WPTF is pleased to submit the
following comments on the Convergence Bidding open issues. Please feel free to
contact me if you have question. Thanks,
Ellen
WPTF Comments on
Convergence Bidding Open Issues
First and
foremost, Convergence Bidding should remain a high-priority item for release
immediately following Release 1 (unless FERC orders its inclusion in Release 1).
It should not be traded-off with the broad group of other post Release 1 design
changes.
In regards
to the design elements of Convergence Bidding (CB):
1.
Explicit vs. implicit
bidding. The ISO seems to recognize that CB is by its nature
explicit. Having virtual bids be explicit allows the ISO to understand
what physical energy is expected as opposed to parties’ financial
positions.
2.
Spatial Granularity. CB
should be allowed at the HUBs and LAPs. Allowing CB at generating nodes would
provide an additional means of price convergence and hedging for generators. The
ISO should investigate further what additional costs – if any – would be
incurred to implement CB at the generating nodes.
3.
LDFs – The ISO should use the same
LDFs in the DA as those used HA/RT to liquidate the CB financial
position.
4.
Market Power Mitigation.
Virtual bids should be subject to the price caps but no other market power
mitigation, similar to the practice in other ISOs. Further, the
CAISO should take steps to ensure that virtual bids cannot be used to take
advantage of gaming opportunities.
5.
IFM and RUC commitment costs:
Virtual bids should only be allocated commitment costs (either IFM or RUC) to
the extent that such bids result in additional commitment beyond what would have
occurred due to physical supply and bid-in load in the IFM and due to the load
forecast in RUC. In other words, if the ISO would have committed resources in
RUC due to underscheduling of load absent the virtual bids, then financial bids
in the DA should not be allocated those costs that would have resulted
anyway. Conversely, it is appropriate to allocate RUC costs to supply that
creates a reduction in DA commitment below which would have occurred without
virtual bids. WPTF is pleased to work with the ISO to develop a workable
mechanism to implement his proposed cost-causation approach.
6.
Collateral requirements. WPTF
supports implementing a collateral mechanism consistent with those in place at
other ISO’s. Further, we support using the 50th
percentile as the proxy clearing price for the collateral calculation.
7.
Allocation of other
(non-commitment) uplift costs. WPTF believes that treatment of uplifts
depends on the type of uplift. To the extent the uplift is the result of
physical delivery such as nopay allocations, or differences in calculations of
prices for example, such uplifts would be doubly allocated if allocated to
physical demand (for example) and virtual bids. This seems
inappropriate. However, transaction based uplifts (e.g., elements of the
GMC) seem appropriately applied to virtual bids given that virtual bids create
an impact on the ISO’s systems and processes.
Ellen
Wolfe
WPTF MRTU
Consultant
ph 916 791
4533
fax 916 791
4333
www.resero.com