20 December 2007 – 102 days to MRTU market launch on March 31, 2008

 

In This Issue

Executive Corner with Steve Berberich, California ISO Chief Information Officer

Certification for GO LIVE … Here’s what to expect

IMS Update 1 Closes; Update 2 Coming Up

Settling the New Settlements Processes

Client Focus: Edison Prepares for GO LIVE

Chuck King, VP Market Development & Program Management

Executive Corner
Steve Berberich, California ISO Chief Information Officer
and Vice President Information Services

2008 is just around the corner, leaving us with little more than three months until the launch of the Market Redesign and Technology Upgrade (MRTU) program.  These last few months contain a number of program targets that must be successfully met in order to meet our March 31, 2008 launch date.  The articles that follow provide detailed objectives and a schedule leading up to GO LIVE.

I am gratified to report that in recent weeks, communication and cooperation between the ISO and market participants have reached new levels.  The ISO Executive Team, accompanied by members of our customer services team, various business units and the MRTU program, has been onsite with many of you to understand how the new systems are working from your perspective.  These meetings have provided a greater understanding of the issues and challenges we all face as we prepare for MRTU.  We very much appreciate your cooperation and willingness to team with us to make MRTU successful.

This intensive communication strategy will continue up to and following MRTU GO LIVE on March 31, 2008.  ISO account managers and client representatives and the MRTU Team will maintain frequent contact with market participants in order to monitor readiness progress and provide needed support.  In addition, a newly formed MRTU Quick Response Team with specially-assigned liaisons will work with market participants and internal ISO units to rapidly resolve client issues and communicate the results to the participant community at large.  All of this is intended to support your organization through the readiness certification process and the remaining weeks of market simulation–both of which are described in articles below.

The final phase of MRTU market simulation was recently delayed into the New Year—Update 2 will now begin on Wednesday, January 2nd.  It is critical that the high level of industry cooperation we have achieved continue as we test for the first time the full suite of MRTU system functionality.  The testing process, by design, is full of challenges.  The important thing is that the ISO and market participants continue to work together to address and resolve them.

We at the ISO stand at the ready and are doing all we can to ensure a successful MRTU launch.  We can assure you that we will not open the new market until we all reasonably agree that both your and our systems and processes are ready for GO LIVE.   Contact your ISO account manager or client representative if there is something else we can do to help your organization’s readiness efforts.

Signature

 

MRTU Readiness Snapshot

  
 

The following are brief summaries of recent readiness milestones and activities:

  • Allocation and auction of annual Congestion Revenue Rights (CRRs) concludes this month with the auction process that closed on December 17th.  CRRs provide load serving entities and other holders a stable cost structure by hedging the congestion costs incurred for using the power grid.  This allocation process has gone very smoothly and we are proud to note that the California ISO was the first in the country to release long-term financial rights for a ten-year period.
  • Two MRTU training opportunities are available in the new year:
The 200 level series of classes will be offered  February 11-14
The Bid-to-Bill course will be offered March 11-13

Additional information on MRTU training—along with a series of computer-based training modules—can be found at:  http://www.caiso.com/docs/2005/10/07/200510071157559066.html

  • A final round of Readiness Assessments will be conducted with market participants in late January and early February.  The timing is intended to provide everyone with an opportunity to get a few weeks of testing experience with the new IMS Update 2 environment. Progress on readiness activities surrounding people, process and technology will be discussed and final “punch lists” will be developed in preparation for the Readiness Certification reports and filings discussed in the certification article that follows.

MRTU readiness activities are designed to address the People, Process and Technology requirements for conducting business within the new MRTU markets. A monthly “dashboard” Status Report is filed with the Federal Energy Regulatory Commission (FERC) and is available on the ISO website. The ISO Calendar also provides MRTU meeting and implementation details.

 

Certification for GO LIVE … Here’s what to expect

Market participants and the ISO have been working for months preparing for implementation of MRTU.  But, how will we know for sure that we are ready for the cutover to the new market design?  The ISO has laid out a Certification Process to guide both the ISO and market participants to a successful launch of the MRTU market.

The proposed timeline for readiness certification is:

Jan. 28-29, 2008:  ISO Board of Governors reviews a draft of the January 31st 60-day filing containing the status of ISO and market participant readiness along with a list of required activities needed prior to launch.
Jan. 31, 2008:  ISO files the 60-Day Readiness Certification at the Federal Energy Regulatory Commission (FERC).
Mar. 6, 2008:  A special Board of Governors meeting is convened to affirm readiness for the March 31st market launch. Having completed IMS Update 2, market participants will have an opportunity to address the Board with respect to their readiness status.  A draft of the March 10th FERC filing that provides an update on readiness activities will be discussed.
Mar. 10, 2008:  ISO submits a 21-day informational filing to FERC, stating that the majority of market participants are ready and that the activities identified in the 60-day filing have been attained.
Mar. 20, 2008:  The ISO issues a market notice confirming that MRTU will launch on March 31 for an initial trade day of April 1. This will be the final message before the new market becomes binding.
Mar. 25, 2008:  Open Day-Ahead Market to market participants for April 1, 2008 Trade Date

 

Certification filings with FERC
FERC requires the ISO to submit informational filings certifying that the people, processes and technology for both the ISO and market participants are ready for a successful launch of the new market. These notifications are important, not only because they provide FERC with an understanding about the status of MRTU readiness, but also because they recognize the ongoing cooperation between the ISO and market participants to achieve our collective readiness.  ISO will have a multi-step process that will address several aspects of readiness.  The January filing will include:

  1. A status report of ISO and participant readiness with summary information from market participant assessments and ISO Business Unit readiness and transition activities.
  2. An update on market simulation testing, with a focus on the results achieved to date and status of the various market simulation exit criteria.
  3. Status of FERC filings and outstanding orders.
  4. Statements by ISO officers regarding readiness.
  5. Punch list of additional activities that need to be completed during the last 60-days.

After the January filing, the ISO will have a number of activities that remain, including the following:

  1. Certification by SAIC that software systems accurately implement the MRTU Tariff and are traceable through business requirements and test cases.
  2. A report by LECG on the consistency of market software solutions with the MRTU Tariff and locational marginal pricing methodology.
  3. An audit opinion by PriceWaterhouseCoopers that settlements software calculates quantities and prices in compliance with the MRTU Tariff.
It is critical that the ISO and market participants remain diligent in preparing our people, processes and technologies for MRTU.  If you have questions about the readiness certification process, or are uncertain whether your organization is participating fully in readiness activities, contact your ISO client representative.

IMS Update 1 Closes; Update 2 Coming Up

Currently, market participants and the ISO are in the final days of MRTU Integrated Market Simulation (IMS) Update 1 which will wrap up this Friday, December 21.  The final update to the MRTU testing environment—Update 2 will begin on January 2, concluding at the end of February.

How did Update 1 go?
“Like any market simulation activity, IMS Update 1 hasn’t been perfect.  We’ve accomplished a lot, learned many things and are trying to quickly address participant issues,” said Director of Market Services and MRTU Program Manager Debi Le Vine.  “The weekly report card posted by the ISO indicates that the Day-Ahead and Real-Time Markets have been running daily and system availability of individual MRTU systems was maintained for an average of 98% of the simulation hours.” While this statistic indicates internal system stability, it does not accurately represent the challenges being experienced by market participants, which include:

  1. Market reports and settlement statements have been delayed from their intended publication timelines early on and the ISO is trying to catch-up on the lag.
  2. A key IMS report was not accurately tracking the success of the Real-Time Market from the market participants' perspective.  It tracked whether the market ran, but not if the market broadcast successfully to all downstream systems including the Automatic Dispatch System which the participants see in real time.
  3. The Scheduling Infrastructure and Business Rules (SIBR) system had availability issues.

These are the types of challenges we expected to uncover during the market simulation process and the MRTU team is working to address them as quickly as possible.  IMS Update 1 was extended to run through December 21, 2007.  The additional time allows the ISO to install fixes for some of the issues uncovered during recent simulation activities and also gives participants an opportunity to test additional market scenarios.

Looking ahead to Update 2
The final phase of IMS launches on Wednesday, January 2, 2008 (for an initial trade day of January 3rd) and builds on the functionality within the Day-Ahead and Real-Time Markets in Update 1.  In addition, it will add a new Network Model, consistent with the one used in production today, and an updated Master File that contains static data for generators and Intertie-based resources. 

“Update 2 is our final opportunity to install remaining market functionality, integrate all 21 applications and allow participants to use the full functionality of the market to test their business strategies.  There are very high expectations—and there should be—for having the full MRTU market available and operational throughout Update 2,” said Le Vine.

Perhaps the biggest change is the nine new or upgraded applications that will debut in Update 2:

       CAS:  Tags schedules that move energy in and out of the ISO Balancing Authority Area.
  CAPS:  Evaluates compliance with approved schedules and assesses applicable penalties.
  ETCC:  Calculates Existing Transmission Contracts and Transmission Ownership rights on transmission lines.
  COMT:  Models generation and transmission outages.
  PIRP:  Accommodates Participating Intermittent Resources like wind power.
  PI:  Incorporates dynamic generating plant information.
  RAVE:  Validates data associated with Reliability Must-Run invoices.
  CRR:  Ensures that the settlements process includes CRR allocation and auction amounts.
  MQS:  Incorporates a more robust expected energy allocation algorithm.

 

“I can’t overemphasize the importance of success in IMS Update 2,” said Le Vine.  “This is where the rubber meets the road.  We want everyone to participate so we can see how well the market systems perform under conditions as close to ‘real’ as possible.  If we have learned anything in market simulation so far, it is that the professionalism and dedication exhibited by market participants and ISO staff will get us through.  The men and women who use and operate the MRTU markets are the critical factor that will lead us to a successful launch on March 31, 2008.”

Settling the New Settlements Processes

An important gauge of the success of MRTU is making sure the flow of dollars accurately reflects the activities of the market.  This requires an accurate and timely Settlements process and is the ultimate testament to how well the new market works.

In IMS Update 1, 27 charge codes were validated for use in the MRTU bid-to-bill process.  The ISO is working closely with market participants to ensure these codes also produce accurate calculations for them and their new systems.  At the same time, the ISO is also working to validate the remaining charge codes during scenario testing with the new IMS Update 2 bid-to-bill process.  Market participants can expect additional charge codes to be exercised incrementally throughout Update 2.

Like most markets, the MRTU settlements system has many charge codes—122 to be exact, to track and report on all of the possible market transactions.  This complexity is by design, it ensures transparency of data and it’s a requirement for making sure participants pay and receive payment accurately.  Of that large code set, most market participants will routinely see about 35 on their daily statements and an additional 15 that pertain to monthly statements.  The remaining codes are somewhat specialized, associated with specific scenarios such as emergency energy, black start, tier 2 bid cost recovery, etc. 

Two enhancements have recently been implemented to address market participant challenges with settlements validation:

  1. On December 5th, the ISO began posting a daily report showing the charge codes available for validating the settlements statements produced for each trade day.  You can access these reports at http://www.caiso.com/1c2d/1c2d9ced4aa60.html#1caacdff53ca0  under the heading “Daily Charge Code Status’.
  2. Starting at the December 12th Settlements and Market Clearing (SaMC) User Group meeting, the ISO is discussing market participants’ successes and issues with validating charge codes being used in IMS.

Most market participants use a “shadow” settlement system that predicts expected settlements results, based on their market activities, and compares them to ISO reports.  IMS Update 2 will be a truly rigorous test of both the ISO’s ability to produce statements that accurately trace the financial flows from market activities, and market participants’ abilities to validate those statements.

If you would like to dig deeper into MRTU Settlements activities, please refer to the SaMC User Group web page at http://www.caiso.com/docs/2004/05/11/200405110959025865.html and consider participating in the bi-weekly web conferences announced on that page.

Client Focus: Edison Prepares for GO LIVE

California’s residents have had the benefit of reliable electricity service through private and municipal utilities for over 100 years.  The investor-owned utilities serve the lion’s share of the end-use electricity customers in the state, so this month, Homestretch talked with Southern California Edison (SCE) Director of Energy Operations, Doug Parker, to learn more about their efforts to prepare for the transition to MRTU.

Homestretch: SCE has been in the electric business for decades.  What are the biggest changes to the ways SCE will do business after MRTU launches?
Parker:

Probably the biggest change for us is the need to align our internal business processes to meet the highly integrated nature of the new ISO market.  Much of how we work today, the software and systems we use, how we communicate, how we manage information, has been shaped by the somewhat separate and sequential nature of California’s original market design.  We realized early on that, for us to really capture the benefits of MRTU, we couldn’t just “tweak” our methods here and there, that in some cases we’d have to change them from the ground up.

Perhaps the best example of this is in the way we manage data.  MRTU significantly increases both the complexity and volume of data we will have to process on a day-to-day basis.  In order to manage this data efficiently, and to minimize processing errors, we decided to develop a centralized data store.  Adding this data store to the suite of systems and tools we need to build for MRTU has been a big challenge, but the benefits to both the front and back office are worth it.

Despite the seeming complexity of MRTU, I think it’s important to note that the market itself is not all that revolutionary.  If you look at the essential activities involved in serving customer load – power procurement, system operations and settlements – you realize that more things stay the same than change.  The real changes from MRTU are less what the market does than how it does it.
Homestretch: One of your goals has always been to serve customers economically.  How will MRTU affect your methods for doing that?
Parker:

We view MRTU not as a replacement to, but as an important addition to the existing methods we use to procure power and serve our customer load.  The Day-Ahead Market in MRTU is the “missing link” if you will that fills the gap between the forward bilateral energy markets and the ISO’s Imbalance Energy Market.   There is no question that serving our load without the benefit of a Day-Ahead Market has presented challenges to us economically as well as to the ISO operationally.  With the addition of MRTU, we can transact in multiple markets, focusing our attention on the relative advantages of each, to more efficiently and economically serve our customer load.
Homestretch: How are you organizing your technical, operational and business staff to prepare for the change to MRTU?
Parker:

I would characterize our overall philosophy throughout our MRTU implementation effort as “the earlier the better".  Well over a year ago, prior even to FERC’s September 2006 decision conditionally approving MRTU, we created an MRTU project team to begin developing the new software and systems we would be using in MRTU.  We knew then the largely “home grown” software we use to meet today’s front and back-office needs would be impractical to adapt for MRTU, so we needed to start the replacement process early.  At the same time, we engaged the business staff to determine what our MRTU workflow requirements were going to be and began updating our internal business processes.   It was difficult starting these efforts when we did because so many of the details on how MRTU would actually work were still unknown.  But, given the amount of work we had to do, we really couldn’t wait.  We took what we knew, guessed at the rest and pushed forward knowing we’d have to circle back and make corrections as the details became known.

We carried this philosophy over into our market sim activities, always challenging our business staff to go beyond the minimum requirements of each phase and exercise as many of our end-to-end processes as we could.  In mid-summer, we set an internal goal to begin exercising our complete end-to-end MRTU business process by the beginning of the semi-structured phase of Update 1.  This created still more challenges because our new software would be far from complete.  But, again, the effort has been worth it.  We’ve gained a lot of confidence in what we can do, have a much better sense of what we know and don’t know (the latter being what keeps me up at night) and we are much better prepared for Update 2 than had we not pushed ourselves earlier on.
Homestretch: What are your major challenges in preparing for MRTU?
Parker:

Are there any “minor” challenges presented by MRTU?  Sorry, I couldn’t resist!  I think I’ve already mentioned most of our challenges except maybe for training.  We’ve got a large staff and there’s so much to learn about MRTU, training will definitely be a challenge.  We’ve got ISO training, vendor training, business process training, settlements training, the list goes on and on.  I did a rough back-of-the-envelope on the time we will be investing in training and the numbers are staggering.  Over 100 hours of ISO and internal training for most of our staff and another 50 to 60 hours of “deep dive” training for most of the front and back-office.  And all that on top of the on-the-job training our staff will get as they cycle through market sim.  I guess I shouldn’t be surprised at the amount of training it takes to get ready for a new market of this complexity, but, still, the numbers are quite impressive.

Speaking of impressive, I want to compliment the ISO for the outstanding job it has done providing MRTU training for market participants.  The course offerings, content and delivery of the training you’ve provided has been absolutely first-rate.   I think we all agree there have been many bumps in the MRTU road, but ISO training has not been one of them.
Homestretch: What are some of your notable successes in preparing to implement MRTU?
Parker:

I think our greatest success is that we set high goals for ourselves early on and our prior efforts have really paid off.  We’ve made enough progress that I can now look ahead and say with confidence that, if the market starts on April 1st, SCE will be ready.   I couldn’t have said that six months ago or even three months ago.  That said, we all realize how much work there is left to do, both on the ISO side and ours, and how there are still a lot of things that have to fall into place just right in order for April 1st to work.  

I think another one of our successes is the perseverance of our staff.  Keeping the day-to-day business going and staying fully involved in market sim is tough stuff.  This is especially true when the daily sim activities are so repetitive and things aren’t working that well.  It’s very tempting to adopt a “been there, done that” attitude and simply check out and wait for the ISO to move on to the next phase.  I can’t say we’ve been perfect in exercising every available feature of MRTU on every day of market sim, but we try to come close and I’m proud of our team for the effort.
Homestretch: If you could give other market participants a couple of tips to prepare for the switchover to MRTU, what would you recommend?
Parker:

Unfortunately, I worry it’s getting to be too late for advice.  If you aren’t engaged in preparing for MRTU by now, you’re in trouble.   I realize there are some market participants who are less impacted by MRTU and who may not have all that much to do to get ready.   But for the rest of us, the biggest mistake you can make is to underestimate how involved the changes will be and how many subtle ways these changes will affect you.  As I explained above, there’s a strong temptation to wait until market sim starts working better before you really engage.  It’s less confusing and certainly less frustrating.  But you’ll be kidding yourself.  This is one class where you really can’t wait until the last minute, then “cram” for the test and hope you get a passing grade.  As we get closer and closer to market start,  you want to be demonstrating to yourself that you can reliably transact your full business volumes in MRTU with a minimum number of mistakes.  You have to be working hard at it now, whether market sim is going perfectly or not, if you want to get there from here.

Contact Us

Email boxes are available to receive MRTU questions regarding:

Other MRTU questions can be addressed to:

MRTUImplementation@caiso.com
or
Your California ISO Account Manager or Client Representative