Decision on Modifying Rules Limiting Supply Bid Pool in the - PowerPoint PPT Presentation

Decision on Modifying Rules Limiting Supply Bid Pool in the Integrated Forward Market Mark Rothleder Principal Market Developer Board of Governors Meeting General Session September 10, 2009

Current rule limits the resources available to IFM. All CAISO Resources Bid-in Only the Resources Needed to ~ Clear CAISO Forecast ~ • reviewed for local ~ market power ~ • used to clear the ~ market and set ~ ~ ~ market prices ~ ~ ~ ~ Total Supply Curve Available to CAISO Supply Curve Used to Clear Market CAISO CAISO Forecast Forecast Total Supply Price Supply Curve ($) Curve Created by MPM Run Quantity (MW) Quantity (MW) Slide 2

If bid-in load exceeds ISO forecast scarcity occurs. IFM Run with MPM Supply Compared IFM Bid-in Demand Curve met by MPM Supply to Total Supply Available $500 $500 Total Supply Curve Bid-In Demand Price Price Curve ($) ($) Supply Supply Curve Curve $65 Created by Created by MPM Run MPM Run Bid-In CAISO CAISO Demand Forecast Forecast Curve Quantity (MW) Gap where ISO Quantity (MW) Curtailed Load Problem 1: If bid-in demand exceeds ISO forecasted demand, the market may not clear or will clear at increased price Problem 2: Resources not making the “MPM cut” will not be awarded or participate in pricing in the integrated forward market Slide 3

July 26 case was example of bid-in load higher than ISO forecast producing higher prices. SCE LAP Price Comparison - July 26 Prices due to higher $500 bid-in load and limited set of bids $400 LAP LMP ($/MWH) $300 $200 Prices with all bids $100 $0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Hour DMM Market Rerun All Resource Flag MPM Load = IFM Cleared Load Slide 4

The ISO considered four alternative approaches to address the limit on the IFM supply bid pool issue. ! Approach 1 - Use all bids in the IFM ! Approach 2 - Use all bids conditionally in the IFM ! Approach 3 - Use the greater of the ISO demand forecast and bid-in demand in the Local Market Power Mitigation (LMPM) ! Approach 4 – Use bid-in demand curve in the LMPM Slide 5

Management recommends eliminating the limit on the IFM supply pool (Approach 1). ! The proposal has the following benefits ! Allows all bids to be available for the IFM ! Avoids artificial supply deficiency when bid-in demand is significantly higher than the ISO forecast demand ! Reduces undue market price volatilities ! While ! Maintaining effective local market power mitigation ! Providing competition between mitigated and unmitigated bids in the IFM Slide 6

Management requests approval of the proposal. ! Improved market performance ! Supported by majority of stakeholders ! Can be implemented quickly if approved by FERC Slide 7