Full Network Model Expansion Straw Proposal Comments€¦ · Full Network Model Expansion Straw Proposal Comments Page 1 of 33 ... coordinate HVDC and parallel HVAC operations has

Full Network Model Expansion Straw Proposal Comments Page 1 of 33

Full Network Model Expansion Straw Proposal

Comments

NRG Energy, Inc. ............................................................................................................................4

NRG supports the CAISO’s proposal to expand its full network model (FNM) to: ....................... 4

Pacific Gas & Electric (PG&E) ......................................................................................................5

Opening Comments ............................................................................................................................... 5

1. The CAISO should immediately begin to track all loop flow data. Key information on loop

flows should inform this initiative. ........................................................................................................ 5

2. CAISO loads should not pay for less efficient unit-positioning due to improper positioning or

flows in external Balancing Areas (BAs). ............................................................................................ 6

3. The CAISO should implement cost-allocation based on cost-causation for RTCIO ............... 7

4. The use of WECC tools is a good starting point, but the CAISO’s plan must also ensure

reasonable modeling inputs to ensure reasonable market outcomes. .......................................... 8

a. The scope and formulations of the proposed system-to-system exchanges between the

CAISO and WECC need review. ......................................................................................................... 8

b. The CAISO should address how it will manage flawed inputs or unreasonable model

results. ...................................................................................................................................................... 8

c. The specific formulas and details involved in estimating loop flows, generation distribution

factors, and external BAs’ load-distribution factors warrant high-level stakeholder review. ....... 9

5. The CAISO should review risks of pricing inconsistencies if unique constraints are used to

simultaneously enforce a physical limit and a scheduling limit. .................................................... 10

6. The expanded FNM’s effects on market solution times need review to ensure the time

leading up to a full market solution is used optimally. .................................................................... 10

Powerex ........................................................................................................................................ 11

Opening Comments ............................................................................................................................. 11


The CAISO should require day ahead e-tags of physical interchange awards .......................... 13

The CAISO should ensure it has accurate information on the quality of day ahead and real-

time physical interchange offers ........................................................................................................ 19

The CAISO should combine its physical and scheduling limits on each intertie into a single

value that is coordinated with adjacent transmission providers .................................................... 21

SDG&E .......................................................................................................................................... 22

An Expanded Full Network Model Better Aligns Reliability Requirements with Market

Outcomes .............................................................................................................................................. 22

Obtaining the Data Necessary to Populate and Run the Expanded Full Network Model ......... 23

Which Surrounding Balancing Authorities will be Included in the Expanded Full Network

Model? ................................................................................................................................................... 24

Modeling HVDC Links in the Expanded Full Network Model ........................................................ 25

Shell Energy North America ....................................................................................................... 26

Transaction ID’s .................................................................................................................................... 26

Southern California Edison ........................................................................................................ 27


(1) CAISO Proposed Activity 1: New scheduling point and load aggregation point definitions 28

(2) CAISO Proposed Activity 2: Enforce constraints for both scheduled and physical flow ..... 29

(3) CAISO Proposed Activity 3: Include variables in high voltage direct current transmission

modeling ................................................................................................................................................ 30

(4) Impacts to CRRs ............................................................................................................................ 30

(5) Impacts to the LMP calculation .................................................................................................... 30

Western Power Trading Forum .................................................................................................. 31


WPTF Supports Improving the Modeling Representation ............................................................. 31

More Information is Needed about Physical and Scheduling Limits and Base Schedules ...... 32


Process and Operational Transparency is Needed about the Rollout Schedule for Expanded

Modeling ................................................................................................................................................ 32


Company Date Submitted By

NRG Energy, Inc. 6/25/2013 Brian Theaker

NRG supports the CAISO’s proposal to expand its full network model (FNM) to:

improve its capability to model flows between and around balancing authority area

boundaries;

improve loop flow modeling;

enforce both scheduling and actual flow limits between balancing authority areas;

improve HVDC system modeling; and

leverage WECC Reliability Coordinator data.

Following the CAISO’s June 18 call, NRG understands that the scope of the CAISO’s proposal

does not include modeling the impacts of the loss of external HVDC facilities on CAISO network

flows (e.g., the impacts of the loss of the Pacific DC Intertie on Path 26 flows). The need to

coordinate HVDC and parallel HVAC operations has been well known for a very long time, and

the CAISO’s inability to model this operational constraint and reflect the resulting need for, and

value of, SP26 capacity in its markets, remains a prominent deficiency in the CAISO’s market

model. While NRG supports the CAISO’s efforts to improve its market models, NRG urges the

CAISO to incorporate this long‐standing constraint in its market model and systems as soon as

possible.

The CAISO’s commitment to the quality and meaningfulness of its market prices hinges on its

ability to model the complex realities of operating the bulk power system under its control and

incorporating the impacts of the bulk power system outside of its direct operational control into

its market results. Merely tracking the volume of Exceptional Dispatch as a function of total

energy does not fully capture the detrimental impact of out‐of‐market actions, as Exceptional

Dispatch affects prices on the margin. Moreover, significant differences between the CAISO’s

day‐ahead and real‐time market models drive systematic price differences and non‐transparent

uplift charges, which some parties opportunistically seek to use to discredit virtual bidding. NRG

urges the CAISO to address all of these modeling issues so that the CAISO’s prices are reliable

signals of true reliability needs, and the CAISO’s reliability needs are addressed through, not

outside, its markets.

ISO Response

The ISO appreciates NRG’s comments. The ISO recognizes the ability to model high-voltage

contingencies such as the loss of HVDC facilities as one reason for its proposed FNM


expansion. As mentioned, this effort should help the ISO reduce the use of exceptional

dispatch due to unscheduled flows.


Pacific Gas & Electric (PG&E) 6/24/13 Paul Gribik (415) 973-9267

Alex J. Morris (415) 264-4958

Opening Comments

Pacific Gas and Electric Company (PG&E) offers these comments on the California

Independent System Operator’s (CAISO) Full Network Model (FNM) Expansion straw proposal.1

PG&E generally supports the FNM expansion initiative as it will yield better loop-flow

management and prevention of system-wide disturbances. As a first step in this effort, the

CAISO should immediately begin tracking all loop flows in order to better understand the

problem and the effects of solutions. For the next straw proposal, PG&E requests more details

on the formulas used for calculating expected loop flows and on the processes for updating

features of the expanded FNM, e.g. incorporating updates to WECC’s databases. Such details

will enable stakeholders to further comment on the effectiveness and potential risks of the

CAISO’s proposal. More detailed comments follow.

_____

1 http://www.caiso.com/Documents/StrawProposal-FullNetworkModelExpansion.pdf

ISO Response

Please see ISO responses below.

1. The CAISO should immediately begin to track all loop flow data. Key information on loop flows should inform this initiative.

As PG&E understands it, the CAISO only tracks loop flows under certain circumstances. This

limited tracking may limit assessments of the size and prevalence of the loop flow. Without this

information, it may be difficult to gauge how complex a solution is needed, or to measure the

accuracy of loop flow modeling estimates.

Further exposition on loop flows can greatly inform this stakeholder process. The CAISO should

provide critical details on loop flows in subsequent papers, in addition to tracking the flows on an

appropriate basis, e.g. hourly. Information could include: How big is the loop flow “problem”?

http://www.caiso.com/Documents/StrawProposal-FullNetworkModelExpansion.pdf


What are the key drivers? How is it settled today? How is it measured and reported?

ISO Response

The key drivers of unscheduled flow (USF) on COI (Path 66) during 2012 have been explored

by WECC’s Unscheduled Flow Administrative Subcommittee in a January 2013 report, which is

available at

http://www.wecc.biz/committees/StandingCommittees/JGC/02072013/Lists/Presentations/1/US

F%20Path%2066%20Analysis%20Update%20-%20Robin%20Chung.ppt. This report found

that the level of utilization (scheduled flows vs. SOL, including derates) of Path 66 was a large

contributor to the Path 66 USF events, significant outages of several phase-shifters eroded the

effectiveness of the Unscheduled Flow Mitigation Plan (UFMP) through off-path schedule

curtailments, change in generation dispatch patterns with higher exports from the Pacific

Northwest and higher imports to California contributed to USF events on Path 66, and

inappropriate execution of the UFMP and the Reliability-Based Control Field Trial had little

impact on Path 66 USF events. Because the sources of unscheduled flow are outside the ISO,

unscheduled flow is not settled by the ISO. The ISO does not routinely report on unscheduled

flow.

2. CAISO loads should not pay for less efficient unit-positioning due to improper positioning or flows in external Balancing Areas (BAs).

While the CAISO should always work to augment WECC reliability through better situational

awareness, coordination, and modeling, the CAISO should not, simply because it has the ability

to see a potentially less stable dispatch regime in other areas, mitigate the external area’s

problems to the detriment of its native customers. Put another way, CAISO loads should not

automatically pay for less efficient dispatches in the CAISO simply because the CAISO fears a

potential cascading event from another area, especially if the CAISO is compliant with WECC

reliability standards in its own right. Instead, all BAs should comport with WECC reliability

standards and rules on their own.

The CAISO should clarify its plan for communicating to other BAs about perceived risks of

system-wide disturbances originating in an external BA. If the CAISO can use its fairly

sophisticated modeling to better support reliability in the WECC, how can it communicate to

other BAs in real-time? How will BAs share in the responsibilities for resolving risks of a system-

wide disturbance, if WECC rules are not fully clear?

ISO Response

As a first step, the ISO has been closely coordinating with external balancing authorities

http://www.wecc.biz/committees/StandingCommittees/JGC/02072013/Lists/Presentations/1/USF%20Path%2066%20Analysis%20Update%20-%20Robin%20Chung.ppt

http://www.wecc.biz/committees/StandingCommittees/JGC/02072013/Lists/Presentations/1/USF%20Path%2066%20Analysis%20Update%20-%20Robin%20Chung.ppt


involved in the September 8th event to improve the modeling of our collective systems to more

accurately reflect day-ahead and real-time conditions. As we gain more experience with the

expanded full network model and improve communications with external entities, the ISO will

evaluate next steps, including mechanisms for coordinating reliability responses with

neighboring BAs. This coordination needs to be developed through discussions among BAs,

and while the ISO’s FNM expansion is a necessary step in this process, the ongoing process of

coordination with neighboring BAs would be beyond the scope of this stakeholder process.

3. The CAISO should implement cost-allocation based on cost-causation for RTCIO

As this initiative proposes to deal with modeling of loop flows, it should also consider the costs

occasionally associated with imperfect modeling of these flows. Flow estimates and imperfect

modeling can create risks of Real-Time Congestion Imbalance Offset (RTCIO). RTCIO risks

have been material in the past2, and an expanded FNM may exacerbate these risks, in spite of

measures underway to reduce the total costs of unreasonable RTCIO.3

The CAISO should implement a causation-based allocation for RTCIO. This allocation rule may

reduce uplifts associated with certain bidding strategies through which profits are funded by

uplifts rather than from willing counter-parties. Information on the drivers of loop flows will

support implementation of this type of rule. The CAISO should initiate a stakeholder process on

RTCIO uplift allocation and should leverage ideas raised by the Department of Market

Monitoring (DMM) as a starting point.4

____ 2 “2012 Annual Report on Market Issues & Performance”, Department of Market Monitoring, April 30, 2013, pg. 92

http://www.caiso.com/Documents/Apr30_2013-2012AnnualReport-MarketIssues-Performance-Department-

MarketMonitoringZZ13-4-000.pdf

3 Initiatives include Transition Constraint Parameter Relaxation and Transmission Reliability Margin Enhancement.

Others may apply.

4 ”Discussion Paper: Real-Time Revenue Imbalance in CAISO Markets”, Department of Market Monitoring, Kurlinski,

Ryan E., April 24, 2013.

http://www.caiso.com/Documents/DiscussionPaper-Real-timeRevenueImbalance_CaliforniaISO_Markets.pdf

ISO Response

The ISO appreciates PG&E’s comments. The improvements in the expanded full network

model should lead to a decrease in RTCIO and improved reliability. However, RTCIO cost

allocation is beyond the scope of this stakeholder process.

http://www.caiso.com/Documents/Apr30_2013-2012AnnualReport-MarketIssues-Performance-Department-MarketMonitoringZZ13-4-000.pdf

http://www.caiso.com/Documents/Apr30_2013-2012AnnualReport-MarketIssues-Performance-Department-MarketMonitoringZZ13-4-000.pdf

http://www.caiso.com/Documents/DiscussionPaper-Real-timeRevenueImbalance_CaliforniaISO_Markets.pdf


4. The use of WECC tools is a good starting point, but the CAISO’s plan must also ensure reasonable modeling inputs to ensure reasonable market outcomes.

PG&E supports the proposed idea of leveraging currently available WECC tools and data for the

CAISO’s FNM expansion through a phased approach. Generally, this plan will help the CAISO

to better consider loop flows and reliability needs.

Changes to the FNM, however, will affect market outcomes and so require several checks on

reasonableness.

ISO Response

The ISO agrees. WECC data will serve as a guide to the ISO for day-ahead conditions but it

will not be the only source. The ISO will also have historical flow data and it remains within our

discretion to adjust data received from WECC to reflect those real-time flows considering the

expected conditions. This serves as a reliable check on reasonableness of the WECC data.

See also discussion in Section 11.

a. The scope and formulations of the proposed system-to-system exchanges between the CAISO and WECC need review.

As PG&E understands it, the CAISO intends to calculate state-estimations and flows for

neighboring BAs for each market run by pulling information from the WECC, e.g. from the

WECC’s exchange tool. How frequent will these transactions occur? How often should the

CAISO “drop” new versions of its expanded FNM? With respect to sequencing the information

exchanges, when and how will WECC-wide information in the Day-Ahead (DA) feed into the

Integrated Forward Market, particularly if e-tags detailing the DA WECC interchanges are not

submitted to WECC until 3pm? The CAISO should thus provide step-by-step details on how its

market optimization will access and use information from the WECC. A general assessment of

this information technology work should show that the proposed plan is feasible.

ISO Response

See discussion in Section 11.

Updates to the expanded FNM are not expected to be any more frequent than current practices,

which is periodic and typically occurs on a 30-60 day cycle.

b. The CAISO should address how it will manage flawed inputs or unreasonable model results.

How will the process include new and relevant information such as major outages on a key BA

to BA intertie? What if the exchange process fails and market results become unreasonable?

What if RAS schemes are activated in external BAs, dramatically effecting transfer capabilities


or resource loading and invalidating the CAISO’s assumed flows? The CAISO must develop a

process for addressing problems that may result from an expanded FNM which is out of the

CAISO’s control and perhaps also visibility.

ISO Response

The ISO appreciates PG&E’s comments. The goal of the FNM expansion is to model and

include as much up-to-date information as possible for the day-ahead and real-time to ensure

reliability. The issues PG&E points out are some of the concerns that have led the ISO to

pursue this initiative. For example, the current day-ahead schedules ignore loop flows from

external transactions (e.g., next day operating conditions of external systems, including

generation schedules and transmission outages). Consequently, the ISO takes several actions

in the real-time to mitigate such loop flows such as transmission limit reductions on power flow

constraints, the use of compensating injections account for the loop flow, and exceptional

dispatch. We believe an expanded FNM will provide us more visibility and options to manage

the system than today. See also discussion in Section 11.

c. The specific formulas and details involved in estimating loop flows, generation distribution factors, and external BAs’ load-distribution factors warrant high-level stakeholder review.

The CAISO should provide these formulas mathematically as seen by the market optimization.

Will the CAISO use the expanded FNM for all market runs? To support stakeholder

engagement, the CAISO should provide an example of a stylized optimization model with the

new constraints.

ISO Response

In response to PG&E, the ISO has provided several examples in Section 10 of the revised straw

proposal.

d. Lastly, if the CAISO plans to include more detailed topologies or elements of external areas, information sharing rules should be developed.

More detailed information may require direct BA to BA coordination and information sharing.

PG&E believes such activities should be fair and equitable among transmission owners and

BAs. To pursue more detailed models based on BA–to-BA information sharing, the CAISO

would need to transparently detail which pieces of information it seeks and how it would obtain

the data beyond or outside of the WECC tools. The Universal Data Sharing Agreement, the

non-disclosure agreement that BAs and others have signed with the WECC RC, may not be

sufficient to address concerns from the affected entities in a BA-to-BA sharing approach.

To develop further BA-to-BA information sharing ideas or rules, the CAISO should consider a


“FNM Expansion Working Group” which would support collaboration, detailed discussion, and

problem solving among the BAs and other stakeholders. This group could review the data

confidentiality concerns, communication protocols, network and outage data needs, and other

relevant information required to allow more detailed network model sharing, potentially

producing recommendations or roadmaps with approximate milestones to guide the effort.

ISO Response

The ISO appreciates PG&E’s comments and will consider such a working group. In this first

phase, the ISO has worked closely with the external balancing authorities involved in the

September 8th event and such collaboration can also serve as a blueprint for future cooperation

with other entities.

5. The CAISO should review risks of pricing inconsistencies if unique constraints are used to simultaneously enforce a physical limit and a scheduling limit.

The CAISO’s design should ensure pricing consistency. To the extent that the CAISO enforces

two incongruous flow constraints at an intertie, it seems possible for multiple prices to result.

This issue, as PG&E understands it, may be akin to the “dual constraint” issue discussed in the

Intertie Pricing and Settlement5 initiative where the optimization produced multiple LMPs at a

single node. Pricing disparities can produce illogical awards and potentially other market

inefficiencies.

The CAISO should further study how the added enforcement of physical limits may or may not

create disparities and related issues. To this end, PG&E recommends the CAISO provide an

example of the stylized optimization model, in line with 4c.

___

5 http://www.caiso.com/Documents/Issue_paper_IntertiePricingandSettlement.pdf

ISO Response

In response to PG&E, the ISO has provided an example of enforcing both scheduling and

physical limits on the interties in Section 10 of the revised straw proposal.

6. The expanded FNM’s effects on market solution times need review to ensure the time leading up to a full market solution is used optimally.

As PG&E understands it, the expanded FNM will not add many constraints to the market run but

will instead only add deemed flows between external BAs into its market optimization. As such,

there is little concern for prolonged market solution times. If, however, the expanded FNM

intends to augment the market solution with further constraints, the effects on solution-times

need review.

As PG&E expressed in its comments on the proposed FERC Order 764 compliance plan, the

CAISO should endeavor to run its day-of markets as close to real-time as possible in order to

http://www.caiso.com/Documents/Issue_paper_IntertiePricingandSettlement.pdf


use the best forecasts for loads and variable energy resources. These inputs are critical to the

real-world optimality of the market solution. The CAISO should consider how to prioritize the

need for accurate forecasts against the desire for more time during or after market runs yet prior

to dispatch, e.g. to provide more time for tagging intertie transactions which ultimately update

the WECC’s interchange database. PG&E recommends the CAISO consider these trade-offs

comprehensively as part of this initiative or separately. The CAISO should also discuss the

interplay and prioritization of this initiative and others, such as the EIM Initiative or FERC 764.

ISO Response

The FNM expansion will not increase solution times because this has been provided as a

requirement to ISO’s software vendor. The proposed market changes to comply with FERC

Order 764 will be beneficial to this stakeholder process as we are able to incorporate more data

closer to the actual dispatch time. However, inconsistencies will remain such as e-tagging

deadlines, which is a trade-off that needs to be made at this point. Therefore, the ISO

welcomes cooperation with external balancing authorities. The first phase of the FNM

expansion will also include modeling of the EIM entity. While the EIM initiative is dependent

upon the FNM expansion, the FNM expansion can proceed independently.


Powerex June 26, 2013 Thomas Elgie

604-891-6010

Opening Comments

Powerex appreciates this opportunity to comment on the CAISO’s Full Network Model

Expansion Straw Proposal (“Straw Proposal”).

Powerex is supportive of the CAISO’s objectives of improving its visibility of external system

conditions in both the day ahead and real-time timeframes, consistent with the FERC/NERC

recommendations from the September 8th blackout. Powerex, however, strongly disagrees with

the CAISO’s approach in this initiative. In Powerex’s view, the CAISO’s proposal has three

significant deficiencies:

1. The CAISO should require day ahead e-tags for day ahead physical interchange awards

2. The CAISO should ensure it has accurate information on the quality of day ahead and

real-time physical interchange offers


3. The CAISO should combine its physical and scheduling limits on each intertie into a

single value that is coordinated with adjacent transmission providers

These deficiencies have serious implications for the reliability of the western interconnect.

Failure to ensure that the CAISO has accurate e-tag information on the quantity, quality and

physical path of interchange deliveries in both the day ahead and real-time timeframes runs

directly counter to the transparency, data coordination and situational awareness

recommendations of FERC/NERC. Failure to coordinate transmission scheduling limits with

adjacent transmission providers via communication of a single value is also inconsistent with

these important recommendations.

In the past, the CAISO has taken market design actions to increase intertie liquidity, including

steps which may now be viewed as detrimental to reliability objectives. While increasing liquidity

at the interties is generally an appropriate objective, it should not come at the expense of

reliability and market efficiency. For example, a contributor to the lack of external transparency

and coordination, that FERC, NERC and CAISO now seek to cure, is the lack of next-day

generation and transmission information sharing between transmission providers and balancing

authorities. The CAISO’s lack of a day ahead e-tag requirement runs directly counter to this

important FERC/NERC information sharing objective, and such a requirement is only absent as

a direct consequence of the CAISO’s pursuit of increased intertie liquidity. As discussed further

herein, this omission of a day ahead e-tag requirement also has the result of devaluing

investments in firm transmission service outside of CAISO in favor of creating value for

congestion rights holders in the state, inconsistent with efficient market outcomes and

appropriate price signals for transmission investment external to CAISO markets.

In addition, the CAISO currently lacks sufficient information, as well as clear, unambiguous and

consistently enforced rules associated with the “quality” of interchange energy offers in both its

day ahead and real-time markets. This further undermines the external transparency and

coordination efforts FERC/NERC and the CAISO desires. Powerex makes the following

comments and recommendations on these issues.

ISO Response

No comment.


The CAISO should require day ahead e-tags of physical interchange awards

The FERC/NERC report on the September 8th blackout, highlights the importance of a day

ahead e-tag requirement:

“some affected TOPs use models for external networks that are not updated to reflect next-day

operating conditions external to their systems, such as generation schedules...” [emphasis

added – Finding 2]

“TOPs and BAs should ensure that their next-day studies are updated to reflect next-day

operating conditions external to their systems, such as generation and transmission outages

and scheduled interchanges…” [emphasis added – Recommendation 2]

Unambiguously, both Finding 2 and Recommendation 2 highlight the need for the CAISO to

have accurate next-day interchange schedule information. In Powerex’s view, this necessitates

the CAISO implement a strict day ahead e-tagging requirement for day ahead physical

interchange schedules.

It is important to note that e-tags are the industry standard mechanism for communication of

important reliability information on scheduled interchanges between balancing authorities and

transmission providers across North America. In fact, day ahead e-tag requirements for day

ahead physical interchange schedules are, undisputedly, the norm outside CAISO markets,

including for transactions for firm energy under the predominant WSPP Schedule C firm

agreement in western bilateral markets, and for physical day ahead interchange transactions in

eastern ISOs. Indeed, the Federal Energy Regulatory Commission considers e-tags so

important that it has required FERC to be cc’d on all e-tags and plans to include reporting of e-

tag information as part of its Electric Quarterly Reports that it uses to monitor transactional

activities.

The CAISO’s unique practice of not requiring day ahead e-tags for day ahead physical

interchange transactions not only allows, but tacitly encourages, participants to submit physical

energy offers into CAISO markets without concurrently committing physical capability to deliver

on such awards. The lack of a day ahead e-tagging requirement for day ahead obligations has

at least three troubling reliability implications for the CAISO, and the broader western

interconnect.

First, until an e-tag is eventually submitted, if at all, in real-time, the CAISO will have little, if any,


knowledge (other than vague historic patterns) in determining:

i) the location and characteristics of the generation resource;

ii) the contracted delivery transmission path, and;

iii) the likelihood of delivery.

This directly undermines the CAISO’s ability to have accurate next-day information on

operations external to its balancing authority, as recommended in Finding 2 of the FERC/NERC

Joint Staff Report on the September 8th Blackout.

Second, the CAISO lacks the necessary information to accurately commit sufficient generation

capacity in its RUC process to backstop “speculative” physical interchange deliveries in the

next-day timeframe. The CAISO can only, at best, make an “educated guess” on how much of

the un-tagged physical interchange may not show up, and thereby make a corresponding

guesstimate of its internal RUC requirements. While this framework of guesstimating hourly

RUC requirements has not yet resulted in a reliability event, there are no assurances that such

guesstimates will continue to be sufficiently accurate going forward.

Third, modeling of actual flows and reliability conditions of the entire western interconnect is

substantially undermined in the next-day window since no reliability coordinator, balancing

authority or transmission provider can be expected to have information on the source and

transmission path that each market participant intends to utilize for its CAISO IFM physical

interchange awards (that lack corresponding next day e-tags).

None of these reliability implications are acceptable.

Powerex believes it is important to re-evaluate the economic rationale for the CAISO’s decision

to not require e-tags, given it is clear that a day ahead e-tag requirement is consistent with the

recommendations of FERC/NERC and overall reliability objectives.

The CAISO’s decision to not require e-tags is based on economic, not reliability, interests.

To understand the CAISO’s economic motivations for not requiring next day e-tags for next day

physical interchange awards, the following quote from the CAISO’s 2010 Straw Proposal on e-

tagging timing requirements provides substantial insight:


“There also may be potential unintended consequences that result from strict enforcement of

earlier e-tag requirements. An earlier requirement may reduce day ahead market liquidity by

reducing the time market participants have to secure energy and transmission to meet their day

ahead awards. Additionally, an earlier e-tag timing requirement may conflict with the timing of

when transmission routinely becomes available in other balancing authority areas. In

considering whether it is appropriate to implement earlier e-tagging requirements in the ISO’s

markets, it is important to assess the potential adverse impacts as well as the benefits.”

Powerex believes this viewpoint illustrates two important perspectives of the CAISO:

1. The CAISO believes it is consistent with its market efficiency and reliability objectives for

physical interchange awards in its IFM market to be backstopped merely by prospective

purchases of energy and/or transmission outside the CAISO in real-time – IFM awards do not

need to be backstopped by day ahead physical delivery capabilities.

2. The CAISO believes it is appropriate for the CAISO’s rules to ensure that “unused” firm

transmission rights that are released by external transmission providers as non-firm

transmission rights (after next-day e-tagging industry timelines) can be prospectively relied upon

by participants for performing on CAISO’s IFM physical interchange awards.

Powerex, respectfully, strongly disagrees with both of these perspectives, and provides an

alternative perspective as follows:

1. IFM physical interchange supply offers to CAISO, representing prospective purchases of

energy and/or transmission in external markets, must be treated as financial offers in the

CAISO’s IFM market.

Powerex agrees with the CAISO that prospective real-time interchange supply should be

encouraged to participate in CAISO’s markets. However, Powerex strongly disagrees with the

CAISO that prospective real-time interchange supply should be treated as physical supply in the

CAISO's day ahead markets- prospective real-time supply simply cannot be reliably relied upon

to meet firm load obligations in the next day window. Only when a participant has secured the

necessary rights to generation output and transmission, as represented by an implemented e-

tag, can the CAISO reasonably rely on such supply to meet its firm load obligations.


Accordingly, it is prudent, consistent with reliability objectives and efficient market outcomes,

and consistent with rules developed across eastern ISOs/RTOs, for prospective real-time

interchange supply, (including un-tagged physical interchange awards) to be treated as financial

awards in the CAISO’s IFM and RUC processes.

The appropriate mechanism for enabling prospective real-time interchange supply to participate

in CAISO markets, thereby increasing IFM liquidity, is through the implementation of

convergence bidding on the interties, and settling un-tagged IFM physical awards consistent

with intertie convergence supply awards. Importantly, treating prospective real-time interchange

supply in this manner (i.e. as financial, not physical supply transactions) in the next day

timeframe would ensure that the CAISO could procure accurate quantities of RUC , with the

costs of this RUC capacity allocated to these supply offers, consistent with cost causation. This

alternative treatment would both protect reliability of the western grid, by directly addressing the

recommendations of the FERC/NERC Joint Staff Report on the September 8th Event, and be

consistent with efficient market outcomes.

In contrast, the CAISO’s current approach, which fails to treat prospective real-time interchange

supply as financial in the next-day timeframe, undermines the CAISO’s RUC process and thus

its reliability objectives, while inefficiently lowering marginal clearing prices in CAISO’s markets.

This price depression effect results from participants with prospective real-time supply being

able to avoid, and hence exclude from their offer prices, the increased dispatch of RUC capacity

necessary to backstop their prospective supply offers. In effect, the CAISO’s incorrect treatment

of prospective real-time interchange supply as physical supply results in “quality” supply under-

scheduling in the CAISO’s IFM physical markets, through the avoidance of day ahead

generation and/or transmission capacity commitments behind the un-tagged day ahead supply

offer. Put another way, the inappropriate co-mingling of un-tagged prospective real-time

interchange supply with physical supply that includes unit commitment (as represented by

implemented e-tags) as equivalent products, distorts CAISO's market clearing prices while

undermining the CAISO’s reliability objectives.

2. The CAISO’s efforts to access “unused” firm transmission to support IFM awards directly

subverts transmission investments and transmission priorities external to CAISO markets,

inappropriately shifting the value to CAISO transmission rights.


Under the pro-forma open access transmission tariff (OATT) prevalent across western markets

outside the CAISO, priority access to use the transmission system is granted under tariff rules

set forth by the Federal Energy Regulatory Commission. Under these rules, investors in long-

term firm transmission rights receive priority access to utilize the transmission system ahead of

all non-firm transmission customers. On transmission paths that are fully subscribed on a long-

term firm basis, such as the transmission paths that enable deliveries from the Pacific Northwest

to serve demand in California, non-firm transmission is generally only available for sale during

hours when the firm transmission customer chooses not to utilize its priority rights. Importantly,

this "choice" appropriately rests with the transmission customer, granted by the respective

transmission provider, not with external entities such as CAISO.

It is important to note that this priority access for firm transmission investors is achieved largely through:

(i) transmission providers monitoring the utilization of firm and non-firm transmission rights on e-tags

(ii) transmission providers limiting the release of unused firm transmission rights as non-firm transmission rights based on path scheduling limits and firm transmission rights utilization as represented on e-tags

(iii) transmission providers curtailing non-firm transmission rights ahead of firm transmission rights during hours where scheduled use exceeds scheduling limits, via implementation of e-tag curtailments. For example, Bonneville Power Administration, the largest OATT transmission provider in the

region, attempts to ensure firm transmission rights holders are given priority access to

transmission on its southern interties in the day ahead markets, via designing the release of

unused firm transmission rights (offered as non-firm transmission rights) only after next-day e-

tagging timelines in western markets have expired. This release timeline attempts to ensure

that:

(i) non-firm transmission customers cannot “step ahead” of firm transmission customers as a

result of seams issues with neighboring jurisdictions

(ii) non-firm transmission rights are available to be utilized if the firm transmission rights-holder

chooses not to utilize its transmission rights in the day ahead timeframe, ensuring efficient

utilization of the transmission network


The CAISO’s lack of a day ahead e-tagging requirement has the effect of nullifying BPA’s

transmission priority framework, enabling non-firm transmission customers to compete directly

with firm transmission customers, for use of the respective transmission path not only on the

CAISO transmission system, but on the BPA transmission system as well. This directly and

severely undermines transmission investment and transmission priorities under BPA’s open

access transmission tariff framework. In effect, this results in the CAISO allocating transmission

awards both on its transmission system and on the BPA system, directly inconsistent with the

BPA’s authority under its OATT and various statutes. In other words, the CAISO chooses which

participants utilize BPA's transmission system. This significantly undermines the value of

transmission investment in the BPA transmission system, by increasing the physical liquidity in

the CAISO’s day ahead physical energy markets potentially beyond the transmission capacity of

the BPA transmission system. Economically, this increases the value of CAISO transmission

rights through increased intertie congestion, at the direct expense of lowering the value of BPA’s

transmission rights, while undermining FERC/NERC’s and the CAISO's reliability objectives, as

previously discussed.

To be clear, Powerex is not seeking to resolve the seams issues between the CAISO and

adjacent transmission providers in a manner which seeks to disproportionately transfer value to

external transmission customers, such as Powerex. Powerex believes there are market design

solutions available which result in efficient market outcomes, are consistent with reliability

objectives, respect both the CAISO and external transmission providers open access

transmission rules and authorities, and result in equitable proportionate allocations of

transmission value to both CAISO transmission customers and external transmission

customers. The CAISO does not, and should not, need to sacrifice the transparency and

coordination objectives sought by FERC/NERC, via continued omission of a day ahead e-tag

requirement, in order to achieve its liquidity objectives and efficient market outcomes. Powerex

hopes such results will be achieved through open and transparent transmission market and rate

design and seams discussions, perhaps as part of the CAISO's EIM stakeholder process, within

the context of the CAISO’s desire to represent wider regional interests beyond California's

transmission customers and ratepayers.

Powerex does, however, oppose the CAISO’s current implementation of its e-tagging timing

rule, which, in its view, results from the pursuit of increased liquidity in its markets at the

expense of efficient market outcomes, equitable allocation of transmission value to both CAISO


and external transmission customers, and reliability objectives. This viewpoint should not be

misinterpreted to suggest that Powerex opposes increased liquidity in CAISO markets. To the

contrary, Powerex generally supports the CAISO’s pursuit of liquidity in its markets but believes

this pursuit should not go beyond the CAISO’s reliability and market efficiency objectives, and

certainly shouldn’t transcend to the inequitable or confiscatory treatment of transmission rights

outside CAISO markets. Importantly, in the context of this stakeholder process focused on

reliability objectives, the pursuit of economic value for CAISO's transmission customers, via

omission of a day ahead e-tag requirement, runs directly counter to the reliability objectives of

FERC/NERC.

ISO Response

The ISO appreciates Powerex’s comments. Current WECC tagging rules only require tagging

20 minutes before flow.

The CAISO should ensure it has accurate information on the quality of day ahead and real-time physical interchange offers

The CAISO should ensure it has accurate information on the quality of day ahead and real-time

physical interchange offers The CAISO currently has three energy product codes applicable to

interchange transactions which are designed to reflect the “quality” of interchange deliveries

from a generation perspective – firm, unit contingent and non-firm. Each of these three products

carries different delivery requirements and different settlement treatment.

Conceptually, firm energy can be relied upon to meet CAISO’s firm load obligations, without the

need for additional CAISO generation capacity commitments to backstop potential failures to

deliver. Unit contingent energy can also be relied upon to meet CAISO’s firm load obligations;

however, additional operating reserves need to be carried by the CAISO in order to backstop

failures to deliver resulting from qualifying contingency events (i.e. unit trips or de-rates, which

can be backstopped by the activation of Contingency Reserves). Non-firm energy products

cannot be relied upon to meet CAISO’s firm load obligations, and hence must be fully coupled

one-for-one with operating reserves to serve firm demand. CAISO’s operating reserve costs

associated with these energy product types are allocated based on these differing requirements

for operating reserves, consistent with cost causation.

In practice, however, the CAISO has poorly defined the differing delivery requirements

associated with each of these energy products in its tariff. Moreover, although these differing


energy products have different settlement and reliability implications, the CAISO takes little, if

any, direct action to ensure that participants utilize the appropriate energy product type to

represent their energy offers, in either its day ahead and/or hour ahead markets. It should not

be surprising, therefore, that deliveries of interruptible energy products to CAISO represented as

firm and unit contingent products appear to be increasing, as more entities become comfortable

with the CAISO’s lack of clarity in its tariff. This trend is exacerbated by the widespread

installation of VERs outside the CAISO and the cost pressures associated with VER integration.

In Powerex’s view, the representation of interruptible interchange supply as firm and/or unit

contingent products, results in “quality” under-scheduling of supply, which undermines efficient

market outcomes in both the CAISO and external markets, and more importantly, seriously

jeopardizes reliability.

To understand the impacts of quality under-scheduling of supply, Powerex believes it may be

helpful to consider the impacts of a similar activity - quantity-based under-scheduling of

demand. It is well documented that under-scheduling of demand from a quantity perspective

distorts efficient market outcomes, lowering day ahead energy prices and raising real-time

prices. It is also well documented that under-scheduling of demand can have serious reliability

implications unless the respective system operator both identifies the under-scheduling activity

and commits additional generation capacity day ahead.

FERC has taken significant steps to both prevent and counter the ability and consequences of

under-scheduling demand practices. For example, the standard design of the Residual Unit

Commitment process in RTOs ensures sufficient capacity is procured from a reliability

perspective to prevent under-commitment of capacity day ahead resulting from load-serving

entities under-scheduling their expected quantity of demand, in pursuit of lower day ahead

prices. Similarly, convergence bidding is a market design mechanism that nullifies the ability for

load-serving entities to benefit from under-scheduling demand through utilizing their monopsony

power to depress day ahead prices and thereby distorting efficient market outcomes.

In Powerex’s view, the CAISO’s failure to differentiate and/or enforce the delivery requirements

of different energy products results in under-scheduling supply from a quality perspective, with

the same troubling consequences as quantity-based under-scheduling of demand. By tolerating

delivery of a portion of its IFM aggregate firm and unit contingent interchange energy awards

from resources and/or balancing authorities that supply energy subject to interruption (outside of


events that can be backstopped by Contingency Reserves) the CAISO IFM (and HASP)

markets run with an over-statement of supply “quality”. This has two undesirable consequences,

similar to those identified with quantity-based demand under-scheduling. First, it artificially

lowers day ahead energy prices for firm energy resources below efficient market outcomes, as

entities offering such supply do not have to include RUC costs in their offer prices. Second, it

increases the reliability risk to the western interconnect since insufficient residual unit

commitments may take place to backstop this quality shortfall.

Powerex urges the CAISO to re-examine and re-define energy product types in its tariff, and

develop sufficient prospective preventative procedures to ensure differing qualities of day ahead

and real-time interchange energy deliveries are treated appropriately from both a reliability and

cost causation perspective. To be clear, Powerex is not seeking a framework which penalizes,

or over-charges, participants that have elected to purchase insufficient capacity reserves to

deliver energy that can be reliably relied upon to serve firm demand, including interruptible

energy deliveries from VERs. To the contrary, Powerex urges the CAISO to identify and

differentiate such interruptible energy products from firm and unit contingent supply offers,

thereby enabling the efficient, reliable and transparent procurement of sufficient capacity

resources in the CAISO day ahead and real-time markets, with the associated costs allocated

consistent with cost causation and efficient market outcomes.

Powerex believes the additional information that would be provided by both a day ahead e-tag

requirement and by well-defined energy product types that are adhered to would go a long way

to increasing the CAISO’s situational awareness of operations in external balancing authorities

both next-day and in real-time. These steps would enhance CAISO reliability while helping

achieve efficient market outcomes. Additional steps such as modeling of external transmission

systems and potential loop flow, layered on top of this important foundation of a robust day

ahead e-tagging and energy product type framework, would go a long way to achieving the

Recommendations of the FERC/NERC Blackout Report.

ISO Response

The ISO appreciates Powerex’s comments. Please see the HASP reversal rule under the ISO’s

FERC Order 764 proposal

http://www.caiso.com/informed/Pages/StakeholderProcesses/FERCOrderNo764MarketChanges.aspx

The CAISO should combine its physical and scheduling limits on each intertie into a single value that is coordinated with adjacent transmission providers

Powerex does not object to the CAISO’s proposal to attempt to calculate physical limits, in

http://www.caiso.com/informed/Pages/StakeholderProcesses/FERCOrderNo764MarketChanges.aspx


addition to scheduling limits that are calculated today. However, Powerex believes it is important

that the lower of the physical and scheduling limit calculation becomes the official scheduling

limit for all purposes internal and external to CAISO markets. Of particular importance, the

CAISO should rely on the lower limit in coordinating ATC with adjacent transmission providers,

to ensure that both transmission providers limit transmission rights to the respective level,

thereby preventing an ATC mismatch. An ATC mismatch has the potential to result in

transmission providers external to the CAISO over-selling transmission rights on their systems,

inconsistent with their OATTs and efficient market outcomes.

Powerex appreciates this opportunity to comment and is hopeful that the CAISO will consider

and incorporate the proposals and recommendations suggested herein. Powerex looks forward

to additional details on the other elements of the CAISO’s Straw Proposal.

ISO Response

In response to Powerex, the ISO has provided an example of enforcing both scheduling and

physical limits on the interties in Section 10 of the revised straw proposal.


SDG&E 6/25/13

An Expanded Full Network Model Better Aligns Reliability Requirements with Market Outcomes

Overall, SDG&E believes the CAISO’s June 11, 2013 Full Network Model Expansion

Straw Proposal is moving in the right direction. It should improve the alignment of grid

reliability requirements and market signals and thereby reduce the need for real-time

out-of-market dispatch.

At the same time, market participants need to understand that because the proposed

expansion relies on information developed (i) outside of the CAISO’s market

mechanisms (e.g., information supplied by the WECC Reliability Coordinator), and (ii)

by the CAISO itself (e.g., where information is not available from the WECC Reliability

Coordinator), market outcomes will be increasingly dependent on decisions made by

non-market entities. To some extent, this is already the case today—for example, the

CAISO imposes its own forecast of CAISO Balancing Authority loads in the Residual

Unit Commitment process. The proposed expansion means that a wider range of

CAISO decisions can impact market outcomes. At some point, the CAISO’s market


neutrality could be called into question. In developing the details of the proposed

expansion, stakeholders need to weigh the advantages and disadvantages of giving the

CAISO greater influence over market outcomes

ISO Response

The ISO disagrees that this initiative provides the ISO with “greater influence over market

outcomes.” In fact, the opposite is true. Today, the ISO uses compensating injections in the

real-time market to estimate unscheduled flows and may use exceptional dispatch to manage

the impact of such flows. With the FNM expansion, we would seek to reduce both, and replace

much of the needed compensating injection calculations with data from WECC, which should

lead to a reduction in the use of exceptional dispatch.

Obtaining the Data Necessary to Populate and Run the Expanded Full Network Model

SDG&E believes that to the extent possible, CAISO markets should rely on information

provided by CAISO market participants through price/quantity bids/offers. Where

additional information is needed to develop and operate an expanded Full Network

Model, SDG&E supports the use of information obtained from the WECC Reliability

Coordinator. This information is likely to better reflect non-market participants’

commercial intentions than would CAISO “estimate[s]” of the same information.

However, while the WECC Reliability Coordinator should have information concerning

the planned outage of transmission facilities and large generating units, it is less likely to

have information concerning generation start-up decisions, output levels, and shut-down

decisions that are driven by economics. The CAISO’s proposal recognizes that there

will be data gaps in the expanded Full Network Model that will need to be filled through

CAISO “estimate[s].” The straw paper states that “the ISO will rely on existing WECC

databases and resources but may have to estimate or extrapolate data that is missing,

incomplete, or not appropriately formatted.”

For example, the straw proposal states that if CAISO cannot obtain “base schedules for

supply directly from the relevant balancing authority area,” the CAISO “will estimate

them by distributing the demand, net of tagged scheduled interchanges, to supply

resources in each balancing authority area using generation distribution factors.” This

estimation process implicitly assumes that each of the “supply resources” that are not


known to be on a planned outage, will be operational for purposes of running the Full

Network Model. In practice, some of these supply resources will actually be off-line for

economic reasons or otherwise running at an output level that is inconsistent with the

demand that is “distributed” to the supply resource by the CAISO. This estimation

process introduces imprecision into the results of the expanded Full Network Model

because the Locational Marginal Prices (LMPs) at every node in the Full Network Model

are affected, to varying degrees, by the specific output level of every supply resource.

ISO Response

The ISO agrees that there may be imprecision to the WECC data but it does represent the best

available information from WECC at the time. This is an improvement over the current practice

where we have very limited visibility into external balancing authority areas. As described in the

ISO’s proposal, the ISO’s market systems will need to use estimation processes when there are

data gaps in the otherwise-available information. See discussion in Section 11.

Which Surrounding Balancing Authorities will be Included in the Expanded Full Network Model?

SDG&E is unclear as to which “surrounding balancing authorities” will be modeled in the

initial version of the expanded Full Network Model. Modeling the Los Angeles

Department of Water and Power (LADWP), Imperial Irrigation District (IID), Western

Area Power Administration (WAPA) and Comision Federal de Electricidad (CFE)

balancing authorities offers significant advantages because each of these balancing

authorities has multiple ties with the CAISO balancing authority which means, inevitably,

that loop-flows will be present. The expanded Full Network Model will predict these

loop flows and should therefore provide more accurate price signals throughout the

CAISO balancing authority.

In addition to modeling loop flows between the CAISO and its adjacent balancing

authorities, it is important to model loop flows that traverse the larger WECC loop, i.e.,

the transmission network connecting southern California, the desert southwest states,

the Rocky Mountain states, the Pacific Northwest and northern California (sometimes

called the “eastern loop”). The eastern loop can be a significant contributor to loop flow

across the CAISO balancing authority. SDG&E is unclear as to whether the initial

version of the expanded Full Network Model will include all of the balancing authorities


that comprise the eastern loop.

ISO Response

In response to SDGE, the ISO has provided an explanation of its phased approach in Section 4

of the revised straw proposal. The first phase (targeted for Fall 2014 implementation) will only

include the external balancing authority areas involved in the September 8th event and the EIM

entity. As we gain more experience with the expanded FNM, we can evaluate where additional

modeling would be most beneficial and that would likely be where there are significant loop

flows. It is important to understand that the ISO’s phased approach to detailed modeling of other

BAAs in the WECC region will be a matter of modeling detail, and modeling the high-level (e.g.,

220 kV or higher voltage) transmission topology and resource locations can precede the

detailed modeling of lower voltage facilities.

Modeling HVDC Links in the Expanded Full Network Model

The straw proposal states that “verified tags for intertie schedules on the HVDC links

[where the ISO does not have direct operational control] would provide a hedge for the

locational marginal price difference between the inverter and rectifier stations, in effect

exempting these schedules from marginal loss and marginal congestion charges

between these stations since the associated energy is flowing on the HVDC link as

opposed to the AC network.” SDG&E asks that the CAISO provide some simple

numerical examples to illustrate the point of this statement.

ISO Response

In response to SDGE, the ISO has provided an example in Section 10 of the revised straw

proposal.



Shell Energy North America 7/12/13 Mike Evans

General Manager, Regulatory

Affairs

Shell Energy North America

4445 Eastgate Mall, Suite 100

San Diego, CA 92121

858-526-2103

[email protected]

Transaction ID’s

Shell Energy wishes to make the following comments to the proposal as described in the

stakeholder presentation on June 18, 2013 to incorporate impacts of neighboring BAA’s into the

ISO dispatch process.

Shell Energy requests that when creating Transaction ID’s that the ISO retains and uses the

existing Resource ID’s and does not require SC’s to modify or change the existing Resource

ID’s which were created during MRTU and have been incorporated extensively into existing

scheduling systems.

The CAISO proposes to create a new “Transaction ID” which would be broader than the current

resource ID’s presently used by SC’s. These Transaction ID’s would provide a broader input to

the CAISO model, to indicate load and supply in external BAA’s.

Shell Energy supports the ISO’s work to implement recommendations associated with the

September 8, 2011 blackout and the modeling work that is proposed. However, as part of the

implementation of Transactions ID’s, it would be very helpful to begin thinking about how these

would be created. It is anticipated that these are an internal tool which the ISO could use to

evaluate the feasibility of the DA schedule relative to external BAAs.

It would be very helpful if the ISO could use the existing Resource ID’s which were set up by all

SC’s in 2008 with the implementation of MRTU, in the creation of the ISO’s Transaction ID’s and

that SC’s would not be required either create new Transaction ID’s or to modify their existing

Resource ID’s.


Resource ID’s can be numerous and in particular, were greatly expanded with the

implementation of MRTU to be very specific to the transaction and location, of, for example

imports and exports. It would be a substantial effort to modify these Resource ID’s. They are

used extensively in both ISO systems and SC’s internal systems to move transaction quantities

of energy to scheduling points, associate with energy sales and deliveries, and properly

schedule daily quantities of energy into and out of the CAISO.

We request that as the ISO contemplates how the implementation of external BAA’s daily

load/supply/import/export schedules are set up and evaluated within a new broader view to be

created by the ISO, that the ISO could allow the existing Resource ID’s to remain intact, and to

use them to create the new Transaction ID’s and that any changes to schedules could then be

fed backwards to the appropriate Resource ID’s, so as to not require SC’s to make a whole new

set of Resource ID’s.

ISO Response

The ISO appreciates Shell’s comments and will consider these points as we move into the

implementation stage.


Southern California Edison 6/25/2013 Wei Zhou (626) 302-3273

Opening Comments

Southern California Edison (SCE) appreciates the opportunity to comment on the California

Independent System Operator (CAISO), June 11, Straw Proposal on Full Network Model

Expansion1. Full Network Model (FNM) plays an important role as it provides a foundation for

the CAISO to run the day-ahead market and the real-time market.

In general, SCE supports the CAISO efforts on improving modeling accuracy to better reflect

physical conditions. As noted by the CAISO, expanding the FNM has the potential to increase


the modeling accuracy and minimize the impact of loop flows2 on the market outcomes.

However, the FNM expansion is a major step and should be carefully evaluated to avoid

adverse impacts to the current system, the CAISO market, and commercial trading around the

CAISO’s markets. Therefore, SCE’s support on this stakeholder process is contingent upon its

further review of details of the CAISO proposal.

Below, SCE provides comments on specific items on:

CAISO Proposed Activity 1: New scheduling point and load aggregation point definitions

CAISO Proposed Activity 2: Enforcing constraints for both scheduled and physical flow

CAISO Proposed Activity 3: Include variables in high voltage direct current transmission

modeling

Impacts to CRRs

Impacts to the LMP calculation

____ 1

ISO Straw Proposal on Full Network Model Expansion: http://www.caiso.com/Documents/StrawProposal-FullNetworkModelExpansion.pdf 2 Page 6 of the straw proposal

ISO Response

The ISO appreciates SCE’s comments and questions. Please see ISO’s responses below.

(1) CAISO Proposed Activity 1: New scheduling point and load aggregation point definitions

The CAISO should clarify any impacts to today’s practice of submitting bids and scheduling

power on interties, including the timeline to submit intertie bids, the mapping between today’s

intertie points and expanded intertie points and the bid validation process. For example, parties

currently schedule power to the CAISO at Palo Verde, will they have to change the way they

scheduled (possibly to different or multiple scheduling points) under the CAISO proposal? The

CAISO should clarify whether it intends to price in its market optimization all of, or a part of, the

set of new scheduling points and load aggregation points outside the CAISO, and how a bid

placed at a new generation aggregation point will get cleared and whether that requires the

disaggregation of the bid involving generation distribution factors?

Regarding the CAISO statement on

“The expanded model will also allow scheduling coordinators to submit physical or virtual import

or export bids at each of the new scheduling points”3,




While SCE understands that a possible outcome of this stakeholder process (i.e., FNM

Expansion) is the modeling capability gained by the CAISO to accept convergence bids on new

scheduling points, will such bids be allowed for points that are not part of the CAISO’s cleared

and settled market? If yes, the policy question and the market impact of whether participants are

allowed to place convergence bids on new interties should be addressed separately, perhaps

even in a forum dedicated to this issue.

____

3 Page 11 of the straw proposal

ISO Response

The bid submission process (including timeline and bid validation) will remain largely the same.

Differences are noted in Sections 5.1 and 5.2.

(2) CAISO Proposed Activity 2: Enforce constraints for both scheduled and physical flow

The CAISO proposes to use a dual approach to enforce both scheduled and physical flows on

each ISO intertie. Since minimizing the impact of loop flows is one of the main goals of this

stakeholder process, the CAISO should assess the marginal benefits on reducing loop flow

impacts by enforcing both scheduled and physical flows.

The CAISO should clarify whether the expanded transmission portion (outside the CAISO,

excluding interties) will be enforced in the model. In other words, will congestion outside the

CAISO be modeled, and if yes, what are the impacts to the CAISO market? Further, we request

details on how the LMP congestion components are associated to scheduling limit and physical

limit constraints on the same intertie. In addition, the CAISO should clarify whether loop flows

are estimated by AC load flow or DC load flow.

ISO Response

The ISO believes that enforcing both scheduling and physical flow limits on the interties will

improve reliability of the ISO grid and market solution accuracy.

Congestion outside of the ISO (excluding interties) will not be enforced. LMP congestion

components using the scheduling limit and physical flow limit constraints will use the existing

calculation methods, except that improved modeling of physical flows will allow the ISO to

enforce physical flow limits on interties in day-ahead, as well as real-time when both scheduling

and flow limits can be enforced today, and resource LMPs will reflect the resources’ designated

interties for scheduling as well as their physical locations. When scheduling limits are enforced,


the resources’ LMPs include the shadow prices of their designated interties’ contract path

capacity. When physical flow limits are enforced, the resources’ LMPs reflect their contribution

to flows on congested branches in the network and the shadow prices of the congested

branches. Please see the examples in Section 10, especially example 2 in Section 10.2.

The FNM is solved by an AC power flow.

(3) CAISO Proposed Activity 3: Include variables in high voltage direct current transmission modeling

SCE believes further information is needed to understand how DC transmission is modeled in

FNM, such as a specific example with schematic diagrams showing the modeling difference

from the AC system. Without detailed information, SCE can’t comment on the impact or benefit

(for example, to unit dispatch and market price) of including variables in DC transmission

modeling as currently proposed by the CAISO.

ISO Response

In response to SCE, the ISO has provided examples in Section 10 of the revised straw

proposal.

(4) Impacts to CRRs

SCE requests the CAISO clarify potential impacts to CRRs. If an existing intertie point is

terminated or replaced with new intertie points, how will a CRR, either sourcing or sinking at the

existing intertie, will be settled? Is there any impact to a CRR for which the existing intertie is a

mid-point along its path? More broadly, how the existing CRR holding with current FNM will be

converted to the expanded FNM?

ISO Response

In response to SCE, the ISO has included a discussion on CRRs in Section 9 of the revised

straw proposal.

(5) Impacts to the LMP calculation

The LMP calculation requires detailed transmission topology information, as well as load

distribution information. While the FNM Expansion may provide additional information about the

topology and the load external to the CAISO, the CAISO should clarify how such information will

be used in the market optimization and assess the impacts to the LMP calculation.

For instance, the system marginal energy component (SMEC) of LMPs today is the weighted

average of the LMPs at individual Pnodes that represent load internal to the CAISO. Similarly,

the marginal congestion component (MCC) and the marginal loss component (MLC) at each

node are calculated based on shift factors with respect to the reference bus which is the



Western Power Trading Forum 6/25/13 Ellen Wolfe, Resero Consulting [email protected] 916-791-4533

Opening Comments

WPTF appreciates the opportunity to provide comments on the ISO’s straw proposal for the

Full Network Model Expansion dated June 11, 2013 and the conversations from the

teleconference of June 18, 2013. WPTF offers the limited comments below.

ISO Response

See ISO’s responses below.

WPTF Supports Improving the Modeling Representation

Improving the modeling representation should both increase the ISO’s ability to operate the grid

successfully and should improve the market results by better representing flows in the day-

distributed load bus4. The transmission topology (e.g., a CAISO-only topology or an expanded

transmission topology) can affect the calculation of shift factors as well. With the expanded

FNM, the CAISO should identify any impacts to the selection of the reference bus, the shift

factor calculation, and the LMP calculation. Depending on the impacts to the LMP calculation,

the market impact can be assessed.

Also, how does the CAISO plan to model the output of generation outside of the CAISO? (Will

the CAISO obtain information from generators – and if so how? Will the CAISO use “bids” and

dispatch the generation economically? What will the CAISO do to model output of use-limited or

restricted units such as hydro?) If external generation output is modeled, how will this interact

with “contract path” bids at the CAISO boarders? Will modeling both external generation and

contract-path schedules result in “double counting” flows on the interties (e.g. the flow from the

contract-path schedule plus the flow contribution from the modeled external generation output)?

_____

4 Under rare conditions, the CAISO may switch to the distributed generation bus as the reference bus.

ISO Response

As a default, the ISO will obtain generation information from the WECC Reliability Coordinator.

We may also receive this information directly from external balancing authorities. The process

for modeling external generation output is described in Section 5 with examples in Section 10 of

the revised straw proposal. See additional discussion in Section 11.

mailto:[email protected]


ahead (DA) model. Given the both benefits WPTF supports this initiative.

ISO Response

Thank you for your comment.

More Information is Needed about Physical and Scheduling Limits and Base Schedules

The ISO paper indicates that a second physical limit will be implemented and that the

scheduling constraint and physical constraints will be treated somewhat differently. We request

that the ISO add additional detail about how the limits will function and how their constraint

prices will affect the LMPs. Secondly, we ask for clarification about what transparency will be

provided operationally about the constraints. Will all the scheduling and physical limits be

posted on OASIS with a priori limits and ex ante flows and prices? Will the ISO publish

documents that explain the underlying basis for the set points of the physical and scheduling

limits? Can the ISO publish the base schedules that it will use to set the expanded modeling

parameters? Please offer additional detail into the design intention and to the expected

operational transparency that will be provided.

ISO Response

In response to WPTF, the ISO has provided an example of enforcing both the scheduling and

physical limit constraints in Section 10 of the revised straw proposal.

The ISO is not proposing to change the available information resulting from the Data Release

and Accessibility stakeholder processes for constraints that are enforced in ISO markets. To

the extent that the ISO’s input data is obtained from the WECC RC, the information is protected

by WECC’s non-disclosure agreements, but market participants may seek to obtain access

through WECC’s data access processes.

Process and Operational Transparency is Needed about the Rollout Schedule for Expanded Modeling

WPTF seeks additional information about the schedule for roll out of the enhanced

representation into adjacent BAAs. The additional modeling should improve the price

formulation for those areas but also may have other impacts on market pricing. WPTF asks if

the ISO can specify those BAAs for which modeling will be expanded for the initial release.

We also ask that the ISO clarify how it will provide transparency with respect to the ongoing

timeline be for which additional expansions will occur in each FNM release cycle and clarify

what public information will be available about the expanded representation. When will market

participants know which additional expansions will occur in advance of each FNM release?


What information can the ISO release publicly that generally shows the expanded model

representation? (For example the expanded Four Corners modeling had publicly available

schematics of the expanded model in addition to any detailed representation that exists in the

protected network model.) Please clarify what information will be available about each area of

expansion and the timeline under which the ISO expects it will provide the information in

advance of the FNM release each cycle.

ISO Response

In response to WPTF, the ISO has provided an explanation of its phased approach in Section 4

of the revised straw proposal.