Pricing Logic Under Flexible Modeling of COG Units |
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BackgroundConstrained Output Generation (COG) units are those that have a very small, or even no dispatchable range. Because of these constraints, COG units are generally unable to set Market Clearing Prices. It is sometimes the case, however, that COG units, which are generally fast-ramping gas turbine units, are critical in meeting local power needs. Under MRTU, therefore, FERC has mandated that COG units be modeled as flexible in order to be able to set prices when they are marginal.In its review of the MRTU market design several years ago, the Law and Economics Consulting Group (LECG) identified a potential "stuck price" problem that could result when COG units are modeled as flexible, but technical constraints prevent flexible units from displacing a COG unit as the price-setter. The purpose of this Stakeholder effort is to assess the potential magnitude of COG Pricing issues under MRTU, and to evaluate what, if any, design change is warranted to addresses the "stuck price" problem and other potential pricing issues associated with the flexible modeling of COG units. Any changes made to the MRTU design would be implemented in the Markets and Performance (MAP) initiative to be launched within one year of MRTU start-up. |
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OutcomeFollowing Stakeholder comments, Market Surveillance Committee discussion, and extensive analysis, the California ISO proposed that no changes be made to the market software relative to Constrained Output Generating (COG) pricing logic. In large part this policy conclusion was driven by the small number of COG units, and the fact that additional refinements made to the pricing logic may well have more far-reaching deleterious pricing ramifications. The ISO received unanimous Stakeholder support for this status quo approach with respect to the COG pricing design. |
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