Under Market Redesign and Technology Upgrade (MRTU) Release 1, the California ISO (the ISO) has proposed a limited scarcity pricing mechanism that raises bids to the bid cap when there are insufficient energy bids in real time while no contingency events have occurred. In the July and September 2005 Orders, the Commission accepted, in concept, the ISO’s initial limited scarcity proposal, but has directed the ISO to develop a more extensive reserve shortage scarcity pricing approach with a later release of MRTU. In its September 2006 MRTU Order, Federal Energy Regulatory Commission (FERC) ordered a more comprehensive reserve shortage scarcity pricing mechanism to be implemented within 12 months of the implementation of MRTU Release 1. In its April 2007 MRTU Order, FERC further emphasized these requirements and urged the ISO to develop a systematic scarcity pricing procedure to ensure that prices can rise during periods of genuine scarcity.
