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 No. ER INTERVENTION AND COMMENTS OF SOUTHERN CALIFORNIA EDISON COMPANY ON CAISO TARIFF AMENDMENT TO IMPLEMENT REAL-TIME MARKET DESIGN ENHANCEMENTS RELATED TO ORDER NO. 764 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 (2013), and the Combined Notice of Filings issued November 27, 2013 in the above-captioned docket, Southern California Edison Company ( SCE ) hereby moves to intervene and comment on the California Independent System Operator s ( CAISO ) Tariff Amendment to Implement Real-Time Market Design Enhancements Related to Order No. 764 ( CAISO Filing or Amendment ). 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 Transmission owner and operator, a Market Participant, and a Participating Transmission Owner in the CAISO, and thus is affected by the outcome of this proceeding, as it proposes modifications to the CAISO 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 Commission grant SCE permission to intervene in this proceeding. SCE hereby reserves its rights to raise 1

2 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 A. Introduction SCE appreciates the opportunity to provide comments on the CAISO proposed amendments to conform its tariff to comply with the Commission s Order No mandated criteria. SCE generally supports the CAISO s Amendment, as we anticipate the design will both improve market efficiency and help reduce uplift costs. However, as explained infra, the Commission should order minor modifications to help ensure a successful implementation. B. SCE Supports the Department of Market Monitoring ( DMM ) Opinion and Shares Their Concern On The Seriousness Of The Systematic Bias Between Day Ahead ( DA ) And 15-Minute Prices The DMM observes: Currently, the 15-minute pre-dispatch market prices are affected by the flexible ramping constraint as well as other differences between the 15- and 5-minute markets, including load forecast and operator adjustments. Figure 1.14 compares the 15-minute realtime pre-dispatch prices (red line), average real-time prices (green line) and average day-ahead price (blue line). As shown in this 1 Integration of Variable Energy Resources, Order No. 764, FERC Stats. & Regs. 31,331 ( Order No. 764 ), order on reh g and clarification, Order No. 764-A, ,232 ( Order No. 764-A ) (2012), order on clarification and reh g, Order No. 764-B, 144 FERC 61,222 (2013). 2

3 figure, the real-time pre-dispatch prices are consistently higher than both the day-ahead and 5-minute real-time market prices. In 2013, the 15-minute real-time pre-dispatch prices exceeded dayahead prices by about 19 percent and 5-minute real-time prices by about 26 percent. The ISO is looking into these differences and expects to make any necessary changes to address the underlying causes of this divergence. DMM is recommending the ISO play[sic] a high priority on addressing this issue prior to implementation of the new 15-minute real-time market design in spring (emphasis added) SCE supports the DMM s opinion on this issue and shares its concern. Before deciding on the CAISO proposal, the Commission should Order the CAISO to explain the causes of the problem of this bias. The DMM states that the flexible ramping constraint is a factor in the Real Time RT systematic upward price bias. If this is the case, and it turns out to be a major factor, then convergence bidding cannot efficiently address this problem. Convergence bidding is designed to deliver fixed quantities of energy, not flexibility. Even if they could deliver flexibility, it would be achieved indirectly by providing additional energy. Delivering additional energy does not ensure that the CAISO will receive the flexibility necessary to converge DA and 15-minute prices. Thus convergence bids alone should not be view as a solution to this bias, and such bids, given their intended design, cannot address this problem efficiently Third Quarter Market Report at p. 23 (emphasis added): 3

4 C. SCE Supports the CAISO s Proposal to Not Provide Bid Cost Recovery ( BCR ) For The Hourly Economic Bid Option As the CAISO states: An important goal of the revised market design is to encourage import suppliers and export buyers to submit flexible 15-minute bids. This goal would be undermined if bid cost recovery were to be paid on hourly transactions to import suppliers. Significantly, if bid cost recovery were allowed under this option, market participants might submit offsetting hourly and 15-minute schedules that would generate net revenues when hourly prices were greater than 15-minute prices. This is because, for example, an import would be guaranteed a higher price while the charge for an export in the 15-minute market could be lower than the clearing price projected by the hour-ahead scheduling process. In this regard, the DMM explained that providing bid cost recovery for imports and exports using this hourly scheduling option would essentially reinstate the same bid or better settlement rules for hourly intertie schedules under the ISO s prior market design that led to over $33 million in uplift costs from the time those settlement rules were implemented in 2004 until they were changed in 2005 pursuant to the filing of an ISO tariff amendment. Those uplift costs inevitably result when real-time prices are either higher or lower than the projected or advisory prices used to clear the market. A very large portion of the $33 million in uplift costs was paid for offsetting import and export bids (by the same or different market participants) that provided no net energy to the ISO system. 3 The CAISO also notes: Further, not permitting bid cost recovery under the economic bid option is consistent with the approach taken by the NYISO in implementing 15-minute scheduling. Before it introduced pricebased 15-minute scheduling on external interfaces two years ago, the NYISO settled price-based intertie transactions at real-time prices and paid bid cost recovery for economically scheduled transactions that did not recover their offer prices at real-time prices. But as the NYISO has implemented price-based 15-minute scheduling over the past two years, it has eliminated its bid 3 CAISO Filing at p

5 production cost guarantee for hourly transactions at external interfaces. 4 SCE strongly supports this dimension of the Amendment, and encourages the Commission to approve it. The proposal helps mitigate the potential of BCR gaming, and should aid in achieving the Order No. 764 s goal of a liquid 15 minute market. 5 SCE commends the CAISO for its efforts in supporting a more efficient outcome that should be less prone to manipulation. D. SCE Opposes Any Intertie Convergence Bidding ( ICB ) Reintroduction Until The CAISO Addresses The Core Structural Uplift Problem Associated With All Convergence Bids Convergence Bidding is a strictly financial instrument and should only be transacted between willing counterparties. However, market prices can diverge based on actions taken by nonmarket participants in particular, actions taken by the CAISO and in turn Convergence Bidders have an incentive to transact with the CAISO, rather than with a willing counterparty. In this case, the CAISO itself can make changes in its modeling of the system between the day ahead ( DA ) and real time ( RT ) market runs. If such changes produce predictable price divergence, Convergence Bidders can profit from placing Convergence Bids. However, there is no willing counterparty in this situation; in fact, this transaction with the CAISO, rather than visà-vis a willing market participant, is not even a market transaction in the sense contemplated by the CAISO Tariff. 6 In effect, the Convergence Bidder has made a bet against the CAISO. Since the CAISO is a not-for-profit corporation, it does not have a balance sheet to willingly become the counterparty to such a transaction. Therefore the CAISO currently pays for this 4 Id. at p As the liquidity of intra-hour energy products stabilizes, market participants also may begin to commit or otherwise acquire fewer reserves in advance, with the knowledge that they can purchase additional reserves on an as-needed basis from third parties. Order No. 764 at P The CAISO Tariff, at Appendix G, Article I, defines Market Transaction as a delivery of Energy or provision of Ancillary Services from a Unit pursuant to a Direct Contract or bids into markets run by the, CAISO or any similar entity. 5

6 Convergence Bidding activity by charging others in the market. Presently, the CAISO forces measured demand which consists predominately of California load to pay for these bets. Load, however, had no control over changes to the model, nor did it willingly enter into a transaction with the Convergence Bidder in this situation. This current structure is unjust and unreasonable and must be remedied before the CAISO commits to any expansion of Convergence Bidding. Further, ICB has not been expressly considered within the context and framework of the Energy Imbalance Market ( EIM ). There are a plethora of other design change initiatives currently being developed or undertaken by the CAISO, with no demonstration of how these changes will interact with ICB or whether they will even perform as intended. Of note, with the introduction of a real-time only EIM, the market models for the DA and RT optimizations by permanent design will be different. Given different DA and RT models, SCE questions how Convergence Bids, particularly on the inter-ties, can either: 1) result in price convergence or 2) be funded without uplift, since they will be structural bets against the CAISO changing the model 7 between DA and RT. It is therefore prudent for the CAISO to perform adequate impact analysis of all contemplated changes prior to any implementation efforts, to ensure that the elements as a whole produce a just and reasonable result, and that convergence bids fund via willing market transactions and without uplift. Finally, the CAISO has not solved the Dual Constraint, 8 and its proposal to work around the problem is insufficient. The Dual Constraint exists because Physical and Convergence Bids are not fungible in the CAISO s proposal. Thus, the Dual Constraint issue has not been resolved, in spite of the CAISO s claim to the contrary. 9 If anything, the CAISO s proposal may threaten 7 See, Motion To Intervene And Comments Of Southern California Edison Company On Proposed CAISO Tariff Amendment To Reduce The Real-Time Transmission Congestion Relaxation Parameter, at pp , filed March 29, 2013 in Docket No. ER The Dual Constraints of physical bids satisfying an intertie s capacity and physical+virtual bids satisfying an intertie s capacity have led to infeasible optimization outcomes. See, CAISO Tariff Amendment Eliminating Convergence Bidding at the Interties, at p. 7, filed September 20, 2011 in Docket No. ER Cook declaration at 12. 6

7 intertie liquidity. 10 Further, if the uplift costs from lack of resolution to this problem are not de minimis, ICB might, once again, have to be suspended to prevent an unjust and unreasonable outcome. Thus, the Commission should reject the Amendment s proposal to reinstate Convergence Bidding on the interties 1-year after the implementation of Order No. 764, and instead require that the CAISO first demonstrate that California load will not be forced to fund Convergence Bidding profits via uplift, and that the Dual Constraint issue on the interties has been resolved in a way that is compatible with a Convergence Bidding design. Until the CAISO makes such a demonstration, the Commission should require ICB to remain off. E. SCE Opposes A Design That Allows Implicit Virtual Bidding Between The 15- Minute And 5-Minute Markets. The Commission Should Order The CAISO To Implement Worse-Of Pricing Or A Consistent Decline Charge To Remedy This Design Flaw. The CAISO has repeatedly stressed the reliability concerns stemming from variable supply, and has emphasized the need for physical supply certainty. The CAISO has launched numerous initiatives, such as Flexible Ramping Product, 11 Flexible Capacity and Local Reliability Resource Retention, 12 Integrated Day Ahead Market, 13 etc., and has stressed the immediacy of reliability needs and the urgency of addressing variability. On one hand the CAISO proposes Contingency Modeling 14 and other features to ensure it has enough responsive capacity to maintain reliability, and on the other hand here in its proposed Amendment to implement Order No. 764 the CAISO proposes a purely financial 15-minute market that will 10 By limiting the acceptance of e-tags, merely to accommodate ICB, the CAISO reduces the likelihood of physical supply participation relative to a scenario where there are no special accommodations and only physical supply participates on the interties. 11 As well as the Flexible Ramping Constraint, Docket No. ER Docket No. ER FlexibleRampingProduct.pdf

8 potentially reward participants for ignoring CAISO instructions by settling them at a potentially higher 5-minute price. Such inconsistent philosophy and implementation is counter-productive in both market and operating space. Particularly, SCE questions why the CAISO is not implementing a consistent decline charge or worse-of 15 rule for pricing interties that fail to deliver awarded transactions. Without such mechanisms, market participants can use the 15-minute market to virtual bid between the 15-minute and 5-minute markets. For example, a 15-minute intertie ( Intertie A ) could submit a low price to sell power, such as $0. Assuming it clears the market, Intertie A will be paid the 15-minute clearing price. Now, if Intertie A does not in turn schedule the energy per its 15- minute award, under the CAISO proposal it will simply buy back the power at the respective 5-minute prices. By not performing on its 15-minute award, Intertie A has created an implicit virtual bid, and it will profit if 5-minute prices turn out lower than the 15-minute price. 16 This form of implicit virtual bidding should not be allowed as part of the implementation of Order No. 764, as it provides a financial incentive for failure to perform. The 15 minute market is the last opportunity for intertie resources to participate economically (that is, to have bids accepted based on economic effectiveness). Moreover, as SCE understands the CAISO s proposal, the optimization will treat these 15 minute market transactions as given in all down-stream processes. Why then, does the CAISO propose a design that may reward parties that strategically violate CAISO instructions and fail to perform on their 15-minute intertie awards? Moreover, SCE does not support the CAISO in designing a system that promotes and rewards strategic participation that can only be captured via uninstructed behavior. For the interties, the CAISO s market is not designed to incentivize economic behavior past 15 minutes (i.e., the last bidding opportunity for the interties is the I.e., a participant will always be settled at a price that is less beneficial to it should it disobey CAISO instructions. This would incentivize resources to follow CAISO dispatch. 16 Conversely, a bidder could submit a bid to buy power at the interties. If it clears the market, it will be charged the 15 minute price, but if it fails to fulfill this obligation by not scheduling the export, it will then be paid the corresponding 5-minute prices. Here, the bidder makes money if the 5-minute prices are higher than the 15- minute prices. 8

9 minute market). And put simply, the design to implement Order No. 764 should eliminate the incentives that will encourage such implicit virtual bidding. SCE suggests two solutions. SCE s preferred solution is a worse-of settlement rule. Under such a rule, if an intertie fails to perform its 15-minute transaction, it will not automatically settle the deviation at the 5-minute price. Rather, it will settle at the worse of the 5 or the 15-minute price. As a result, the intertie will never make an unjust profit via implicit virtual bidding and will have no incentive to try to profit by deviating from instructions. To illustrate how this works, assume a 15-minute price of $35/MWh and a corresponding 5-minute price of $33/MWh. Under the worse-of rule, if a party sells power on the intertie it will still receive the 15-minute price ($35). However, if it fails to deliver, it will be charged the worse of the 15-minute price ($35) or the 5-minute price ($33). In this case, the CAISO will charge the imbalance the 15-minute price of $35 (since this is a larger or worse deviation charge). At the end, it is paid $35, and then charged back $35, and it realizes no unjust profit from the implicit virtual bid. 17 This approach ensures such parties do not have an incentive to implicitly virtual bid in the 15-minute intertie market. Therefore the Commission should direct the CAISO to implement this settlement rule for 15-minute transactions on the inter-ties. The second, but less preferable, option would be to enforce a consistent decline charge that penalized parties for non-performance. 18 The CAISO has proposed a selectively applied decline charge, 19 and this same approach could apply to parties declining 15-minute instructions. However, SCE finds this solution less effective than a worse-of rule because parties may still have an incentive to create implicit virtual bids, even with the charge. Notably, among the 17 If instead this party bought power on the interties and then failed to perform, it would still be charged $35 for the purchase, but it would sell back at the worse 5-minute price of $33, for a net loss of $2/MWh. 18 In Section of the Amendment, the Decline Potential Charge applies to HASP Block Intertie Schedules, HASP Block Intertie with Intra-Hour Option and VERs outside CAISO BAA Using Own Forecast. The Decline Potential Charge does not apply to FMM Schedules of Economic Bids, Dynamic Transfers and VERs outside the CAISO BAA Using CAISO Forecast. There is no Decline Potential Charge for internal generating resources not following through on their FMM Schedules. 19 The monthly threshold for the intertie schedules decline charge with regard to imports or exports is the highest of 300 MW or 10% of total imports or exports. The price that applies to the MW above the threshold is the maximum of $10 or 50% of the hour-ahead scheduling process LMP. CAISO Amendment at Attachment J, Tretheway declaration pp

10 economic bidding options, the decline charge is only proposed for hourly block schedules and hourly block schedules with single intra-hour schedule change. Thus, without changes, this decline charge would not apply to parties which implicitly virtual bid between the 15-minute and 5-minute prices. There is no reason for such inconsistent application of the decline charge. At a minimum, the decline charge should apply to all scheduling options offered by the CAISO. The absence of either a worse-of rule or a decline charge is, in effect, the CAISO signaling intertie resources that they can freely create implicit virtual bids and participate in the 5-minute market, but only by defying the CAISO s instructions. SCE objects to a rule that encourages parties to ignore CAISO market awards, act against the core economic structure of the market design and against the goal of efficiently dealing with real-time uncertainty and variability. SCE urges the Commission to direct the CAISO to correct this design on the interties by implementing the worse of settlement rule for 15-minute intertie transactions. At a minimum, the Commission should at least require 15-minute transactions to be subject to decline charge as described above. F. The CAISO Proposal for Protective Measures is Undeveloped, SCE Opposes Cost Allocation To All Scheduling Coordinators ( SC ) With Net Deviations, and Opposes Allowing All Resources Access to Protective Measures 1. Costs of Protective Measures Should Be Allocated Only to Those SCs that require Protective Measures The current proposal to spread the costs associated with Protective Measures to all negative real-time deviations does not adhere to cost-causation principles. As a result, it does not provide full and proper incentives for Load Serving Entities ( LSEs ) holding contracts with Protective Measures eligible resources to diminish the contractual need for these Protective Measures. Thus the Commission should reject the CAISO s cost allocation proposal. 10

11 Rather, if an LSE amends and/or clarifies all of its contracts so that the affected intermittent resources in its portfolio no longer require these measures, the principle of cost causation dictates that the LSE s customers should not be exposed to Protective Measures costs caused by other market participants, since its portfolio does not impose any of these costs on the market. In fact, an early iteration of the CAISO proposal allocated costs to those LSEs that had contracts receiving Protective Measures. During the July CAISO Board meeting, the CAISO Board encouraged the LSEs to work with contractual counterparties to obviate the need for Protective Measures, with the notion that if they were successful, the LSE would not incur any exposure to Protective Measure costs. SCE worked proactively with its counterparties in good faith to discuss implementing the Board s suggestion, but none of SCE s current counterparties have affirmatively indicated that they will apply for Protective Measures, and SCE s review of the contracts indicate that none of the counterparties would be eligible to do so. Thus, SCE has reduced the total exposure for the CAISO market to potential Protective Measure costs. Yet with the change in the CAISO proposal, SCE would still be exposed to significant costs to which it is not contributing. Such exposure is not just and reasonable. In order to address the unreasonable allocation of costs given the facts above, SCE recommends allocating the Protective Measures netting costs only to participating SCs, as this would provide proper incentives to LSEs to resolve any Participating Intermittent Resource Program ( PIRP ) related issues with their contracted resources, as doing so would exempt them from Protective Measures netting costs or revenues. If an LSE fails to resolve these contractual issues, and its resources opt in for Protective Measures, it would share these costs only with the other SCs availing themselves of the program. 2. The Dispute Resolution Process Still Needs Further Refinement The tariff language in provides for the possibility that a party may dispute the eligibility of a resource for PIRP treatment. It is then possible that upon the resolution of the dispute process, the resource could be found to be ineligible. Additionally, the tariff indicates 11

12 that the resource should continue to receive Protective Measures until the dispute is resolved. However, the tariff does not provide for a refund process if the resource is found to not be eligible. This is particularly problematic as the Tariff allocates the costs/revenues associated with Protective Measures to all net negative deviations. As such, the cost or revenue of the Protective Measures will accrue potentially to many parties that are not the beneficiary of the Protective Measures. As such, SCE believes that the tariff should require that any Protective Measure payments made, regardless of whether the payment was a cost or revenue to the resource, be subject to refund. By doing so, the CAISO can ensure that resources that are not eligible for Protective Measures do not improperly benefit from such measures during the dispute process. 3. Protective Measures Should Only Be Available to Resources Whose Contractual Provisions Are Harmed By Changes to PIRP Resources without a contract are already exposed to market risks and uncertainties, and have had plenty of time to adjust to upcoming market changes. It is worth noting that changes to PIRP were contemplated beginning at least three years ago, in the Renewable Integration Market Product Review ( RIMPR ) Phase I. 20 In addition, these are likely fully depreciated resources with over 20 years of commercial operation. As such, they have had ample indication of the upcoming market shift, and have had the opportunity to prepare for new conditions by investing in their resource and/or contracting to mitigate any imbalance risk, and therefore, these resources which do not already have contractual provisions should not receive Protective Measures. Simply put, Protective Measures should be used as a method to protect the sanctity of the contractual arrangements for which parties had little likelihood of being able to forecast this market change. Protective Measures should not be used to provide blanket protection to resources when the market requires changes in order to maintain reliable grid operation. And 20 RenewablesIntegrationMarketandProductReviewStaleholderMeeting16-Jul-2010.pdf. 12

13 particularly here where the market changes being made to implement Order 764 were done with the goal to accommodate intermittent resources. G. The CAISO Should Use Cost-Causation In Uplift Allocation Based On Deviations From Net Load Forecast Rather Than Using The 15 And 5 Minute, Hourly Weighted Average Changes in CAISO s forecast of net load between the 15 and 5 minute markets may result in uplift. The CAISO itself admits that its Department of Market Monitoring ( DMM ) stated that high real-time imbalance energy offset charges can also result from differences in congestion prices and flows on interties between the day-ahead and real-time markets. 21 The CAISO further states that it recognizes that real-time congestion offset is an issue that should be examined, but notes that nothing in the fifteen-minute market proposal will exacerbate it. 22 SCE disagrees with this conclusion. Using the CAISO s proposed hourly weighted average rather than a cost-causation-based uplift allocation will exacerbate the problem of unjust and unreasonable cost burdens on load. For example, if the CAISO over-procures in the 15-minute market and sells the excess back in the 5-minute market at a loss, this creates uplift. CAISO should not bake this uplift into the price charged to load deviations. Rather, there should be transparency over how much uplift the new design generates, and CAISO should allocate the uplift based on cost-causation (e.g. proportionally allocate uplift to entities contributing to the errors in CAISO s 15-minute and 5-minute forecast). 23 The use of the CAISO s proposed methodology of weighted average LMP of the 15 and 5 minute markets would disguise uplift costs and unfairly charge uplift costs only to those load serving entities that have deviated. To illustrate this, assume that in the day-ahead market load 21 CAISO Filing at p Id. 23 In addition, without a worse-of or decline charge for 15-minute intertie transactions, uplift from model changes between 15 and 5-minute markets will be amplified by implicit virtual bids. And again, the CAISO proposal forces load to pay this uplift. 13

14 procured 35,000 MW at $43/MW. Then, in the 15-minute market, the CAISO forecasts that load will be 37,000 MW, so it procures the extra 2,000 MW at a price of $45. However, actual realtime load turns out to be 36,000 MW. Thus, the CAISO over-procured from the 15-minute market, and must sell back 1,000 MW at a loss at the 5-minute market price of $44. In this scenario, there is only 1,000 MW of net load that deviated between the day-ahead and the realtime markets. That deviation of 1,000 MW will be charged the weighted average real-time price, which is calculated as the difference between the cost of procuring 2,000 MW in the higher price 15-minute market (2,000 MW x $45 = $90,000) minus the revenue returned by reselling 1,000 MW in the lower price 5-minute market (1,000 MW x $44 = $44,000), divided by the 1,000 MW of net load deviation ($46,000 / 1,000MW = $46/MW). The resulting average weighted price is $46/MW for each of the 1,000 MWs of deviation, even though the market price never went above $45. See Table 1, below, for a tabular illustration of this example. As a result, using the weighted average real-time price unfairly charges uplift costs only to load deviators. In extreme cases, market prices could be reasonable, yet load deviators could be charged extraordinarily high prices for their deviation. The uplift created by discrepancies between the 15 and 5 minute markets should be charged to all entities whose variability and uncertainty caused CAISO s inaccurate 14

15 procurement. This would include an allocation to entities that have historic uncertainty, including generation and non-performing and dynamic interties. The Commission should reject this cost allocation proposal and instead direct the CAISO to explore the most equitable and transparent mechanism for both identifying and allocating these uplift costs to all causes of uncertainty: load, generation, and interties. H. SCE Has Concerns Over The Long-Term Performance Of The RT Local Market Power Mitigation Process As noted by the DMM in its Third Quarter Market Monitoring Report: The differences in model inputs between the mitigation run and the 5-minute market run can reduce the accuracy of prediction of congestion by the mitigation runs. In turn, this can impact the accuracy of the process to identify local market power and consequently impact the potential accuracy of the mitigation process. Results of this analysis show that the accuracy of congestion prediction is notably lower in the real-time local market power mitigation process than in the day-ahead. 24 The DMM cautions that, given the 55% accuracy of the new process, it is unclear if this slight improvement reflects underlying fundamental or temporary factors. 25 While 55% consistency is low, SCE treats these results with caution and reserves its judgment on the performance of the new Local Market Power Mitigation process in RT. Although SCE does not yet see necessary improvements to the proposed mitigation process, it urges the Commission and the DMM to dedicate further resources in monitoring the new procedure. Should problems arise, both the CAISO and the Commission should be prepared to act quickly to ensure the 5-minute market has effective market power mitigation at p Id. at p. 71. Although the DMM also admits that it is unclear about the source of this improvement. 15

16 I. The CAISO Should Provide Stakeholders Opportunity To Review Combined Tariff Changes For Order No. 764 And Bid Cost Recovery Design Change. SCE requests that the Commission order the CAISO to provide a comprehensive version of the tariff that includes language encompassing both the new 15-minute settlement as well as the separation of the DA and RT Bid Cost Recovery. The two sets of market design changes have direct impact on each other, and the integration of these changes require further consideration and review prior to implementing one or the other. SCE is concerned with potentially unforeseen issues arising out of the interaction between the new DA-RT Bid Cost Recovery and the new 15- minute settlement. Market participants have not had an opportunity to review the integrated changes comprehensively. 16

17 III. CONCLUSION For all of the foregoing reasons, SCE respectfully requests that the Commission allow SCE to Intervene and be accorded full Party status herein. Furthermore, while SCE generally supports the CAISO s filing, we request that the Commission to direct the CAISO to make the changes described herein. Respectfully submitted, ANNA J. VALDBERG GARY Y. CHEN ERIN K. MOORE /s/ 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: December 17,

18 CERTIFICATE OF SERVICE I hereby certify that I have this day served the foregoing INTERVENTION AND COMMENTS OF SOUTHERN CALIFORNIA EDISON COMPANY ON CAISO TARIFF AMENDMENT TO IMPLEMENT REAL-TIME MARKET DESIGN ENHANCEMENTS RELATED TO ORDER NO. 764 upon each person designated on the official service list compiled by the Secretary in this proceeding. Dated at Rosemead, California, this 17 th day of December, /s/ Rodger Torres Rodger Torres, Case Analyst SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California Telephone: (626)