Convergence bidding

Convergence (or virtual) bidding is a mechanism whereby market participants can make financial sales (or purchases) of energy in the day ahead market, with the explicit requirement to buy back (or sell back) that energy in the real time market. Virtual bids pressure day ahead and real time prices to move closer together, thus reducing the incentive for buyers and sellers to forgo bidding physical schedules in the day ahead market in expectation of better prices in the real time market. Under FERC's Sept., 2006 MRTU Order, the California ISO must implement convergence bidding within twelve months after the new ISO market startup. FERC's April 20, 2007 Order specifies that the ISO must file tariff language for the implementation of convergence bidding no later than 60 days prior to the one-year anniversary of the new market startup. Thus the ISO is seeking focused stakeholder input now to help develop the design for convergence bidding so that the necessary software features and business processes can be built to meet a reasonable implementation schedule.