UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION

Transcription

1 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION California Independent System Operator Corporation ) ) ) Docket Nos. ER INTERVENTION AND COMMENTS OF SOUTHERN CALIFORNIA EDISON COMPANY ON THE CALIFORNIA INDEPENDENT SYSTEM OPERATOR S AMENDMENT TO ADOPT PRICE CAP AND FLOOR Pursuant to Rules 211 and 214 of the Rules and Regulations of the Federal Energy Regulatory Commission ( Commission or FERC ), 18 C.F.R , 214 (2008), and the Combined Notice of Filings issued November 10, 2008 in the above-captioned docket, Southern California Edison Company ( SCE ) hereby moves to intervene and comment on the November 3 rd MRTU Tariff Amendment to Adopt a Price Cap and Floor ( Amendment ) filed by the California Independent System Operator ( CAISO ). I. MOTION TO INTERVENE SCE, a wholly owned subsidiary of Edison International, is an investor-owned utility, subject to the Commission s jurisdiction. SCE s principal place of business is 2244 Walnut Grove Avenue, Rosemead, California SCE is a Participating Transmission Owner ( PTO ) in the California Independent System Operator Corporation ( CAISO ), and thus is affected by the outcome of this proceeding, as it proposes modifications to the CAISO s tariff. As such, SCE has an immediate interest in the outcome of this proceeding. SCE s interest cannot be represented by any other party and, consequently, SCE respectfully requests that the

2 Commission grant SCE permission to intervene in this proceeding. SCE hereby reserves its rights to raise substantive issues regarding all aspects of this proceeding, and to file additional comments, as warranted by the proceeding. SCE designates the following person for service on the Commission s service list in this proceeding: Erin K. Moore Southern California Edison Company 2244 Walnut Grove Avenue Rosemead, CA (626) erin.moore@sce.com II. COMMENTS The CAISO Amendment proposes to adopt a price cap and price floor on MRTU market prices for Energy and Ancillary Services ( AS ). The CAISO is proposing its price cap ($2,500/MWh) and price floor (- $2,500/MWh) to prevent potentially severe settlement impacts of extreme prices for Energy, RUC and Ancillary Services that could result from unanticipated and unusual circumstances as the CAISO transitions into MRTU. 1 A. The Levels of Price Caps and Floors 1. The proposed price cap is appropriate SCE agrees with the CAISO that price caps and floors are necessary in transitioning to MRTU as a means to protect consumers from excessive Locational Marginal Pricing ( LMP ) prices. SCE notes that stakeholders have observed, at times, extreme price throughout the market simulation process and this simulation data has convinced us that caps and floors are appropriate. 1 CAISO Filing Letter at p. 2.

3 During the simulation process it has become obvious that the MRTU model has the ability to produce prices that are spurious and clearly unjust and unreasonable. For example, in recent simulations SCE has observed HASP interval prices as high as $538,986/MWh and as low at -$106,940/MWh. Moreover, even prices that are mathematically correct, but are the result of the optimization not being able to find a feasible solution in the time allotted, have exceeded the -$30 bid floor by more than 10,000% and the $500 bid cap by more than 3,500%. SCE agrees with the CAISO that a just and reasonable price cap of $2,500, or 5 times the current energy bid cap, provides an effective economic signal in cases of operational constraints, supply shortages, or high demand periods during market start-up, while at the same time protects consumers against extreme prices resulting from mathematical artifacts within the MRTU software. 2. The proposed price floor is unreasonable SCE does not support the CAISO s proposal to introduce a price floor value of -$2,500, approximately 83 times the current energy bid floor price of -$30. Rather, similar to the price cap set at 5 times the bid cap, the price floor should be set at 5 times the bid floor, that is -$30x5, $150. This too should provide ample room for economic solutions to establish market prices, while at the same time protect the market from unjust and unreasonable rates. The CAISO current proposal of a price floor approximately 83 times the bid floor level, and the potential for the resulting extreme negative prices, is insufficient to ensure rates remain just and reasonable. For example, we see many instances in market simulation where real-time prices exceed (are lower than) -$1,000 on must take generation facilities, such as nuclear units. These prices are again often the result of administrative articfacts from the optimization and should not be allowed to create binding financial settlements. A such, SCE requests that the Commission revise the CAISO proposal to implement a price cap at 5 times the current bid cap ($2,500) per the CAISO proposal, and a price floor of 5 times the current bid floor (-$150).

4 B. Implementation of the Proposed Price Cap/Floors SCE objects to the CAISO s proposal to apply the proposed price cap and floor policy through the price correction mechanism that allows the CAISO to correct prices after the market optimization has run. There is no valid reason for the CAISO to publish all uncapped prices as calculated by the market optimization software, knowing that those prices will not be used in actual market settlements. The publishing of these prices will just create added confusion to stakeholders and provide additional complexity for stakeholders systems when trying to validate market settlements against published LMP results. Moreover, bilateral transactions that settle based on posted CAISO prices in near real-time may be settling against incorrect prices. For example, a generation hub is made up of a predefined weighted average of all the generation within the hub. If several of the nodes within the hub were to clear above the price cap, under the current CAISO proposal, the CAISO would nevertheless publish a generation hub prices based on the unmitigated prices. This would result in an artificially inflated published generation hub price and bilateral contracts settling against the price on a daily basis would either setteled incorrectly, or would require a true up after the CAISO corrected the prices in the settlement process. To avoid such market confusion, SCE requests that the Commission require the CAISO to post only the mitigated prices to the market in the first instance. Alternatively, SCE would be open to the CAISO flagging LMP prices that have been adjusted through the market software to provide a means of transparency to stakeholders that market prices have been adjusted to price cap and floor levels. We also do not object to the CAISO storing the unmitigated prices in internal system so that the CAISO can use this information to diagnose software errors and to make future improvements to their pricing methodology. However, since these prices will never be financially binding, they should not be released to the market in any form that could complicate settlements. Internally storing all uncapped prices and externally flagging all price adjusted to cap and floor levels provides the transparency needed by stakeholders as well as provides the CAISO with the necessary information to

5 thoroughly test the MRTU software and correct any identified problems prior to and after MRTU go-live. III. CONCLUSION For all of the foregoing reasons, SCE respectfully requests that the Commission allow SCE to intervene in this proceeding and be accorded full party status herein. SCE further requests that the Commisson revise the CAISO proposal to: 1) implement a price cap at 5 times the current bid cap ($2,500) per the CAISO proposal, and a price floor of 5 times the current bid floor (-$150) and 2) require the CAISO post only capped prices to the market after the market optimization has run. 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: (626) Facsimile: (626) Erin.Moore@SCE.com Dated: November 24, 2008

6 CERTIFICATE OF SERVICE I hereby certify that I have this day served the foregoing INTERVENTION AND COMMENTS OF SOUTHERN CALIFORNIA EDISON COMPANY ON THE CALIFORNIA INDEPENDENT SYSTEM OPERATOR S AMENDMENT TO ADOPT PRICE CAP AND FLOOR upon each person designated on the official service list compiled by the Secretary in this proceeding. Dated at Rosemead, California, this 24 th day of November, Rodger Torres, Case Analyst SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California Telephone: (626)