FERC Gives Nod to CAISO?s Market Overhaul Outline

By Published On: December 13, 2003

In approving the California Independent System Operator?s market redesign blueprint October 28, the Federal Energy Regulatory Commission deemed the plan a decent draft on which further staff work will not be wasted. Regulators also specifically gave nods to the grid operator?s plan to create location-specific market pricing and its spot-market proposals. ?This is what we needed,? said CAISO spokesperson Gregg Fishman. However, ?the devil will be in the details,? he added. The grid operator submitted a conceptual redesign to FERC in place of specific market-fix proposals that included tariff language to avoid the plan?s being sent back to the drawing board by federal regulators after expenditure of considerable time and resources. FERC gave its blessing to CAISO?s cautious phased-in remake approach aimed at designing market rules that support grid operations. ?The CAISO?s filing represents significant progress and reflects a pragmatic approach to its market redesign effort,? FERC?s order states. The latest approval will allow CAISO to move ahead with software and hardware deals with vendors needed to get its market overhaul, MD02, up and running, Fishman said. The grid operator plans to submit tariff language on this segment of the redesign next February. Federal regulators specifically gave CAISO the green light to implement locational marginal pricing, which will allow price fluctuations in smaller regions in place of three large geographic areas, to better reflect the cost of serving load on the grid. Other specifics in FERC?s order include:<ul> Requiring CAISO to file a breakdown of the costs of its redesign every month to ensure transparency. Giving conditional acceptance of the grid operator?s residual unit commitment process and proposed bidding and scheduling concepts. Ordering CAISO to complete the study on its proposed congestion-revenue-rights allocation process and existing transmission contract plan. Mandating that CAISO revise its proposed day- and hour-ahead must-offer obligations to give generators leeway to choose a day-ahead or real-time market.</ul> FERC will hold a daylong technical conference on CAISO?s market redesign November 6 at the California Public Utilities Commission. Development of MD02 was initiated in 2001, and the implementation time line has been pushed back a number of times. CAISO submitted its first MDO2 proposal to FERC in May 2002. In July of that year, FERC directed CAISO to hold technical conferences to develop the longer-term elements of its plan. CAISO sought a rehearing on certain aspects of FERC?s order. The phase of MD02 FERC previously signed off on and expected to be implemented by next February involves real-time economic dispatch and penalties for uninstructed deviations. The former refers to assessing which generating units should be dispatched to meet real-time demand. The latter entails penalties that will be slapped on generators for not following dispatch instructions. CAISO?s comprehensive market overhaul is not expected to be fully operational until the end of 2005. <i>FERC order #ER-02-1656</i>

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