UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION ) ) ) ) )

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1 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION California Independent System Operator Corporation Docket No. ER COMMENTS OF SOUTHERN CALIFORNIA EDISON COMPANY ON THE CALIFORNIA INDEPENDENT SYSTEM OPERATOR CORPORATION S JANUARY 21, 2009 COMPLIANCE FILING Pursuant to Rule 212 of the Rules of Practice and Procedure, 18 C.F.R (2008, of the Federal Energy Regulatory Commission ( FERC or the Commission and the Combined Notice of Filings dated January 28, 2009, Southern California Edison Company ( SCE submits its Comments to the January 21, 2009 Compliance Filing ( Compliance Filing by the California Independent System Operator Corporation ( CAISO regarding the Commission s directive to develop a tariff provision that would exempt from under-scheduling charges any load that is administratively curtailed by the CAISO due to reasons beyond the Scheduling Coordinator s ( SC control. In its response to the Commission s directive, the CAISO s revised tariff language provides for an exemption from under-scheduling charges for all quantities of self-scheduled load that is administratively curtailed by the CAISO s Day-Ahead market software. The revised tariff language, contrary to the Commission s Order, 1 does not provide such an exemption for load, other than self-scheduled load that is bid in the Day-Ahead market and administratively 1 Order Denying In Part And Granting In Part Rehearing And Conditionally Accepting Compliance Filing ( December 19 th Order, 125 FERC 61,339 (December 19, 2008, P

2 curtailed. CAISO states that the FERC directive for applying an exemption for all load bid into the Day-Ahead market creates the impression that there exists a type of load other than selfscheduled load that may be subject to administrative curtailment by the CAISO and that would increase a Scheduling Coordinator s exposure to the under-scheduling penalty. 2 The CAISO further notes that under current Market Redesign and Technology Upgrade ( MRTU tariff rules, other than IFM self-scheduled demand there is no other load that is subject to administrative curtailment by CAISO in the Day-Ahead market. 3 SCE respectfully disagrees with the CAISO s interpretation of the Commission s directive, and requests that the Commission require the CAISO to provide a similar exemption for load, bid at the cap, that does not get scheduled in the Day-Ahead market when LMP prices dictate otherwise. Situations can occur where one or more Scheduling Coordinator bids all or a portion of its load economically at the bid cap and, due to the principles of supply and demand, not all of the MWs are cleared, even though the resultant LMP price is equal to the load bid. 4 When this situation occurs, the CAISO software must take administrative action to determine the amount of each Scheduling Coordinator s bid to not schedule (i.e. the load that is subject to administrative curtailment in the day-ahead market. SCE provides the following example to illustrate this situation: 2 Compliance Filing, p Id. 4 An economic bid of this nature signals to the CAISO market optimization software that the Scheduling Coordinator is willing to purchase a given quantity of load if the LMP price is equal to or below the bid price

3 Total Supply Curve 500 LSE A LSE B LSE C $ 250 Total Demand Curve MW In this example, assume the market is made up of three Load Serving Entities and multiple suppliers with a total demand curve of 325 MW and a total supply curve of 245 MW. Individual load bids are as follows: LSE A submits a price cap load bid for its entire demand quantity (100 MW at $500/MWh; LSE B submits a price cap load bid for its entire demand quantity (150 MW at $500/MWh; and LSE C submits a price cap load bid for 25 MW of demand at $500/MWh and 50 MW of demand at $250/MWh. The market clears at an LMP price of $500 and a market quantity of 245 MW. The CAISO s IFM software is only able to clear 245 MW of demand at a price of $500, even though 275 MW - 3 -

4 was willing to be scheduled at this price. We see this as possible because this is the highest economic demand bid allowed in MRTU, and there may be many parties willing to pay $500/MWh, but are unwilling to self-schedule because they will purchase at a price that may be significantly higher than $500/MWh. 5 Because the total demand willing to purchase power at $500/MWh exceeds the total available supply at $500/MWh, the CAISO s software must make administrative curtailments. SCE understands that when this situation occurs, the CAISO software will prorate curtailments across each LSE with an economic bid priced at the bid cap based on each LSE s percentage of load bid at the cap. In the above example, LSE A would be scheduled for approximately 89 MW (36.36% of the 245 MW scheduled, LSE B would be scheduled for approximately 133 MW (54.55% of the 245 MW scheduled, and LSE C would be scheduled for approximately 22 MW (9.09% of the 245 MW scheduled. Even though all three LSEs are willing to purchase additional load in the Day-Ahead market at the resultant LMP price, the CAISO market software can not match all of the demand with supply, and must administratively determine the MW quantity from each of the three LSEs to schedule, and also curtail, in the Day-Ahead market. Consistent with the Commission s Order that any day-ahead scheduled load that is administratively curtailed by the CAISO under circumstances in which that load would otherwise have cleared the day-ahead market. 6 the CAISO should implement tariff language that takes into consideration the example above. The additional tariff language should address the situation where the energy price clears at the bid cap, and CAISO software is forced to make administrative prorated curtailments to balance supply and demand. In the example above, LSE A should have an adjustment of 11 MW, LSE B should have an adjustment of 17 MW, and LSE C should have an adjustment of 3 MW. The CAISO can effectuate this by expanding the proposed definition of CASIO IFM Curtailed Quantity as follows: 5 FERC recently approved a hard-price cap of $2,500/MWh for the first year of MRTU operations. 6 December 19 th Order at P

5 In each Trading Hour for each Scheduling Coordinator, the maximum of zero or the submitted Day-Ahead Self-Schedule for Demand minus the cleared Day- Ahead Schedule for Demand in each applicable LAP., or, in the event a LAP clears at the bid cap, the maximum of zero or the bidden quantity of Day-ahead Demand submitted at the bid cap minus the cleared Day-Ahead Schedule for Demand in each applicable LAP. As such, SCE requests that the Commission reject in part the CAISO Compliance Filing and require the CAISO to adopt SCE s proposed expansion of the definition of CAISO IFM Curtailed Load, and provide a further exemption for load that is economically bid at the cap but is not scheduled by the IFM software. Respectfully submitted, JENNIFER R. HASBROUCK ERIN K. MOORE By: Erin K. Moore Attorneys for SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California Telephone: ( Facsimile: ( Erin.Moore@SCE.com Dated: February 11,

6 CERTIFICATE OF SERVICE I hereby certify that I have this day served the foregoing COMMENTS OF SOUTHERN CALIFORNIA EDISON COMPANY ON THE CALIFORNIA INDEPENDENT SYSTEM OPERATOR CORPORATION S JANUARY 21, 2009 COMPLIANCE FILING upon each person designated on the official service list compiled by the Secretary in this proceeding. Dated at Rosemead, California, this 11 th day of February, Rodger Torres, Case Analyst SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California 91770