The California Independent System Operator board June 8 voted to revise its congestion rights revenue pricing design to help ensure revenue and costs are in sync. Revenue is $50 million below the costs, according to Greg Cook, CAISO market design and regulatory design manager. The revenue rights policy, reworked two years ago, allows market participants to hedge their congestion rights in the day-ahead market. The current congestion revenue rights policy is part of CAISO’s market overhaul launched in April 2009. To address the revenue shortfall, the board voted 4-0 to incorporate into the two-year old congestion rights revenue design “expected” transmission blackouts. “This is another example of a great outcome,” said Bob Foster, CAISO board chair. CAISO staff considers lack of outage predictions to be the key reason for the revenue deficiency. It concluded the current revenue rights model fails to accurately reflect system capability, allowing too many revenue rights to be released, said Cook. The CAISO management memo to the board stated staff “believes incorporating expected transmission outages into the transmission network model for allocating and auctioning annual CRRs will address ongoing concerns with revenue adequacy resulting from releasing too many CRRs in the annual process.” In response to concerns by Southern California Edison and other stakeholders, the grid operator agreed to review the effectiveness of the policy change. It also plans to look at other possible causes of the disparity between revenues and costs.
