Grid Operator’s Market Doubles, Prices Surge

By Published On: July 29, 2005

In the last month, the California Independent System Operator’s real-time market jumped from its usual 5 percent of grid deliveries to about 13 percent. As much as 5,000 MW passed through the real-time market as demand hit the 44,000 MW range. While the real-time market soared in size, the clearing price hit the ceiling?$249.99/MWh?at about 3 p.m. during the Stage 2 emergency called on July 22. Real-time prices stayed in the $200/MWh range until that night. CAISO currently caps its bids at $250/MWh. During the rest of the week, prices stayed in the $60-$70/MWh range during the afternoons, despite continuing triple-digit weather in much of the state. Before the Stage 2 emergency was called?during the second two weeks of July?the price of electricity on the grid operator’s market nearly topped out at its $250/MWh cap. However, the clearing price of $249.05/MWh lasted for only 15 minutes, according to CAISO’s department of market analysis. During those weeks, the price in the afternoon peak hours remained mostly in the $70/MWh range, while the spikes have been in the late evening and early morning, according to Gregg Fishman, CAISO spokesperson. The grid operator did not blame market participants for failing to schedule enough energy in the day-ahead markets, which would leave CAISO in the lurch. “We know that they?re trying not to underschedule,” said Yakout Mansour, CAISO chief executive officer. Because of confidentiality agreements, Mansour said he could not divulge what participants were doing, but he said that individually, they’ve been responsive. The grid operator is finalizing agreements with load-serving entities to begin scheduling “at least 95 percent of their forecast demand in the day-ahead time frame” and to provide a list of resources available to meet the uncovered amount. “You could think of it as a form of short-term resource adequacy,” Fishman said. Traders defend underscheduling as a “rational” move, according to Gary Ackerman, Western Power Trading Forum executive director. He added that arbitraging between real-time prices and forward prices is reasonable?”if and only if it doesn’t compromise reliability.” Underscheduling and using the grid operator’s spot market for sales were blamed for price volatility during the energy crisis. During that time, CAISO’s real-time market was responsible for about 35 percent of energy trades. Since then, more power is in long-term contracts, reducing the spot market to about 5 percent until the recent demand surges. In other CAISO news, staff are ironing out details of a new board selection process that follows a protracted dispute between the state and the Federal Energy Regulatory Commission. As a result of a July 1 FERC order, the grid operator plans to engage a headhunter to track down at least four qualified candidates to serve on the board. Member Tim Gage’s appointment is the first to expire under this directive?at the end of the year. After the names are submitted, a panel of 36 stakeholders will review prospective candidates and send a short list to the governor on an advisory basis. The governor will make final appointments.

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