CAISO: This Redesign Is It

Suddenly playing the strict father, the California Independent System Operator insisted this week that its market redesign will be implemented in 2007. According to the redesign details laid out in 300 pages released February 23, the grid operator expects several principal Federal Energy Regulatory Commission filings to be made this year that implement the basics of its long-awaited market redesign. ?The pressing need to implement the new design by February 2007? requires CAISO to freeze the design to give the implementation team sufficient time to develop and test the new design, stated Charlie Robinson, CAISO general counsel. The agency?s schedule has stakeholder comments due March 9, following a March 1-2 stakeholder meeting. During that time, stakeholders and CAISO have to identify elements that are ?absolutely necessary? from a reliability and function perspective to be included in the day-one design, he added. ?It?s an aggressive? process and ?likely contentious,? Robinson said in a memo to the CAISO board. The board is ?likely to face some tough decisions in March,? he added. Expected FERC 2005 filings include: A comprehensive market redesign filing in early April with a final design to be implemented February 2007. An interscheduling coordinator trade market rule. A compliance filing honoring existing transmission rights. Congestion revenue rights allocation rules. The tight deadline comes shortly after Yakout Mansour was named new chief executive officer and Ken Wiseman was appointed new board chair. Among other changes, the new proposals have caps on bids increasing in $250/MWh segments to a top end of $1,000/MWh?if there is no finding of market manipulation. Caps exceeding $250/MWh are what put former CAISO chief executive officer Terry Winter out of favor with state legislators. Winter argued high prices were necessary to avoid blackouts. The proposed policy also calls for a move away from real-time and hour-ahead schedules to a day-ahead time frame as well as locational marginal pricing, which shows the cost of producing power as well as cost of delivery. Another policy included in this week?s CAISO position paper is that the entity is likely to continue must-offer obligations for resource adequacy in a day-ahead market. In addition, it proposes adopting load aggregation point bids based on aggregated prices, not demand curves for each node, or delivery point, creating an hour-ahead spot market that has none of its own clearing prices, instead relying on real-time price settlements. Another change is that the grid operator would not charge for self-scheduling to meet a participant?s own load. To avoid market manipulation, CAISO proposes to track hourly load deviations and assess penalties if the observed behavior of a participant over time results in frequent, large real-time deviations. If all the changes come to fruition, they will be software-intensive. CAISO notes that it must launch with technology better adapted to a redesigned market. Officials have promised stakeholders that they will not have to adapt to new software roll-outs on an indeterminate schedule?new software will be issued on a predetermined basis.

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CAISO: This Redesign Is It

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