Revised EDAM straw proposal continues to progress

Our next big milestone is approaching in our work to develop an extended day-ahead market (EDAM) for electricity throughout the Western United States when the ISO hosts a virtual meeting Monday, August 29 to discuss the recently published revised straw proposal on market design.

We published the revised straw proposal for EDAM on August 16 after considering more than 500 pages of comments from dozens of neighboring balancing authorities, utilities, regulators and other stakeholders, as well as feedback we received in a series of public workshops in July.

Our first set of next steps is for the ISO EDAM team to take stakeholders through the highlights of the 113-page proposal on August 29, following up that discussion with two in-person meetings in Sacramento on September 7 and 8. That is where we will further discuss the design and hear more direct feedback from the many stakeholders who have been an integral part of the EDAM initiative.

Overall, we are seeking to build on the success and leverage extension of market principles now supporting our Western Energy Imbalance Market (WEIM), where appropriate. Many of the energy providers who participate in the WEIM today have been actively engaged in the EDAM initiative and are already familiar with many of those market processes.

We believe that an extended day-ahead market, where the vast majority of electricity transactions occur, could provide sizable economic, environmental and operational efficiencies across a broad regional footprint. This would help utilities in states throughout the West more efficiently and cost-effectively achieve their energy policy objectives through increased regional coordination and cooperation.

For context, the WEIM has achieved nearly $2.4 billion in cumulative economic benefits for its participating entities since the market launched in late-2014, and it represents a fraction of the energy transactions that would occur in a larger day-ahead market.

Here are some highlights of the EDAM design described in the revised straw proposal that we will discuss in the upcoming meetings, after which stakeholders will have until September 20 to share additional written comments:

• The proposal includes a voluntary participation framework for joining the EDAM.  WEIM entities can elect to join and participate in the EDAM, or continue to participate only in WEIM, which is a real-time market where electricity is bought and sold close to the time it is being used. Ease of entry and ease of exit into EDAM would allow entities to evaluate the benefits of the market while maintaining the ability to exit with a 6-month notice if they are not accruing the expected benefits.
  
  
• Participating entities (balancing authority areas) would have a robust day-ahead resource sufficiency evaluation (RSE) through which each entity would bring sufficient supply to the market to meet its forecasted load and a level uncertainty that may materialize between day ahead and real time. Load-serving entities, consistent with good utility practice, do this similar type of resource planning today in the day-ahead timeframe to ensure they have sufficient supply to meet their next day obligations. The EDAM would be introducing a more formal sufficiency evaluation.  
  
  The design also introduces mechanisms to provide incentives for establishing resource sufficiency in the day-ahead timeframe through a robust pool of supply made available to the market, instilling further confidence in the market and the transfers that emerge from it.
  
  
• The design also seeks to maximize transmission availability in EDAM to support robust transfers between EDAM balancing authority areas while increasing benefits to participants. We would do this by providing pathways for high-quality, or firm, transmission to be released to the market in advance, or – if the transmission is not scheduled by the time of the day-ahead market – automatically making the unscheduled transmission available to the market to support robust transfers. 
  
  To the extent unscheduled transmission rights held by a transmission customer are automatically made available to the market for optimization, the transmission customer would have pathways to exercise those transmission rights after the day- ahead market and into real time.  The proposal describes different pathways a transmission customer with transmission rights can take to exercise its rights or otherwise make these available to the market, and in return receive transfer revenues.  The transmission provider would also make unsold firm transmission capacity available to the market to optimize transfers in the day-ahead market.
  
  
• The proposal also provides a mechanism through EDAM for transmission provider recovery of historical transmission revenue requirements to keep EDAM entities whole from a transmission revenue perspective as a result of EDAM participation.
  
  
• On several market issues, the proposal leverages extension of the current WEIM design such as extending the WEIM market power mitigation framework to the EDAM. The proposal also extends the current WEIM framework for external resource participation to the EDAM where dynamically scheduled resources can economically bid into the market even if physically located outside of the EDAM footprint, while supply sourced from other resources outside EDAM but contracted to serve EDAM entity load can be self-scheduled into the market to continue supporting bilateral market arrangements.
  
  
• The proposal also provides a transition period to introducing convergence bidding, or virtual bidding, in EDAM balancing authority areas. While convergence bidding is an important feature of all organized markets, the EDAM proposal provides for a one-year transition period at the start of EDAM with no convergence bidding in EDAM balancing authority areas except the ISO area, allowing entities to develop experience in the market prior to introducing this feature.  After one year, EDAM entities could enable convergence bidding in their area or avail themselves of an additional transition year after which convergence bidding would be enabled.  We would monitor for any potential adverse impacts of limited convergence bidding across the footprint.
  
  
• Finally, as an important highlight, the proposal extends the WEIM resource specific approach to greenhouse gas (GHG) accounting to the EDAM, with some enhancements as described in the proposal. Together with stakeholders we have had extensive discussions on alternate approaches and the initiative will continue to consider alternatives identified through the stakeholder process. We believe that the GHG accounting framework must be nimble and will need to evolve as the EDAM and state regulatory policies evolve, and we are very much open to moving to one of the alternate frameworks considered in the proposal as these mature from a design perspective and further provide for, or clarify, compatibility with regulatory structures.

As you can see, the proposal has many moving parts as we strive to design a market that evolves and works for all of its participants, as I am proud to say has been the case with the WEIM.

I also want to mention the important parallel track on governance changes to support EDAM.  The Governance Review Committee (GRC) has received and is absorbing the stakeholders’ comments from its July 15^th straw proposal.  The committee is hosting a public virtual meeting on August 29, from 8 a.m. to 10 a.m. PDT to discuss the feedback it received and will hear from a number of stakeholders on their thoughts regarding how to refine the proposal.

The draft final proposal is targeted for publication in late October with an additional round of stakeholder meetings and comments. In the weeks ahead, we will also publish a draft tariff framework that describes the tariff sections that would need to be modified, based on the revised straw proposal as a prelude to drafting tariff language.

We look forward to briefing the ISO Board of Governors and the WEIM Governing Body at their joint meeting on December 14. While this work is proceeding, the EDAM team continues to make progress on several corollary issues to make sure we take all the interdependencies into account and that they fit together, including transmission service and market scheduling priorities, flexible ramping product refinements and phase two of the resource sufficiency evaluations enhancements for the WEIM.

My colleagues and I are extremely grateful for the robust participation we have had from our stakeholders, ranging from a series of intensive stakeholder working groups in the early part of the year through sizable stakeholder comments and additional targeted workshops in July. We are excited about the progress we have made together so far and have some great momentum as we continue to work on building a market that can have a profoundly positive impact on how electricity is managed and dispatched throughout the West.