shown RA value. This is appropriate for resources with an NQC value established through an effective load-carrying capability methodology.

ITC Considerations

CalCCA is concerned with the CAISO’s proposal that storage resources must bid their full charge and discharge capability to fulfill their must offer obligation. The CAISO indicates its expectation that resources manage ITC grid charging restrictions through bidding. However, resources cannot fully capture the costs of losing ITC credits in their bids in all instances. When the next megawatts (MW) of grid charging results in the resource losing their ITC credit, a $1000 bid may not be sufficient to reflect the cost of the lost ITC credit. The CAISO must provide resources a mechanism to maintain their ITC credit because contracts have already been executed by load-serving entities (LSEs) to procure ITC-eligible resources prior to the development of RA rules for those resources.

The CAISO indicated on the stakeholder call that it would further consider how to accommodate ITC requirements in the Energy Storage Enhancements initiative. The CAISO should allow solutions to develop in that stakeholder process prior to modifying the storage must offer obligation to require bidding of the full charge and discharge capability.

Crossover with Day-Ahead Market Enhancements (DAME) Initiative

The CAISO proposes a standard 24 by 7 must offer obligation in day-ahead and real-time through the DAME transitionary period. As stated in CalCCA’s comments to the DAME second revised straw proposal, CalCCA does not support the CAISO’s proposal to relieve RA resources of their real-time must offer obligation after the day-ahead market if they do not receive a day-ahead award once the DAME transitionary period ends.[1] Instead, CalCCA recommends the CAISO maintain the real-time must offer obligation for RA resources. The CAISO should also require RA resources bid zero dollars and not receive the marginal price for imbalance reserves until the impacts of removing the zero-dollar bidding requirement can be evaluated within the Extended Day-Ahead Market (EDAM) initiative.

As outlined in CalCCA’s DAME comments, because RA resources are already paid to be available to provide energy through real-time, the CAISO should not release that capacity already paid for after the day-ahead market. The CAISO proposes the transition period in part to allow time for RA contracts to be updated to account for the removal of the RA real-time must offer obligation and zero-dollar imbalance reserve bidding requirement. However, the ability for LSEs to renegotiate RA contracts already executed to account for this change will be extremely difficult given tight supply conditions in the RA market. The result of implementing this change under current RA market conditions could result in LSEs paying for resources to be available to provide energy twice; first, within the RA market when procuring RA capacity, and second, within the day-ahead market when procuring imbalance reserves and reliability capacity. As such, CalCCA has significant concerns around the feasibility of renegotiating RA contracts at a reasonable price to facilitate this structural change without significant increases in ratepayer costs.

Additionally, if RA resources are relieved of their must offer obligation after the day-ahead, the CAISO market would not receive the full benefit of having all resources and their attributes that have already been paid for available to meet grid needs. Relieving RA resources of their real-time must offer obligation after day ahead could result in the CAISO needing to rely on out-of-market actions to access the resource in the event conditions in real-time require additional resources beyond what is procured through the imbalance reserve or reliability capacity products to maintain grid reliability. Given the costs of making resources available through real-time are already covered in RA contracts, the CAISO should not limit its access to resources already procured to maintain grid reliability, and instead, should maintain the real-time must offer obligation for RA resources within this initiative.

Finally, CalCCA supports the CAISO requirement for RA resources to bid zero dollars for imbalance reserves and recommends RA resources be required to bid zero dollars and not receive the marginal price for imbalance reserves until the impacts of removing the zero-dollar bidding requirement can be evaluated within the EDAM initiative. This is consistent with the current RUC process. CalCCA understands the rationale behind removing the zero-dollar bidding requirement under an EDAM where resources in other balancing authority areas would be bidding for the same products without the zero-dollar bidding requirement. However, given the difficulty LSEs will face renegotiating contracts under current RA market conditions, the CAISO should not consider removing the zero-dollar bidding requirement within the DAME initiative. Additionally, the CAISO should not pay RA resources the marginal price for imbalance reserves and reliability capacity since existing RA contracts already compensate resources for being available through real-time. Instead, the CAISO should maintain the zero-dollar bidding requirements and continue not to pay resources for capacity already accounted for in RA contracts indefinitely until this change can be fully evaluated within the EDAM initiative.

[1]             CalCCA Comments to the Day-Ahead Market Enhancements Second Revised Straw Proposal: https://stakeholdercenter.caiso.com/Comments/AllComments/0860b0d0-5bc0-48f4-af5e-b63b28fb71b0#org-7da099a9-4c56-4d71-9fb9-2fe8f7c6da05. 

3. Provide your organization’s feedback on the Flexible RA topic as described in section 4.2:

Staged Approach to Modify the Flexible RA Program

CalCCA supports the CAISO’s proposal to modify the flexible resource adequacy program in three stages, in which:

• Stage 1 would maintain the existing flexible RA program and require all resources eligible of providing imbalance reserves to submit economic bids in the day-ahead market and bid zero dollars for imbalance reserves;
• Stage 2 would evaluate whether a separate flexible RA requirement is necessary; and
• Stage 3 would implement new flexible RA program or sunset the existing flexible RA program. 

This approach will allow the CAISO to examine whether a separate flexible RA requirement is needed after the modifications to self-schedule rules proposed in this initiative and the imbalance reserve product proposed in DAME are in place. Additionally, broader RA structural changes are being examined in the California Public Utilities Commission’s RA reform track. The outcome of that effort may further reduce the need for a separate flexible RA program and should be considered in the CAISO’s evaluation in Phase 2.

Further, CalCCA agrees with the CAISO that LSEs will procure with the CAISO’s predictable net-load ramps in mind, considering trade-offs among cost, ramp rate, and renewable portfolio obligations and targets.[1] Therefore, CalCCA supports a staged approach that includes an evaluation of whether a separate flexible RA requirement is needed. If the CAISO finds that the system and local RA programs adequately address the CAISO’s operational needs following the proposed changes, it would be prudent for the CAISO to eliminate the flexible RA requirements, as it would significantly reduce the complexity of the RA program.

Exemptions to the Economic Bidding Requirement

As described in the must offer obligation comments above, storage resources must have a mechanism to allow them to schedule in such a way that they can meet both the must offer obligation and generate energy that allows them to charge the storage component with the Variable Energy Resource (VER) component when it is economical to do so. The CAISO should not penalize hybrid or co-located resources for self-scheduling storage charging in day-ahead with VER production to displace grid charging.

[1]             Resource Adequacy Enhancements Phase 2 Straw Proposal at 18.

4. Please provide your organization’s feedback on the proposed EIM Governing Body role as described in section 5:

CalCCA has no comments at this time.

5. Please provide your organization’s feedback on the Appendix as described in section 7:

CalCCA has no comments at this time.

6. Additional comments on the Resource Adequacy Enhancements phase 2 straw proposal:

The CAISO intends to take Phase 2 elements to the Board of Governors in February 2022. Given the interdependencies between these proposals and the DAME initiative, the CAISO should ensure the timing of board approval is aligned for both initiatives, to ensure proposals in this initiative align with the final DAME design.  

1. Provide a summary of your organization's comments on the phase 2 straw proposal:

The Phase 2 straw proposal appears to be simplified and limited in scope compared to the previous version of Phase 2 proposal. While CDWR supports phased approach to flexible RA enhancements with an aim to align with Day Ahead Market Enhancements (DAME), it does not support a requirement imposed on generic RA capacity to offer economic bids (for energy and ancillary services) and offer imbalance reserve (IR) product in Phase 1. CDWR supports CAISO’s proposal of a study that would determine whether day ahead market (DAM) optimization outcome meets IR needs and whether a redesigned flexible RA program will be needed in future.

2. Provide your organization’s feedback on the Must Offer Obligations and Bid Insertion topic as described in section 4.1:

CDWR supports the CAISO proposal not to change the must offer obligation for participating load that is pumping load under the existing tariff section 40.6.4.3. CDWR seeks clarification that the tariff section 40.6.4.3 is applicable to use limited participating load.

Use-limited resources (ULR) are not available 24 hours a day, 7 days a week. The concept of bid insertion on use limited resource itself does not align with the need for the use limitation designation of ULRs. As it exists today, ULRs are required to offer when available because of their characteristics. No ULR resource would be holding its RA capacity if operationally available. Besides, bid insertion does not make a ULR resource available if the underlying conditions, such as fuel limitations, do not permit its operation.

Does the proposed bid insertion apply to energy, certified A/S, RUC, and IR (in Phase 1)?

What will be the outcome of bid insertion if the required bid is missing, and an outage card is not submitted? Will the outcome be RAAIM penalty if the resource is not available (even if the underlying use limit conditions do not permit operation)? An illustrative example would provide a better insight.

3. Provide your organization’s feedback on the Flexible RA topic as described in section 4.2:

CDWR supports a phased approach of data-based determination of a need for redesign or sunset of the flexible RA program. The phased approach will allow more time to assess the outcome of DAME and its impact on flexible RA capacity need.

CAISO proposes that the Must Offer Obligations (MOO) be modified to require all imbalance reserve eligible RA resources (whether they are shown as flex, system or local) to economically bid for energy, AS, and submit $0 bids for imbalance reserves to ensure sufficient bids for Imbalance Reserves. A requirement to submit economic bids from a generic RA resource (eligible to offer IR) is even more stringent than offering economic bids from a flexible RA category 1 resource. This can make a huge difference in operations of resources with constraints including environmental obligations. Ability of generic RA capacity to meet its RA obligation through self-schedules should not be eliminated. If flexible RA capacity offering economic bids is not sufficient to meet the IR needs, a market mechanism to fill the gap should be considered so that any willing resource can offer IR bids at a price.

Requiring a generic RA resource to offer IR is not appropriate because it would also need an economic bidding capability for IR. Imposing the IR must offer requirement on the existing generic RA fleet which requires 15 minutes dispatch can produce undesired consequences in operations if the resources have environmental and other operational constraints.

Since flexible RA is tied to DAME, IR needs should be addressed through flexible RA aspect and not through generic RA requirements. Imposing such stringent requirements to the whole RA fleet just to meet a fraction of system capacity needs (such as IR) would undermine the capability to offer as a generic RA resource.

If IR capacity is subject to RAAIM, will the RAAIM charge applied to the portion of capacity overlapping with other generic and flexible RA capacity be not assessed the RAAIM to avoid double RAAIM charges (for the same capacity)?

4. Please provide your organization’s feedback on the proposed EIM Governing Body role as described in section 5:

 No comment.

5. Please provide your organization’s feedback on the Appendix as described in section 7:

Table 7.1.1 lists Pumping Load (without qualifying use limit) as one of the resources not being subject to bid insertion by CAISO. CDWR’s understanding is that the Pumping Load that is participating Load (and that is a use limited resource) will not be subject to bid insertion as well. The proposal indicates at footnote (11) that the CAISO is not proposing changes to the must offer obligation for participating load that is pumping load under the existing tariff section 40.6.4.3.  CDWR seeks clarification on whether a Pumping Load that is use limited participating load will have the same requirement as for the Pumping Load (without qualifying use limit) in the table 7.1.1.

6. Additional comments on the Resource Adequacy Enhancements phase 2 straw proposal:

No further comments.

1. Provide a summary of your organization's comments on the phase 2 straw proposal:

The California Efficiency + Demand Management Council (Council) appreciates the opportunity to comment on the CAISO Resource Adequacy Enhancements Phase 2 Straw Proposal. The Council’s comments are limited to Section 4.1 in support of the clarification that the availability of demand response (DR) resources must be clearly communicated and approved via Local Regulatory Authority (LRA)-approved documentation.  To that end, the CAISO should be proactive in identifying instances where it believes clarity is lacking.The California Efficiency + Demand Management Council (Council) appreciates the opportunity to comment on the CAISO Resource Adequacy Enhancements Phase 2 Straw Proposal. The Council’s comments are limited to Section 4.1 in support of the clarification that the availability of demand response (DR) resources must be clearly communicated and approved via Local Regulatory Authority (LRA)-approved documentation.  To that end, the CAISO should be proactive in identifying instances where it believes clarity is lacking.

2. Provide your organization’s feedback on the Must Offer Obligations and Bid Insertion topic as described in section 4.1:

The Council agrees with the CAISO’s decision to abstain from making changes to the day-ahead and real-time Must Offer Obligation (MOO) for DR resources conditioned on clear LRA-approved availability requirements.  As a matter of principle, the CAISO should never make changes to the MOO of DR that are out of alignment with LRA rules.  To ensure there is no confusion, the Council encourages the CAISO to specify, either within the context of this stakeholder initiative and/or in the appropriate LRA proceedings, instances in which it believes clear DR availability requirements are missing. This will ideally provide sufficient impetus to create the needed clarity moving forward.

To ensure complete clarity in this new requirement, the CAISO should also clarify that unless there are explicit real-time bid requirements in the DR program tariff or contract provisions, long-start DR resources are only required to bid or self-schedule up to the day-ahead market award quantity.

3. Provide your organization’s feedback on the Flexible RA topic as described in section 4.2:

The Council reserves comment on this topic.

4. Please provide your organization’s feedback on the proposed EIM Governing Body role as described in section 5:

The Council reserves comment on this topic.

5. Please provide your organization’s feedback on the Appendix as described in section 7:

The Council reserves comment on this topic.

6. Additional comments on the Resource Adequacy Enhancements phase 2 straw proposal:

1. Provide a summary of your organization's comments on the phase 2 straw proposal:

CESA appreciates the work of the ISO on this initiative as well as the opportunity to provide feedback and recommendations related to the Straw Proposal. In particular, CESA supports the ISO’s consideration of this initiative and its interactions and implications with regards to two other important stakeholder initiatives and processes, the Day-Ahead Market Enhancements (DAME) Initiative, and the Resource Adequacy (RA) proceeding at the California Public Utilities Commission (CPUC). It is fundamental to preserve contract certainty and minimize market disruptions. 

In light of the growing concerns to maintain reliability as the state’s grid evolve, CESA requests the ISO retains its commitment to market principles of economic efficiency, open access to the participation of different resources and technologies, and the proper valuation and compensation of all services and products provided by the wide array of resources currently participating in the ISO’s markets. In addition, CESA requests the ISO consider existing tools and regulations when evaluating modifications in an effort to minimize duplicity and efficiently incent the desired behavior. In this context, CESA’s comments can be summarized as follows:?

• The ISO should not impose a must-offer obligation (MOO) for the charging of non-generator resources (NGRs). 
  • If imposed, the ISO should refine its MOO proposal for NGR assets to properly value and acknowledge the nature of resources interconnected under the wholesale distribution access tariff (WDAT). 
• An indefinite period in which resources eligible for imbalance reserves (IR) must bid at $0 will not contribute to market discovery.
  • A $0 IR bid requirement would hinder the economics of storage and hybrid resources, potentially affecting their deployment.

2. Provide your organization’s feedback on the Must Offer Obligations and Bid Insertion topic as described in section 4.1:

 The ISO should not impose a MOO for the charging of NGR assets. 

In the Sixth Revised Straw Proposal, the ISO introduced the concept of a MOO that reflects both the charge and discharge capabilities of resources participating under the NGR model. In comments submitted January 2021, CESA strongly opposed this proposal, noting that it was unnecessary given the existence of management tools (e.g., the end-of-hour state-of-charge (EOH SOC) tool) and market incentives and penalties that generally promote the behavior the ISO advocates for. Today, despite the development of the minimum state-of-charge (MSOC) requirement, yet another tool for the ISO to manage the charging of NGRs, the ISO continues to advocate for a charge-side MOO in the Straw Proposal.

In addition to the existence of other means to manage and ensure the state-of-charge (SOC) of storage assets, the ISO has failed to consider the implications that a charging MOO would have on assets claiming the Investment Tax Credit (ITC). The fact that this issue was highlighted by several parties during the October 12 Stakeholder call should not be lost on the ISO. According to preliminary queue cluster (QC) 14 data published by the ISO on May 20^th, 2021, 120 of the 363 projects (~33%) included are battery energy storage systems paired with some form of generation. In terms of total MW at the point of interconnection (POI), 38 GW out of 106 GW (~36%) come from paired assets.[1] The significant commercial interest on these resources demonstrates the urgency to implement policies that align with the economics needed to bring these resources online. Currently, it is unclear if and how the ISO would design this charge-side MOO requirement in a way compliant with ITC considerations. In this context, and given the state of the market and the tools available to both asset owners and the ISO to manage the state-of-charge (SOC) of a storage asset, CESA strongly opposes the ISO’s proposal to institute a charging MOO.    

If imposed, the ISO should refine its MOO proposal for NGR assets to properly value and acknowledge the nature of resources interconnected under the WDAT

As emphasized above, CESA opposes imposing a MOO for the charging of NGR assets. This is unnecessary and reduces market efficiencies that storage can provide. If and as the MOO proposal is considered though, the ISO should be aware of developments for distribution-connected resources. Specifically, within the MOO proposal for NGRs, the ISO notes that the requirement for the charging range would be applied to NGRs regardless of their point of interconnection.⁶ However, unlike the networked transmission system, WDAT-interconnected assets may face charging limitations that are imposed exogenously by the resources’ respective utility distribution company (UDC). As more WDAT-interconnected projects have come online, particularly in locations where Southern California Edison (SCE) operates as the UDC, projects have started to receive “paper charging schedules” with conservative charging restrictions that these facilities must abide by, which are developed in accordance with the UDC’s N-1 criteria and lack time-based granularity. These restrictions, paired with the ISO’s proposal, represent significant access limitations for WDAT-interconnected NGRs. CESA urges the ISO to, ad minimum, refine its MOO proposal for WDAT-interconnected NGRs to recognize the nature and value of WDAT resources and allow them more flexibility in their charging requirements by integrating distribution-level information provided by UDCs to inform their MOOs. This could be potentially achieved by leveraging the ISO’s authority under Section 4.4.1 of the CAISO Tariff to access all information pertaining the physical state of operation, maintenance, and failure in a UDC’ Distribution System to inform the charging potential/limitations of WDAT-interconnected assets. 

At the same time, CESA again stresses that MOO for the charging of NGRs is unnecessary and is an element that we oppose. The above is added for important consideration if the ISO does end up moving forward with this element of the proposal.  

[1] Since the CAISO’s Preliminary QC 14 data does not differentiate between hybrid and co-located resources, paired assets is used above in a manner that encompasses both.

3. Provide your organization’s feedback on the Flexible RA topic as described in section 4.2:

An indefinite period in which resources eligible for imbalance reserves (IR) must bid at $0 will not contribute to market discovery

In the Straw Proposal, the ISO proposes a staged approach to modifying the Flexible (Flex) RA program in alignment with the DAME initiative. This alignment is particularly important considering the ISO’s introduction of two new Day-Ahead (DA) products: Reliability Capacity (RC) and Imbalance Reserves (IR). In order to collect information on the operation and performance of DAME products and reform the Flex RA program in turn, the ISO proposes that all resources, whether they be shown as system, local, or flex, that are determined by the CAISO to be eligible to provide IR would be obligated to submit bids for imbalance reserves up and down at $0 to be co-optimized with energy and ancillary services in the integrated forward market.[1] Essentially, the resources that: (1) provide any type of RA; and (2) could be eligible for IR, would be subject to a 24-by-7 IR MOO where they could only bid at $0. Notably, the ISO notes that this provision would commence on Fall 2022 (for RA Year 2023) but could go on until 2025 or 2026. The ISO states that this proposal is designed to maximize the number of bids for IR in order to better understand if tweaks or modifications are necessary prior to full implementation.

CESA opposes this proposal as it does not provide any assurances to asset owners with regards to the duration of this requirement. As a result, this proposal has the potential to disincentivize resources capable of providing IR (i.e., those that are 5- or 15-minute dispatchable) from providing any type of RA. Moreover, this proposal rests on the assumption that a $0 bidding period would allow the ISO to maximize the number of bids and identify issues with the formulation or optimization of the IR product. CESA challenges this assumption, as: (1) the proposal may disincentivize resources from providing any type of RA, limiting the number of bids; (2) $0 bids will not require economic co-optimization, potentially overlooking issues with the modifications the ISO is considering; (3) the lack of economic co-optimization will overlook opportunity costs faced by IR-providing assets; and, (4) the proposal hinges on the timeline of the DAME initiative, which has a schedule that remains “under development”.

A $0 IR bid requirement would hinder the economics of storage and paired resources, potentially affecting their deployment

At its core, IR is a product that seeks to find the most cost-effective resources to cover fast and unpredictable variance in the net load. As such, resources that are fast and responsive are poised to serve a significant portion of that need. Both standalone energy storage and paired resources are well-positioned to contribute to the IR needs of the grid. As a result, an obligation to present $0 bids could result in these assets being routinely selected to be reserved in the real-time market to provide IR. Without proper compensation for said reservation and increased milage from being dispatched in the real-time market, the financials for these assets could differ substantially from their initial iterations. The proposal by the ISO thus constitutes a significant threat to the financeability of assets essential to preserve the reliability of the grid.

[1] Straw Proposal, at 19.

4. Please provide your organization’s feedback on the proposed EIM Governing Body role as described in section 5:

CESA does not offer comment at this time.  

5. Please provide your organization’s feedback on the Appendix as described in section 7:

CESA does not offer comment at this time.  

6. Additional comments on the Resource Adequacy Enhancements phase 2 straw proposal:

CESA does not offer comment at this time.  

1. Provide a summary of your organization's comments on the phase 2 straw proposal:

Please see the attached PDF below for DMM's full comments.

Comments will also be available within a few business days of 10-26-2021 in the "Comments on stakeholder processes" section of DMM's website at:  http://www.caiso.com/market/Pages/MarketMonitoring/MarketMonitoringReportsPresentations/Default.aspx#comments

2. Provide your organization’s feedback on the Must Offer Obligations and Bid Insertion topic as described in section 4.1:

Please see the attached PDF below for DMM's full comments.

3. Provide your organization’s feedback on the Flexible RA topic as described in section 4.2:

Please see the attached PDF below for DMM's full comments.

4. Please provide your organization’s feedback on the proposed EIM Governing Body role as described in section 5:

Please see the attached PDF below for DMM's full comments.

5. Please provide your organization’s feedback on the Appendix as described in section 7:

Please see the attached PDF below for DMM's full comments.

6. Additional comments on the Resource Adequacy Enhancements phase 2 straw proposal:

Please see the attached PDF below for DMM's full comments.

1. Provide a summary of your organization's comments on the phase 2 straw proposal:

The Public Advocates Office at the California Public Utilities Commission (Cal Advocates) appreciates the opportunity to provide feedback on the California Independent System Operator’s (CAISO) Resource Adequacy (RA) Enhancements Phase 2 Straw Proposal (Proposal).  Cal Advocates recommends that the CAISO clarify what market tools and protocols are suitable to use prevent grid charging for resources subject to the Investment Tax Credit.  Cal Advocates also recommends that Must Offer Obligations for the charging range of storage be discussed at other storage-related initiatives before being implemented.

2. Provide your organization’s feedback on the Must Offer Obligations and Bid Insertion topic as described in section 4.1:

The CAISO proposes to apply a twenty-four hour a day, seven days a week (24x7) Must Offer Obligation (MOO)[1] for storage resources (stand-alone, co-located, and hybrid) to include the full charge and discharge capabilities of the resource.[2]  Currently, storage and hybrid resources have a 24x7 MOO for their discharge capabilities only, with no CAISO bid insertion.[3] 

The CAISO previously proposed[4] to apply a MOO for the charging capabilities of storage resources; however, numerous stakeholders raised concerns[5] that a charging MOO could cause co-located and hybrid resources to lose Investment Tax Credit (ITC) qualification,[6] resulting in a loss of the related federal tax credit’s revenue.[7]  Battery systems that charge 100% from renewable resources, rather than the grid, receive the full ITC tax credit, while batteries that charge between 75%-99.9% from renewables receive a prorated portion of the ITC.  Battery systems that charge less than 75% from renewables are ineligible for the ITC.[8]  In the Proposal, the CAISO offers two options to decrease instances of grid charging if a charging MOO is implemented but recognizes that neither option would entirely prevent grid charging.[9]

The CAISO’s proposal to add a charging capability MOO would likely create additional ratepayer costs, as well as additional greenhouse gas (GHG) emissions if hybrid or co-located storage charges from GHG-emitting grid resources rather than on-site renewable resources.  A charging capability MOO could allow the CAISO to charge hybrid or co-located storage from the grid rather than the storage’s paired renewable resource.  Charging from the grid would jeopardize the resource’s ITC qualification.  Losing ITC qualification would reduce the revenue received by the storage resource through reduced tax credits.[10]  Existing, planned, and future hybrid and co-located storage resources could lose some or all of the ITC revenue stream.[11]  That loss would impact the resource owner for the duration of any existing contract, which could result in ratepayers paying higher prices for new contracts due to the loss of ITC revenue.  Lastly, storage resources operated by load-serving entities themselves may recover less overall revenue if ITC qualification is lost, potentially resulting in a direct increase in cost recovery from ratepayers.

In order to avoid increased ratepayer costs, contractual obstacles, and prevent charging hybrid and co-located resources with GHG-emitting resources, the CAISO should clarify in the next draft proposal what opportunities are available for hybrid and co-located resources to avoid grid charging.  The CAISO indicates that grid charging for hybrid resources can be managed with the dynamic limit tool.[12]  However, the CAISO explained that the tool was not intended to be used in such a way.[13]  The CAISO should specify whether the dynamic limit tool may be employed to avoid costly grid charging and how this or any other market functions, such as showing a PMin of zero in the CAISO Masterfile, may avoid charging from the grid.

The CAISO should also not implement any MOO changes to storage before introducing the topic in the Energy Storage Enhancements (ESE) stakeholder initiative process.  The ESE is informed by the RA Enhancements initiative and its purpose is to explore market rules and processes like bidding behavior.[14]  Coordination between the two initiatives would ensure optimal solutions are implemented; solutions that consider the CAISO’s desire to increase resource availability and the operational constraints and market tools of energy storage.

[1] A 24x7 MOO is a construct of the RA program that obligates RA resources to bid into the CAISO day-ahead and real-time markets for all hours of every day.  CAISO Tariff 40.6.

[2] Proposal, p. 9.

[3] CAISO Business Practice Manual (BPM) Section 7.1.3.1.  See also the Resource Adequacy Enhancements Web Meeting of October 12, 2021 for verbal responses indicating that storage only has a discharge MOO currently.

[4] A charging MOO was most recently previously proposed in the RA Enhancements Phase 2 Sixth Revised Straw Proposal through a web meeting presentation on January 15, 2021.  See page 17 at http://www.caiso.com/InitiativeDocuments/Presentation-ResourceAdequacyEnhancementsSixthRevisedStrawProposal-Jan152021.pdf.

[5] Proposal, p. 8.

[6] The ITC is a federal tax incentive program which provides tax credits to energy storage that is charged by a paired photovoltaic solar system.  Tax credits diminish rapidly when the storage is instead charged by the grid.  See National Renewable Energy Laboratory, Federal Tax Incentives for Energy Storage Systems, Retrieved October 19, 2021.  Available at: https://www.nrel.gov/docs/fy18osti/70384.pdf.

[7] Proposal, p. 8.  See also the Comments on Sixth Revised Straw Proposal – Phase 2A Resource Adequacy Enhancements, January 29, 2021, for stakeholder comments summarized by the Proposal at: https://stakeholdercenter.caiso.com/Comments/AllComments/c3b766fe-d976-42b8-8304-e082feae46c1.

[8] National Renewable Energy Laboratory, Federal Tax Incentives for Energy Storage Systems, Retrieved October 19, 2021.  Available at https://www.nrel.gov/docs/fy18osti/70384.pdf.

[9] Proposal, p. 8.

[10] Since storage developers build their offer prices of resources based partly on the total cost of the resource, which would include potential tax credit revenue, the loss of ITC qualification would remove the tax credit and increase the total cost of the storage resource.  The Large-scale Solar Association (LSA) and Solar Energy Industries Association (SEIA) have previously pointed out that ITC loss would raise cost to ratepayers and cause financing problems for resource owners.  RA Enhancements Sixth Revised Straw Proposal Phase 2A, Comments of LSA and SEIA, January 1, 2021, Section 7.  Available at: https://stakeholdercenter.caiso.com/Comments/AllComments/c3b766fe-d976-42b8-8304-e082feae46c1#org-380505f8-7620-4fc3-9124-858f594addd7.

[11] This concern has also been raised at the CAISO’s Hybrid Resources initiative where the CAISO summarized, “Many stakeholders commented that the ITC is critical to receiving financing for utility scale storage products.”  Hybrid Resources Final Proposal, October 16, 2020, p. 24.  Available at: http://www.caiso.com/InitiativeDocuments/RevisedFinalProposal-HybridResources.pdf.

[12] Proposal, p. 9.

[13] Resource Adequacy Enhancements Web Meeting of October 12, 2021, verbal dialog of Pacific Gas and Electric Company (PG&E) and the CAISO.  Beginning approximately 20:15, available at https://www.youtube.com/watch?v=srZf-7XAzqs.

[14] ESE Issue Paper, April 28, 2021, p. 3.

3. Provide your organization’s feedback on the Flexible RA topic as described in section 4.2:

Cal Advocates has no comment on this topic at this time.

4. Please provide your organization’s feedback on the proposed EIM Governing Body role as described in section 5:

Cal Advocates has no comment on this topic at this time.

5. Please provide your organization’s feedback on the Appendix as described in section 7:

Cal Advocates has no comment on this topic at this time.

6. Additional comments on the Resource Adequacy Enhancements phase 2 straw proposal:

Cal Advocates has no additional comments at this time.

1. Provide a summary of your organization's comments on the phase 2 straw proposal:

EDF-R opposes the energy storage 24/7 charge must offer obligation (MOO.) 

2. Provide your organization’s feedback on the Must Offer Obligations and Bid Insertion topic as described in section 4.1:

EDF-R submits these brief comments in opposition to the energy storage 24/7 charge must offer obligation (MOO.) EDF-R does not support CAISO’s statement that “[resource] availability should not be limited due to subsidies.” The RA program certainly cannot be designed with the inverse statement “resource availability should be unlimited regardless of commercial realities.” Commercial realities such as investment tax credits (ITCs) are a concern in all aspects of planning and design as we collectively seek to increase supply and meet procurement targets. Historically speaking, the CAISO has made accommodation for commercial realities and complexities. As a recent and relevant example, CAISO listed “Capturing Investment Tax Credit” as a business driver for hybrid development in its Hybrid Resources Straw Proposal, the goal of which was to “inform the various options that should be provided … to best integrate these resources into the market.” CAISO has not demonstrated that the current must offer configuration is specifically driving reliability issues, nor that implementation of the 24/7 storage rule would produce improved, or even different, outcomes than seen in the current configuration given how motivated generators will be to avoid grid charging.

3. Provide your organization’s feedback on the Flexible RA topic as described in section 4.2:

4. Please provide your organization’s feedback on the proposed EIM Governing Body role as described in section 5:

5. Please provide your organization’s feedback on the Appendix as described in section 7:

6. Additional comments on the Resource Adequacy Enhancements phase 2 straw proposal:

1. Provide a summary of your organization's comments on the phase 2 straw proposal:

LSA/SEIA appreciate the opportunity to offer these comments and looks forward to seeing them incorporated in the next proposal version in this initiative.

• Energy storage MOOs:  The CAISO should not extend the energy storage Must-Offer Obligation (MOO) to require bidding of both the positive and negative operating ranges for energy storage providing “generic” Resource Adequacy (RA) capacity, unless the energy storage Qualifying Capacity (QC) is likewise extended to match this obligation.  Otherwise, the CAISO will be requiring a service for which these resources cannot receive compensation.

• EIR exports:  The CAISO should clarify the proposed prohibition against Eligible Intermittent Resources using “energy from these resources above the NQC value…to support an export from non-RA capacity.”  LSA/SEIA suggest application of a proportional metric and requests that CAISO confirm that this reflects CAISO’s intent, though the situation seems unlikely.

• Management of grid charging for Co-located Resources (CLRs):  The Proposal response to stakeholder concerns regarding the impact of the MOO on Investment Tax Credit (ITC) recovery for energy storage resources – in particular, Co-located Resources (CLRs) – is inadequate. 

The MOO is only one element of the overall grid-charging management issue for energy storage resources (for Co-located Resources (CLRs) in particular), and the response in the Proposal continues the overall balkanization and “whack a mole” treatment of this issue. 

The need for further focused and comprehensive work on the larger CLR grid-charging management issue – tariff/BPM clarifications and revisions – was explained in detail in LSA/SEIA’s comments in the Energy Storage Enhancements (ESE) initiative, and it was discussed in more detail on the last stakeholder call in that initiative.  The CAISO’s response to that concern in the Proposal does not contain any indication that the CAISO has considered that other input at all.

Thus, the CAISO should defer action on the MOO element for CLRs here, and then consolidate its response with those on the related issues in the ESE initiative. 

2. Provide your organization’s feedback on the Must Offer Obligations and Bid Insertion topic as described in section 4.1:

Must-Offer Obligation for Energy Storage 

(response to Proposal, p.4 - Storage and Hybrid Resources)

Fundamentally, it is unfair and unjust to require storage and Mixed-Fuel Resources (MFRs, the CAISO's own term) providing generic Resource Adequacy (RA) to bid the entire positive and negative range of their storage capacity, since they only get Qualifying Capacity (and thus NQC) for the positive range.

Such resources must already bid the positive and negative range (and with economic bids) if they are counted for Flexible Capacity.  This is equitable, because the Effective Flexible Capacity (EFC) values for such resources include the entire operating range, i.e., 2 x NQC.  Unless the CAISO also includes a proposal to effectively double the QC and NQC for these resources, then it will be imposing a requirement without compensation. 

If the CAISO believes that the entire operating range is needed for reliability, then it should propose increasing the QC accordingly, and advocate for that position before the CPUC and other Local Regulatory Authorities (LRAs).  Until that change is made, no commensurate increase to the storage MOO should be imposed.

As a practical matter, nearly all storage capacity from larger facilities is contracted to provide both NQC and EFC, and the rest will undoubtedly be incented economically to offer the negative range into the market even if the MOO does not require it.  Thus, the CAISO would not be “losing” much utility by retaining the MOO for those providing only NQC at the positive operating range only.

EIR Exports

(response to Proposal, p.10 - Eligible Intermittent Resources)

This situation appears to apply to a rather specialized situation, where part of an EIR is providing RA capacity to an LSE-area off-taker and the other part is bid as an export.  (The term “ELCC” appears to refer to the monthly solar or wind Technology Factor times the portion of the resource providing RA capacity, as indicated below.)

For example, 50 MW of a 100 MW solar project with FCDS might be contracted in July 2022 to a CAISO-area LSE.  The RA value of the project in that month is 100MW x 39% TF = 39 MW, so the LSE off-taker is entitled to claim (39MW x 50MW/100MW =) 19.5 MW NQC for that month.

Suppose that the hourly forecasted output for HE 15 is 70 MW.  LSE/SEIA assume that the Proposal intent is that: (1) at least (70MW x 50MW/100MW =) 35 MW of energy must be scheduled inside the CAISO, even though the NQC claimed by the CAISO-area LSE is 19.5 MW; and (2) no more than 70MW-35MW =) 35 MW can be scheduled as an export.

In reality, this situation seems very unlikely.  Capacity committed to an off-taker under a PPA for only a portion of a project would almost certainly be covered under a separate Resource ID, which would have its own EIR forecast and MOO; thus, application of this proportional method would almost certainly not be needed, and the CAISO’s concern would not materialize.

MOO impact on Grid-Charging Management 

(response to Proposal, p.8 - Storage and Investment Tax Credit (ITC) Considerations, and CAISO presentation, slide 10)

As noted above, LSA/SEIA’s comments and related presentation in the Energy Storage Enhancements initiative included strong arguments why the grid-charging management issue requires focused attention for CLRs.  That input included requests to the CAISO to: (1) Clarify the grid-charging tools that may be available now; and (2) consider expanding the available tools.

On the last stakeholder call in that initiative, the CAISO said it would likely include that larger issue in the ESE initiative scope definition. 

Unfortunately, CAISO issuance of the ESE Straw Proposal has been postponed from October 21^st to October 28^th, so it is not available yet, and there is no mention of input into that initiative in the Proposal here.  Thus, it’s unclear whether the CAISO’s dismissal of stakeholder concerns in this initiative reflects anything submitted in the other one, or perhaps just an internal lack of communication.

The MOO for CLRs should be considered in the larger context of grid-charging management.  We provide some excerpts from our ESE comments, and attached to these comments our ESE workshop presentation, to explain the need to address this issue comprehensively, and not in the piecemeal fashion used to date.

Specifically, LSA/SEIA ask that the CAISO revise its response in the Proposal to recognize the input provided in the ESE initiative, and then incorporate MOO concerns into what we hope will the requested, focused examination of the grid-charging management issue in the ESE initiative.

Excerpt from ESE initiative comments on initiative scope

…Under this topic, the CAISO should clarify/confirm tools that are available now, for example:

• Whether these resources could use a “limiting scheme” or tool to limit grid charging, based both on long-standing guidance in the CAISO’s 2016 Technical Bulletin on Mixed-Fuel Resources (MFRs) and subsequent statements in Hybrid Resources Phase 1 Straw Proposal and Revised Straw Proposal. 

• If so, the type of limiting scheme or tool, e.g., software algorithms preventing or controlling the maximum amount of grid charging (and reflected in the Master File), or Aggregate Capability Constraint (ACC) minimum setting at zero.

The option to set ACC minimums at zero is a particularly elegant solution.  It would allow storage CLRs to fully offer their entire positive and negative operating range in CAISO markets (even where not required by their Must-Offer Obligations (MOOs)) without fear that doing so would expose them to large grid-charging risks.  This option would require no tariff or software change, and LSA and SEIA strongly urge the CAISO to confirm that this it is available now.

The CAISO should also consider in this initiative additional tools that are needed.  These could include (but are not limited to):

• (Additional) Master File options, e.g., separate storage CLR Pmin parameters for physical limitations and market-dispatch limitations.  For example, the former could apply during System Emergencies and the latter could apply at all other times.

• Expanded Storage CLR flexibility, since the Minimum State of Charge (MSOC) ensures availability for subsequent hourly schedules when supply conditions are tight (and, presumably, any MSOC replacement would do the same).  For example, the CAISO could:

• Allow storage CLRs to reduce charging, to the extent that real-time VER output is below schedule when charging is occurring.  This suggestion would be the “flip side” of the currently allowed flexibility to increase charging or reduce discharging where VER output is above schedule, to prevent VER curtailments.???????

• Allow storage CLRs to exercise storage flexibility (in both directions) in intervals when providing A/S, subject to the MSOC. 

(CAISO declined to consider the two suggestions above in the Hybrid Resources initiative, fearing the resulting lower-than-expected storage state of charge (SOC) might leave storage CLRs unable to fulfill Ancillary Services and/or Energy schedules in later hours.  However, the MSOC (and, presumably any approved successor mechanism) would address this issue by allowing use of these flexibility features only to the extent that they do not impair storage CLR ability to meet later schedules.)

• Bid/payment “adders” where storage CLR grid charging would result in loss of ITC and other tax benefits.  These could be similar to greenhouse-gas adders, though possibly more complex to design.

3. Provide your organization’s feedback on the Flexible RA topic as described in section 4.2:

LSA/SEIA’s only comments on this issue, at this time, consist of a requested clarification about EIR resources, in response to the CAISO's presentation slide 22.  In response to our earlier comments in the Day Ahead Market Enhancements (DAME) intiative, the CAISO clarified that EIRs are eligible to provide reserve products, but there was no indication that they were required to do so.  It is not yet clear whether these products will require some form of certification, like Ancillary Services, but in any case:

• EIRs should not be required to provide reserve-product bids, just because they are "eligible;" and

• Only those voluntarily providing such bids should be required to bid Day Ahead and/or economically, and be subject to RAAIM.

4. Please provide your organization’s feedback on the proposed EIM Governing Body role as described in section 5:

5. Please provide your organization’s feedback on the Appendix as described in section 7:

6. Additional comments on the Resource Adequacy Enhancements phase 2 straw proposal:

1. Provide a summary of your organization's comments on the phase 2 straw proposal:

2. Provide your organization’s feedback on the Must Offer Obligations and Bid Insertion topic as described in section 4.1:

MRP appreciates that the CAISO has identified the types of capacity that would be exempt from the proposed must-offer obligations (MOOs) and bid insertion rules (BIRs) (e.g., listing those resource exempt from the standard MOO at page 10 and listing those resource exempt from bid insertion rules at page 11).  While this listing is helpful, providing the total number of MW of capacity that are exempt from MOOs and BIRs would provide greater context for these exemptions. 

MRP supports the CAISO’s proposal that energy from VER above the VER’s NQC (established by ELCC analysis) cannot be used to support an export from non-RA capacity (P2SP at page 10).   However, the CAISO’s proposal appears to assume that VERs will have their NQC values either fully committed or not committed at all.  MRP recommends the CAISO consider a scenario in which the capacity from the VER is partially committed and whether some portion of energy associated with the non-RA capacity could then be used to support an export.  While MRP believes such an instance would be rare at this time, this thought exercise may help the CAISO implement its policy differently so as to be prepared when such cases do occur.

The CAISO has proposed that the CAISO will defer to program parameters established or approved by Local Regulatory Authorities (LRAs) for demand response (“DR”) resources to determine the hours of the DR resource’s must-offer obligation (P2SP at page 4).  Such deference may not ensure that the DR provides value during the CAISO’s operationally challenging hours.  For example, if an LRA established DR program hours of noon to 5 p.m., such hours would not fully overlap with the CAISO’s current availability assessment hours of 4 – 9 p.m.  While MRP appreciates the position the CAISO is in with regards to the requirements set by LRAs, deferring to LRA requirements where those requirements are not aligned with CAISO operational needs does not comport with the fundamental purpose that RA requirements play, namely, providing the CAISO with the resources it needs to reliably operate the system under its operational control. 

Finally, the CAISO has proposed to require resources that will be providing imbalance reserves (“IR”) and Reliability Capacity (“RC”) under the new Day-Ahead Market Enhancements (“DAME”) framework to submit $0/MW bids for those two products (P2SP at page 13).   The CAISO also proposes to require this $0/MW bidding during a transition period over which the performance of these products would be assessed. (Id.)   MRP disagrees with this proposal for several reasons. 

First, as the CAISO notes, allowing non-$0 bids for IR and RC would allow a resource providing these products to reflect the costs associated with providing these products, including the non-zero cost of having to arrange for fuel to provide energy from these products in real-time.   While the P2SP implies that some stakeholder holders believe that RA contracts already compensate RA capacity for these costs, in MRP’s experience the treatment of these costs is not explicitly spelled out in RA contracts.

Second, scheduling coordinators are currently allowed to submit non-$0/MW bids for non-RA capacity into the RUC process.  The CAISO has not demonstrated a valid reason as to why non-RA capacity should be required to submit $0/MW bids for their IR and RC products even during the transition period.

For these reasons, MRP encourages the CAISO allow all eligible resources to submit non-$0/MW IR and RC bids even during the transition period, to allow for more efficient pricing and dispatch of resources.  Requiring all eligible resources to offer $0/MW bids for these products leaves nothing for the CAISO to use to differentiate these offers.     

3. Provide your organization’s feedback on the Flexible RA topic as described in section 4.2:

Except as noted above (with regards to the requirement to bid $0/MW), MRP does not object to the CAISO’s three-stage proposal for the Flexible RA program.   MRP notes that in the introduction to the P2SP, the CAISO referred to requiring all resources with 15-minute or 5-minute dispatchability to bid $0/MW for IRs (P2SP at page 5), while later in the P2SP the CAISO clarifies that this obligation would apply to resources that are shown for system, local or flexible RA (i.e., are RA resources).   While MRP would not expect the CAISO to propose to impose a MOO on resources that are not RA resources, precisely describing the universe of resources to which certain obligations apply will benefit the presentation of the CAISO’s proposal. 

4. Please provide your organization’s feedback on the proposed EIM Governing Body role as described in section 5:

MRP supports the proposed classification. 

5. Please provide your organization’s feedback on the Appendix as described in section 7:

MRP appreciates the CAISO providing a redlined version of BPM for Reliability Requirements Table 7.1.1 as proposed by Vistra. 

6. Additional comments on the Resource Adequacy Enhancements phase 2 straw proposal:

During summer 2021, the CAISO implemented its new planned outage substitution obligation process in which substitute capacity must be provided for the CAISO to not reject an approved planned outage at a later time.  The current substitution process limits scheduling coordinators to submit substitute capacity for planned outages submitted prior to T-45 only within a 24-hour window after the CAISO’s T-29 RASC process runs.  Additionally, the substitution approval must also be received within CIRA within the same 24-hour period.  This process creates unnecessary timing challenges for scheduling coordinators especially if planned outages were submitted well in advance of T-45 and the scheduling coordinator already has substitute capacity available.  MRP requests the CAISO to enhance this process so that substitute capacity can be submitted any time after submitting the planned outage to 24 hours after the T-29 RASC process.  While MRP understands that the CAISO may not know whether a resource on planned outage would be an RA resource until after the T-45 timeframe, the scheduling coordinator of the resource does know; allowing them to submit replacement capacity starting when the outage is requested provides additional time for the scheduling coordinator to coordinate and request approval from third party scheduling coordinators.  Moreover, allowing a scheduling coordinator to submit and receive approval from a third-party scheduling coordinator prior to the T-29 RASC process should not harm the CAISO or any other market participants, but only improve the outage coordination process. 

1. Provide a summary of your organization's comments on the phase 2 straw proposal:

NCPA supports the elements and concepts within the phase 2 straw proposal and appreciates CAISO's more focused and incremental approach to evaluate the wide range of RA topics. 

2. Provide your organization’s feedback on the Must Offer Obligations and Bid Insertion topic as described in section 4.1:

3. Provide your organization’s feedback on the Flexible RA topic as described in section 4.2:

4. Please provide your organization’s feedback on the proposed EIM Governing Body role as described in section 5:

5. Please provide your organization’s feedback on the Appendix as described in section 7:

6. Additional comments on the Resource Adequacy Enhancements phase 2 straw proposal:

1. Provide a summary of your organization's comments on the phase 2 straw proposal:

See attached.

2. Provide your organization’s feedback on the Must Offer Obligations and Bid Insertion topic as described in section 4.1:

3. Provide your organization’s feedback on the Flexible RA topic as described in section 4.2:

4. Please provide your organization’s feedback on the proposed EIM Governing Body role as described in section 5:

5. Please provide your organization’s feedback on the Appendix as described in section 7:

6. Additional comments on the Resource Adequacy Enhancements phase 2 straw proposal:

See attached.

1. Provide a summary of your organization's comments on the phase 2 straw proposal:

Olivine's only comments are on the Must Offer Obligations for Resource Adequacy as they apply to DR. We want to make sure that there is clarity so that DRPs with RA contracts are only required to bid the program hours and that long-start PDRs are not required to submit additional bids in the real-time market.

2. Provide your organization’s feedback on the Must Offer Obligations and Bid Insertion topic as described in section 4.1:

Olivine has no issue with CAISO's proposal to maintain 24/7 default Must Offer Requirements for generating resources. However, given historical confusion over use limited status and availability requirements for DR, we would like to ensure that Proxy Demand Resources qualifying for RA are not penalized or scrutinized for lack of 24/7 bidding due to lack of clarity in DR program parameters (e.g. for a CCA Program or DRAM Purchase Agreement) or RA contracts. If there are concerns with the contracting language, we suggest that an attestation of the expected bid days and hours from the contracting LSE and/or appropriate LRA should suffice. We would also like CAISO to clarify that long-start DR resources will only be required to bid (or self schedule) in the real-time market during hours with a day-ahead award. For example, a long-start DR resource with an award from 4-5 PM in the Day-Ahead market would not have any RTM bid obligation from 5-9 PM if it is not required to be real-time dispatchable in its respective program or RA contract.

3. Provide your organization’s feedback on the Flexible RA topic as described in section 4.2:

4. Please provide your organization’s feedback on the proposed EIM Governing Body role as described in section 5:

5. Please provide your organization’s feedback on the Appendix as described in section 7:

6. Additional comments on the Resource Adequacy Enhancements phase 2 straw proposal:

1. Provide a summary of your organization's comments on the phase 2 straw proposal:

Main highlights of PG&E’s comments:  

Must Offer Obligation and Bid insertion rules:  

• PG&E recommends that no changes be made for charging constrained co-located resources until that is resolved in the Energy Storage Enhancements initiative. PG&E is concerned the must offer obligation and bid insertion rules proposal for storage, co-located, hybrid and hydro resources is largely inconsistent with the CPUC’s RA resources counting rules and charging constraints for co-located resources being considered in the Energy Storage Enhancements initiative. PG&E believes the proposed rules could cause some contracting difficulties for LSEs. 

• PG&E reiterates previous concerns raised that the bid insertion rules for hydro imply a resource is available when it may not be and that outage cards are not a functional tool for hydro. PG&E proposes some actions that the CAISO should take to address this problem. 

Flexible RA: 

• PG&E requests that the CAISO clarify if the expanded MOO for imbalance reserves in DA market would be a requirement only for 15-min and 5-min resources that have a Flex RA obligation and have a Flex award in that month. 

• PG&E agrees with the staged approach proposal for flexible RA, allowing time to assess any modifications needed to better align with the imbalance products under development in the Day-ahead market enhancements initiative.  

2. Provide your organization’s feedback on the Must Offer Obligations and Bid Insertion topic as described in section 4.1:

PG&E welcomes the CAISOs consideration of stakeholder's concerns related to the real-time must offer obligation removal and agrees with the CAISO proposal to maintain the real-time must offer obligation. In this section, PG&E provides comments and requests clarifications on the MOO for storage, co-located, hybrid and hydro. 

MOO for storage: 

CAISO should explicitly acknowledge the charging constraints of co-located solar plus storage resources. While PG&E appreciates that the CAISO has many priorities, creating systems that acknowledge charging constraints, which may be only for a limited time duration, may enable California to build needed capacity more cheaply than systems where the ITC credit is at risk. If California customers are not allowed to take advantage of these cost savings for the relatively short time they exist, the CAISO should quantify the value of losing the ITC credits. PG&E appreciates that the CAISO is going to address this in Energy Storage Enhancements initiative, but no changes for charging constrained co-located resources should be made until that is resolved in that initiative.  

PG&E is concerned with inconsistencies between CPUC and CAISO expectations of RA contracts, as such inconsistencies can result in RA attributes not being used appropriately or priced correctly, and thus in real costs to customers.  With respect to hybrid and co-located resources, the CPUC’s RA counting for charging constrained co-located resources explicitly considers how much energy is available from the solar resource.  

CPUC Decision (D.20-06-031) specifies that “for hybrid or co-located, the QC of the battery component shall be based on the renewable charging energy transferred to the battery in the allotted time period divided by four”. It is not logical to place a charging MOO when the QC already accounts for this constraint.  

PG&E believes that charging must offer rules should be consistent with CPUC QC rules and assumptions about co-located and hybrid charging. PG&E is also concerned about other MOO rules that would effectively reserve more battery capacity than has been contractually procured as RA: in particular, if a battery is procured for RA to a level less than its maximum discharge, its charge MOO must be discounted comparably to a fraction of its maximum charge capability.  

MOO for hydro (N.B. see also previous PG&E’s comments to the Sixth RSP – Link): 

PG&E opposes any MOO and bid insertion proposals for hydro as water management cannot be accurately conveyed through outage cards. 

In our previous comments, PG&E recommended that the CAISO should take the following actions to address this problem: 

1. Revise the Reliability Requirements Table 7.1.1 “Summary of Bidding Requirements for Resources Providing RA Capacity” to reflect language in the must-offer obligation section to have all hydro submit bids for energy or as available energy up to the RA quantity. This would extend the existing CAR language to all resources with the hydro QC based on historical exceedance, but not those that choose to have a QC above the historical exceedance calculation. 

• The CAISO does not currently have the tools to optimize hydro. Hydro resources are an energy limited, interconnected system each with their own quirks, including inflows, efficiency, permit requirements, and reservoir size. Unlike simple batteries, the CAISO cannot see the “state of charge” of these resources and cannot independently optimize them. The current tools (i.e., use limited status, CAR status, and Run of River status) are not adequate to represent hydro in the CAISO systems. PG&E appreciates the need for the CAISO to understand what resources they have available but adding must-offer obligation language for hydro would shoehorn these resources into a system which does not work for them. 

• Hydro resources (i.e., CAR, UL, and RoR resources) should not be subject to bid insertion as indicated by the Bidding Requirements table since the CAISO does not know if the bid is feasible. Bid insertion and awards could lead to reliability problems. PG&E optimizes hydro generation to occur when grid needs are usually highest and already provides the maximum flexibility possible. If the CAISO were to change this schedule or haphazardly create physically infeasible schedules across the watershed, the plants may no longer be able to meet grid needs as well.  

2. Consider tools other than OMS to reflect water availability. While outage cards are appropriate for mechanical outages, they are not a viable tool for hydro resources for availability due to water conditions for all of the same reasons that make them unviable for hybrid resources. PG&E is open to the exploration of the dynamic limit tool for hydro. No changes to the MOO or bid insertion for hydro should occur until better tools are developed.  

• The CAISO’s assertion that “conditionally available resources are also able to use outage cards to manage their conditionally available outages and derates” appears to be inconsistent with previous conversations with the CAISO and neglects the limitations of hydro resources. Earlier this year, the CAISO confirmed to PG&E that the RA must-offer obligation is entirely separate from the outage card requirements found in Tariff section 9.3.3. PG&E confirmed that the OMS outage card requirement is for any limitation which brings a unit below its PMax, and is not a requirement to match whatever capacity is bid in a resource’s must-offer obligation (e.g., in the case of CAR, as-available capacity). Many of PG&E’s hydro schedules do not represent a limitation to achieving Pmax but are a physically feasible way to generate energy across the watershed. If the CAISO were to require more capacity under an exceptional dispatch scenario, such capacity might be available. The CAISO agreed that the act of submitting availability in OMS with schedules matching PG&E’s hydro operations was not their intent and did not provide useful information. Mandating cards creates additional work for PG&E hydro operators and CAISO operators without achieving any reliability gains. 

MOO for DR: 

PG&E supports the CAISO’s proposal to “defer to the local regulatory authority to establish program parameters for demand response – If none established, resource must follow standard must offer obligation – Days and hours resources must bid must be clearly communicated through LRA-approved documentation such as contract provisions or decisions” and PG&E supports that,” Reliability Demand Response Resources (RDRR) will still have the option to bid day ahead and must be available in real-time.” 

3. Provide your organization’s feedback on the Flexible RA topic as described in section 4.2:

PG&E requests that the CAISO clarify that bid insertion for Flex product only applies when the resources have been claimed for flex RA. Otherwise, the inability to self-schedule could be problematic.  

PG&E requests the CAISO delay modification to the Storage MOO to provide imbalance reserves until policies developed under the Energy Storage Enhancements initiative are implemented. 

4. Please provide your organization’s feedback on the proposed EIM Governing Body role as described in section 5:

PG&E supports the EIM advisory role of the Governing Body as proposed. 

5. Please provide your organization’s feedback on the Appendix as described in section 7:

Additional comments on bid insertion: 

PG&E suggests the CAISO clarify in this table the language for hybrid and co-located resources. PG&E suggests adding two rows to Table 7.1.1, one for Hydrid resources and one for Co-located resources.  This would remove any ambiguity as to the requirements for these resource types. 

Additionally, the CAISO should clarify that hydro resources, regardless of CAR, use-limited, or Run-of-river status, should not have bid insertion and should have a MOO limited to expected energy or expected as-available energy.  

6. Additional comments on the Resource Adequacy Enhancements phase 2 straw proposal:

No comments.

1. Provide a summary of your organization's comments on the phase 2 straw proposal:

Please see Powerex's comments at https://powerex.com/sites/default/files/2021-10/Powerex_RA_Phase_2_Straw_Comments.pdf

2. Provide your organization’s feedback on the Must Offer Obligations and Bid Insertion topic as described in section 4.1:

3. Provide your organization’s feedback on the Flexible RA topic as described in section 4.2:

4. Please provide your organization’s feedback on the proposed EIM Governing Body role as described in section 5:

5. Please provide your organization’s feedback on the Appendix as described in section 7:

6. Additional comments on the Resource Adequacy Enhancements phase 2 straw proposal:

Please see Powerex's comments at https://powerex.com/sites/default/files/2021-10/Powerex_RA_Phase_2_Straw_Comments.pdf

1. Provide a summary of your organization's comments on the phase 2 straw proposal:

REV Renewables (“REV”) supports with caveats CAISO’s proposals for Must Offer Obligations (MOO) and Bid Insertion related to storage. REV does not oppose a day-ahead MOO that includes an offering for imbalance reserves and reliability capacity, but REV strongly opposes requiring a $0/MW bid for these products. A $0/MW bid does not reflect a resource’s marginal cost or opportunity cost to provide this service, nor does it provide an appropriate market signal for resources to show up for this new product.

REV Renewables does not oppose CAISO’s proposal Flexible Resource Adequacy (RA).

REV encourages CAISO to place a hold on these RA Enhancements proposals until the Day Ahead Market Enhancements (DAME) initiative has made further progress on its proposal. These RA Enhancements proposals are based on potential changes from the DAME initiative. But the DAME initiative is currently still in the Straw Proposal phase and has yet to schedule the next working group and draft final proposal release date. This RA Enhancements proposal would require resources to bid $0/MW bids for imbalance reserves and reliability capacity until an undetermined date and for a product that is not fully defined. CAISO should wait to finalize this proposal until DAME is further along.

2. Provide your organization’s feedback on the Must Offer Obligations and Bid Insertion topic as described in section 4.1:

REV Renewables supports CAISO’s proposal for a standard MOO in the day-ahead market as well as the real-time market through the DAME transitionary period. REV Renewables agrees that for stand-alone storage resources the MOO must reflect both the charge and discharge capabilities of the resource. REV Renewables also agrees with CAISO’s proposal to use the Default Energy Bid as established in ESDER 4 for bid insertion after it is implemented in November 2021.

REV does not oppose a day-ahead MOO that includes an offering for imbalance reserves and reliability capacity, but REV strongly opposes requiring a $0/MW bid for these products during the DAME transitionary period. CAISO states that bids for imbalance reserves and reliability capacity are intended to reflect the costs to be available in real-time (page 12). Yet if a $0/MW bid is required, that likely does not reflect the marginal cost or opportunity cost of the resource to provide that service. CAISO appears to choose $0/MW to be consistent with the existing rules that require RA resources to submit $0/MW bids to the residual unit commitment (RUC) process (page 13). However, the proposed imbalance reserves and reliability products are new and should not be subject to RUC rules, these new products are intended to improve reliability and provide ramping capability. Resources need appropriate market signals to show up and provide these services. Resources also require the ability reflect their marginal cost, and requiring a $0/MW bid could undermine the effectiveness of this product and create significant losses for resources if they are required to provide this reliability and ramping service for free.

3. Provide your organization’s feedback on the Flexible RA topic as described in section 4.2:

For Stage 1, REV does not oppose requiring RA resources to submit bids for imbalance reserves up and down, but strongly opposes that resources be required to bid at $0/MW (as noted in #2). REV agrees with CAISO’s proposal to require all imbalance reserve eligible RA resources to economically bid for energy and ancillary services (if certified), and would no longer be allowed to self-schedule energy in the day-ahead timeframe. REV also agrees that imbalance reserve bidding would be subject to resource adequacy availability incentive mechanism (RAAIM).

REV supports a need for Stage 2 to evaluate further changes to Flexible RA after evaluating performance of the imbalance reserves product.

4. Please provide your organization’s feedback on the proposed EIM Governing Body role as described in section 5:

REV has no comments at this time. 

5. Please provide your organization’s feedback on the Appendix as described in section 7:

REV has no comments at this time. 

6. Additional comments on the Resource Adequacy Enhancements phase 2 straw proposal:

REV has no additional comments at this time. 

1. Provide a summary of your organization's comments on the phase 2 straw proposal:

SDG&E appreciates the opportunity to provide comments on CAISO’s RA Enhancements Phase 2 Straw proposal.  SDG&E further appreciates CAISO heeding stakeholder feedback both in this proceeding as well as the Day Ahead Market Enhancements (DAME) initiative. 

2. Provide your organization’s feedback on the Must Offer Obligations and Bid Insertion topic as described in section 4.1:

No comment.

3. Provide your organization’s feedback on the Flexible RA topic as described in section 4.2:

SDG&E supports CAISO’s proposal to break up DAME’s Imbalance Reserves (IR) and Flex Ramp (FR) products into two pieces and sequential phases. SDG&E further supports breaking up the Flexible RA Enhancements into three stages. This is a sensible approach that will allow CAISO to analyze and identify flexible RA needs, if any, with data before layering on additional market changes. 

As it currently stands, SDG&E continues to believe that CAISO already has more work to do to quantify its need for DAME’s IR product. Breaking up IR and FR with this RA Enhancements Phase 2 Straw Proposal is a welcome improvement but is not in itself sufficient. CAISO could strengthen its DAME proposal by providing data on how out-of-market dispatches have been increasing, why this is concerning, and to what extent DAME is expected to solve this problem.  

Additionally, SDG&E supports the CAISO’s decision to retain the three-hour net load ramp requirements of the existing Flex RA program. 

4. Please provide your organization’s feedback on the proposed EIM Governing Body role as described in section 5:

No comment. 

5. Please provide your organization’s feedback on the Appendix as described in section 7:

No comment. 

6. Additional comments on the Resource Adequacy Enhancements phase 2 straw proposal:

No comment. 

1. Provide a summary of your organization's comments on the phase 2 straw proposal:

See attached.  

2. Provide your organization’s feedback on the Must Offer Obligations and Bid Insertion topic as described in section 4.1:

See attached.  

3. Provide your organization’s feedback on the Flexible RA topic as described in section 4.2:

See attached.  

4. Please provide your organization’s feedback on the proposed EIM Governing Body role as described in section 5:

See attached.  

5. Please provide your organization’s feedback on the Appendix as described in section 7:

See attached.  

6. Additional comments on the Resource Adequacy Enhancements phase 2 straw proposal:

See attached.  

1. Provide a summary of your organization's comments on the phase 2 straw proposal:

The Six Cities do not support specific elements of the Phase 2 Straw Proposal at this time.  As outlined below, the Six Cities

• Oppose the CAISO’s proposal to require energy storage resources, including resources that are subject to Investment Tax Credit-based restrictions on grid charging, to comply with a must offer obligation (“MOO”) for the full amount of charging and discharging capabilities of the resource, without provisions to accommodate ITC-based grid charging limits. 
• Oppose the 24x7 bidding requirements for resources providing RA capacity to the extent that these revised requirements would preclude certain of the Cities’ resources from supplying RA capacity. 
• Oppose the requirement that Imbalance Reserve (“IR”)-eligible resources must economically bid for energy supply and may not engage in self-scheduling.

2. Provide your organization’s feedback on the Must Offer Obligations and Bid Insertion topic as described in section 4.1:

With respect to the CAISO’s proposals related to MOO and bid insertion, the Six Cities conceptually do not oppose the CAISO’s application of a 24x7 MOO in the Day Ahead Market for RA Resources (and in the Real Time Market through the Day Ahead Market Enhancements (“DAME”) transition period), subject to the following comments.

• Use Limited and Conditionally Available Resources:  It appears, based on the discussion at page 10 of the Straw Proposal, that the current practice of using outage cards to manage use and availability limitations will remain in place.  The Six Cities support continued recognition of these limitations via outage cards.  

• Hoover Power Plant:  The Six Cities have, at multiple times in this proceeding, raised concerns relating to the specific implementation of the 24x7 MOO requirement and bid insertion rules as applied to the Six Cities’ Hoover Power Plant entitlements, for which sub-set of hours bidding is permitted today.  It is critical that the CAISO address the particulars of how Hoover – and similarly situated RA resources – may continue to be used to provide RA given the proposal for a standardized 24x7 MOO.  The Six Cities have consistently understood that the CAISO does not, through its proposal in this initiative, intend to limit the ability of LSEs with entitlement rights to Hoover to continue to rely upon their entitlements to provide RA capacity.  The Six Cities therefore request that the CAISO specifically confirm and explain how Hoover will either be exempted from the 24x7 MOO and bid insertion requirements or that these requirements will be adapted for Hoover’s operational needs. 

• Application of the MOO to Co-Located Storage:  The Six Cities oppose application of the MOO to both the charge and discharge capabilities of Non-Generator Resources (“NGRs”), unless the CAISO refines its proposal to provide for a transition period applicable to the storage components of co-located resources with grid-charging limitations arising from application of the ITC.  The proposed participation rules for co-located resources, including the charge/discharge MOO requirements proposed in the Straw Proposal, provide that such resources will bid their full charging capabilities into the CAISO markets, a requirement that the Six Cities and other stakeholders have previously explained is incompatible with how many of these resources are likely to have been financed – i.e., in reliance on ITC to partially fund the development of these resources.  The applicable ITC rules limit these resources’ ability to comply with a charge-side MOO through restrictions on charging the storage component of these resources from the grid, rather than from the associated variable resource.  If the CAISO is to have access through its RA program to mixed fuel resources that have adopted the co-located resource model, then it is critical that the CAISO acknowledge and accommodate the restrictions on these resources that prohibit – and, in some cases, physically prevent through the installation of certain equipment – charging from the grid.  Although the CAISO has advised that resources with ITC restrictions may engage in “self-help” through bidding strategies (see Straw Proposal at 8), this approach obviously does not fully mitigate grid charging risks. 

It is highly likely that co-located resources entering commercial operation in the near term do not have power purchase agreements or other development contracts that account for a mandated charge-side MOO, and it is unreasonable for the CAISO to insist on compliance with a charge and discharge MOO for resources subject to development agreements that were executed well before the CAISO proposed this requirement.  The Six Cities therefore request that the CAISO adopt a limited transition period for a sub-set of co-located resources during which the CAISO would not apply the charge-side MOO, whether such restrictions are embodied in contractual limitations or are applied via equipment that will physically prevent grid charging.  This transition period would be applicable to co-located resources for which development agreements were executed prior to January 1, 2021, and would apply for the initial five years after the resource enters operations.  The grandfathering mechanism would operate to exclude from the 24x7 MOO only the charging side of the storage resource component and would not apply to the discharging portion.  Creating an exception to permit a temporary grandfathering period for a sub-set of storage resources that are subject to unique federal tax requirements would enable these resources to maximize their participation in the CAISO’s RA program by making the discharge portion of their capacity available to the CAISO while not undermining a critical financial driver in the development of these resources.

With respect to the CAISO’s identification of RA changes that are linked with the DAME initiative, the Six Cities have raised a number of concerns regarding elements of the DAME initiative.  As the DAME proposals relate to RA changes under consideration in this initiative, the Six Cities are concerned that the CAISO is advancing RA-related changes before the DAME structure is fully complete.  This creates challenges for stakeholders in evaluating proposals based on elements of DAME that are not final and did not appear to generate significant stakeholder support.  The Six Cities observe that the CAISO’s most recent proposal in the DAME initiative was issued more than three months ago. 

The Six Cities in particular oppose the CAISO’s proposal in this initiative to remove the ability to self-schedule within the Day Ahead timeframe from resources that are eligible to provide Imbalance Reserves.  In addition to general concerns with removing this flexibility from resource owners as between economic bidding or self-scheduling, certain of the Six Cities face distribution system-related conditions that require internal units to operate.  Such conditions may be weather-related, such as during high temperatures, where the City’s load exceeds its import capability to its distribution system, and its units must produce energy in order to avoid load shed within the City, or they may be related to internal maintenance or other operational reasons.  If the CAISO is unwilling or unable to accommodate self-schedules during periods when a municipal electric system determines its units must operate for distribution system reliability or other reasons, then several of the Cities may be forced to discontinue reliance on their own internal units for purposes of providing Resource Adequacy, which will exacerbate tight capacity supply conditions within the CAISO and inappropriately drive up costs.  The Six Cities strongly oppose revocation of self-scheduling for Imbalance Reserve eligible resources, absent development of appropriate exemptions that accommodate the Six Cities’ self-scheduling needs. 

With respect to the CAISO’s proposal on application of the MOO to resources that are capable of supplying Imbalance Reserves, the Six Cities note that the Straw Proposal is unclear as to whether this MOO, if adopted, would apply to all resources that can provide Imbalance Reserves irrespective of their RA status, or only to resources that can provide Imbalance Reserves and are RA resources. 

3. Provide your organization’s feedback on the Flexible RA topic as described in section 4.2:

As discussed in response to Question 2 above, the Six Cities have significant concerns with the CAISO’s proposal to require economic bidding and prohibit self-scheduling by all resources (or all RA resources) eligible to provide Imbalance Reserves.  Those concerns apply with equal force to the CAISO’s Stage 1 Flexible RA proposal as described at pages 19-20 of the Straw Proposal.

Subject to resolution of the Six Cities’ concerns regarding prohibition of self-scheduling as noted above and described in response to Question 2, the Six Cities generally do not oppose the CAISO’s proposal to phase consideration of changes to the Flexible RA program to allow further evaluation of operational experience with any modifications that are implemented as a result of the Day-Ahead Market Enhancements initiative. 

4. Please provide your organization’s feedback on the proposed EIM Governing Body role as described in section 5:

At this time, the Six Cities do not have comments on the proposed EIM Governing Body role.

5. Please provide your organization’s feedback on the Appendix as described in section 7:

The Six Cities generally agree with the RA Enhancements Principles and Objectives as outlined in broad terms in Section 7 of the Straw Proposal and, in particular, agree that the RA program should seek to ensure that the RA fleet can provide sufficient energy to meet load requirements in all hours of the year.

With respect to the Table in Section 7.2 summarizing the bidding requirements for RA resources, the Six Cities note that the bidding requirements for resources in the first block of the table would permit submission of self-schedules, consistent with current practice and with the requirements proposed at page 22 of the Second Revised Straw Proposal in the DAME initiative, but inconsistent with the proposals to require economic bidding by all resources eligible to provide Imbalance Reserves as proposed at pages 14 and 19-20 of the Straw Proposal.  As discussed in detail in response to Question 2 above, the Six Cities have significant concerns with the proposal to prohibit self-scheduling by all resources eligible to provide Imbalance Reserves and, absent resolution of those concerns, support continuation of the current bidding requirements that allow self-scheduling by System RA resources as provided in Table 7.1.1.

6. Additional comments on the Resource Adequacy Enhancements phase 2 straw proposal:

The Six Cities do not have additional comments at this time. 

1. Provide a summary of your organization's comments on the phase 2 straw proposal:

2. Provide your organization’s feedback on the Must Offer Obligations and Bid Insertion topic as described in section 4.1:

3. Provide your organization’s feedback on the Flexible RA topic as described in section 4.2:

4. Please provide your organization’s feedback on the proposed EIM Governing Body role as described in section 5:

5. Please provide your organization’s feedback on the Appendix as described in section 7:

6. Additional comments on the Resource Adequacy Enhancements phase 2 straw proposal:

1. Provide a summary of your organization's comments on the phase 2 straw proposal:

Vistra appreciates the opportunity to provide our perspective and feedback on the CAISO’s Resource Adequacy Enhancements Phase 2 straw proposal. Vistra provides feedback on the following topics:

• Section 4.1 on must-offer obligations and bid insertion elements dependent on Day-Ahead Market Enhancements initiative to extend the Generic Resource Adequacy must-offer obligation into reliability capacity product, including bidding rules, and to remove real-time must-offer obligations.
• Section 4.1 on must-offer obligations and bid insertion elements not dependent on Day-Ahead Market Enhancements initiative to clarify existing standard must-offer obligation, largely reaffirm existing bid insertion rules, and introduce a rule change to storage’s must-offer obligation and bid insertion to apply to full operating range.
• Section 4.2 on CAISO reflections on need for a flexible capacity program implying that a flexible energy product suite could be a potential substitute for flexible capacity product.
• Section 4.2 on CAISO proposal for staged changes to RA must-offer obligations to extending the must-offer obligation to include Imbalance Reserves and evaluate the trade-off between the flexible energy product suite and need for flexible RA.
• Section 4.2 on CAISO proposal to apply bidding rules on must-offer obligations into Imbalance Reserves product.

Please see our responses below to the CAISO straw proposal.

Vistra hopes the CAISO thoughtfully considers our feedback on its proposal. We do support the CAISO goals in this initiative to ensure a sufficiently firm and flexible fleet. As the devil is always in the details, we hope to help the CAISO further develop a proposal that is workable and improves reliability. We commit to engaging thoughtfully in future stakeholder discussions to explore any concerns with Vistra’s recommendations and requested changes. We are optimistic there is a path forward to allow CAISO to implement its policy intent without applying undue harm to resources in the process. We will aid CAISO in its efforts to achieve its goal in a workable fashion that supports market efficiency and improved reliability.

2. Provide your organization’s feedback on the Must Offer Obligations and Bid Insertion topic as described in section 4.1:

Vistra provides feedback first on the elements of this section that are dependent on the DAME initiative being implemented and second on the must-offer and bid insertion elements not dependent on the DAME initiative.

Vistra response to elements dependent on DAME initiative

Vistra strongly requests the CAISO move the elements of this section that are interdependent with the DAME initiative into the DAME initiative. The changes proposed by CAISO to remove the real-time must-offer obligation and provide a transition period are not and cannot be severed from the DAME proposal. If DAME is not completed or if the DAME proposals are not adopted by FERC, the policy intent of (1) must-offer extension to reliability capacity and (2) removal of the real-time MOO are null and void. We respectfully urge the CAISO to rethink its approach and stakeholder these interdependent changes in the DAME initiative.

On the merits of the proposal to require Generic RA to economically bid for reliability capacity. Vistra provides more details below in response to the same restriction applied to all RA resources for offering into the Imbalance Reserves product, energy, and existing ancillary service products. Self-schedules are a necessary tool in certain instances and must still be supported even for RA resources. See response to #3.

On the merits of the proposal to remove the real-time must-offer obligation, Vistra finds the concept of removing the obligation for RA resources, even if they receive no day-ahead awards, as counter-intuitive to the purpose of capacity commitments. This may not be in the best interest of reliability, which leads Vistra to hesitate to support this proposal. We request the CAISO provide more explanation and support for why it wants to change the nature of capacity resources to only require day-ahead participation.

Additionally, Vistra provides a modest clarification on the details related to Exceptional Dispatch on Page 13. It is confusing to include a description of the Participating Generator Agreement requirements for all resources with a PGA to be available to grid operations for exceptional dispatch purposes since this is existing rule and we believe well understood. We suggest the CAISO provide clarity in the next iteration that PGA rules apply broadly today with this exceptional dispatch obligation to avoid implying this is a proposal rather than explanation of existing rules.

Vistra response to elements not dependent on DAME initiative

Vistra believes that capacity resources should be sufficiently firm to reliably support the grid. While there are always going to need to be tools to allow resources to inform the market of its operational needs or unavailability, there are appropriate ways to do so.

Vistra struggles with the general context of the must-offer obligation and bid insertion proposals because much of these reflect what we understand to be the current rules. For example, the CAISO clarifies the standard must-offer obligation that exists today, which may create an appearance inaccurately that this is a policy change. The must-offer obligation for all resources is to offer 24x7 when physically available (includes impact of use/operational limitations or other outages). CAISO’s clarification that Demand Response have a must-offer obligation pursuant to its program parameters is also an existing rule. If the CAISO believes the existing expectations are unclear and not being respected, they should not only be clarified but enforced. While the mechanisms may differ, the policy has been in place for years. Below are a few other examples:

• Use limited resources are under the standard MOO but have registered use limitations that when reached restrict its operations and they are required to reflect this through outage cards.
• Operationally limited resources that have an environmental need to limit their output whether due to water or air permits are supposed to reflect their lack of availability through outage cards (e.g., environmental limitations).
• For Variable Energy Resources, the forecasts are used as the basis for identifying what amount of the resource is physically available.

The only must-offer and bid insertion rule that appears to differ from status quo is the change to require storage and co-located resources to offer their full operating range.

Vistra believes the CAISO should ensure its must-offer obligation and bid insertion rules result in a sufficiently firm fleet regardless of the type of resource. We support the need for clarifying the existing must-offer rules but encourage the CAISO to enforce these rules through existing tariff mechanisms if they are not currently being met. We encourage the CAISO to use the scope of this initiative to further evaluate its treatment of use-limited, operationally limited resources, or conditionally available resources. Vistra requests the CAISO reassess if its bid insertion exemptions are still needed, including for resources without default DEBs. If resources follow outage practices appropriately and seek a negotiated DEB where no default is available then there does not appear to be a reason to continue to support the majority of the exemptions.

3. Provide your organization’s feedback on the Flexible RA topic as described in section 4.2:

Vistra strongly requests the CAISO move the scope of these changes to the DAME initiative as a logical extension of those policy proposals to introduce a new flexible ramping energy product into the day-ahead market resulting in requiring a need to enhance RA resources’ must-offer obligation in this proposal. The changes proposed by CAISO to expand the MOO to include offers into the DAME proposed Imbalance Reserve product is not and cannot be severed from the DAME proposal. If DAME is not completed or if the DAME proposals are not adopted by FERC, the policy intent in this proposal is null and void. We respectfully urge the CAISO to rethink its approach and stakeholder these interdependent changes in the DAME initiative.

Vistra assumes that the Section 4.2 scope of this Straw Proposal will be moved into the DAME initiative for the remainder of our comments. We provide feedback on the following elements:

• CAISO reflections on need for a flexible capacity program
• CAISO proposal for staged changes to RA must-offer obligations
• CAISO proposal to apply bidding rules on must-offer obligations

Vistra response to CAISO reflections on need for a flexible capacity program

Vistra found the discussion in this Straw Proposal generally supported the retirement of the flexible RA product, however we believe that more than theory is needed and the staged approach can provide support for some of the implicit assumptions. We noted two acknowledgements in the CAISO’s straw proposal that imply there is no operational need for flexible capacity, such as:

• “CAISO agrees these [three-hour net load ramp hour] ramps are largely forecastable on a day-to-day basis and can be addressed through day-ahead market awards” (Page 18)
• “Furthermore, as long as the system RA is sufficient to meet the net load peak, the CAISO’s day-ahead market can commit and schedule resources to meet the predictable ramping needs (neck of the duck).” (Page 18)

We also found the discussion on the benefits that a flexible capacity program provides as illustrative to support conceptually that a flexible capacity product is not needed to achieve CAISO operational needs. Below are the examples of benefits from forward planning for market flexibility needs identified by CAISO in its straw proposal[1]:

• “Markets have sufficient economic bid range to dispatch around load and resource variability (or inflexibility), manage significant net load ramps, address uncertainty and differences in market granularity (i.e., hourly vs. fifteen minute) between market runs”
• “The CAISO must ensure it has sufficient flexible capacity to pass its own EIM ramp sufficiency tests”
• “Flexible resources have a path to economic viability relative to inflexible resources (i.e., leads to more rational retirement)”

These are noble goals and ones that indicate that forward planning is important but whether the forward planning requires a separate flexible product is an open question. Regardless of the product type, CAISO needs to unlock the flexible energy capability of its fleet. There are some other policy efforts that can greatly enhance the CAISO’s ability to achieve these goals regardless of whether flexible RA remains a product.

• First, the Extended Day-Ahead Market would add an equivalent Resource Sufficiency Evaluation test that includes a flexible ramp sufficiency test to the Integrated Forward Market, which will introduce failure consequences for Balancing Authority Areas with insufficient flex ramp.
• Second, the Day-Ahead Market Enhancements Imbalance Reserve product for procuring flexible energy in the IFM will greatly enhance the CAISO’s ability to ensure sufficient flex ramp feeds into the Real-Time Market mitigating risks of failing the Resource Sufficiency Evaluation’s flex ramp sufficiency test in real-time.
• Finally, the commercial markets do see modest value being attributed to flexible resources relative to inflexible resources. If the Imbalance Reserve product and Flexible Ramping Product provide sufficient price signal with a more deserving premium for flexible RA than flexible energy products could be a superior incentive for economic viability. However, if the CAISO pursues retiring the flexible RA product, it is important the Imbalance Reserve and Flexible Ramp Product provide incentives at minimum equivalent to that provided by the flexible RA product to maintain the revenue sufficiency of flexible assets.

Vistra response to CAISO proposal for staged changes to RA must-offer obligations

Vistra conceptually can support the CAISO belief that the flexible ramp energy products whether from Imbalance Reserves or Flexible Ramping Product may be a more efficient route to incentivize economic viability of flexible resources than flexible RA, however we strongly believe that confidence in the replacement products needs to be affirmed. Given this, Vistra supports the CAISO proposal to stage the implementation of any extension of must-offer obligations (assuming Imbalance Reserves is approved). Vistra requests the CAISO shorten its analysis period to a single year in Stage 2. We propose the following stages:

• Stage 1: On Imbalance Reserve Implementation
• Stage 2: Evaluation period of one year to evaluate Imbalance Reserve performance
• Stage 3: Align flexible RA with flexible energy spot products or retire flexible RA[2]

CAISO proposal to apply bidding rules on must-offer obligations

While Vistra can support the staged approach to extend all RA resources’ must-offer obligation to include the Imbalance Reserve product in day-ahead, this support is contingent on changes to the CAISO straw proposal.

We emphasize that conceptually we agree that the flexible attributes of all RA resources should be able to be operationalized by the market, consequently the proposal to extend the must-offer obligation of Generic RA (system, local, and flex) and Flexible RA-only to include a requirement to offer into the Imbalance Reserve product is reasonable. However, the CAISO’s straw proposal would impose bidding rule limitations on these resources that may result in a practical and unjust harm.

Vistra raises two concerns with the CAISO straw proposal and provides two requests for changes to resolve these concerns to avoid undue harm.

• RA resources must retain the ability to submit self-schedules as needed to manage practical and unavoidable operational needs. Vistra interprets the CAISO intent when it proposes that Imbalance Reserve eligible resources must only economically offer into the day-ahead market across all products (energy, ancillary services, and imbalance reserves) is to ensure it has access to as much flexibility as possible. Vistra generally agrees there should be incentives for resources to economically offer when possible and not rely on self-schedules unless it is for an operational need or limitation. The nature of the CAISO-controlled fleet is that resources will continue to have instances when they must flow, such as hydro resources that need to manage must flow requirements in licenses/permits, or must run needs, such as need to perform unit testing. We provide two specific examples that are valid and necessary uses for self-schedules that must be supported:
  • A unit must perform periodic testing where regardless of economics it will need the CAISO markets to allow it to run, where the energy is being made available to the market.
  • A Multi-Stage Generator that receives day-ahead ancillary service awards is compelled to self-schedule to ensure those ancillary service awards are available in the real-time by being in the right configuration to meet the ancillary service award. This limitation is due to market functionality and not a desire by the unit to be inflexible.
• RA resources should not be capped to $0/MWh Imbalance Reserve offers for this day-ahead flexible energy product. Vistra is concerned the CAISO staff has confused the reasoning behind the $0/MWh offer being generated for RA resources in Residual Unit Commitment (RUC) backstop capacity process. The CAISO generates the RUC capacity offer rather than allowing RUC availability bids, which are only for non-RA capacity, and generates the offer at $0/MWh because it is inappropriate to pay resources for capacity that was already sold. It is inappropriate for a seller to sell the same capacity twice for the same service, which is why RA resources not only have generated offers at $0/MWh but are also not eligible to receive a RUC payment for their RUC capacity – only RUC awards from non-RA capacity receive a payment[3]. The must-offer into the Imbalance Reserve product is not analogous to RUC capacity but instead it is analogous to offering into the day-ahead energy market to make the resource available for energy awards and offering into real-time market. Vistra emphasizes the Imbalance Reserve offer is to make a resource’s flexible energy that has not been sold previously available to the market, like its offers into the energy market. The CAISO through its co-optimization will decide whether issuing an energy award or Imbalance Reserve award is most efficient, but both are day-ahead awards communicating intent to use that energy in real-time if needed. It is a better market design for the CAISO if the Imbalance Reserve offers reflect contemporaneous market fundamentals and opportunity costs to provide the service so that market results can be as efficient as possible. Consequently, the offer cap should be aligned with the energy offer cap at $1,000/MWh.

[1] See CAISO Resource Enhancements Phase 2 Straw Proposal, Page 17.

[2] A forward planning product should be the same product eligibility and requirement to provide service as spot products (i.e., Imbalance Reserves for day-ahead spot and Flexible Ramping Product for real-time spot). This is because a forward product should be able to be liquidated in day-ahead or real-time if a seller does not provide the service for which it was forward contracted. If the eventual decision is to retire the flexible RA product, then this enhancement is not necessary, however if flexible RA is retained the alignment between the products is an urgent priority.

[3] See settlement configuration guide Charge Code #6800, DA RUC Availability Settlement, Business Rule #4, https://bpmcm.caiso.com/BPM%20Document%20Library/Settlements%20and%20Billing/Configuration%20Guides/Cost%20Recovery/BPM%20-%20CG%20CC%206800%20DA%20RUC%20Availability%20Settlement_5.2.doc. Also, see Market Operations Business Practice Manual, Section 6.7.4.2, RUC Capacity and RUC Awards, Page 286, “The portion of the RUC Capacity that corresponds to RA RUC obligation is also not eligible for RUC Award.”, https://bpmcm.caiso.com/BPM%20Document%20Library/Market%20Operations/BPM_for_Market%20Operations_V77_redline.pdf.

4. Please provide your organization’s feedback on the proposed EIM Governing Body role as described in section 5:

None currently.

5. Please provide your organization’s feedback on the Appendix as described in section 7:

None currently. There remain many higher-level policy items to focus on in this round. Vistra thanks the CAISO for providing the details in the Appendix and will leverage this information as we discuss policy refinements needed to achieve a workable proposal that supports reliability goals.

6. Additional comments on the Resource Adequacy Enhancements phase 2 straw proposal:

1. Provide a summary of your organization's comments on the phase 2 straw proposal:

WPTF appreciates the CAISO’s clear goal to coordinate with state agencies but is concerned that the CAISO’s restart of the Resource Adequacy (RA) Enhancements initiative is not sufficiently coordinated with the current CPUC RA proceeding. This initiative was initially scoped in October 2018 prior to the significant shift in storage development and authorization, the 2020 blackouts and focus on net load peak, as well as prior to the CPUC’s proposal to completely revise the system RA proposal. Thus, WPTF supports the CAISO reconsidering the scope of this initiative and RA positions globally in light of current grid and policy needs.  

The CPUC is proposing a revision of the entire system RA process and WPTF asks that the CAISO prioritize aligning RA policies and working within the CPUC process to ensure the final system RA product (that the CAISO will be required to administer) will work the existing local RA rules and ensure CAISO reliability. This includes evaluating the existing CAISO flexible RA program and assessing whether it is bringing any benefits to the grid or can be removed from the state’s RA framework without issue.

With regards to specific items in the proposal, WPTF strongly objects to RA capacity being forced to offer $0/MWh for a co-optimized energy market product and if this aspect remains, will protest this at FERC. Forcing a resource with a capacity contract that covers their fixed costs to bid-in $0 will negatively impact the resource’s energy revenue and is contrary to basic economic principles of running a market.

It is also unclear whether the CAISO is proposing that all RA capacity (including system capacity) must offer into the imbalance product at $0/MWh and therefore not be able to self-schedule. WPTF is guessing that this is just a mis-reading of the proposal so asks that the CAISO clarify in its next draft. Many WPTF members are extremely concerned about their ability as a system resource to not be able to self-schedule as in many cases it is a necessary bidding strategy for operational or contractual reasons.      

2. Provide your organization’s feedback on the Must Offer Obligations and Bid Insertion topic as described in section 4.1:

The CAISO has provided no evidence or analysis that the existing must-offer obligation rules and bid insertion functionality are causing reliability or market issues, so it is hard to evaluate the need for this aspect of the proposal. In particular, the charging must-offer obligation on storage resources seems like it won’t work functionally because storage resources cannot both bid in charging and self-schedule discharging, and vis versa because it violates offer monotonicity. WPTF asks the CAISO clarify their reasons for updating the rules and consider whether they are feasible to implement.

3. Provide your organization’s feedback on the Flexible RA topic as described in section 4.2:

The proposal to modify the CAISO’s outdated flexible RA requirement in 2023 by requiring a $0/MW imbalance reserve offer only to then propose a re-design or removing the flexible RA program two years later in 2025 is unnecessary for reliability. The flexible RA requirement and resource counting rules have little to do with the DAME imbalance product need from a design perspective. The flexible RA requirement is based on max 3-hour ramping net load ramping needs. The imbalance product requirement is based on uncertainty and variability between the day-ahead and real-time.

Even more to the point, WPTF strongly objects to RA capacity being forced to offer $0/MWh for a co-optimized energy market product and will protest this at FERC. Forcing a resource with a capacity contract that covers their fixed costs to bid-in $0 for a product that is co-optimized and thus inherently impacts the resource’s energy dispatch is contrary to basic economic principles of running a market.  Forcing a generator to bid zero without any guarantee of dispatch will impact the ability of a generator to capture energy margin; this represents a major shift from how generators are compensated today and would lead to higher RA prices and potentially impact availability.  It is unclear why imbalance should be treated differently than ancillaries such as Regulation, Spin, or Non-Spin.  A generator should be able to get paid to offer this product knowing that the energy may never be called upon.       

4. Please provide your organization’s feedback on the proposed EIM Governing Body role as described in section 5:

5. Please provide your organization’s feedback on the Appendix as described in section 7:

The CAISO lists 4 principles and objectives for the RA Enhancements initiative:

1. The RA framework must reflect the evolving needs of the grid
2. RA counting rules should procurement of the most dependable, reliability, and effective resources
3. The RA program should incentivize showing all RA resources
4. LSE’s RA resources must be capable of meeting its load requirements all hours of the year.

WPTF’s reaction to each are outlined below.

1. The RA framework must reflect the evolving needs of the grid.

The RA framework must ensure reliability and the reliability needs are evolving. We support this principle and objective.

2. RA counting rules should promote procurement of the most dependable, reliability, and effective resources.

WPTF supports this objective.

3. The RA program should incentivize showing all RA resources

WPTF does not support this principle/objective. If an LSE can off-set their RA costs by not showing RA and exporting the non-RA energy so other Balancing Areas, why should the CAISO object as long as LSEs have met their RA requirement? This principle is counter to the idea of expanding across the west and being a good neighbor to other Balancing Areas. 

4. LSE’s RA resources must be capable of meeting its load requirements all hours of the year.

The description under this principle is confusing and the CAISO is not considering the aggregate benefits that come from operating the grid. It first describes an issue with differing planning reserve margins by LSEs and then discusses CPUC statute. The information presented is not rooted in reliability needs and lacks nuance. In aggregate, across the CAISO, system RA capacity should be able to meet system demand, but this is vastly different than saying each LSE must be capable of meeting its own load requirements each hour. One of the main benefits from joining an ISO and having a jointly administered system RA program is that it allows LSEs to take advantage of load and supply diversity. This is different than leaning – each LSE is still required to procure sufficient capacity to meet their load, but the diversity benefits are shared among LSEs and costs are ultimately lowered for all rate payers.

WPTF additional supports the following objectives in all RA Enhancement initiative phases.

1. The CAISO Resource Adequacy program should be consistent with the CPUC resource adequacy program to all extents possible.
2. Resource adequacy requirements should ensure local, flexible, and system needs can be met with RA capacity under all reasonably expected circumstances.
3. Resource counting rules should reflect resources individual contribution to reliability.
4. The Resource Adequacy program should align with the CPUC’s integrated resource plan and other LR planning processes.

6. Additional comments on the Resource Adequacy Enhancements phase 2 straw proposal: