Comments on Feasibility Assessment and Straw Proposal

1. Please provide your organization’s perspective on what the objective of the market design for summer 2024 should be.

Problem Statement and market design objective: During the 4/23 working group, stakeholders provided their perspectives around limitations on certain resources bidding above the soft offer cap and what market design changes broadly supported by stakeholders could address bidding limitations. For example, some stakeholders support an approach that ensures resources can protect state of charge during any hour of the day, while other stakeholders support an approach to more accurately capture opportunity costs.

For Bonneville, the primary objective of a desirable interim market design is to implement policy changes that would increase BPA’s ability to appropriately manage its hydro resources during tight system conditions. This requires an approach that gives equitable treatment of similar resources in proposed summer 2024 market design, recognizing operational impacts on both hydro and batteries from inconsistent offer caps. 

The BPA hydro system is modeled as three separate non-generating resources in the WEIM and utilizes an energy bid curve for each NGR representing our opportunity cost to charge (DEC) or discharge (INC) our participating hydro resources.  BPA does not utilize the day-ahead market to manage our WEIM participation, but we do participate in the CAISO MRTU market as a non-resource specific intertie resource that is not subject to the same bid caps that our same hydro resources are subject to in the WEIM.  BPA resources are similar to battery storage resources in the WEIM footprint in that its energy production is limited, often within a 24-hr period.  These limitations are due to hydraulic factors, including fuel (water), environmental (fish) considerations, and other factors including recreational and navigation usages, all of which take precedence over power generation.  In low stream flow, high load, or operationally restrictive conditions, these system limitations can quickly force BPA into an extremely limited intraday energy limited position. 

BPA designs its hourly WEIM base schedule and RTM energy inc/dec bid curve to achieve its daily operational obligations within the limitations described above.   However, this desired hydraulic dispatch between the hourly operation and hourly market prices is susceptible to disruption when BPA is unable to accurately account for the intraday opportunity cost of dispatch (Inc/Dec) of our energy limited resources.  If BPA resources in WEIM are limited to the soft cap ($1000/MWh) during times when other markets and other WEIM resources may bid up to the hard cap ($2000/MWh), this could potentially result in a dispatch of BPA hydro units that is inconsistent with our operations plan and non-power obligations.  During tight market conditions, this may impact BPA’s ability to save the required fuel (water) to meet future load obligations in the highest demand hours and force BPA to purchase energy in the bilateral market at prices higher than our bid price cap.  It may also result in BPA failing the WEIM hourly resource sufficiency tests or even force BPA to limit or pause its participation in the WEIM.  In summary, the NGR $1000/MWh bid cap limitation as applied to BPA’s WEIM resources prevents accurate intraday valuation of its energy limited resource and may lead to uneconomic dispatch and operational risk that can further jeopardize BPA’s participation in the market.

2. Please provide your organizations feedback on each of the proposals under Approach 1—A, B, C, and D.

BPA would like to reiterate its desire to preserve a predictable relationship between its WEIM energy bid curves and its planned operation of its resources.  BPA’s feedback for the alternatives under Approach 1 reflect this objective.  BPA would also like to reiterate its support for alternate stakeholder-proposed approaches that more fully incorporate intraday opportunity cost into DEB calculation. 

Approach 1A = “Uncapped DEB Calculation and Bids above $1000 are capped by the higher of $1000 and the uncapped DEB”: 

This solution is helpful but not ideal for BPA.  An uncapped hydro DEB may help narrow the price gap between our accepted bid price and the cleared market price, but it doesn't resolve premature dispatch concerns and does not meet BPA's desired objective to efficiently manage our operation to ensure we have sufficient energy to meet our load obligation in the highest demand hours of the day.  Of Approaches 1A-1D, this solution is the lease desirable in assuring BPA's operational objectives.  

Approach 1B = 1A “and the highest DA SMEC with a scalar”: 

This solution improves on Approach 1A but is not ideal for BPA.  It may further narrow the price gap between BPA’s accepted bid price and the cleared market price, but it doesn’t resolve premature dispatch concerns and does not meet our desired objective to efficiently manage our operation to ensure we have sufficient energy to meet our load obligation in the highest demand hours of the day.  The inconsistency between the DA SMEC and RT prices, especially during tight market conditions, will continue to inhibit BPA in managing its operational objectives.

Approach 1C = 1B “and the higher of the MIBP or highest cost-verified bid for that hour”:  

This solution improves on Approach 1B but is not ideal for BPA.  It may further narrow the price gap between our accepted bid price and the cleared market price, but it doesn’t resolve premature dispatch concerns and does not meet our desired objective to efficiently manage our operation and load obligation in the highest demand hours of the day.  While this solution improves on Approaches 1A and 1B, it still falls short of recognizing the 24-hr intraday opportunity costs that enable us to efficiently manage our planned hydro system operation during tight market conditions.

Approach 1D = 1C “and the price of the highest priced hour of the MIBP”:

This solution improves on Approach 1C and represents the solution that may best meet BPA operational objectives to manage its system during those days where our energy availability is very limited.  Allowing for the highest priced hour of the MIBP to set the bid cap in a day limits the undesirable issue of intraday premature dispatch and the inefficient use of our resources.  Additionally, in the event BPA is uneconomically dispatched and is forced to purchase energy in the bilateral market, the economic risk between the two market actions is minimized relative to approaches 1A, 1B, and 1C.  We recognize this solution remains less than ideal in that it does not impact DEB calculation and any price mitigation may nullify the intended benefits of the uncapped bid solution, as implemented for participants to better manage their energy-limited resource’s placement in the bid stack.

3. The ISO is seeking feedback from stakeholders to understand the intended effect of the proposed modifications.

Triggering the bid cap and penalty pricing: Today, one of two conditions must be met to raise the energy bid cap to $2,000/MWh: 1. The market accepts a bid above $1,000/MWh from a resource-specific resource, or 2. The allowable MIBP goes above $1,000/MWh Today, the tariff requires resource-specific resources to successfully cost-verify an adjusted DEB through the reference level change request (RLCR) process in order to bid above $1,000/MWh. From a systems perspective, any bid above $1,000/MWh from a resource specific resource would fulfill the condition to change the energy bid cap. However, the market only clears resource-specific resource bids above $1,000/MWh that have been successfully verified through the RLCR process because that is the only way for resource-specific resources to reflect a bid above $1,000/MWh in the market today. When the bid cap goes up, a set of penalty price parameters are doubled so that priorities are preserved. If the bid cap is raised in any hour of the day-ahead market, the penalty prices will be scaled up for all trading hours of the day-ahead market and real-time market for the same trading day. If the bid cap is not raised in any hour of the day-ahead market, but the conditions apply to raise the bid cap in hours of the real-time market, the real-time market will use the scaled up penalty price for all intervals of overlapping real-time market horizons. Stakeholder proposals being considered would allow resource-specific resources to bid above $1,000/MWh without using the RLCR process. Any bid above $1,000/MWh from a resource specific resource as a result of these proposals would be considered ‘cost-verified’ by ISO system logic for the purposes of raising the energy bid cap and scaling penalty prices, and informing the logic that applies to unspecified imports that are RA.

BPA recognizes the concern by some stakeholders that additional resources will have the ability to raise penalty prices, while inconsistent with existing CAISO policy.  However, BPA believes this risk is limited.  BPA’s participating resources are not modeled within the CAISO Day-Ahead market and, consequentially, do not utilize the WEIM to address DA market awards.  The incremental impacts to penalty prices due to BPA’s WEIM-related actions would be limited to a subset of hours where BPA desires to manage its intraday dispatch within the WEIM, and therefore its system operation, in a way that is consistent with other resources that may set the price in 831 conditions.  It is imperative that BPA have the ability to participate in the WEIM as a compliment to its operational requirements as best as possible via WEIM Inc/Dec bid curves in a predictable fashion.

4. Please provide your perspective on the following questions:

1. Do you consider bids above $1,000/MWh but within the range of an uncapped DEB value to be cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the maximum import bid price (MIBP) and highest cost-verified bid?

Yes.  BPA believes its existing DEB calculation, including the short-term and long-term opportunity cost components, represents verified costs.  These costs are ultimately borne by BPA’s customers.  Uncontrolled bidding outcomes exacerbate customer costs.  The missing component of the hydro DEB is the intraday price component.  Without this component, BPA will continue to face situations when an inability to manage our hydro resources within WEIM will jeopardize our desired dispatch, hydro constraints, and potentially our participation in the market. 

5. Please provide your perspective on the following questions:

2. Do you consider bids above $1,000/MWh and above a DEB value to be considered cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the MIBP and highest cost-verified bid?

Yes.  BPA believes its existing DEB calculation, including the short-term and long-term opportunity cost components, represents verified costs that may be incurred during 831 conditions.  BPA’s bidding rules must be consistent with others in the WEIM in order for BPA to efficiently manage its resources.  Therefore, BPA believes bids above $1000/MWh and above its DEB value should be considered cost-verified in order to maintain this consistency with the greater market.  The missing component of BPA’s hydro DEB is the intraday price component.  Without this component, BPA faces increased risk of unplanned (and unnecessary) within-day purchases and DA purchases.  In the extreme event of persistent exposure to undesirable consequences of our current bid cap limitations, BPA may face exposure to costly bilateral block energy purchases.

6. Please comment on whether bid cap changes discussed here should apply to all resources, or only a subset.

Today, the ISO applies similar bid caps to all resources, with the exception of those capped by the MIBP, RDRR, virtual supply and other resources exempt from the soft offer cap. The ISO is considering Identifying a subset by default energy bid calculation (e.g. hydro DEB, storage DEB, or negotiated DEBs with an opportunity cost component), targeted to those resources identified as having short-term opportunity costs.

BPA believes the CAISO should proceed with an interim solution that it believes is feasible, with expected minimal unintended consequences.  BPA desires that solution to include modifications to bid caps as currently applied to hydro resources modeled as non-generating resources.  BPA urges the CAISO to re-examine the feasibility of also updating DEB formulas in the interim solution to reflect the full range of opportunity cost exposures, further improving the connection between resource operation planning and bid award predictability.

7. Please provide your organization’s feedback on the 831 data analysis presented.

BPA appreciates CAISO’s analyses of selected historical days. It is important to remember that, by definition, these days featured extreme operational conditions. Several stakeholders used the analysis of these specific days and conditions to make statements about general bidding behavior and BPA cautions against over-extrapolation without careful consideration of the factors at play in the broader WEIM footprint during the specific days that CAISO examined.

Critically, for resources outside the CAISO footprint and in the WEIM, day-ahead market participation and EIM participation differ markedly. For such resources (without a CA RA contract) participation in the DAM over the interties is purely voluntary; price formation is geographically limited to the CAISO footprint plus interties; and the market model can incorporate the intertemporal constraints of use-limited resources over the entire operating day. By contrast, WEIM participants are highly incentivized – through resource sufficiency tests and associated consequences of failure – to offer to the market both upward and downward capacity (they cannot simply self-schedule or schedule a non-existent day-ahead award); price formation is geographically expansive and reflects grid conditions over a much broader region with diverse load profiles and alternative markets (e.g. bilateral day-ahead and bilateral real-time markets); and the market horizon is relatively short.

These differences are crucial in understanding the drivers of the real-time bidding behavior shown in the 831 analyses, particularly for the January 2024 cold snap event.  Several industry groups and CAISO itself produced lengthy and detailed analyses of this event. They all provided quantitative evidence of the extreme market conditions the NW faced in this event, with load at historic peaks and market prices regularly at, or in excess of, $1000/MWh. To manage limited fuel and competing operational constraints over this multi-day event, many entities in the NW required or desired net purchases in day-ahead markets during this period. In real-time, this desire persisted. EIM participants that are modeled as non-generating resources faced a nearly intractable combination of operational conditions and participation constraints: they offered (expensive) capacity to the WEIM in an effort to maintain full access to external generation from the broader WEIM footprint, but the $1000 bid cap combined with the monotonicity requirement for these bids meant that the willingness to purchase energy was also limited by the $1000 cap. The restrictions of this cap were felt acutely in some hours, where bilateral purchases made in excess of $1000/MWh were unwound in the EIM.  Thus, contrary to the perspective of some stakeholders, the bidding at the $1000 cap observed in the 831 events (in the case of the 831 analysis for January 2024 for a single hour known to be particularly constraining for the CAISO footprint) is not evidence of rent-seeking behavior in extreme conditions, but rather a rational response to current-day and expected future-day market conditions in the broader footprint and an artifact of the current bidding restrictions imposed on NGRs.

BPA understands and has become accustomed to the CAISO-centered focus of many stakeholder initiatives but encourages the stakeholder community to broaden its perspective when considering initiatives that affect participation in the entire WEIM footprint, particularly for issues that involve differential treatment of resources in reflecting their energy costs during stressed grid conditions. 

8. Do you have any additional questions on the topic that would help with continued policy development discussions?

9. Please provide any additional feedback.

1. Please provide your organization’s perspective on what the objective of the market design for summer 2024 should be.

Problem Statement and market design objective: During the 4/23 working group, stakeholders provided their perspectives around limitations on certain resources bidding above the soft offer cap and what market design changes broadly supported by stakeholders could address bidding limitations. For example, some stakeholders support an approach that ensures resources can protect state of charge during any hour of the day, while other stakeholders support an approach to more accurately capture opportunity costs.

The California Community Choice Association (CalCCA) appreciates the California Independent System Operator’s (CAISO) expediency in addressing the rules for bidding above the soft offer cap for summer 2024. A solution that will allow bids to capture resources’ opportunity costs more accurately will allow for both the resources’ recovery of costs and improved reliability by ensuring state-of-charge is preserved for times when the resources are most needed. Both objectives can and should be met by allowing all resources with intra-day opportunity costs to better reflect those costs in their bids. A market-based solution is better suited for addressing cost recovery and reliability than a manual solution like exceptional dispatch. Before committing to implementing a new market design that would allow resources with intra-day opportunity costs to bid above the soft-offer cap by summer 2024, however, the CAISO must further explore any unintended consequences associated with pursuing an expedited solution. Such unintended consequences were raised during the Market Surveillance Committee (MSC) meeting on April 24, 2024, but were not fully explored.

Should the CAISO, with input from the MSC, come to the conclusion that the CAISO can implement a solution with minimal unintended consequences, CalCCA supports the CAISO moving forward with Approach 1 for summer 2024 and recommends that the CAISO pursue a market design that resembles Option C. Option C would allow the default energy bid (DEB) to rise above $1000 per megawatt-hour (MWh) and allow bids to rise above $1,000 per MWh up to the higher of the maximum import bid price (MIBP) or the highest cost verified bid for the hour. Option C is preferred over Option B, which would allow bids to rise to the highest day-ahead marginal energy cost rather than the MIBP. System conditions can change between day-ahead and real-time, so it is possible that day-ahead prices are not good reflectors of real-time prices (e.g., if there is a transmission failure between day-ahead and real-time, a resource that was not behind a constraint in day-ahead may be behind a constraint in real-time).

2. Please provide your organizations feedback on each of the proposals under Approach 1—A, B, C, and D.

CalCCA has no additional comments at this time.

3. The ISO is seeking feedback from stakeholders to understand the intended effect of the proposed modifications.

Triggering the bid cap and penalty pricing: Today, one of two conditions must be met to raise the energy bid cap to $2,000/MWh: 1. The market accepts a bid above $1,000/MWh from a resource-specific resource, or 2. The allowable MIBP goes above $1,000/MWh Today, the tariff requires resource-specific resources to successfully cost-verify an adjusted DEB through the reference level change request (RLCR) process in order to bid above $1,000/MWh. From a systems perspective, any bid above $1,000/MWh from a resource specific resource would fulfill the condition to change the energy bid cap. However, the market only clears resource-specific resource bids above $1,000/MWh that have been successfully verified through the RLCR process because that is the only way for resource-specific resources to reflect a bid above $1,000/MWh in the market today. When the bid cap goes up, a set of penalty price parameters are doubled so that priorities are preserved. If the bid cap is raised in any hour of the day-ahead market, the penalty prices will be scaled up for all trading hours of the day-ahead market and real-time market for the same trading day. If the bid cap is not raised in any hour of the day-ahead market, but the conditions apply to raise the bid cap in hours of the real-time market, the real-time market will use the scaled up penalty price for all intervals of overlapping real-time market horizons. Stakeholder proposals being considered would allow resource-specific resources to bid above $1,000/MWh without using the RLCR process. Any bid above $1,000/MWh from a resource specific resource as a result of these proposals would be considered ‘cost-verified’ by ISO system logic for the purposes of raising the energy bid cap and scaling penalty prices, and informing the logic that applies to unspecified imports that are RA.

CalCCA has no additional comments at this time.

4. Please provide your perspective on the following questions:

1. Do you consider bids above $1,000/MWh but within the range of an uncapped DEB value to be cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the maximum import bid price (MIBP) and highest cost-verified bid?

CalCCA has no additional comments at this time.

5. Please provide your perspective on the following questions:

2. Do you consider bids above $1,000/MWh and above a DEB value to be considered cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the MIBP and highest cost-verified bid?

CalCCA has no additional comments at this time.

6. Please comment on whether bid cap changes discussed here should apply to all resources, or only a subset.

Today, the ISO applies similar bid caps to all resources, with the exception of those capped by the MIBP, RDRR, virtual supply and other resources exempt from the soft offer cap. The ISO is considering Identifying a subset by default energy bid calculation (e.g. hydro DEB, storage DEB, or negotiated DEBs with an opportunity cost component), targeted to those resources identified as having short-term opportunity costs.

CalCCA has no additional comments at this time.

7. Please provide your organization’s feedback on the 831 data analysis presented.

CalCCA has no additional comments at this time.

8. Do you have any additional questions on the topic that would help with continued policy development discussions?

CalCCA has no additional comments at this time.

9. Please provide any additional feedback.

CalCCA has no additional comments at this time.

1. Please provide your organization’s perspective on what the objective of the market design for summer 2024 should be.

Problem Statement and market design objective: During the 4/23 working group, stakeholders provided their perspectives around limitations on certain resources bidding above the soft offer cap and what market design changes broadly supported by stakeholders could address bidding limitations. For example, some stakeholders support an approach that ensures resources can protect state of charge during any hour of the day, while other stakeholders support an approach to more accurately capture opportunity costs.

Please see the attached Comments from the Department of Market Monitoring.

2. Please provide your organizations feedback on each of the proposals under Approach 1—A, B, C, and D.

Please see the attached Comments from the Department of Market Monitoring.

3. The ISO is seeking feedback from stakeholders to understand the intended effect of the proposed modifications.

Triggering the bid cap and penalty pricing: Today, one of two conditions must be met to raise the energy bid cap to $2,000/MWh: 1. The market accepts a bid above $1,000/MWh from a resource-specific resource, or 2. The allowable MIBP goes above $1,000/MWh Today, the tariff requires resource-specific resources to successfully cost-verify an adjusted DEB through the reference level change request (RLCR) process in order to bid above $1,000/MWh. From a systems perspective, any bid above $1,000/MWh from a resource specific resource would fulfill the condition to change the energy bid cap. However, the market only clears resource-specific resource bids above $1,000/MWh that have been successfully verified through the RLCR process because that is the only way for resource-specific resources to reflect a bid above $1,000/MWh in the market today. When the bid cap goes up, a set of penalty price parameters are doubled so that priorities are preserved. If the bid cap is raised in any hour of the day-ahead market, the penalty prices will be scaled up for all trading hours of the day-ahead market and real-time market for the same trading day. If the bid cap is not raised in any hour of the day-ahead market, but the conditions apply to raise the bid cap in hours of the real-time market, the real-time market will use the scaled up penalty price for all intervals of overlapping real-time market horizons. Stakeholder proposals being considered would allow resource-specific resources to bid above $1,000/MWh without using the RLCR process. Any bid above $1,000/MWh from a resource specific resource as a result of these proposals would be considered ‘cost-verified’ by ISO system logic for the purposes of raising the energy bid cap and scaling penalty prices, and informing the logic that applies to unspecified imports that are RA.

Please see the attached Comments from the Department of Market Monitoring.

4. Please provide your perspective on the following questions:

1. Do you consider bids above $1,000/MWh but within the range of an uncapped DEB value to be cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the maximum import bid price (MIBP) and highest cost-verified bid?

Please see the attached Comments from the Department of Market Monitoring.

5. Please provide your perspective on the following questions:

2. Do you consider bids above $1,000/MWh and above a DEB value to be considered cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the MIBP and highest cost-verified bid?

Please see the attached Comments from the Department of Market Monitoring.

6. Please comment on whether bid cap changes discussed here should apply to all resources, or only a subset.

Today, the ISO applies similar bid caps to all resources, with the exception of those capped by the MIBP, RDRR, virtual supply and other resources exempt from the soft offer cap. The ISO is considering Identifying a subset by default energy bid calculation (e.g. hydro DEB, storage DEB, or negotiated DEBs with an opportunity cost component), targeted to those resources identified as having short-term opportunity costs.

Please see the attached Comments from the Department of Market Monitoring.

7. Please provide your organization’s feedback on the 831 data analysis presented.

Please see the attached Comments from the Department of Market Monitoring.

8. Do you have any additional questions on the topic that would help with continued policy development discussions?

Please see the attached Comments from the Department of Market Monitoring.

9. Please provide any additional feedback.

Please see the attached Comments from the Department of Market Monitoring.

1. Please provide your organization’s perspective on what the objective of the market design for summer 2024 should be.

Problem Statement and market design objective: During the 4/23 working group, stakeholders provided their perspectives around limitations on certain resources bidding above the soft offer cap and what market design changes broadly supported by stakeholders could address bidding limitations. For example, some stakeholders support an approach that ensures resources can protect state of charge during any hour of the day, while other stakeholders support an approach to more accurately capture opportunity costs.

The Public Advocates Office at the California Public Utilities Commission (Cal Advocates) is the state-appointed independent ratepayer advocate at the California Public Utilities Commission (CPUC).  Our goal is to ensure that California ratepayers have affordable, safe, and reliable utility services while advancing the state’s environmental goals.  Our efforts to protect ratepayers include energy, water, and communications regulation advocacy. 

Adoption of an Expedited Interim Solution for Summer 2024 is not Warranted

The objective of the market design for Summer 2024 should be to ensure that the CAISO is able to serve system load during extreme system conditions without unnecessary costs to ratepayers.  The CAISO has noted that there is no reliability risk for Summer 2024 in the context of this effort’s proposed solutions.[1]  Cal Advocates also notes that existing out-of-market actions, like exceptional dispatch, and the end-of-hour state of charge (SOC) bid parameters is an in-market option designed to help Scheduling Coordinators preserve their SOC.[2]  The Problem Statements identified by the CAISO relate to an inability for some resources to bid in a manner to preserve their SOC, not an inability to recover costs.[3]  Addressing those Problem Statements does not require an expedited process given that the CAISO does not believe reliability is at risk.[4] 

The proposed solutions would enable economic bids and/or default energy bids (DEBs) to exceed the soft bid cap of $1000/MWh,[5] potentially increasing wholesale energy costs and harming ratepayers with no resulting enhancement to reliability.  The development of potential solutions should proceed in a non-expedited manner and should include CAISO analysis identifying potential impacts to wholesale energy costs resulting from potential solutions.

[1] April 23, 2024 – Price Formation Enhancements Working Group Session 17 Recording, April 23, 2024, available at: https://www.youtube.com/watch?v=kFOX3HCfLFg&t=1366s.

[2] The end-of-hour SOC tool is an optional bid parameter that can allow a scheduling coordinator to limit real-time dispatch of a storage resource and can facilitate availability during higher-priced and higher-need hours later in the day.  For more information, see Department of Market Monitoring (DMM), Special Report on Battery Storage, July 7, 2023 at 6.  Available at:  https://www.caiso.com/Documents/2022-Special-Report-on-Battery-Storage-Jul-7-2023.pdf.

[3] CAISO, Rules for Bidding Above the Soft Offer Cap: Feasibility Assessment and Straw Proposal, April 23, 2024 (Straw Proposal) at 6.  Available at: https://www.caiso.com/InitiativeDocuments/Price-Formation-Enhancements-Feasibility-Assessment-and-Straw-Proposal-Apr-22-2024.pdf.

[4] April 23, 2024 – Price Formation Enhancements Working Group Session 17 Recording, April 23, 2024, available at: https://www.youtube.com/watch?v=kFOX3HCfLFg&t=1366s.

[5] Straw Proposal at 17.

2. Please provide your organizations feedback on each of the proposals under Approach 1—A, B, C, and D.

Approach 1 Options Should Not be Adopted for Summer 2024

As Cal Advocates notes above, an expedited solution that modifies DEBs or bidding limits is unwarranted and carries significant risk of increasing wholesale market costs.  The CAISO should pursue the Issue Paper’s Approach 2[1] to utilize existing mechanisms to maintain appropriate resource SOC[2] and develop any necessary long-term solutions through the Price Formations Enhancement initiative.

Non-Emergency Resources Should not be Allowed to Bid Far Above Emergency Resources

Enabling storage, hydro, or Proxy Demand Response (PDR) resources to bid above the soft bid cap would conflate that supply with emergency capacity.  Reliability Demand Response Resources (RDRR) have a market trigger of $950/MWh.[3]  RDRR is an emergency resource intended to be dispatched during emergency conditions.[4]  Although non-emergency resources can bid up to the $1000/MWh soft bid cap today, enabling opportunity-cost resources to exceed the soft bid cap, up to the $2000/MWh hard bid cap, would enable those resources to grossly exceed existing price caps during non-emergency periods.  Cal Advocates is concerned that increasing access for non-emergency resources to prices reached typically only in emergency conditions creates significant cost risks to ratepayers and may harm the integrity and purpose of RDRR and other steps taken by the CAISO during an Energy Emergency Alert (EEA) phase.[5]

[1] CAISO, Price Formation Enhancements: Rules for Bidding Above the Soft Offer Cap Issue Paper, April 12, 2024 (Issue Paper) at 15.  Available at: https://www.caiso.com/InitiativeDocuments/IssuePaper-StakeholderRecommendations-PriceFormationEnhancements-Rules-BiddingAboveSoftOfferCap.pdf.

[2] Cal Advocates previously made this recommendation.  For more information, see Cal Advocates, Comments on Issue Paper and Stakeholder Recommendations, April 19, 2024 at Section 3.  Available at: https://stakeholdercenter.caiso.com/Comments/AllComments/78bdff25-f128-4b8d-82f8-d32b0dc04143#org-18b1c32e-a41c-4b5a-a049-16a617e6060b.

[3] CPUC Decision 23-06-029, Decision Adopting Local Capacity Obligations for 2024-2026, Flexible Capacity Obligations for 2024, and Program Refinements, June 29, 2023 at 81 and 85; issued in Rulemaking (R.) 21-10-002, Order Instituting Rulemaking to Oversee the Resource Adequacy Program, Consider Program Reforms and Refinements, and Establish Forward Resource Adequacy Procurement Obligations.  Available at: https://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M513/K132/513132432.PDF.

[4] Opening Comments of the California Independent System Operator Corporation on the Proposed Decision Adopting Local Capacity Obligations for 2024-2026, Flexible Capacity Obligations for 2024, and Program Refinements, June 14, 2023 at 7; filed in R.21-10-002.  Available at: https://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M511/K485/511485180.PDF.

[5] For example, the EEA Watch phase occurs when all available resources are committed, including non-emergency opportunity-cost based resources that proposed solutions may allow to bid beyond the soft bid cap.  This would coincide with the dispatch of RDRR at the EEA Watch phase, and additional emergency energy programs and measures sought for at EEA 2 and other phases.  CAISO, Emergency Notifications Fact Sheet, accessed April 25, 2024.  Available at: https://www.caiso.com/Documents/Emergency-Notifications-Fact-Sheet.pdf.

3. The ISO is seeking feedback from stakeholders to understand the intended effect of the proposed modifications.

Triggering the bid cap and penalty pricing: Today, one of two conditions must be met to raise the energy bid cap to $2,000/MWh: 1. The market accepts a bid above $1,000/MWh from a resource-specific resource, or 2. The allowable MIBP goes above $1,000/MWh Today, the tariff requires resource-specific resources to successfully cost-verify an adjusted DEB through the reference level change request (RLCR) process in order to bid above $1,000/MWh. From a systems perspective, any bid above $1,000/MWh from a resource specific resource would fulfill the condition to change the energy bid cap. However, the market only clears resource-specific resource bids above $1,000/MWh that have been successfully verified through the RLCR process because that is the only way for resource-specific resources to reflect a bid above $1,000/MWh in the market today. When the bid cap goes up, a set of penalty price parameters are doubled so that priorities are preserved. If the bid cap is raised in any hour of the day-ahead market, the penalty prices will be scaled up for all trading hours of the day-ahead market and real-time market for the same trading day. If the bid cap is not raised in any hour of the day-ahead market, but the conditions apply to raise the bid cap in hours of the real-time market, the real-time market will use the scaled up penalty price for all intervals of overlapping real-time market horizons. Stakeholder proposals being considered would allow resource-specific resources to bid above $1,000/MWh without using the RLCR process. Any bid above $1,000/MWh from a resource specific resource as a result of these proposals would be considered ‘cost-verified’ by ISO system logic for the purposes of raising the energy bid cap and scaling penalty prices, and informing the logic that applies to unspecified imports that are RA.

Cal Advocates does not comment on this topic at this time.

4. Please provide your perspective on the following questions:

1. Do you consider bids above $1,000/MWh but within the range of an uncapped DEB value to be cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the maximum import bid price (MIBP) and highest cost-verified bid?

Cal Advocates does not respond to this question at this time.

5. Please provide your perspective on the following questions:

2. Do you consider bids above $1,000/MWh and above a DEB value to be considered cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the MIBP and highest cost-verified bid?

Cal Advocates does not respond to this question at this time.

6. Please comment on whether bid cap changes discussed here should apply to all resources, or only a subset.

Today, the ISO applies similar bid caps to all resources, with the exception of those capped by the MIBP, RDRR, virtual supply and other resources exempt from the soft offer cap. The ISO is considering Identifying a subset by default energy bid calculation (e.g. hydro DEB, storage DEB, or negotiated DEBs with an opportunity cost component), targeted to those resources identified as having short-term opportunity costs.

Eligibility to Bid Beyond the Soft Bid Cap Should not be Considered in an Expedited Process

The bid caps are necessary to mitigate the exercise of market power and to limit adverse impacts related to imperfect information of short-run marginal costs.[1]  These important ratepayer protections should not be adjusted through this underdeveloped and expedited effort.  Expanding resource eligibility to bid above the soft bid cap should only be considered in a stakeholder process with sufficient time for the CAISO to develop analysis and discussion of how ratepayers would benefit or be harmed by adjustments to the soft bid cap.

[1] Imperfect information here includes bid inputs considered in the day-ahead market that may be estimates or otherwise potentially inaccurate.  Those inputs are part of the verification of cost-based bids that may enable a resource to bid above the soft bid cap.  FERC Docket RM16-5-000 Final Rule, November 17, 2016 (FERC Order 831), paragraphs 83, 87, and 193.  Available at: https://www.ferc.gov/sites/default/files/2020-06/RM16-5-000.pdf.

7. Please provide your organization’s feedback on the 831 data analysis presented.

Cal Advocates does not respond to this question at this time.

8. Do you have any additional questions on the topic that would help with continued policy development discussions?

Market Power Mitigation

The CAISO Balancing Authority Area’s (BAA) local market power mitigation (MPM) process may mitigate a resource’s economic bid down to the resource’s DEB when the automated process determines that regional congestion creates uncompetitive conditions.[1]  If the DEBs are allowed to exceed the soft bid cap,[2] would local MPM’s bid mitigation still effectively address uncompetitive conditions and the potential exercise of market power of that resource?

Accurate Default Energy Bids

The Department of Market Monitoring (DMM) has pointed out that

inaccurately high DEBs have potentially serious consequences, including allowing resources with local market power to avoid being mitigated below these inaccurate DEBs. Inaccurately high DEBs that allow the submission of energy bids over $1,000/MWh when the $2,000/MWh price cap is in effect may also exacerbate issues with bid cost recovery (BCR) payments to storage resources.[3] 

What constitutes an inaccurate DEB?  Are current DEBs including opportunity costs considered “accurate”?  Would proposed modifications to the DEB or enabling DEBs to exceed the soft bid cap be considered “accurate”?  The CAISO as well as stakeholders should coordinate to develop answers to these questions in the Price Formation Enhancements initiative.

[1] CAISO, 2022 Annual Report on market Issues & Performance, July 11, 2023 at 159.  Available at: https://www.caiso.com/Documents/2022-Annual-Report-on-Market-Issues-and-Performance-Jul-11-2023.pdf.

[2] Approach 1 may eliminate the existing $1000/MWh cap on DEBs, while Approach 3 would alter the bid calculation using inputs that could exceed the soft bid cap.  Straw Proposal at 17 and 22. 

[3] DMM, Comments on Price Formation Enhancements Working Group Session 15, March 22, 2024 at 1-2.  Available at: https://stakeholdercenter.caiso.com/Common/DownloadFile/e5cf183c-e3c9-4254-9c66-953c4a12f6bd.

9. Please provide any additional feedback.

Cal Advocates does not provide any additional feedback at this time.

1. Please provide your organization’s perspective on what the objective of the market design for summer 2024 should be.

Problem Statement and market design objective: During the 4/23 working group, stakeholders provided their perspectives around limitations on certain resources bidding above the soft offer cap and what market design changes broadly supported by stakeholders could address bidding limitations. For example, some stakeholders support an approach that ensures resources can protect state of charge during any hour of the day, while other stakeholders support an approach to more accurately capture opportunity costs.

The California Energy Storage Alliance (CESA) appreciates the opportunity to comment on the Feasibility Assessment and Straw Proposal.  CESA notes that an August 1 implementation target is not consistent with requests made by stakeholders since the start of 2024 to implement changes before Summer 2024.  CAISO’s lack of urgency earlier in the year and delays in discussing implementation details is why no change can be implemented before Summer 2024.  Nevertheless, CAISO should still bring to the May Board of Governors and EIM Governing Body proposed interim changes to allow resources with intraday opportunity costs to reflect their short-run marginal costs consistent with FERC Order No. 831. Holistic changes should be discussed as part of the upcoming Scarcity Pricing initiative which should review all FERC Order No. 831 related rules to ensure those rules do not undermine the scarcity pricing implementation.

CESA reiterates the intent of its proposed changes is to position resources with intraday opportunity costs in the real-time market bid stack to prevent inefficient dispatch relative to day-ahead schedules.  CESA believes that positioning storage resources at the correct level of the bid stack is a sufficient representation of intraday opportunity costs and justifies the bid to be considered a cost-verified bid.  CESA previously believed that the bid cap of non-resource specific resource adequacy (RA) imports could be used to correctly position storage resources in the real-time bid stack.  However, as illustrated by questions 3-6 below, directly using this approach has “chicken and egg” issues that don’t allow the policy objective to be achieved. 

CESA recommends that the CAISO apply a slightly modified reference level change request (RLCR) process to resources with intraday opportunity costs, such as storage.  For each hour in the day, CAISO will calculate the reference level for storage resources as the maximum of the highest uncapped adjusted DEB in the footprint and the hourly maximum import bid price (MIBP).  The reference level would be calculated once per day, prior to the start of the real-time market. During high price conditions in the real-time market, if the storage resource’s bid is less than this reference level, the bid is cost-verified.  If the storage resource’s bid is higher than this reference level, the bid is reduced to the reference level and is cost-verified.  Since the storage bid is cost verified, this becomes the adjusted DEB for the hour.

This approach does not change the logic used for establishing the bid cap for non-resource specific RA imports which is the maximum of the highest cost-verified bid or the MIPB.  Also, based on discussions at the workshop and Market Surveillance Committee, it has become apparent that the issues experienced in the Pacific Northwest in January 2024 were caused primarily by the rule which capped the hydro DEB at $1,000/MWh even though the short-term opportunity cost component in the hydro DEB exceeded $1,000/MWh.  As previously proposed, there may not be a need to change the calculation of the short-term opportunity costs used in the hydro DEB which minimizes the implementation changes.

2. Please provide your organizations feedback on each of the proposals under Approach 1—A, B, C, and D.

CESA believes the interim solution should focus on changes to the RLCR and not exclusively modifications to the bid caps.

3. The ISO is seeking feedback from stakeholders to understand the intended effect of the proposed modifications.

Triggering the bid cap and penalty pricing: Today, one of two conditions must be met to raise the energy bid cap to $2,000/MWh: 1. The market accepts a bid above $1,000/MWh from a resource-specific resource, or 2. The allowable MIBP goes above $1,000/MWh Today, the tariff requires resource-specific resources to successfully cost-verify an adjusted DEB through the reference level change request (RLCR) process in order to bid above $1,000/MWh. From a systems perspective, any bid above $1,000/MWh from a resource specific resource would fulfill the condition to change the energy bid cap. However, the market only clears resource-specific resource bids above $1,000/MWh that have been successfully verified through the RLCR process because that is the only way for resource-specific resources to reflect a bid above $1,000/MWh in the market today. When the bid cap goes up, a set of penalty price parameters are doubled so that priorities are preserved. If the bid cap is raised in any hour of the day-ahead market, the penalty prices will be scaled up for all trading hours of the day-ahead market and real-time market for the same trading day. If the bid cap is not raised in any hour of the day-ahead market, but the conditions apply to raise the bid cap in hours of the real-time market, the real-time market will use the scaled up penalty price for all intervals of overlapping real-time market horizons. Stakeholder proposals being considered would allow resource-specific resources to bid above $1,000/MWh without using the RLCR process. Any bid above $1,000/MWh from a resource specific resource as a result of these proposals would be considered ‘cost-verified’ by ISO system logic for the purposes of raising the energy bid cap and scaling penalty prices, and informing the logic that applies to unspecified imports that are RA.

The discussion of changing penalty prices and the real-time bid cap for non-resource specific non-RA imports and exports isn’t relevant to the issue at hand.  Any change which results in a cost-verified bid or when the MIBP is above $1,000 will continue to automatically raise penalty prices and the bid cap for certain resources.

CESA’s proposal seeks to leverage the existing RLCR process for resources with intraday opportunity costs, this approach can approve a cost-verified bid consistent with the correct ordering of the bid stack necessary to prevent inefficient dispatch of storage resources in the real-time market inconsistent with day-ahead or WEIM base schedules.   

4. Please provide your perspective on the following questions:

1. Do you consider bids above $1,000/MWh but within the range of an uncapped DEB value to be cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the maximum import bid price (MIBP) and highest cost-verified bid?

If the uncapped DEB of a storage resource or hydro resource is greater than $1,000, by definition any bid below the uncapped DEB is a cost-verified bid and should be used for setting the bid cap of non-resource specific RA imports.  Not doing so is inconsistent with FERC Order No. 831.

5. Please provide your perspective on the following questions:

2. Do you consider bids above $1,000/MWh and above a DEB value to be considered cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the MIBP and highest cost-verified bid?

CESA’s interim proposal is to slightly modify the RLCR process by setting a reasonableness threshold allowing storage resources to submit reference level change request to adjust the DEB to the correct positioning of the storage resource in the bid stack of each real-time market operating hour.  CESA believes that this level in the bid stack is a reasonable approximation of the real-time intraday opportunity costs not currently reflected in the uncapped DEB calculation for storage resources because this cost-verified bid will prevent inappropriately discharging the storage resource earlier. 

6. Please comment on whether bid cap changes discussed here should apply to all resources, or only a subset.

Today, the ISO applies similar bid caps to all resources, with the exception of those capped by the MIBP, RDRR, virtual supply and other resources exempt from the soft offer cap. The ISO is considering Identifying a subset by default energy bid calculation (e.g. hydro DEB, storage DEB, or negotiated DEBs with an opportunity cost component), targeted to those resources identified as having short-term opportunity costs.

CESA does not propose any changes to the bid caps for those capped by MIBP, RDRR, non-resource specific non-RA imports or exports that are exempt from the soft offer cap.  CESA’s interim proposal is targeted at the RLCR process for only resources with real-time intraday opportunity costs.  CESA’s interim proposal is to apply the modified RLCR process only in the real-time market.

7. Please provide your organization’s feedback on the 831 data analysis presented.

The analysis was helpful in clarifying the current FERC Order No. 831 implementation approach and highlighted that seldom is there a cost-verified bid which sets the hourly bid cap for non-resource specific RA imports.  The graphs illustrate that setting the reasonableness threshold at the higher of the uncapped DEB or MIBP would result in storage resources cost-verified bids to align with the correct positioning in the real-time market bid stack.  CESA does agree with comments from the MSC that comparing to the system marginal energy cost understates the magnitude of the issue at hand across the broader WEIM footprint.

8. Do you have any additional questions on the topic that would help with continued policy development discussions?

No. 

9. Please provide any additional feedback.

Holistic changes should be discussed as part of the upcoming Scarcity Pricing initiative which should review all FERC Order No. 831 related rules to ensure those rules do not undermine the scarcity pricing implementation.

1. Please provide your organization’s perspective on what the objective of the market design for summer 2024 should be.

Problem Statement and market design objective: During the 4/23 working group, stakeholders provided their perspectives around limitations on certain resources bidding above the soft offer cap and what market design changes broadly supported by stakeholders could address bidding limitations. For example, some stakeholders support an approach that ensures resources can protect state of charge during any hour of the day, while other stakeholders support an approach to more accurately capture opportunity costs.

NV Energy appreciates the opportunity comment in this expedited stakeholder initiative and commends CAISO for taking up an issue mentioned in the Regional Issues Forum on such a quick timeframe for stakeholder consideration. NV Energy supports the problem statement that energy storage resources should be able to reflect a bid high enough to preserve their state of charge in order to discharge at the highest priced hours when the resource is needed.

Based on the risks that were discussed in the April 23^rd stakeholder call; however, NV Energy does not support a push to implement a solution by August 1, 2024, even if that was feasible. The proposed solutions that might be technologically feasible for an interim late-Summer 2024 implementation come with risks that should be thoroughly vetted with stakeholders rather than pushed forward with a resolution that may or may not resolve the problem statement. 

Given that the proposed timeline to implement such a large market change maybe nearly impossible to accomplish even by late-Summer 2024 and the CAISO has admitted that the technology risk is high for implementation, NV Energy submits it would be preferrable to work through the remainder of 2024 to develop a preferable, interim solution for that could be implemented still on an expedited basis for the Summer of 2025. Meaning, NV Energy believes that by pursuing an interim solution for a potential Summer 2024 implementation, stakeholders may not have sufficient time to vet either a more developed interim or even a permanent solution for implementation prior to Summer 2025. NV Energy does support the importance of this issue but would like to consider the Department of Market Monitor’s (“DMM”) and other stakeholder proposals that were determined to be infeasible for a Summer 2024 implementation.

2. Please provide your organizations feedback on each of the proposals under Approach 1—A, B, C, and D.

To reiterate, NV Energy does not support any of the proposed options for an interim solution to be implemented by or during Summer 2024.

3. The ISO is seeking feedback from stakeholders to understand the intended effect of the proposed modifications.

Triggering the bid cap and penalty pricing: Today, one of two conditions must be met to raise the energy bid cap to $2,000/MWh: 1. The market accepts a bid above $1,000/MWh from a resource-specific resource, or 2. The allowable MIBP goes above $1,000/MWh Today, the tariff requires resource-specific resources to successfully cost-verify an adjusted DEB through the reference level change request (RLCR) process in order to bid above $1,000/MWh. From a systems perspective, any bid above $1,000/MWh from a resource specific resource would fulfill the condition to change the energy bid cap. However, the market only clears resource-specific resource bids above $1,000/MWh that have been successfully verified through the RLCR process because that is the only way for resource-specific resources to reflect a bid above $1,000/MWh in the market today. When the bid cap goes up, a set of penalty price parameters are doubled so that priorities are preserved. If the bid cap is raised in any hour of the day-ahead market, the penalty prices will be scaled up for all trading hours of the day-ahead market and real-time market for the same trading day. If the bid cap is not raised in any hour of the day-ahead market, but the conditions apply to raise the bid cap in hours of the real-time market, the real-time market will use the scaled up penalty price for all intervals of overlapping real-time market horizons. Stakeholder proposals being considered would allow resource-specific resources to bid above $1,000/MWh without using the RLCR process. Any bid above $1,000/MWh from a resource specific resource as a result of these proposals would be considered ‘cost-verified’ by ISO system logic for the purposes of raising the energy bid cap and scaling penalty prices, and informing the logic that applies to unspecified imports that are RA.

NV Energy would like additional time to carefully consider these questions and the tradeoffs for each proposed market design.

4. Please provide your perspective on the following questions:

1. Do you consider bids above $1,000/MWh but within the range of an uncapped DEB value to be cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the maximum import bid price (MIBP) and highest cost-verified bid?

5. Please provide your perspective on the following questions:

2. Do you consider bids above $1,000/MWh and above a DEB value to be considered cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the MIBP and highest cost-verified bid?

6. Please comment on whether bid cap changes discussed here should apply to all resources, or only a subset.

Today, the ISO applies similar bid caps to all resources, with the exception of those capped by the MIBP, RDRR, virtual supply and other resources exempt from the soft offer cap. The ISO is considering Identifying a subset by default energy bid calculation (e.g. hydro DEB, storage DEB, or negotiated DEBs with an opportunity cost component), targeted to those resources identified as having short-term opportunity costs.

7. Please provide your organization’s feedback on the 831 data analysis presented.

8. Do you have any additional questions on the topic that would help with continued policy development discussions?

9. Please provide any additional feedback.

1. Please provide your organization’s perspective on what the objective of the market design for summer 2024 should be.

Problem Statement and market design objective: During the 4/23 working group, stakeholders provided their perspectives around limitations on certain resources bidding above the soft offer cap and what market design changes broadly supported by stakeholders could address bidding limitations. For example, some stakeholders support an approach that ensures resources can protect state of charge during any hour of the day, while other stakeholders support an approach to more accurately capture opportunity costs.

PG&E considers the inability of storage resources to bid over $1,000/MWh during stressed system conditions an urgent issue that deserves prompt action. However, over the course of the last few working groups, it has been demonstrated that the currently proposed solutions either do not address the core problem and/or come with significant risks. If a clear alternative is presented which stakeholders agree upon, PG&E would be open to summer 2024 implementation. Otherwise, PG&E recommends that these important stakeholder discussions continue in a formalized policy initiative, with a proposed implementation timeline of spring or summer 2025.

2. Please provide your organizations feedback on each of the proposals under Approach 1—A, B, C, and D.

Proposal A

As an initial step, PG&E is supportive of allowing uncapped DEBs to be above $1,000/MWh. However, as CAISO points out, this proposal would not address the problem statement of premature depletion of storage/hydro capacity.

Proposal B

Based on the data and discussion around the proposal for using the DA MEC as a bid cap, PG&E does not support this proposal as an appropriate solution.

Proposal C

While this proposal most closely reflects PG&E’s initial recommendation, the CAISO explained how the complications of accessing energy bid cap data (e.g. from cost-verified bids) across ISO systems make this option infeasible for summer 2024 implementation. If PG&E’s interpretation is incorrect, and the proposal is still valid, the CAISO should clarify this point.

Proposal D

PG&E does not support an approach which takes the highest priced MIBP and applies it to hydro/storage bid caps for a full 24-hour period. Such an approach bears significant risks of distorting the real-time market and therefore should be avoided. Using the real-time MIBP, which is shaped hourly, is a better approach by comparison, but still comes with risks pointed out by the CAISO and the CPUC. Therefore PG&E does not support implementation of this proposal by summer 2024.   

3. The ISO is seeking feedback from stakeholders to understand the intended effect of the proposed modifications.

Triggering the bid cap and penalty pricing: Today, one of two conditions must be met to raise the energy bid cap to $2,000/MWh: 1. The market accepts a bid above $1,000/MWh from a resource-specific resource, or 2. The allowable MIBP goes above $1,000/MWh Today, the tariff requires resource-specific resources to successfully cost-verify an adjusted DEB through the reference level change request (RLCR) process in order to bid above $1,000/MWh. From a systems perspective, any bid above $1,000/MWh from a resource specific resource would fulfill the condition to change the energy bid cap. However, the market only clears resource-specific resource bids above $1,000/MWh that have been successfully verified through the RLCR process because that is the only way for resource-specific resources to reflect a bid above $1,000/MWh in the market today. When the bid cap goes up, a set of penalty price parameters are doubled so that priorities are preserved. If the bid cap is raised in any hour of the day-ahead market, the penalty prices will be scaled up for all trading hours of the day-ahead market and real-time market for the same trading day. If the bid cap is not raised in any hour of the day-ahead market, but the conditions apply to raise the bid cap in hours of the real-time market, the real-time market will use the scaled up penalty price for all intervals of overlapping real-time market horizons. Stakeholder proposals being considered would allow resource-specific resources to bid above $1,000/MWh without using the RLCR process. Any bid above $1,000/MWh from a resource specific resource as a result of these proposals would be considered ‘cost-verified’ by ISO system logic for the purposes of raising the energy bid cap and scaling penalty prices, and informing the logic that applies to unspecified imports that are RA.

PG&E recognizes the concerns expressed by the CAISO and others regarding the proposed modifications. The CPUC, for example, highlighted the risk of a $2,000/MWh cap being applied to hydro and storage resources for a full 24-hour period. The DMM pointed out that intraday opportunity costs for storage should be addressed in the storage DEB, which requires a longer-term stakeholder effort. PG&E supports continuing these important policy considerations in what has been a series of productive and informative working groups. 

4. Please provide your perspective on the following questions:

1. Do you consider bids above $1,000/MWh but within the range of an uncapped DEB value to be cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the maximum import bid price (MIBP) and highest cost-verified bid?

Within the range of an uncapped DEB?

Yes, PG&E considers the DEB calculations created and approved by the CAISO to be cost-verified, even if they exceed $1,000/MWh.

To inform the logic that applies to non-resource-specific imports?

Yes, as cost-verified bids, uncapped DEBs would be considered in the comparison between higher of MIBP and highest cost-verified bids. 

To inform the logic allowing resource-specific battery storage and hydro bids to bid to the higher of the MIBP and highest cost-verified bid?

Yes, as cost-verified bids, uncapped DEBs would be considered in the comparison between higher of MIBP and highest cost-verified bids. 

5. Please provide your perspective on the following questions:

2. Do you consider bids above $1,000/MWh and above a DEB value to be considered cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the MIBP and highest cost-verified bid?

Above the range of an uncapped DEB? 

No, bids above $1,000/MWh and above the uncapped DEB (e.g. for storage and hydro) would not be considered cost-verified. However, if a bid from a thermal resource was cost-verified (via the automated or manual reference level change request process) at such a level, there may be an argument for allowing bids from other resources (such as storage) at this level in order to keep a level playing field. More stakeholder discussion is required to inform policy recommendations on this topic.

To inform the logic that applies to non-resource-specific imports?

No, except for the situation described in the previous response where a thermal bid was cost-verified (via the automated or manual reference level change request process) at such a level.

To inform the logic allowing resource-specific battery storage and hydro bids to bid to the higher of the MIBP and highest cost-verified bid?

No, except for the situation described in the previous response where a thermal bid was cost-verified (via the automated or manual reference level change request process) at such a level.

6. Please comment on whether bid cap changes discussed here should apply to all resources, or only a subset.

Today, the ISO applies similar bid caps to all resources, with the exception of those capped by the MIBP, RDRR, virtual supply and other resources exempt from the soft offer cap. The ISO is considering Identifying a subset by default energy bid calculation (e.g. hydro DEB, storage DEB, or negotiated DEBs with an opportunity cost component), targeted to those resources identified as having short-term opportunity costs.

PG&E agrees with other stakeholders that the scope of a short-term solution should be limited to storage resources to the extent possible. However, based on information presented by the CAISO in the working groups, the structure of CAISO systems makes applying that limitation difficult. PG&E would be interested in learning about any proposals for bid cap changes which only apply to storage resources.

7. Please provide your organization’s feedback on the 831 data analysis presented.

PG&E applauds the CAISO for preparing and presenting the 831 data analysis; the analysis has been helpful to inform the policy discussions.

8. Do you have any additional questions on the topic that would help with continued policy development discussions?

9. Please provide any additional feedback.

1. Please provide your organization’s perspective on what the objective of the market design for summer 2024 should be.

Problem Statement and market design objective: During the 4/23 working group, stakeholders provided their perspectives around limitations on certain resources bidding above the soft offer cap and what market design changes broadly supported by stakeholders could address bidding limitations. For example, some stakeholders support an approach that ensures resources can protect state of charge during any hour of the day, while other stakeholders support an approach to more accurately capture opportunity costs.

PacifiCorp believes allowing hydro resources to bid above the soft offer cap during days when FERC Order 831 conditions are triggered will give hydro resource owners the ability to protect their reservoir levels during midday hours so that hydro capacity is available during peak hours. In PacifiCorp’s opinion, it is also important that storage resource owners are able to protect their state of charge during the midday hours so that storage resources can be dispatched over peak hours.

2. Please provide your organizations feedback on each of the proposals under Approach 1—A, B, C, and D.

Since PacifiCorp’s preferred approach of expanding the reference level change request process for hydro and storage resources is not feasible for this summer, PacifiCorp believes the next best option is to remove the default energy bid (DEB) caps for all resources and cap resource bids by the higher of the soft offer cap or default energy bid. PacifiCorp believes this is a sufficient option for the following reasons:

• The option has the lowest regulatory risk. PacifiCorp has concerns that the other approaches may not be acceptable for FERC since resource bids above $1,000/MWh will not be cost-verified. In PacifiCorp’s opinion, using DEBs to cap resource bids is a justifiable way for the CAISO to cost-verify since DEBs reflect resource costs based on calculations developed by the CAISO and stakeholders.
• There is no risk of bids above the soft offer cap being mitigated at or below the soft offer cap for bids being capped by a default energy bid.
• The approach is resource-agnostic for resources with DEBs. In other approaches, hydro and storage resources would be able to bid up to a pre-determined price cap while other resources would not be able to. By removing the DEB cap for all resources with DEBs, resources will have the same opportunity to bid above the soft offer cap when justified by DEBs that are greater than the soft offer cap.
• The gas floor and short-term components are likely high enough to allow hydro resources to bid above gas resources due to the relatively high heat rate used in the gas floor calculation and the 140% multiplier in the short-term component calculation.

While removing the DEB cap may achieve the goal of allowing hydro resource owners to protect reservoir levels, PacifiCorp would like to better understand whether it can achieve the goal of allowing storage resource owners to protect their state of charge. PacifiCorp requests to hear from storage resource owners if removing DEB caps and utilizing the CAISO’s current tools for managing state of charge will be sufficient for managing storage resources this summer.

3. The ISO is seeking feedback from stakeholders to understand the intended effect of the proposed modifications.

Triggering the bid cap and penalty pricing: Today, one of two conditions must be met to raise the energy bid cap to $2,000/MWh: 1. The market accepts a bid above $1,000/MWh from a resource-specific resource, or 2. The allowable MIBP goes above $1,000/MWh Today, the tariff requires resource-specific resources to successfully cost-verify an adjusted DEB through the reference level change request (RLCR) process in order to bid above $1,000/MWh. From a systems perspective, any bid above $1,000/MWh from a resource specific resource would fulfill the condition to change the energy bid cap. However, the market only clears resource-specific resource bids above $1,000/MWh that have been successfully verified through the RLCR process because that is the only way for resource-specific resources to reflect a bid above $1,000/MWh in the market today. When the bid cap goes up, a set of penalty price parameters are doubled so that priorities are preserved. If the bid cap is raised in any hour of the day-ahead market, the penalty prices will be scaled up for all trading hours of the day-ahead market and real-time market for the same trading day. If the bid cap is not raised in any hour of the day-ahead market, but the conditions apply to raise the bid cap in hours of the real-time market, the real-time market will use the scaled up penalty price for all intervals of overlapping real-time market horizons. Stakeholder proposals being considered would allow resource-specific resources to bid above $1,000/MWh without using the RLCR process. Any bid above $1,000/MWh from a resource specific resource as a result of these proposals would be considered ‘cost-verified’ by ISO system logic for the purposes of raising the energy bid cap and scaling penalty prices, and informing the logic that applies to unspecified imports that are RA.

PacifiCorp acknowledges that under the current proposals, penalty prices will be based on the hard offer cap anytime the CAISO receives a bid over $1,000/MWh. PacifiCorp does not fully understand all the implications of potentially having higher penalty prices more frequently and so PacifiCorp requests the CAISO comment on this in the next stakeholder meeting.

4. Please provide your perspective on the following questions:

1. Do you consider bids above $1,000/MWh but within the range of an uncapped DEB value to be cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the maximum import bid price (MIBP) and highest cost-verified bid?

PacifiCorp does consider bids above $1,000/MWh but below a resource’s uncapped DEB to be cost-verified and that the bids meet the criteria for informing the logic that applies to non-resource-specific imports that are RA. PacifiCorp does not necessarily disagree that the bids should inform the logic for hydro and storage resources to bid up to the higher of the MIBP or highest cost-verified bid, but PacifiCorp prefers that all resources with DEBs have bids capped at their uncapped DEB.

5. Please provide your perspective on the following questions:

2. Do you consider bids above $1,000/MWh and above a DEB value to be considered cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the MIBP and highest cost-verified bid?

PacifiCorp has concerns with the regulatory risk associated with allowing hydro and storage resources to bid to the higher of the MIBP or cost-verified bid. In PacifiCorp’s opinion, assuming the MIBP or highest cost-verified bid is equal to the opportunity cost for all hydro and storage resources may not meet the standards for cost-verifying as intended by FERC in Order 831. Furthermore, if FERC finds it unreasonable for the MIBP or highest cost-verified bid to be the opportunity cost for hydro and storage resources, and ultimately rejects any CAISO tariff change, it will not be possible for the CAISO to implement any changes before this summer. Therefore, PacifiCorp is in favor of taking an approach that minimizes regulatory risk.

6. Please comment on whether bid cap changes discussed here should apply to all resources, or only a subset.

Today, the ISO applies similar bid caps to all resources, with the exception of those capped by the MIBP, RDRR, virtual supply and other resources exempt from the soft offer cap. The ISO is considering Identifying a subset by default energy bid calculation (e.g. hydro DEB, storage DEB, or negotiated DEBs with an opportunity cost component), targeted to those resources identified as having short-term opportunity costs.

If the CAISO moves forward with using the uncapped DEB for a resource’s bid cap, then it should apply to all resources with a DEB. PacifiCorp does not believe that only resources with an opportunity cost component in the DEB should be allowed to bid above $1,000/MWh without going through the cost-verification process in place today. In PacifiCorp’s opinion, any interim solution should be as resource-agnostic as possible.

7. Please provide your organization’s feedback on the 831 data analysis presented.

PacifiCorp appreciates the CAISO providing stakeholders with data analysis during FERC Order 831 conditions. PacifiCorp found the counterfactual DEBs particularly interesting and believes it would also be useful to see the counterfactual DEBs of gas resources for the same days. This would give stakeholders a better understanding of whether hydro and storage resources would have been able to bid themselves higher in the bid stack than gas on ‘831’ days.

8. Do you have any additional questions on the topic that would help with continued policy development discussions?

PacifiCorp requests the CAISO explain to stakeholders some of the implications of potentially having penalty prices based on the hard offer cap for more intervals this year than in previous years. PacifiCorp believes changes to the bidding rules will cause penalty prices to be higher more often because resources will be able to bid above $1,000/MWh more frequently.

9. Please provide any additional feedback.

PacifiCorp appreciates the CAISO and stakeholders’ commitment to finding solutions that can be implemented this summer. PacifiCorp commends the CAISO’s willingness to fast-track the policy development process due to concerns raised by stakeholders. Furthermore, PacifiCorp believes stakeholders have a common level of understanding about the challenges and current market processes due to presentations by the CAISO and the Issue Paper, which has led to robust discussions in the working group meetings. PacifiCorp asks the CAISO to continue providing insight into the feasibility of implementing market changes and the risks associated with those changes.  

1. Please provide your organization’s perspective on what the objective of the market design for summer 2024 should be.

Problem Statement and market design objective: During the 4/23 working group, stakeholders provided their perspectives around limitations on certain resources bidding above the soft offer cap and what market design changes broadly supported by stakeholders could address bidding limitations. For example, some stakeholders support an approach that ensures resources can protect state of charge during any hour of the day, while other stakeholders support an approach to more accurately capture opportunity costs.

Portland General Electric (“PGE” or “the Company”) appreciates the opportunity to supply feedback on the CAISO’s April 23 stakeholder meeting on the issue paper and stakeholder recommendations.  As PGE noted in its April 19 comments, the Company is strongly supportive of an expedited interim solution that would allow for bidding of hydro and storage resources above the $1000 price cap and could be implemented by July 1, 2024.

PGE’s priority is reliability and water management are key to reliability in the PNW; therefore, the Company is looking for more control over water during price scarcity events. PGE is supportive of Approach 1 as the interim solution until Approach 3 can be implemented. Approach 3 enhances a resources’ ability to use the reference level change request process, which introduces technical constraints if implemented; however, this approach provides a more effective solution to water management. Unfortunately, PGE cannot wait for the implementation of Approach 3 and needs a change to the current approach for this summer. The current soft cap of $1,000 no longer protects ponds from the market and puts hydro-entities at risk. For example, slide 58 of the CAISO’s April 23 presentation shows how the soft cap of $1,000 was unable to allow ponds to refill as the price was above the cap for most hours of January 14, 2024. Approach 1 allows for resources to bid up to a pre-determined cap and seems like a more feasible solution for FERC to approve on the path to implementing Approach 3.

PGE continues to be supportive of continued conversations and stakeholder meetings upon completion of an interim solution for this summer while a comprehensive solution can take effect in Summer 2025.

2. Please provide your organizations feedback on each of the proposals under Approach 1—A, B, C, and D.

Generally, PGE is supportive of Approach 1 as a short-term solution due to the expediency of implementation. Removing the soft offer cap and allowing resources to bid up to a specified cap that is “cost verified” will allow PGE to water manage its hydro resources more effectively until a longer-term solution can be implemented, such as Approach 3.

3. The ISO is seeking feedback from stakeholders to understand the intended effect of the proposed modifications.

Triggering the bid cap and penalty pricing: Today, one of two conditions must be met to raise the energy bid cap to $2,000/MWh: 1. The market accepts a bid above $1,000/MWh from a resource-specific resource, or 2. The allowable MIBP goes above $1,000/MWh Today, the tariff requires resource-specific resources to successfully cost-verify an adjusted DEB through the reference level change request (RLCR) process in order to bid above $1,000/MWh. From a systems perspective, any bid above $1,000/MWh from a resource specific resource would fulfill the condition to change the energy bid cap. However, the market only clears resource-specific resource bids above $1,000/MWh that have been successfully verified through the RLCR process because that is the only way for resource-specific resources to reflect a bid above $1,000/MWh in the market today. When the bid cap goes up, a set of penalty price parameters are doubled so that priorities are preserved. If the bid cap is raised in any hour of the day-ahead market, the penalty prices will be scaled up for all trading hours of the day-ahead market and real-time market for the same trading day. If the bid cap is not raised in any hour of the day-ahead market, but the conditions apply to raise the bid cap in hours of the real-time market, the real-time market will use the scaled up penalty price for all intervals of overlapping real-time market horizons. Stakeholder proposals being considered would allow resource-specific resources to bid above $1,000/MWh without using the RLCR process. Any bid above $1,000/MWh from a resource specific resource as a result of these proposals would be considered ‘cost-verified’ by ISO system logic for the purposes of raising the energy bid cap and scaling penalty prices, and informing the logic that applies to unspecified imports that are RA.

Based on the scenario in this question, PGE is supportive of the proposed modification as an interim solution for this summer because it is setting the cap for the day ahead and real time market based on the highest accepted day ahead market for all hours. The intent to manage hydro resources is predicated on the most expensive hour for water management.

4. Please provide your perspective on the following questions:

1. Do you consider bids above $1,000/MWh but within the range of an uncapped DEB value to be cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the maximum import bid price (MIBP) and highest cost-verified bid?

PGE supports this option as an interim solution. From PGE’s standpoint, the opportunity cost (i.e., MIBP) being included in the DEB justification would be cost-verified because the opportunity cost is set by the market for both hydro and BES resources. While readjusting the DEB calculation could be challenging from the CAISO’s perspective, this is the correct solution for a long-term solution.

5. Please provide your perspective on the following questions:

2. Do you consider bids above $1,000/MWh and above a DEB value to be considered cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the MIBP and highest cost-verified bid?

Based on the information provided in the working group, PGE understands this to be cost verified. For price scarcity events, PGE believes this is a short-term solution. PGE would encourage the CAISO to evaluate, after the summer, the calculations to hydro DEBs to reflect the opportunity cost similar to Approach 3 for a longer term intraday solution.

6. Please comment on whether bid cap changes discussed here should apply to all resources, or only a subset.

Today, the ISO applies similar bid caps to all resources, with the exception of those capped by the MIBP, RDRR, virtual supply and other resources exempt from the soft offer cap. The ISO is considering Identifying a subset by default energy bid calculation (e.g. hydro DEB, storage DEB, or negotiated DEBs with an opportunity cost component), targeted to those resources identified as having short-term opportunity costs.

Bid cap changes should apply to a subset of resources, such as hydro and battery energy storage, that charge from the energy wholesale market. These are fuel and physical limited resources where you can discharge only so much without the ability to refill or recharge.

7. Please provide your organization’s feedback on the 831 data analysis presented.

 PGE has no comment at this time.

8. Do you have any additional questions on the topic that would help with continued policy development discussions?

9. Please provide any additional feedback.

1. Please provide your organization’s perspective on what the objective of the market design for summer 2024 should be.

Problem Statement and market design objective: During the 4/23 working group, stakeholders provided their perspectives around limitations on certain resources bidding above the soft offer cap and what market design changes broadly supported by stakeholders could address bidding limitations. For example, some stakeholders support an approach that ensures resources can protect state of charge during any hour of the day, while other stakeholders support an approach to more accurately capture opportunity costs.

PGP agrees with the problem statements from the issue paper and would like to reiterate problem statement 3: “Scheduling coordinators of non-gas resource-specific resources have challenges verifying and reflecting costs in the market when costs are above $1000/MWh. DEBs are capped at $1,000/MWh unless the SC cost-verifies a higher DEB through the RLCR process. The reasonableness threshold, which is based on the variable cost DEB and used in the automated RLCR process, is insufficient to validate DEB adjustments for non-gas resources and enable cost-verified bidding above $1,000/MWh.”

From PGP’s perspective, the core objective for the short-term solution is to find a mechanism for resources with intra-day opportunity costs to submit automatically cost-verified bids above $1000 when those costs are reflected in the market. Other objectives that should be considered within scope for summer 2024 include:

-During tight system conditions current rules can result in premature market dispatch of resources and exhaustion of limited fuel, this concern leaves participants stuck with limiting market participation and losing access to market benefits. PGP is seeking an in-market solution that allows EIM BAs the flexibility to appropriately manage their systems and preserve limited energy for the times of day with the highest need, while continuing to participate in the market, rather than a solution that encourages self-scheduling and limited market participation.  

-The solution implemented for summer should be compatible with supplemental add-on solutions or refinements that may be introduced through further work on this topic. PGP believes some options under consideration in the narrowed feasible solution set meet this objective, as discussed further in question 2 below.

PGP recognizes and appreciates the complexity of this topic and the broader questions and issues that it raises in relation to the CAISO’s current approach to FERC Order 831 compliance, interaction with bilateral markets, and interaction with differing participation frameworks for the CAISO DA market participants vs WEIM participants. A longer-term solution should seek to address these broader topics and should also be more comprehensively linked to the EDAM and related scarcity design that is within scope of the Price Formation Enhancements initiative. PGP supports further work on this topic with the goal of more comprehensive design improvements by winter 2024/2025 if feasible.

2. Please provide your organizations feedback on each of the proposals under Approach 1—A, B, C, and D.

1. PGP supports approach A as a reasonable solution for summer 2024 until a longer-term solution can be found. Benefits of this solution include the relatively lower technology risk compared to the other options and alignment with FERC precedent. This solution meets or partially meets our summer 2024 objectives above, in that it allows resources to automatically verify and reflect costs when the rise above $1000 and it could be a starting point for other design modifications such as DEB calculation modifications, granularity updates, or later updates to the broader 831 implementation design including the MIBP calculations.
2. The analysis showing the disconnect between the MEC and the uncapped DEB calculations demonstrated that this is not a solution that will work for the broader regional market and the high technology risk presented with this potential solution makes it not a viable option for consideration for summer 2024. PGP recommends tabling this option until the group can discuss alignment with broader EDAM design.
3. While PGP recognizes there are outstanding concerns about the MIBP calculation and the reliance on potentially illiquid or locationally sensitive bilateral prices with potentially inaccurate price-scalars based on the CAISO system, and that there are further implications of introducing hourly shapes in the price, we see both options C and D as potentially reasonable representations of opportunity costs in the market for resources with intra-day storage. Further exploration of these may be warranted alongside future discussions that cover refinements to the MIBP logic, improved granularity of DEB calculations, and/or improved look-ahead functionality in Real-Time.
4. As calculated, the higher of the MIBP, highest cost verified bid, and the uncapped DEB is still representative of the intra-day opportunity costs for resources wtih intra-day storage. This construct may be closer to the ideal solution than option A. Given the feasibility tradeoffs, adressing the DEB cap first may be appropriate if it enables earlier implementation and consideration of this as an add-on later.

3. The ISO is seeking feedback from stakeholders to understand the intended effect of the proposed modifications.

Triggering the bid cap and penalty pricing: Today, one of two conditions must be met to raise the energy bid cap to $2,000/MWh: 1. The market accepts a bid above $1,000/MWh from a resource-specific resource, or 2. The allowable MIBP goes above $1,000/MWh Today, the tariff requires resource-specific resources to successfully cost-verify an adjusted DEB through the reference level change request (RLCR) process in order to bid above $1,000/MWh. From a systems perspective, any bid above $1,000/MWh from a resource specific resource would fulfill the condition to change the energy bid cap. However, the market only clears resource-specific resource bids above $1,000/MWh that have been successfully verified through the RLCR process because that is the only way for resource-specific resources to reflect a bid above $1,000/MWh in the market today. When the bid cap goes up, a set of penalty price parameters are doubled so that priorities are preserved. If the bid cap is raised in any hour of the day-ahead market, the penalty prices will be scaled up for all trading hours of the day-ahead market and real-time market for the same trading day. If the bid cap is not raised in any hour of the day-ahead market, but the conditions apply to raise the bid cap in hours of the real-time market, the real-time market will use the scaled up penalty price for all intervals of overlapping real-time market horizons. Stakeholder proposals being considered would allow resource-specific resources to bid above $1,000/MWh without using the RLCR process. Any bid above $1,000/MWh from a resource specific resource as a result of these proposals would be considered ‘cost-verified’ by ISO system logic for the purposes of raising the energy bid cap and scaling penalty prices, and informing the logic that applies to unspecified imports that are RA.

The intended effect is to enable resources with intra-day opportunity cost to appropriately represent those costs in their bids even when costs rise above $1000/MWh.

4. Please provide your perspective on the following questions:

1. Do you consider bids above $1,000/MWh but within the range of an uncapped DEB value to be cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the maximum import bid price (MIBP) and highest cost-verified bid?

Do you consider bids above $1,000/MWh but within the range of an uncapped DEB value to be cost-verified? Yes- the DEB calculations have undergone extensive stakeholder process and are a transparent representation of costs for these resources. PGP suggests that the $1000 cap overriding these was counter to the intent of order 831.

Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Yes but we recommend further refinement to the MIBP logic based on issues raised by the MSC and others during this process and in response to the original 831 compliance filing.

Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the maximum import bid price (MIBP) and highest cost-verified bid? Yes, the DEBs are designed to provide an accurate approximation of costs for these resource types.

Further design discussion should address the appropriate level of transparency and market communication of conditions/costs and later dialogue about compatibility with EDAM should ensure that this doesn’t introduce market distortions such as extreme congestion prices with minimal market management tools due to a lack of regionality in these prices.  Scenarios where resource mix, fuel prices and bilateral prices introduce large locational spreads within the broader footprint should be evaluated further to establish the appropriate/comprehensive design in these situations.

5. Please provide your perspective on the following questions:

2. Do you consider bids above $1,000/MWh and above a DEB value to be considered cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the MIBP and highest cost-verified bid?

PGP recommends additional dialogue around this concept.

6. Please comment on whether bid cap changes discussed here should apply to all resources, or only a subset.

Today, the ISO applies similar bid caps to all resources, with the exception of those capped by the MIBP, RDRR, virtual supply and other resources exempt from the soft offer cap. The ISO is considering Identifying a subset by default energy bid calculation (e.g. hydro DEB, storage DEB, or negotiated DEBs with an opportunity cost component), targeted to those resources identified as having short-term opportunity costs.

For the summer 2024 solution the subset listed here is reasonable for inclusion. In particular, Storage and Hydro resources with intra-day opportunity cost make up a significant portion of the resources in the WEIM and therefore need immediate resolution to encourage reliable operations and equitable market outcomes during this summer.

7. Please provide your organization’s feedback on the 831 data analysis presented.

PGP appreciates the analysis provided but recommends that it is difficult to interpret without showing a more localized analysis for the WEIM areas vs the CAISO. Given what was presented, we also posit that it indicates we should expect to see competitive behavior and bidding at a wide range of prices, even if the cap is lifted or resources are enabled to bid up to the MIBP or highest cost-verified bid. If this was not the case, the analysis would show significantly more resources bidding at the $1000 cap when their DEB calculations were indicating prices above that. PGP would like to understand if the CAISO agrees that this is a reasonable inference to make from the analysis provided, and if this should alleviate concerns raised by some stakeholders about all resources just offering at the highest possible price during these conditions.

To better understand localized calculations, PGP suggests that the MEC option may only be appropriate in an EDAM design construct, in which case it would be the BA-level MEC in these situations. Further analysis of this using localized prices may improve the dialogue on this option for consideration in the suite of long-term options, while the current analysis clearly demonstrates it will not work when using the MEC as a signal for the broader WEIM under today's constructs.

8. Do you have any additional questions on the topic that would help with continued policy development discussions?

PGP would like to see an analysis exploring the role of the DEB caps in the January event this year. It appears from existing analysis that the limits on DEBs, disconnects between the capped DEBs and the bilateral market, and the high prevalence of self-scheduling contributed to some of the issues experienced. Better understanding the issues inherent in the status quo from a regional market perspective will help to guide the broader design discussion towards a viable longer-term solution.

9. Please provide any additional feedback.

PGP appreciates the attention to this important issue and we look forward to continuing to engage in discussions to find a longer-term solution that is ultimately more compatible with the EIM/CAISO participation differences, the EDAM design, scarcity design, and any future seams between markets.

1. Please provide your organization’s perspective on what the objective of the market design for summer 2024 should be.

Problem Statement and market design objective: During the 4/23 working group, stakeholders provided their perspectives around limitations on certain resources bidding above the soft offer cap and what market design changes broadly supported by stakeholders could address bidding limitations. For example, some stakeholders support an approach that ensures resources can protect state of charge during any hour of the day, while other stakeholders support an approach to more accurately capture opportunity costs.

The Salt River Project Agricultural Improvement and Power District (SRP) appreciates the opportunity to submit comments on the feasibility assessment and straw proposal. SRP has a concern with the feasibility of implementation in both short and longer term windows.

2. Please provide your organizations feedback on each of the proposals under Approach 1—A, B, C, and D.

• Base – A variable cost DEB* a scalar ≤ $1000
• A1A – Resource Specific DEB without a DEB Cap
  • SRP does not favor this method as the resource specific DEB is not uncapped.  It is set by the reasonableness threshold which will be set by the similar resources in the market.  A function which is perceived as difficult given the nodal considerations and different maintenance costs associated with like resources.
• A1B – Existing DEB with a Scalar ≤ DEB+Headroom
  • SRP does not support this method as the headroom is indeterminate.  SRP likes the headroom being determined on an hourly basis to provide shaping.
• A1C –Highest DA MEC with a Scalar
  • SRP and the majority of entities favor this process with a caveat.  This process is done daily and is not shaped which many consider to be unrealistic.  SRP recommends CAISO use historical values to determine typical day profile in the specific month.  Use this profile scaled to set reasonableness threshold allowing for hourly shaping computed daily.
• A1D – Max Value of MIBP ≤ $2000
  • SRP favors this method with the same adaptation specified for A1C.  By using historical price shapes to set the hourly shape and the average of the day to set the scalar value or in this case the $2000 participants gain the benefit of an average cap of $2000 with hourly shaping considering the increased pricing of the super peak period and the depressed pricing of the off-peak periods.

3. The ISO is seeking feedback from stakeholders to understand the intended effect of the proposed modifications.

Triggering the bid cap and penalty pricing: Today, one of two conditions must be met to raise the energy bid cap to $2,000/MWh: 1. The market accepts a bid above $1,000/MWh from a resource-specific resource, or 2. The allowable MIBP goes above $1,000/MWh Today, the tariff requires resource-specific resources to successfully cost-verify an adjusted DEB through the reference level change request (RLCR) process in order to bid above $1,000/MWh. From a systems perspective, any bid above $1,000/MWh from a resource specific resource would fulfill the condition to change the energy bid cap. However, the market only clears resource-specific resource bids above $1,000/MWh that have been successfully verified through the RLCR process because that is the only way for resource-specific resources to reflect a bid above $1,000/MWh in the market today. When the bid cap goes up, a set of penalty price parameters are doubled so that priorities are preserved. If the bid cap is raised in any hour of the day-ahead market, the penalty prices will be scaled up for all trading hours of the day-ahead market and real-time market for the same trading day. If the bid cap is not raised in any hour of the day-ahead market, but the conditions apply to raise the bid cap in hours of the real-time market, the real-time market will use the scaled up penalty price for all intervals of overlapping real-time market horizons. Stakeholder proposals being considered would allow resource-specific resources to bid above $1,000/MWh without using the RLCR process. Any bid above $1,000/MWh from a resource specific resource as a result of these proposals would be considered ‘cost-verified’ by ISO system logic for the purposes of raising the energy bid cap and scaling penalty prices, and informing the logic that applies to unspecified imports that are RA.

SRP prefers a permanently raised bid cap to $2,000 MWh rather than a contingent cap which could be raised.

4. Please provide your perspective on the following questions:

1. Do you consider bids above $1,000/MWh but within the range of an uncapped DEB value to be cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the maximum import bid price (MIBP) and highest cost-verified bid?

1. Do you consider bids above $1,000/MWh but within the range of an uncapped DEB value to be cost-verified? 
   1. SRP considers bids above $1,000/MWh within the range of an uncapped DEB value to potentially be cost verified with supporting market conditions and prices.
2. Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? 
   1. SRP considers the bids to be “cost-verified” for the purpose of informing non-resource specific imports.
3. Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the maximum import bid price (MIBP) and highest cost-verified bid? 
   1. SRP considers the bids to be “cost-verified” for resource specific battery storage and hydro bids above the MIBP.

5. Please provide your perspective on the following questions:

2. Do you consider bids above $1,000/MWh and above a DEB value to be considered cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the MIBP and highest cost-verified bid?

1. Do you consider bids above $1,000/MWh and above a DEB value to be considered cost-verified?
   1. SRP considers bids above $1,000/MWh above a DEB value to potential be cost verified with supporting market conditions and fuel or competitive power prices.
2. Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid?
   1. SRP considers the bids to be “cost-verified” for the purpose of informing non-resource specific imports.
3. Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the MIBP and highest cost-verified bid? 
   1. SRP considers the bids to be “cost-verified” for resource specific battery storage and hydro bids above the MIBP.

6. Please comment on whether bid cap changes discussed here should apply to all resources, or only a subset.

Today, the ISO applies similar bid caps to all resources, with the exception of those capped by the MIBP, RDRR, virtual supply and other resources exempt from the soft offer cap. The ISO is considering Identifying a subset by default energy bid calculation (e.g. hydro DEB, storage DEB, or negotiated DEBs with an opportunity cost component), targeted to those resources identified as having short-term opportunity costs.

SRP supports the bid cap changes to be applied to all resources rather than a subset. This grants SRP and other entities the flexibility when dealing with an exceptional situation.

7. Please provide your organization’s feedback on the 831 data analysis presented.

SRP appreciates the 831 data analysis presented and notes the data supports the need for the inclusion of hourly shaping in the specified methodology.  SRP recognizes the complexity of computing hour by hour and proposes a methodology which adopts a typical day shape based on historic scaled according to the average price for the day in relation to the $2,000/MWh cap.  The resulting price profile will consider Super Peak period prices (greater than $2,000/MWh) and off-peak period prices (less than $2,000/MWh). 

8. Do you have any additional questions on the topic that would help with continued policy development discussions?

SRP would like to hear the impact of changing the DEB on NPR resources which are also affected by DEB value in numerous occasions include ABC events. 

9. Please provide any additional feedback.

No additional feedback at this time.

1. Please provide your organization’s perspective on what the objective of the market design for summer 2024 should be.

Problem Statement and market design objective: During the 4/23 working group, stakeholders provided their perspectives around limitations on certain resources bidding above the soft offer cap and what market design changes broadly supported by stakeholders could address bidding limitations. For example, some stakeholders support an approach that ensures resources can protect state of charge during any hour of the day, while other stakeholders support an approach to more accurately capture opportunity costs.

SDG&E believes that the objective of the market design should be focused on finding a limited-scope, interim solution that improves the status quo for resources with intra-day opportunity costs for summer 2024. While we believe that the optimal solution, whether short or long-term, would allow storage resources to reflect intra-day opportunity costs in their bids, we echo the concerns raised by several stakeholders over the potential for unintended consequences that may result from several of the options being fast-tracked for this summer. While we still support further exploration of the approaches that more accurately capture opportunity costs, ensuring resources can protect their state of charge during any hour of the day would still be an improvement to the status quo if other options are not implementable. However, regardless of the type of approach, it is critical that CAISO and stakeholders have sufficient time to carefully weigh the proposals and make an informed decision on the path forward prior to a summer 2024 release. 

2. Please provide your organizations feedback on each of the proposals under Approach 1—A, B, C, and D.

SDG&E appreciates the effort CAISO has made to explore different iterations of Approach 1. While we still think that some version of this approach is the best path forward, there are many uncertainties and risks that need to be addressed. However, due to the expedited timeline of this initiative, we are concerned that there may not be enough time to sufficiently vet each option for its impacts. That being said, SDG&E is not opposed to moving forward with one of these solutions for summer 2024 so long as there is sufficient evidence that the benefits of such a change outweigh the risks. We urge CAISO to continue providing examples and analysis, similar to that which was provided during the April 23-24 meetings, as details of each of the proposals are developed. 

In response to the four options, we offer the following considerations. First, while we generally believe there is sufficient competition in the market so that not all resources would bid at the cap if given the opportunity, any solution that results in the market losing important differentiation between offers is a sub-optimal outcome. Enabling more granularity in the solution could ensure there are appropriate price signals and could address the concerns that resources would bid up to the $2000/MWh cap across multiple hours. Second, while we support the development of a solution that enables storage resources to reflect their opportunity costs and correctly position themselves in the bid stack, we are concerned that embedding the proposed changes into the logic could allow these resources to trigger the bid cap and penalty pricing without using the RLCR process (and therefore without demonstrated cost verification). We suggest CAISO consider how it could be possible to limit this proposal to when the real-time energy bid cap has already been triggered. 

3. The ISO is seeking feedback from stakeholders to understand the intended effect of the proposed modifications.

Triggering the bid cap and penalty pricing: Today, one of two conditions must be met to raise the energy bid cap to $2,000/MWh: 1. The market accepts a bid above $1,000/MWh from a resource-specific resource, or 2. The allowable MIBP goes above $1,000/MWh Today, the tariff requires resource-specific resources to successfully cost-verify an adjusted DEB through the reference level change request (RLCR) process in order to bid above $1,000/MWh. From a systems perspective, any bid above $1,000/MWh from a resource specific resource would fulfill the condition to change the energy bid cap. However, the market only clears resource-specific resource bids above $1,000/MWh that have been successfully verified through the RLCR process because that is the only way for resource-specific resources to reflect a bid above $1,000/MWh in the market today. When the bid cap goes up, a set of penalty price parameters are doubled so that priorities are preserved. If the bid cap is raised in any hour of the day-ahead market, the penalty prices will be scaled up for all trading hours of the day-ahead market and real-time market for the same trading day. If the bid cap is not raised in any hour of the day-ahead market, but the conditions apply to raise the bid cap in hours of the real-time market, the real-time market will use the scaled up penalty price for all intervals of overlapping real-time market horizons. Stakeholder proposals being considered would allow resource-specific resources to bid above $1,000/MWh without using the RLCR process. Any bid above $1,000/MWh from a resource specific resource as a result of these proposals would be considered ‘cost-verified’ by ISO system logic for the purposes of raising the energy bid cap and scaling penalty prices, and informing the logic that applies to unspecified imports that are RA.

No comment at this time. 

4. Please provide your perspective on the following questions:

1. Do you consider bids above $1,000/MWh but within the range of an uncapped DEB value to be cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the maximum import bid price (MIBP) and highest cost-verified bid?

No comment at this time. 

5. Please provide your perspective on the following questions:

2. Do you consider bids above $1,000/MWh and above a DEB value to be considered cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the MIBP and highest cost-verified bid?

No comment at this time. 

6. Please comment on whether bid cap changes discussed here should apply to all resources, or only a subset.

Today, the ISO applies similar bid caps to all resources, with the exception of those capped by the MIBP, RDRR, virtual supply and other resources exempt from the soft offer cap. The ISO is considering Identifying a subset by default energy bid calculation (e.g. hydro DEB, storage DEB, or negotiated DEBs with an opportunity cost component), targeted to those resources identified as having short-term opportunity costs.

No comment at this time. 

7. Please provide your organization’s feedback on the 831 data analysis presented.

No comment at this time. 

8. Do you have any additional questions on the topic that would help with continued policy development discussions?

No comment at this time. 

9. Please provide any additional feedback.

While SDG&E supports the development of an interim solution, we believe that CAISO and stakeholders should exercise caution to minimize any adverse effects from the proposals being considered. Further, SDG&E has concerns that there might be unintended impacts, including to costs, of embedding the Approach 1 proposals into the bid-cap logic and believes this approach warrants additional discussion to better understand the impacts of allowing these bids to be “cost verified”.  

1. Please provide your organization’s perspective on what the objective of the market design for summer 2024 should be.

Problem Statement and market design objective: During the 4/23 working group, stakeholders provided their perspectives around limitations on certain resources bidding above the soft offer cap and what market design changes broadly supported by stakeholders could address bidding limitations. For example, some stakeholders support an approach that ensures resources can protect state of charge during any hour of the day, while other stakeholders support an approach to more accurately capture opportunity costs.

Seattle City Light’s objective is to create a mechanism to put its resources on equal footing with other resource types that are able to bid above $1000, to 1. be able to more accurately capture its opportunity costs and 2. to be able to stay in the market during scarcity conditions and not be subject to uneconomic dispatch. The current limitations inherent in today’s bid-cap structure results in hydro (and other storage resources) being uneconomically dispatched during tight system conditions to the point that if no changes are made City Light would be forced to pull its resources out of the market.     

2. Please provide your organizations feedback on each of the proposals under Approach 1—A, B, C, and D.

Given CAISO’s assessment from a policy, regulatory, and system/technology risk perspective, City Light supports moving forward with Option 1 where the $1000 bid cap is removed and the modification of the higher of the real-time MIBP is used as the cap for resources with opportunity cost based DEBs with bids above $1000 are deemed “cost verified.”

3. The ISO is seeking feedback from stakeholders to understand the intended effect of the proposed modifications.

Triggering the bid cap and penalty pricing: Today, one of two conditions must be met to raise the energy bid cap to $2,000/MWh: 1. The market accepts a bid above $1,000/MWh from a resource-specific resource, or 2. The allowable MIBP goes above $1,000/MWh Today, the tariff requires resource-specific resources to successfully cost-verify an adjusted DEB through the reference level change request (RLCR) process in order to bid above $1,000/MWh. From a systems perspective, any bid above $1,000/MWh from a resource specific resource would fulfill the condition to change the energy bid cap. However, the market only clears resource-specific resource bids above $1,000/MWh that have been successfully verified through the RLCR process because that is the only way for resource-specific resources to reflect a bid above $1,000/MWh in the market today. When the bid cap goes up, a set of penalty price parameters are doubled so that priorities are preserved. If the bid cap is raised in any hour of the day-ahead market, the penalty prices will be scaled up for all trading hours of the day-ahead market and real-time market for the same trading day. If the bid cap is not raised in any hour of the day-ahead market, but the conditions apply to raise the bid cap in hours of the real-time market, the real-time market will use the scaled up penalty price for all intervals of overlapping real-time market horizons. Stakeholder proposals being considered would allow resource-specific resources to bid above $1,000/MWh without using the RLCR process. Any bid above $1,000/MWh from a resource specific resource as a result of these proposals would be considered ‘cost-verified’ by ISO system logic for the purposes of raising the energy bid cap and scaling penalty prices, and informing the logic that applies to unspecified imports that are RA.

City Light supports allowing resources with short term opportunity cost based DEBS to be considered “cost verified” in scarcity system conditions. The current RLCR process is not viable for hydro resources so without automatic deeming of cost verification, this change would not improve the status quo for City Light and still result in uneconomic dispatch.   

4. Please provide your perspective on the following questions:

1. Do you consider bids above $1,000/MWh but within the range of an uncapped DEB value to be cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the maximum import bid price (MIBP) and highest cost-verified bid?

Yes. See response to Question 3.

5. Please provide your perspective on the following questions:

2. Do you consider bids above $1,000/MWh and above a DEB value to be considered cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the MIBP and highest cost-verified bid?

City Light requests additional dialogue around this concept.

6. Please comment on whether bid cap changes discussed here should apply to all resources, or only a subset.

Today, the ISO applies similar bid caps to all resources, with the exception of those capped by the MIBP, RDRR, virtual supply and other resources exempt from the soft offer cap. The ISO is considering Identifying a subset by default energy bid calculation (e.g. hydro DEB, storage DEB, or negotiated DEBs with an opportunity cost component), targeted to those resources identified as having short-term opportunity costs.

City Light supports the bid cap changes being limited to short-term opportunity cost resources (hydro DEB, storage DEB, or negotiated DEBs with an opportunity cost component). Other resource types have market mechanisms in place to allow for bidding above the soft cap offer in tight system conditions and can utilize the RLCR process. By extending these changes to resource types that don’t currently have these tools available to them, would be taking steps to leveling the playing field and helping to more accurately value the characteristics that these unique resources bring to the market.

7. Please provide your organization’s feedback on the 831 data analysis presented.

N/A

8. Do you have any additional questions on the topic that would help with continued policy development discussions?

Not at this time.

9. Please provide any additional feedback.

As stated in earlier comments but bears repeating, City Light wants to emphasize that it views the solutions discussed during the April 23^rd meeting to be the first step in a long-term multi-step process. Support of Option 1 appears to be the most feasible solution to implement by August 1 with the lowest assessed risk. This solution will likely partially mitigate uneconomic dispatch for hydro and storage resources, but it is not considered complete or optimal. After implementation it should be closely monitored to assess long term viability or whether it ends up as a stop gap put in place until a more thorough holistic solution can be constructed to address issues around uneconomic dispatch during tight system conditions. City Light is cognizant that a long-term fix may include reopening the hydro DEB calculation but understands the scope of that conversation will need to be fleshed out.

Another issue that was discussed on the April 23 call was whether this is a reliability issue. City Light feels strongly that it is a reliability issue which is part of the reason why taking action as soon as possible is so critical. The argument that there are out of market actions that can be taken as a possible workaround doesn’t mean it changes the nature of the reliability aspects inherent in the issue.    

City Light would like to thank CAISO for prioritizing this issue, compliment the work and effort that CASIO staff have put into addressing this issue, and will continue to actively participate in the process to help shape a short term and long term solution.

1. Please provide your organization’s perspective on what the objective of the market design for summer 2024 should be.

Problem Statement and market design objective: During the 4/23 working group, stakeholders provided their perspectives around limitations on certain resources bidding above the soft offer cap and what market design changes broadly supported by stakeholders could address bidding limitations. For example, some stakeholders support an approach that ensures resources can protect state of charge during any hour of the day, while other stakeholders support an approach to more accurately capture opportunity costs.

The Six Cities remain supportive of the objectives of this initiative, as articulated in the problem statements discussed on slide 12 of the April 23^rd stakeholder meeting, and continue to believe that development of solutions to address bidding limitations for non-generator resources, including an interim approach that could realistically be made effective this summer, represents the preferred outcome.  However, following the April 23^rd stakeholder meeting and the Market Surveillance Committee meeting, it has become less clear that there is an optimal solution that will achieve the objective of placing storage resources correctly in the bid stack, can be adopted in time for the summer period, and entails a relatively low risk of unintended consequences.  The short time horizon for analysis of possible approaches unfortunately does not seem to accommodate adequate evaluation of concerns regarding potentially broad impacts on prices.  It would be helpful for the CAISO to articulate whether, among the proposals put forth by stakeholders that can be implemented this summer, there is a preferred solution that strikes a balance between accomplishing the objectives in the problem statements and undue risk. 

2. Please provide your organizations feedback on each of the proposals under Approach 1—A, B, C, and D.

As noted, it is not clear that the Approach 1 options reasonably balance this initiative’s objectives with undue price risk and are capable of implementation in time for the summer peak period.  While the Six Cities support continued work on options for this summer, it is necessary for the CAISO to be clear about whether any of the Approach 1 proposals are likely to timely address the problems that stakeholders have identified while minimizing undue price risk and/or whether such risks are reasonably capable of mitigation. 

3. The ISO is seeking feedback from stakeholders to understand the intended effect of the proposed modifications.

Triggering the bid cap and penalty pricing: Today, one of two conditions must be met to raise the energy bid cap to $2,000/MWh: 1. The market accepts a bid above $1,000/MWh from a resource-specific resource, or 2. The allowable MIBP goes above $1,000/MWh Today, the tariff requires resource-specific resources to successfully cost-verify an adjusted DEB through the reference level change request (RLCR) process in order to bid above $1,000/MWh. From a systems perspective, any bid above $1,000/MWh from a resource specific resource would fulfill the condition to change the energy bid cap. However, the market only clears resource-specific resource bids above $1,000/MWh that have been successfully verified through the RLCR process because that is the only way for resource-specific resources to reflect a bid above $1,000/MWh in the market today. When the bid cap goes up, a set of penalty price parameters are doubled so that priorities are preserved. If the bid cap is raised in any hour of the day-ahead market, the penalty prices will be scaled up for all trading hours of the day-ahead market and real-time market for the same trading day. If the bid cap is not raised in any hour of the day-ahead market, but the conditions apply to raise the bid cap in hours of the real-time market, the real-time market will use the scaled up penalty price for all intervals of overlapping real-time market horizons. Stakeholder proposals being considered would allow resource-specific resources to bid above $1,000/MWh without using the RLCR process. Any bid above $1,000/MWh from a resource specific resource as a result of these proposals would be considered ‘cost-verified’ by ISO system logic for the purposes of raising the energy bid cap and scaling penalty prices, and informing the logic that applies to unspecified imports that are RA.

The CAISO needs to be involved in actively advising stakeholders about the potential for unintended effects from the potential modifications that are under consideration, rather than relying on stakeholders to bring these concerns forward or trusting that all stakeholders are able to accurately perceive all relevant impacts.  While the Six Cities appreciate the CAISO’s focus on a stakeholder-driven effort, it is important that the CAISO also be engaged in a critical evaluation of the proposals under consideration and able to inform stakeholders about the ramifications of the various options.  Stakeholders do not, in all instances, have perfect information about the operation of the CAISO’s market processes applicable to implementation of the bid cap logic, for example.  It would be instructive for the CAISO to weigh the approaches and provide guidance to stakeholders, including if the CAISO’s perspective is that changes are not viable for the summer period or may have effects that are broader than intended. 

4. Please provide your perspective on the following questions:

1. Do you consider bids above $1,000/MWh but within the range of an uncapped DEB value to be cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the maximum import bid price (MIBP) and highest cost-verified bid?

The Six Cities are not stating a position on this question at this time. 

5. Please provide your perspective on the following questions:

2. Do you consider bids above $1,000/MWh and above a DEB value to be considered cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the MIBP and highest cost-verified bid?

The Six Cities are not stating a position on this question at this time. 

6. Please comment on whether bid cap changes discussed here should apply to all resources, or only a subset.

Today, the ISO applies similar bid caps to all resources, with the exception of those capped by the MIBP, RDRR, virtual supply and other resources exempt from the soft offer cap. The ISO is considering Identifying a subset by default energy bid calculation (e.g. hydro DEB, storage DEB, or negotiated DEBs with an opportunity cost component), targeted to those resources identified as having short-term opportunity costs.

For purposes of development and consideration of an interim solution, the Six Cities support a narrowly-tailored solution that is focused on the limited subset of resources with a short-term opportunity cost.  Broader impacts should be reserved for a longer term initiative. 

7. Please provide your organization’s feedback on the 831 data analysis presented.

The Six Cities do not have feedback on this data at this time. 

8. Do you have any additional questions on the topic that would help with continued policy development discussions?

While recognizing that a market-based solution may be preferable, the Six Cities encourage the CAISO to engage in a more complete discussion of the Approach 2 options and to explain why these measures will or will not address the concerns that stakeholders have raised.  Can any of the tools listed within this approach be modified or adjusted on an interim basis to address stakeholders’ concerns?  The Six Cities note that the CAISO advised it would not dedicate significant time to consideration of these options based on stakeholder input.  However, stakeholders would benefit from an increased understanding of whether these options can be viable and, from the storage community in particular, an explanation of why these options may not be adequate to address their concerns. 

9. Please provide any additional feedback.

The Six Cities do not have any additional feedback to provide to the CAISO at this time.

1. Please provide your organization’s perspective on what the objective of the market design for summer 2024 should be.

Problem Statement and market design objective: During the 4/23 working group, stakeholders provided their perspectives around limitations on certain resources bidding above the soft offer cap and what market design changes broadly supported by stakeholders could address bidding limitations. For example, some stakeholders support an approach that ensures resources can protect state of charge during any hour of the day, while other stakeholders support an approach to more accurately capture opportunity costs.

SCE acknowledges and appreciates the substantial effort CAISO has put into proposing an interim solution for this summer.  This solution, once developed, would enable hydro and energy storage resources to bid above the soft offer cap of $1,000/MWh, closer to those of other participating resources.  However, SCE is concerned that CAISO may be rushing for a solution without sufficient consideration. Such a rush could lead to unintended consequences, potentially exposing ratepayers to substantial costs and inadvertently allowing resources the opportunity to bid indiscriminately up to the hard offer cap.  CAISO has not provided enough time between each comment period to allow participants to vet the proposals internally, analyze the proposed solutions, and develop reasoned comments.  This lack of time and lack of a formal straw proposal prevents stakeholders from being sufficiently informed to make meaningful comments on how CAISO should proceed.  Thus, SCE feels the current timeline proposed to develop a solution for August 1, 2024, is likely too short of a timeframe to result in a robust outcome. 

SCE urges CAISO to continue with this initiative but without feeling constrained by a deadline to implement a solution this summer.  SCE holds the view that it is of utmost importance for CAISO to adhere to a standard stakeholder process. This approach would grant market participants ample time to scrutinize multiple proposals, considering that any proposal could significantly influence prices. 

Moreover, this would allow CAISO additional time to craft more-detailed written proposals, conduct technical workshops/trainings, and allocate more time for stakeholder feedback. 

In the interim, CAISO and market participants can continue to utilize existing tools.  These tools include the current end-of-hour state-of-charge tool, exceptional dispatch functionality, and self-schedules for this summer until a more comprehensive and effective proposal is developed. 

2. Please provide your organizations feedback on each of the proposals under Approach 1—A, B, C, and D.

SCE does not have any further comments at this time.  

3. The ISO is seeking feedback from stakeholders to understand the intended effect of the proposed modifications.

Triggering the bid cap and penalty pricing: Today, one of two conditions must be met to raise the energy bid cap to $2,000/MWh: 1. The market accepts a bid above $1,000/MWh from a resource-specific resource, or 2. The allowable MIBP goes above $1,000/MWh Today, the tariff requires resource-specific resources to successfully cost-verify an adjusted DEB through the reference level change request (RLCR) process in order to bid above $1,000/MWh. From a systems perspective, any bid above $1,000/MWh from a resource specific resource would fulfill the condition to change the energy bid cap. However, the market only clears resource-specific resource bids above $1,000/MWh that have been successfully verified through the RLCR process because that is the only way for resource-specific resources to reflect a bid above $1,000/MWh in the market today. When the bid cap goes up, a set of penalty price parameters are doubled so that priorities are preserved. If the bid cap is raised in any hour of the day-ahead market, the penalty prices will be scaled up for all trading hours of the day-ahead market and real-time market for the same trading day. If the bid cap is not raised in any hour of the day-ahead market, but the conditions apply to raise the bid cap in hours of the real-time market, the real-time market will use the scaled up penalty price for all intervals of overlapping real-time market horizons. Stakeholder proposals being considered would allow resource-specific resources to bid above $1,000/MWh without using the RLCR process. Any bid above $1,000/MWh from a resource specific resource as a result of these proposals would be considered ‘cost-verified’ by ISO system logic for the purposes of raising the energy bid cap and scaling penalty prices, and informing the logic that applies to unspecified imports that are RA.

SCE does not have any further comments at this time.  

4. Please provide your perspective on the following questions:

1. Do you consider bids above $1,000/MWh but within the range of an uncapped DEB value to be cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the maximum import bid price (MIBP) and highest cost-verified bid?

SCE does not have any further comments at this time.  

5. Please provide your perspective on the following questions:

2. Do you consider bids above $1,000/MWh and above a DEB value to be considered cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the MIBP and highest cost-verified bid?

SCE does not have any further comments at this time.  

6. Please comment on whether bid cap changes discussed here should apply to all resources, or only a subset.

Today, the ISO applies similar bid caps to all resources, with the exception of those capped by the MIBP, RDRR, virtual supply and other resources exempt from the soft offer cap. The ISO is considering Identifying a subset by default energy bid calculation (e.g. hydro DEB, storage DEB, or negotiated DEBs with an opportunity cost component), targeted to those resources identified as having short-term opportunity costs.

SCE does not have any further comments at this time.  

7. Please provide your organization’s feedback on the 831 data analysis presented.

SCE does not have any further comments at this time.  

8. Do you have any additional questions on the topic that would help with continued policy development discussions?

SCE does not have any further comments at this time.  

9. Please provide any additional feedback.

SCE does not have any further comments at this time.  

1. Please provide your organization’s perspective on what the objective of the market design for summer 2024 should be.

Problem Statement and market design objective: During the 4/23 working group, stakeholders provided their perspectives around limitations on certain resources bidding above the soft offer cap and what market design changes broadly supported by stakeholders could address bidding limitations. For example, some stakeholders support an approach that ensures resources can protect state of charge during any hour of the day, while other stakeholders support an approach to more accurately capture opportunity costs.

Tacoma Power (TPWR) appreciates recognition by CAISO and stakeholders that certain resources, including hydro resources in the WEIM, should have a mechanism to submit supply offers representing intra-day opportunity costs. We also acknowledge that many of the issues and challenges raised by stakeholders are complex and warrant continuing stakeholder process beyond the summer of 2024 so that an appropriate long-term solution can be developed. However, we support development of an interim solution that can achieve meaningful progress by this summer.

2. Please provide your organizations feedback on each of the proposals under Approach 1—A, B, C, and D.

As an interim step for the summer of 2024, TPWR prefers Approach 1-A, allowing bids above $1,000/MWH to be capped by the higher of $1,000/MWH and the uncapped DEB. We recognize that the other proposals have merit as well, but acknowledge the risks associated with the proposals may present challenges for near-term implementation. 

3. The ISO is seeking feedback from stakeholders to understand the intended effect of the proposed modifications.

Triggering the bid cap and penalty pricing: Today, one of two conditions must be met to raise the energy bid cap to $2,000/MWh: 1. The market accepts a bid above $1,000/MWh from a resource-specific resource, or 2. The allowable MIBP goes above $1,000/MWh Today, the tariff requires resource-specific resources to successfully cost-verify an adjusted DEB through the reference level change request (RLCR) process in order to bid above $1,000/MWh. From a systems perspective, any bid above $1,000/MWh from a resource specific resource would fulfill the condition to change the energy bid cap. However, the market only clears resource-specific resource bids above $1,000/MWh that have been successfully verified through the RLCR process because that is the only way for resource-specific resources to reflect a bid above $1,000/MWh in the market today. When the bid cap goes up, a set of penalty price parameters are doubled so that priorities are preserved. If the bid cap is raised in any hour of the day-ahead market, the penalty prices will be scaled up for all trading hours of the day-ahead market and real-time market for the same trading day. If the bid cap is not raised in any hour of the day-ahead market, but the conditions apply to raise the bid cap in hours of the real-time market, the real-time market will use the scaled up penalty price for all intervals of overlapping real-time market horizons. Stakeholder proposals being considered would allow resource-specific resources to bid above $1,000/MWh without using the RLCR process. Any bid above $1,000/MWh from a resource specific resource as a result of these proposals would be considered ‘cost-verified’ by ISO system logic for the purposes of raising the energy bid cap and scaling penalty prices, and informing the logic that applies to unspecified imports that are RA.

4. Please provide your perspective on the following questions:

1. Do you consider bids above $1,000/MWh but within the range of an uncapped DEB value to be cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the maximum import bid price (MIBP) and highest cost-verified bid?

TPWR would welcome the ability to consider the DEB for hydro resources as “cost-verified” for bids above $1,000/MWh.

5. Please provide your perspective on the following questions:

2. Do you consider bids above $1,000/MWh and above a DEB value to be considered cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the MIBP and highest cost-verified bid?

TPWR recognizes the potential for bids above the DEB for hydro resources to be “cost-verified” but does not seek consideration for this by summer 2024. 

6. Please comment on whether bid cap changes discussed here should apply to all resources, or only a subset.

Today, the ISO applies similar bid caps to all resources, with the exception of those capped by the MIBP, RDRR, virtual supply and other resources exempt from the soft offer cap. The ISO is considering Identifying a subset by default energy bid calculation (e.g. hydro DEB, storage DEB, or negotiated DEBs with an opportunity cost component), targeted to those resources identified as having short-term opportunity costs.

TPWR requests bid cap changes for hydro resources.  While we believe that these changes may have sound application for storage resources, TPWR would observe that hydro and battery resources are functionally different so a solution for one resource type may not adequately address the needs of the other.

7. Please provide your organization’s feedback on the 831 data analysis presented.

8. Do you have any additional questions on the topic that would help with continued policy development discussions?

9. Please provide any additional feedback.

1. Please provide your organization’s perspective on what the objective of the market design for summer 2024 should be.

Problem Statement and market design objective: During the 4/23 working group, stakeholders provided their perspectives around limitations on certain resources bidding above the soft offer cap and what market design changes broadly supported by stakeholders could address bidding limitations. For example, some stakeholders support an approach that ensures resources can protect state of charge during any hour of the day, while other stakeholders support an approach to more accurately capture opportunity costs.

The Energy Authority (TEA) reiterates its support and appreciation for the CAISO’s expedited efforts to address the current implementation gap regarding bidding rules for Proxy-Demand, Storage and Hydro resources during higher-price and operationally-challenging system conditions. TEA understands that the CAISO’s choices regarding its initial Order 831 compliance approach were conservative and reflected a compromise position among WEIM and CAISO full-market stakeholders and CAISO staff that at the time was seen as a reasonable starting point for the market changes given CAISO’s overall market design. Market experience over the intervening years though has demonstrated that this approach was overly conservative and has been challenging for opportunity-cost based resources, particularly during operating conditions when it is most important that these fast-ramping and often reliability-focused resources be used efficiently in the market. TEA therefore supports the CAISO taking a different policy direction at this time, first making incremental changes to its Order 831 bidding rules that fit within technical implementation constraints for Summer 2024 and then considering broader changes for implementation as soon as possible to ensure all resources are able to participate in the market efficiently and effectively across the CAISO’s full-market and WEIM footprints with minimal in-market seams.

At its core, this expedited effort is about making targeted adjustments to existing policy where needed such that affected resources can use economic bids to place themselves at an appropriate position in the supply stack given their limited “fuel” and limited dispatch duration, and preserve their critical fast-responding, fast-ramping attributes and services they provide to the market (and where transfer-constrained to their local balancing authority areas) for the most valuable hours of the operating day. Based on its experience as a SC in CAISO’s markets managing both load and generation interests, and with knowledge of the impacts its partners in the Pacific Northwest have experienced as entities affected by WEIM operations and settlements, TEA believes the that the market efficiency and reliability risks inherent in maintaining the status-quo bidding rules framework for these resources far outweighs concerns regarding market price formation or market participant bidding behavior. TEA encourages the CAISO therefore to develop policy that provides the maximum amount of economic bidding flexibility possible for these resources in both its short- and long-term solutions.

Importantly, the policy must be crafted in a way that allow these resources to participate effectively in the market regardless whether they are California RA storage and/or hydro resources participating in the CAISO’s full day-ahead and real-time market, or hydro or storage resources outside California that are participating only in the WEIM real-time market. When developing the policy, therefore, CAISO staff must consider that system conditions and drivers for preserving “fuel” availability for specific dispatch hours may vary considerably – e.g., while California storage resources may predominantly need bidding flexibility to prevent mid-day or late-afternoon dispatch and target availability during a small number of evening-peak hours, Pacific Northwest hydro resources participating in the WEIM, and/or future WEIM participating Pacific Northwest storage resources, may have much more variable constraints and dispatch-shaping needs. Similarly, the tools and value-streams available to the CAISO-located resources, ranging from how SCs can use the CAISO DAM, SOC management tools, CRRs, and virtuals to strategically manage their resources to the side-payments that may accrue to the resources from RA contracts and/or operator-initiated compensation, differ from those available to the external WEIM resources, which only bid in the real-time WEIM, with a limited look-ahead and without congestion-hedging or other economic tools or value streams beyond the in-market LMP at which they are settled. TEA therefore cautions against developing operating-hour focused solutions or solutions that pre-suppose the CAISO full-market context when such may only be relevant for a subset of resources operating in a subset of the CAISO’s markets. To be clear, TEA fully supports policy being developed that addresses the issues faced by California storage and PDR resources, it simply wants to acknowledge the in-market seams that separate these resources’ market participation context from WEIM hydro resources.

2. Please provide your organizations feedback on each of the proposals under Approach 1—A, B, C, and D.

TEA agrees with the Western Power Trading Forum’s (WPTF) assessment of the Approaches offered, which focuses on Approach 1-D, potentially with an adjustment to the “4^th-highest MIBP” as the cost-verification proxy, as the most feasible option within those offered under Approach 1 that addresses the needs of both CAISO storage and WEIM hydro resources, even though it still has drawbacks because of the exposure it leaves to CAISO’s impact-based local market power mitigation framework leading to inefficient dispatch.

However, if the CAISO is unable to implement that option this summer, implementing Approach 1-A would be an incremental improvement on the status-quo and would likely have practical benefits for both resource types, so TEA would support such an option as a fallback alternative. If this direction is taken though, it is even more imperative that CAISO fast-track deeper policy changes in this area for Winter 2024/25 implementation, as discussed further below.

3. The ISO is seeking feedback from stakeholders to understand the intended effect of the proposed modifications.

Triggering the bid cap and penalty pricing: Today, one of two conditions must be met to raise the energy bid cap to $2,000/MWh: 1. The market accepts a bid above $1,000/MWh from a resource-specific resource, or 2. The allowable MIBP goes above $1,000/MWh Today, the tariff requires resource-specific resources to successfully cost-verify an adjusted DEB through the reference level change request (RLCR) process in order to bid above $1,000/MWh. From a systems perspective, any bid above $1,000/MWh from a resource specific resource would fulfill the condition to change the energy bid cap. However, the market only clears resource-specific resource bids above $1,000/MWh that have been successfully verified through the RLCR process because that is the only way for resource-specific resources to reflect a bid above $1,000/MWh in the market today. When the bid cap goes up, a set of penalty price parameters are doubled so that priorities are preserved. If the bid cap is raised in any hour of the day-ahead market, the penalty prices will be scaled up for all trading hours of the day-ahead market and real-time market for the same trading day. If the bid cap is not raised in any hour of the day-ahead market, but the conditions apply to raise the bid cap in hours of the real-time market, the real-time market will use the scaled up penalty price for all intervals of overlapping real-time market horizons. Stakeholder proposals being considered would allow resource-specific resources to bid above $1,000/MWh without using the RLCR process. Any bid above $1,000/MWh from a resource specific resource as a result of these proposals would be considered ‘cost-verified’ by ISO system logic for the purposes of raising the energy bid cap and scaling penalty prices, and informing the logic that applies to unspecified imports that are RA.

TEA supports the comments of the WPTF in this area.

4. Please provide your perspective on the following questions:

1. Do you consider bids above $1,000/MWh but within the range of an uncapped DEB value to be cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the maximum import bid price (MIBP) and highest cost-verified bid?

TEA supports the comments of the WPTF in this area.

5. Please provide your perspective on the following questions:

2. Do you consider bids above $1,000/MWh and above a DEB value to be considered cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the MIBP and highest cost-verified bid?

TEA supports the comments of the WPTF in this area.

6. Please comment on whether bid cap changes discussed here should apply to all resources, or only a subset.

Today, the ISO applies similar bid caps to all resources, with the exception of those capped by the MIBP, RDRR, virtual supply and other resources exempt from the soft offer cap. The ISO is considering Identifying a subset by default energy bid calculation (e.g. hydro DEB, storage DEB, or negotiated DEBs with an opportunity cost component), targeted to those resources identified as having short-term opportunity costs.

TEA supports the comments of the WPTF in this area.

7. Please provide your organization’s feedback on the 831 data analysis presented.

TEA supports the comments of the WPTF in this area. TEA emphasizes that it would be more appropriate to compare locational prices in the WEIM than to look at the SMEC as the voluntary nature of the ETSR-based transfer limitations inherent to the WEIM have a significant impact on settled prices during extreme market conditions. That said, TEA greatly appreciates the efforts of CAISO staff that went into the analysis and believes it was a helpful inroads to thinking critically about these issues.

8. Do you have any additional questions on the topic that would help with continued policy development discussions?

TEA supports the Public Generating Pool’s request for “…an analysis exploring the role of the DEB caps in the January event this year.” – and agrees that in general care should be taken to ensure that issues and market results of specific concern to the WEIM receive due consideration and exploration.

TEA would also like to better understand the opportunities and implementation risks associated with any of the options that have been identified as being unable to be implemented for Summer 2024. For example, if the best long-term path forward is to implement the interim changes in play but it is identified that updates still need to be made to the reference level change request process to allow more timely updates when market conditions are changing rapidly, it would be good to understand whether that is something that could be scoped, solved, filed, and implemented by Winter 2024/25. Given that 1:10 weather events seem to be happening yearly, it is not unthinkable that the Pacific Northwest could experience extreme conditions this coming winter and should the analysis requested above further support the enhancements requested by stakeholders, it would be imprudent not to do everything possible to address those issues as soon as possible. Within this effort, TEA also requests that the CAISO identify any tradeoffs inherent to pursuing fast-tracked enhancements, such as whether doing so would push out the timeline for other Price Formation Enhancements scope items (fast-start pricing, shortage pricing, etc.), or may in fact be complementary to those efforts.

9. Please provide any additional feedback.

Regardless the bidding-flexibility path chosen, TEA wishes to emphasize that the competitive forces present in the CAISO’s markets and the advanced transparency around individual market participant market behavior across the CAISO’s full-market and WEIM areas, plus good utility practice, drive SCs to structure their economic bids to participate in the market in a way that maximizes their economic dispatch efficiency of their portfolio given expected market conditions and system demands. Market participants engaging in the markets in this way, with sufficient flexibility, ultimately deliver optimal, least-cost, greatest-reliability outcomes for consumers, which is in the end the goal of organized markets.

Further, TEA notes that specifically for the Pacific Northwest hydro resources participating in the CAISO WEIM that would be subject to these policy changes, it is generally not possible in practice for these resources to participate “uneconomically” in the market in a way that would negatively impact California or non-Pacific Northwest demand, which was raised as a concern during the last stakeholder call. During market conditions in which these resources would need and likely use the additional flexibility, one of three things would likely be happening:

(1) demand in the Pacific Northwest would be high and supply scarce while demand in the CAISO and Desert Southwest regions would be low and supply plentiful such that the Pacific Northwest would be import-constrained likely in both the day-ahead intertie and real-time WEIM markets, increasing LMPs in the Pacific Northwest while decreasing LMPs in California and Desert Southwest, and causing these resources to need additional headroom to properly place themselves in the dispatch stack relative to participating thermal resources and resources optimized outside the WEIM solution (i.e., day-ahead or HASP intertie imports from the CAISO market);

(2) demand everywhere would be high and supply everywhere would be scarce and therefore higher prices experienced in the California and Desert Southwest, along with the Pacific Northwest, would be expected and justified based on system-wide conditions and Pacific Northwest resources would need the bidding flexibility to ensure proper economic and local-reliability outcomes; or

(3) demand in California or the Desert Southwest would be high and supply scarce such that generation in the Pacific Northwest would be export constrained in both the day-ahead intertie and real-time WEIM markets, decreasing LMPs in the Pacific Northwest (economically or through applying LMPM) while increasing LMPs in the California and the Desert Southwest, and thereby increasing the risk that Pacific Northwest resources would be dispatched uneconomically and potentially unreliably relative to their local-area needs simply due to the contract-path based transfer constraints being managed in the CAISO SCED solution, absent appropriate bidding flexibility that would help these resources counterbalance extreme congestion impacts on their dispatch even as they are still exposed to LMPM-based uneconomic dispatch.

It TEA’s view, it is important for stakeholders and CAISO staff to test assumptions about market behavior and the opportunity for “bad actors” to influence market outcomes against the reality of the market construct and observed market outcomes such that well-intentioned conservative approaches to setting policy do not prevent efficient market outcomes.

__________________________

About TEA: The Energy Authority is a public power-owned, nonprofit corporation that as a national energy marketing company, evaluates challenges, manages risks, and executes solutions to help its clients maximize the value of their assets and respond competitively in the changing energy markets. TEA partners with over 60 public power clients, managing approximately 30,000 MW of peak load and 24,000 MW of generation in North America’s organized and bilateral wholesale energy markets. TEA’s Western Interconnect partners are directly engaged in and impacted by the CAISO’s existing and evolving day-ahead and real-time energy markets.

1. Please provide your organization’s perspective on what the objective of the market design for summer 2024 should be.

Problem Statement and market design objective: During the 4/23 working group, stakeholders provided their perspectives around limitations on certain resources bidding above the soft offer cap and what market design changes broadly supported by stakeholders could address bidding limitations. For example, some stakeholders support an approach that ensures resources can protect state of charge during any hour of the day, while other stakeholders support an approach to more accurately capture opportunity costs.

Vistra requests that the CAISO focus on ensuring opportunity-cost bidding resources (storage and hydro) can reflect intra-day opportunity costs in the real-time market even under mitigation. We support an approach that pursues a variation of Approach 3 in time for summer 2024 by addressing the implementation details through Scheduling Infrastructure Business Rules (SIBR) existing design and available inputs. This approach would limit implementation to a single application – SIBR. It also accepts that changes to the Default Energy Bid (DEB) calculation performed in Electricity Cost Index Calculator (ECIC) are out of scope of this fast track effort, and will be deferred until a storage stakeholder effort is launched.

This variation would allow CAISO to leverage existing SIBR functionality and data inputs readily available to calculate a reasonableness threshold in SIBR. Reference level change requests for storage DEBs and hydro DEBS would be allowed to be submitted into SIBR. SIBR would calculate a reasonableness threshold. This SIBR reasonableness threshold for storage and hydro DEBs would be used for the ex-ante verification of any storage DEB or hydro DEB’s reference level change requests directly in SIBR. Energy price-based offers would be allowed up to its adjusted DEBs after ex ante verification.

Allowing adjusted storage and hydro DEBs through the reference level change request process will ensure opportunity cost based offers when mitigated are a more reasonable reflection of real-time intra-day opportunity costs. Adjusted DEBs that reflect real-time opportunity costs will will ensure a more optimal market outcome for storage and hydro assets in summer 2024.

Vistra urges the CAISO to move forward with a proposal selecting Approach 3 variation described above. The exact reasonableness threshold formula should be proposed by CAISO in that proposal. Differences across stakeholders on the precise formula should not delay CAISO moving forward to identify which approach is being pursued and the proposed details for each approach. It is important to not let perfect be the enemy of the good, and to continue to move forward with a proposal that respects existing CAISO policies, FERC Order 831 policy intent, and minimizes implementation lift. Vistra genuinely believes a variation of Approach 3 allowing reference level change requests to be validated with a SIBR calculated reasonableness threshold directly in SIBR best meets these three principles.

2. Please provide your organizations feedback on each of the proposals under Approach 1—A, B, C, and D.

Please see Vistra’s previous comments that addressed each Approach in detail.

3. The ISO is seeking feedback from stakeholders to understand the intended effect of the proposed modifications.

Triggering the bid cap and penalty pricing: Today, one of two conditions must be met to raise the energy bid cap to $2,000/MWh: 1. The market accepts a bid above $1,000/MWh from a resource-specific resource, or 2. The allowable MIBP goes above $1,000/MWh Today, the tariff requires resource-specific resources to successfully cost-verify an adjusted DEB through the reference level change request (RLCR) process in order to bid above $1,000/MWh. From a systems perspective, any bid above $1,000/MWh from a resource specific resource would fulfill the condition to change the energy bid cap. However, the market only clears resource-specific resource bids above $1,000/MWh that have been successfully verified through the RLCR process because that is the only way for resource-specific resources to reflect a bid above $1,000/MWh in the market today. When the bid cap goes up, a set of penalty price parameters are doubled so that priorities are preserved. If the bid cap is raised in any hour of the day-ahead market, the penalty prices will be scaled up for all trading hours of the day-ahead market and real-time market for the same trading day. If the bid cap is not raised in any hour of the day-ahead market, but the conditions apply to raise the bid cap in hours of the real-time market, the real-time market will use the scaled up penalty price for all intervals of overlapping real-time market horizons. Stakeholder proposals being considered would allow resource-specific resources to bid above $1,000/MWh without using the RLCR process. Any bid above $1,000/MWh from a resource specific resource as a result of these proposals would be considered ‘cost-verified’ by ISO system logic for the purposes of raising the energy bid cap and scaling penalty prices, and informing the logic that applies to unspecified imports that are RA.

Please see Vistra’s previous comments that addressed each Approach in detail. Vistra does not support stakeholders’ requests described in this question. If CAISO pursues this option, Vistra asks the CAISO to make clear offers above $1,000/MWh would be subject to the reference level change request documentation and audit rules.

4. Please provide your perspective on the following questions:

1. Do you consider bids above $1,000/MWh but within the range of an uncapped DEB value to be cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the maximum import bid price (MIBP) and highest cost-verified bid?

We would consider an individual resource’s bid above $1,000/MWh to be a cost-based offer, but that cost-based offer must be subject to verification if it is a resource-specific resource and if not subject to verification would not consider it “cost-verified”. The verification for that cost-based offer could be at a minimum an uncapped adjusted DEB where a reference level change request is approved through SIBR based on higher of uncapped DEB, highest cost-verified offer, or 4^th highest maximum import bid price.  

We would not consider a price-based bid to be the same as a reference level change request that results in an approved cost-verified offer unless the CAISO applied ex ante or manual verification to these energy offers and defined these energy offers above $1,000/MWh as cost-based. However, if the CAISO were to develop the ex-ante verification to validate the energy offers it would have largely completed the work to provide the ability to submit reference level change requests. Given this, Vistra believes it will be better return on implementation efforts to leverage Approach 3.

5. Please provide your perspective on the following questions:

2. Do you consider bids above $1,000/MWh and above a DEB value to be considered cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the MIBP and highest cost-verified bid?

Energy price-based bids are not cost-based bids. Reference level change requests are cost-based bids. Energy bids are price-based bids that are subject to bid validation where they cannot exceed the higher of the soft energy bid cap ($1,000/MWh) or an approved reference level change request adjusting its DEB between $1,000/MWh and $2,000/MWh. The reference level change request is subject to cost verification, which is why approved requests leading to adjusted DEBs are considered “cost-verified”. If CAISO were to deviate from this policy, energy bids above $1,000/MWh would need to be defined as cost-based offers and subject to reference level change request verification processes, document retention, and audit. 

6. Please comment on whether bid cap changes discussed here should apply to all resources, or only a subset.

Today, the ISO applies similar bid caps to all resources, with the exception of those capped by the MIBP, RDRR, virtual supply and other resources exempt from the soft offer cap. The ISO is considering Identifying a subset by default energy bid calculation (e.g. hydro DEB, storage DEB, or negotiated DEBs with an opportunity cost component), targeted to those resources identified as having short-term opportunity costs.

Vistra strongly prefers Approach 3 over Approach 1. Resources should be able to submit cost-based offers between $1,000/MWh and $2,000/MWh subject to cost-verification per FERC Order 831. However, the cap and penalty prices aligned to that cap applies to the entire market operating horizon and all resources within that market. Under existing rules there are limits to the resource-specific cost-based bid cap between $1,000/MWh and the effective cap if that resource-specific cost-verified offer (approved reference level change request) is between $1,000/MWh and the cost-based bid cap in effect if there are other higher cost-verified offers. This question seems to conflate the market-wide bid cap in effect in each market horizon versus bid validation rules. We do not support different “caps”. We can support approaches that apply different resource-specific bid validation rules as that already exists today.

7. Please provide your organization’s feedback on the 831 data analysis presented.

None currently.

8. Do you have any additional questions on the topic that would help with continued policy development discussions?

None currently.

9. Please provide any additional feedback.

None currently.

1. Please provide your organization’s perspective on what the objective of the market design for summer 2024 should be.

Problem Statement and market design objective: During the 4/23 working group, stakeholders provided their perspectives around limitations on certain resources bidding above the soft offer cap and what market design changes broadly supported by stakeholders could address bidding limitations. For example, some stakeholders support an approach that ensures resources can protect state of charge during any hour of the day, while other stakeholders support an approach to more accurately capture opportunity costs.

On days when FERC Order 831 conditions apply, enable energy limited resources to be able to bid in a way that (1) more accurately reflects expected intra-day opportunity costs, (2) allows the market to more efficiently and optimally dispatch the resources such that they are available to serve load when needed most, and (3) provides sufficient bidding flexibility to help manage day-ahead schedules.

To be clear, any effective policy will have to allow these resource types to be able to reflect expected intra-day opportunity costs in market offers in hours even outside those hours where the resource would be needed most by the market to help mitigate premature utilization of the resources. Further, it will need to ensure mitigated bids continue to reflect expected intra-day opportunity costs.

As explained throughout these comments, WPTF believes that the CAISO can achieve a variation of Approach 3 in time for summer 2024 by addressing the implementation details through SIBR. Specifically, we suggest the CAISO set the reasonableness threshold to the higher of the 4th highest MIBP, uncapped DEB, and highest cost-verfied offer, setting the reasonableness threshold as a single value across the day which is consistent with current implementation. Thus, we respectfully request the CAISO evaluate the relative difference in implementation lift between a modified version of Approach 1D below and Approach 3 as described in response to #9. If implementing Approach 3 is the same or even slightly higher than Approach 1D, WPTF supports the CAISO moving forward with Approach 3 described in #9 due to the tradeoffs between the two. Only in the event it is infeasible to implement Approach 3, WPTF would be supportive of Approach 1D as modified in our response to #2 below.

2. Please provide your organizations feedback on each of the proposals under Approach 1—A, B, C, and D.

WPTF provides more specific responses to each approach below but wants to highlight a few key aspects that hold true regardless of which version of Approach 1 is being considered.

• All resources will still be subject to mitigation and thus can have their bids that reflect expected intra-day opportunity costs lowered to the CAISO’s calculated DEB that no longer reflects the updated expected costs. Per the CAISO’s data analysis only a few instances of storage DEBs during 831 days were above $1,000/MWh and similarly (albeit with higher frequency) very few hydro DEB’s were above $1,000/MWh. Thus, even being mitigated to an uncapped DEB will practically still result in bids lower than $1,000/MWh under FERC Order 831 conditions.
• While we appreciate that these approaches enable bids to be submitted above $1,000/MWh (mitigation concerns aside) to be consistent with FERC Order 831 policy they have to be considered cost-verified offers. Thus, to mitigate FERC risk, the CAISO and stakeholders may want to consider ways in which to support cost verification requirements. This could include simply applying the same audit and documentation requirements as applied to reference level change requests. Furthermore, basing the bid cap on the higher of the 4^th highest MIBP (as discussed in more detail below), uncapped DEB, or highest cost-verified offer would align with the CAISO’s existing cost estimate for the resources. Today the storage DEB can be set by the 4^th highest IFM LMP and is considered a reasonable approximation of the expected intra-day opportunity cost in real-time per existing policy. Since the CAISO’s data shows that real-time prices align well with the real-time MIBP, using the 4^th highest MIBP can be considered an improved cost estimate for these resources under FERC Order 831 conditions and thus cost verified. CAISO will likely have to include in its FERC filing discussion around how the higher of the 4^th highest MIBP, uncapped DEB, or cost-verified offer can be considered an updated cost estimate of the intra-day opportunity costs for these resources and that while the implementation is being done on the bid cap side, it is only done on the bid cap due to implementation timing constraints; bids above $1,000/MWh from these resources will be viewed as cost-based offers and subject to same audit, monitoring, and documentation requirements as those that go through the reference level change request process.

CAISO’s Approach 1A (Bid Cap based on Uncapped DEBs): WPTF does not believe simply uncapping the DEBs and allowing those to set the bid cap will achieve the desired outcome of this policy effort, especially for storage resources. Per the data analysis provided by the CAISO, there were minimal instances in which the uncapped DEB for storage resources was more than $1,000/MWh, rendering this approach ineffective for storage. WPTF suspects this is because the storage DEBs are based on 4^th highest day-ahead LMPs and, per the data analysis, the day-ahead prices rarely reflect the higher real-time price conditions on the “831 days” analyzed in 2023 and 2024.  While in some instances the hydro DEBs did reach levels greater than $1,000/MWh leaning on an approach that will achieve a desired outcome only for a certain resource type does not seem to be an ideal or reasonable approach.

CAISO’s Approach 1B (Bid Cap based on highest DA SMEC plus Scalar): Similar to Approach 1A, WPTF does not believe this approach will achieve the desired outcome. Per the data analysis presented, there was only one “831 day” in 2023 and 2024 where the day-ahead SMEC was above $1,000/MWh. Furthermore, using the SMEC by default will naturally chose “winners and losers” with this approach. This is because the SMEC ignores congestion. Resources with higher nodal day-ahead LMPs relative to the SMEC due to congestion (i.e. positive congestion component) will likely be worse off with the bid cap based on day-ahead SMECs; resources with lower nodal day-ahead LMPs relative to the SMEC due to negative congestion components will likely be better off with the bid cap based on day-ahead SMECs. In other words, this approach seems to only have the potential of improving bidding ability for resources that tend to have negative congestion components. But regardless, the day-ahead SMECs do not seem to accurately capture the real-time conditions on “831 days” and thus are not an accurate indication of intra-day opportunity costs for these resources. Lastly, this approach, without modification, cannot be applied to the day-ahead market since it’s based on day-ahead market outputs.

CAISO’s Approach 1C (Bid Cap based on higher of MIBP or cost-verified bid for that hour): WPTF believes this approach has the potential to enable more accurate reflection of intra-day opportunity costs in offers relative to 1A and 1B but it will be limited to only the hours during which the MIBP or cost-verified offer is above $1,000/MWh. Per the CAISO’s data analysis, the hours during which the MIBP is above $1,000/MWh tends to be during the hours in which storage resources are likely optimal to be dispatched by the market. Additionally, the CAISO has noted that very rarely do they receive cost-verified bids above $1,000/MWh which means the bid cap will likely only be above $1,000/MWh in hours when the MIBP is above $1,000/MWh. In practice what this means is that the resources will be unable to reflect intra-day opportunity costs midday and thus will still likely be dispatched earlier in the day than optimal and when needed most by the market. This approach will unlikely be effective in terms of avoided premature dispatch of these resources.

For this option to be more effective, the bid cap logic would have to be expanded to include something like the highest uncapped DEB as discussed during the stakeholder meeting to allow some amount of intra-day opportunity costs to be reflected in bids midday. However, because this is a bid cap that may vary by hour, especially during the hours where the MIBP is setting the cap, it is still prone to not effectively dispatching resources in hours where needed most when the MIBP is setting the cap in more hours than the hourly limitation of these resources. Take for example a 4hr storage resource and a day where the MIBP is $1,300/MWh in two hours and $1,400/MWh in four hours directly following. The most efficient utilization of the resource is to dispatch in the four hours where the MIBP is $1,400/MWh. However, since the resource is only able to bid up to $1,300/MWh in the two preceding hours, and the real-time optimization does not see the full 6-hour period at once, the market may discharge the resource in the first two hours and then its only available to be discharged in two of the four hours where the MIBP is $1,400/MWh. In order for an hourly bid cap to achieve the desired outcome of the policy, it has to be high enough such that the resource can reflect the intra-day opportunity cost (in this example, $1,400/MWh) in all hours where the market may prematurely dispatch the resource. 

CAISO’s Approach 1D (Bid Cap based on Highest MIBP across the day):  WPTF believes of all variations of Approach 1, this approach has the potential to achieve the desired outcome of this policy effort. The difference between this approach and approach 1C above is this would establish a single static bid cap across the day whereas 1C sets a bid cap that can vary by hour. This approach will enable the most accurate reflection of intra-day opportunity costs in offers throughout the entire day, thus ensuring these resources are not prematurely dispatched by the market as may be the case under Approaches 1A – 1C. Furthermore, and to be more consistent with existing cost-based policies for these resources, the CAISO could consider setting the bid cap at the higher of the 4^th highest MIBP (rather than highest MIBP as currently contemplated), uncapped DEB, or highest cost-verified offer. For storage and hydro, the DEBs today include an opportunity cost component. Specifically, the storage DEB takes the 4th highest day-ahead LMP as the expected intra-day opportunity cost. Thus, by setting the bid cap based on the higher of the 4^th highest MIBP, uncapped DEB, or highest cost-verified offer would then be considered consistent with existing cost-based policies. When the 4^th highest MIBP sets the cap, this can be considered that the expected intra-day opportunity cost is the 4^th highest expected value; and under FERC Order 831 days the MIBP is a reasonable approximation for the expected values as supported by the CAISO’s own analysis. However, and as noted above, this approach is still prone to unwinding the intended outcome of the policy whenever the resources are mitigated. This is a key issue with Approaches 1A-1D.

3. The ISO is seeking feedback from stakeholders to understand the intended effect of the proposed modifications.

Triggering the bid cap and penalty pricing: Today, one of two conditions must be met to raise the energy bid cap to $2,000/MWh: 1. The market accepts a bid above $1,000/MWh from a resource-specific resource, or 2. The allowable MIBP goes above $1,000/MWh Today, the tariff requires resource-specific resources to successfully cost-verify an adjusted DEB through the reference level change request (RLCR) process in order to bid above $1,000/MWh. From a systems perspective, any bid above $1,000/MWh from a resource specific resource would fulfill the condition to change the energy bid cap. However, the market only clears resource-specific resource bids above $1,000/MWh that have been successfully verified through the RLCR process because that is the only way for resource-specific resources to reflect a bid above $1,000/MWh in the market today. When the bid cap goes up, a set of penalty price parameters are doubled so that priorities are preserved. If the bid cap is raised in any hour of the day-ahead market, the penalty prices will be scaled up for all trading hours of the day-ahead market and real-time market for the same trading day. If the bid cap is not raised in any hour of the day-ahead market, but the conditions apply to raise the bid cap in hours of the real-time market, the real-time market will use the scaled up penalty price for all intervals of overlapping real-time market horizons. Stakeholder proposals being considered would allow resource-specific resources to bid above $1,000/MWh without using the RLCR process. Any bid above $1,000/MWh from a resource specific resource as a result of these proposals would be considered ‘cost-verified’ by ISO system logic for the purposes of raising the energy bid cap and scaling penalty prices, and informing the logic that applies to unspecified imports that are RA.

WPTF appreciates the additional clarification provided in this comment template as it relates to how and when the penalty prices are set based on the $2,000/MWh hard energy bid cap. We believe there was some unwarranted confusion during the last few calls that raised unnecessary issues. As explained below, WPTF does not believe that the implications of the approaches being discussed on the penalty prices is of utmost concern that the CAISO should not move forward with an interim solution for 2024.

As described by the CAISO here, if in day-ahead there is one MIBP above $1,000/MWh or one cost-verified bid above $1,000/MWh the penalty prices are scaled based on the $2,000/MWh hard energy bid cap in all 24 hours in both the day-ahead and real-time market for that trading day. This is existing policy. Thus, for storage and hydro resources to bid above $1,000/MWh in the day ahead under any approach being considered here, the conditions already exist and penalty prices will be set based on $2,000/MWh regardless. This policy will not create any additional instances where the penalty prices will be set based on $2,000/MWh. 

For real-time, and only on days where the conditions were not already triggered in the day-ahead, if resources are able to bid above $1,000/MWh then the penalty prices will be set based on $2,000/MWh only in the real-time optimization horizon that includes the hour with the bid above $1,000/MWh. If the resource does not bid above $1,000/MWh in the subsequent hour, then the penalty prices go back down in real-time. Put differently, simply increasing the bid cap in all hours does not mean the penalty prices will all be based on $2,000/MWh in all hours; a resource has to actively submit an offer above $1,000/MWh in all hours of the day for that to occur. We understand the risk that increasing the bid cap in all hours of the day allows these resources to bid above $1,000/MWh in all hours but that risk and implication is not significant enough to not proceed with a solution for a few reasons.  First, the incremental impact of this policy will only be when a bid above $1,000/MWh is submitted only from a storage or hydro resource (i.e., no other resource submitted a cost-verfied offer) in real time on a day where the conditions were not triggered in day-ahead. Second, market participants offer their resources into a competitive market; they do not simply offer in at the cap in all hours. A major benefit of operating a competitive market is the existence of natural competitive market forces which help offset uncompetitive behavior. Third, if the CAISO also includes some form of documentation/verification requirements along with the ability to audit and additional monitoring, this will create a natural disincentive for resources to offer in above $1,000/MWh in all hours just because they can – they will only offer in above $1,000/MWh when they can justify the cost and need to reflect the higher intra-day opportunity cost in the hours they submitted higher offers. The Max Import Bid Prices, uncapped Default Energy Bid, or a cost-verified offer could be the basis of that cost justification.

4. Please provide your perspective on the following questions:

1. Do you consider bids above $1,000/MWh but within the range of an uncapped DEB value to be cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the maximum import bid price (MIBP) and highest cost-verified bid?

Yes. By definition and policy perspective the calculated default energy bid is cost-based. Thus any offer within range of the uncapped DEB is and should be considered cost-based. Because they are cost-based for specific resources, then the same logic should apply here as other resource specific cost based offers above $1,000/MWh in terms of informing the logic that applies to non-resource specific imports. The CAISO should apply consistent treatment across all resources regardless of if the cost-verified offer is based on fuel costs or intra-day opportunity costs. Also, practically speaking, increasing the offer cap for non-resource specific RA imports will not materially impact bidding of those resources given the current CPUC must-flow requirement and subsequent bidding expectations.

5. Please provide your perspective on the following questions:

2. Do you consider bids above $1,000/MWh and above a DEB value to be considered cost-verified? Do you consider these bids to be “cost-verified” for the purpose of informing the logic that applies to non-resource-specific imports that are RA to bid up to the higher of MIBP and highest cost-verified bid? Do you consider these bids to be “cost-verified” for the purpose of informing the stakeholder proposed logic allowing resource-specific battery storage and hydro bids to bid to the higher of the MIBP and highest cost-verified bid?

WPTF believes that if the offer above $1,000/MWh and above a DEB reflects expected intra-day opportunity costs for resources whose costs are based on opportunity costs (i.e., storage, hydro, and PDR) then yes, they are cost-verified to the extent they represent expected intra-day opportunity cost.  As discussed in response to #2 above, the 4^th highest MIBP is a reasonable expected intra-day opportunity cost for these resource types and is consistent with the current policy of estimating cost based opportunity cost for these resources. A cost-verified offer is also a reasonable expected intra-day opportunity cost for these resource types, because the cost-verified offer moves that resource higher in the bid stack potentially due to higher gas costs that are not subject to use limitations where the opportunity-cost based resources would appear artificially more economic because its intra-day opportunity cost is not being fully captured when these cost-verified offers set the clearing prices in real-time. Similarly as noted in response to #4, WPTF does believe that the CAISO should apply consistent treatment across all resources types and if offers are submitted that reflect intra-day opportunity costs and are higher than both the DEB and $1,000/MWh it too should be considered cost-based in terms of the logic used for non-resource specific imports.

6. Please comment on whether bid cap changes discussed here should apply to all resources, or only a subset.

Today, the ISO applies similar bid caps to all resources, with the exception of those capped by the MIBP, RDRR, virtual supply and other resources exempt from the soft offer cap. The ISO is considering Identifying a subset by default energy bid calculation (e.g. hydro DEB, storage DEB, or negotiated DEBs with an opportunity cost component), targeted to those resources identified as having short-term opportunity costs.

WPTF believes it should apply to storage, hydro, and PDR. However, we do understand that addressing PDR at this moment may make the implementation lift too burdensome. Thus, if not feasible to apply to storage, hydro, and PDR for summer of 2024, focusing on storage and hydro initially will have the greatest impact.  

7. Please provide your organization’s feedback on the 831 data analysis presented.

WPTF appreciates the data analysis that the CAISO provided. We have the following observations:

1. The use of the MIBP as an approximation of intra-day opportunity costs is a reasonable approach. The real-time prices track relatively well with the real-time MIBP during hours when the real-time MIBP was above $1,000/MWh. Thus, using the higher of the MIBP (either the highest MIBP or the 4^th highest MIBP), uncapped DEB, or highest cost-verified offer as an approximation of the intra-day opportunity costs is the most effective metric available as an interim solution.  To be clear, the CAISO could use the 4^th highest day-ahead MIBP to approximate intra-day opportunity costs that can be reflected in day-ahead offers and the 4^th highest real-time MIBP to approximate intra-day opportunity costs that can be reflected in real-time offers.
2. Using the day-ahead SMEC as an estimate of intra-day opportunity costs during FERC Order 831 conditions is not a reasonable approach. Not only does it lack consistency in terms of pricing, it fails to reflect more regional diversity in prices and will have minimal to no impact on the market inefficiency that is trying to be addressed.
3. The uncapped DEBs will have minimal to no impact on the market inefficiency that is trying to be addressed. While some resources may see DEBs above $1,000/MWh most will not. Thus setting a bid cap based on an uncapped DEB and/or relying on the uncapped DEB to address the downfall of mitigating higher offer prices that reflect intra-day opportunity costs back down to a mitigated offer will be ineffective. The mitigated offers even based on the uncapped DEBs will predominately be less than $1,000/MWh and thus unwind the intended outcome of the policy.

8. Do you have any additional questions on the topic that would help with continued policy development discussions?

9. Please provide any additional feedback.

WPTF continues to believe there is a feasible approach that will leverage the existing reference level adjustment process that the CAISO should strongly consider. As explained by the CAISO, reference level change requests are submitted through SIBR. This means that SIBR has the reasonableness threshold. We also know SIBR has the MIBP which is used to also cap non-resource specific RA import bids in SIBR during FERC Order 831 conditions. We also know that SIBR is a rules based platform and making changes in SIBR from an IT perspective is easier than having to make changes in other upstream systems like ECIC. Thus, the CAISO should explore adding a logic rule in SIBR that will set the reasonableness threshold for storage, hydro, and PDR (potentially) to the higher of the 4^th highest MIBP, highest cost-verfied offer, and uncapped DEB. This would create a single static value for the reasonableness threshold across the day, which is consistent with current implementation. Again – SIBR already consumes these three data points and is a logics based platform thus should be able to add additional logic. This would then allow SCs to submit reference level change requests that reflect intra-day opportunity costs and is consistent with the existing cost-based policies for these resource types. It would then follow that, per existing Tariff language, such resources would be subject to audit by CAISO and require supporting documentation. The documentation can simply be the published MIBP values that the CAISO calculates. The added benefit to this approach, in addition to being consistent with existing FERC Order 831 policy, is the accepted reference level change request becomes the DEB. Thus if these resources are mitigated, they will not be mitigated back down to a bid that does not reflected the updated intra-day opportunity costs.

In summary, WPTF provides below the approaches in order of preference.

1. Set reasonableness threshold in SIBR to the higher of 4^th highest MIBP, highest cost-verified offer, and uncapped DEB to enable these resources the ability to seek reference level change requests that more accurately reflect expected intra-day opportunity costs. This approach aligns with existing cost-based policies and minimizes FERC risk.
2. Increase bid cap to the higher of the 4^th highest MIBP, highest cost-verfied offer, and uncapped DEB with a value that is consistent across the day. Hold SCs that submit offers for resources above $1,000/MWh to the same audit and documentation requirements as those that seek reference level change requests. Uncap DEBs.
3. Increase bid cap to the higher of the MIBP, cost-verfied offer, and uncapped DEB in each hour. The bid caps will then vary by hour. Hold SCs that submit offers for resources above $1,000/MWh to the same audit and documentation requirements as those that seek reference level change requests. Uncap DEBs.