Decision on Modifying Rules Limiting Supply Bid Pool in the - - PowerPoint PPT Presentation

Decision on Modifying Rules Limiting Supply Bid Pool in the Integrated Forward Market

Mark Rothleder Principal Market Developer Board of Governors Meeting General Session September 10, 2009

Slide 2

Current rule limits the resources available to IFM.

All CAISO Resources Bid-in

~ ~ ~

Only the Resources Needed to Clear CAISO Forecast

• reviewed for local

market power

• used to clear the

market and set market prices

~ ~ ~ ~ ~ ~ ~ ~ ~

Quantity (MW)

Total Supply Curve Available to CAISO

CAISO Forecast Total Supply Curve

Price ($) Quantity (MW)

Supply Curve Used to Clear Market

CAISO Forecast Supply Curve Created by MPM Run

Slide 3

If bid-in load exceeds ISO forecast scarcity occurs.

Quantity (MW)

IFM Bid-in Demand Curve met by MPM Supply

CAISO Forecast Supply Curve Created by MPM Run

Problem 1: If bid-in demand exceeds ISO forecasted demand, the market may not clear or will clear at increased price Problem 2: Resources not making the “MPM cut” will not be awarded or participate in pricing in the integrated forward market

Bid-In Demand Curve

Price ($)

$500 Gap where ISO Curtailed Load

Quantity (MW)

IFM Run with MPM Supply Compared to Total Supply Available

CAISO Forecast Total Supply Curve Supply Curve Created by MPM Run Bid-In Demand Curve $500 $65

Price ($)

Slide 4

July 26 case was example of bid-in load higher than ISO forecast producing higher prices.

SCE LAP Price Comparison - July 26

$0 $100 $200 $300 $400 $500 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Hour LAP LMP ($/MWH)

DMM Market Rerun All Resource Flag MPM Load = IFM Cleared Load

Prices due to higher bid-in load and limited set of bids Prices with all bids

Slide 5

The ISO considered four alternative approaches to address the limit on the IFM supply bid pool issue.

! Approach 1 - Use all bids in the IFM ! Approach 2 - Use all bids conditionally in the IFM ! Approach 3 - Use the greater of the ISO demand

forecast and bid-in demand in the Local Market Power Mitigation (LMPM)

! Approach 4 – Use bid-in demand curve in the LMPM

Slide 6

Management recommends eliminating the limit on the IFM supply pool (Approach 1).

!

The proposal has the following benefits

! Allows all bids to be available for the IFM ! Avoids artificial supply deficiency when bid-in demand is significantly higher than the ISO forecast demand ! Reduces undue market price volatilities

!

While

! Maintaining effective local market power mitigation ! Providing competition between mitigated and unmitigated bids in the IFM

Slide 7

Management requests approval of the proposal.

! Improved market performance ! Supported by majority of stakeholders ! Can be implemented quickly if approved by FERC