System Market Power Mitigation Perry Servedio Lead Market Design - - PowerPoint PPT Presentation

CAISO Public CAISO Public

System Market Power Mitigation

Perry Servedio Lead Market Design Policy Developer Market Surveillance Committee Meeting General Session May 15, 2020

CAISO Public

Agenda

• Pivotal supplier test trigger
• Market conditions when test would trigger
• System market power in energy needed to supply intra-

hour ramp

• Evaluating and mitigating jointly pivotal supply within the

CAISO balancing area

Page 2

CAISO Public

The ISO proposed to only perform pivotal supplier test when ISO is in the highest priced constrained region in the EIM

• This approach to evaluating for wider-area competitive conditions,

while based on the approach used for other EIM balancing areas, discounts the competitive pressure from intertie import offers in the trigger itself

• The proposed design shifted the competitive impact of imports from

the trigger itself into the subsequent pivotal supplier test by ensuring all import offers that the ISO could clear would be considered competitive supply

• The ISO has concerns about relying too heavily on binding import

constraints as a pre-condition to its competitive supply evaluation, as there may be wider-area limitations to access to the ISO market

Page 3

CAISO Public

There may be limitations on access to our market that are beyond our borders

• Frequently unused import capability and consistent concentration of
• ffers among a small number of participants on major interties may

indicate that there are limitations on access to our market that are beyond our borders

• The offers that suppliers consistently make on the interties may be a

reflection of broader transmission access between generators and

• ur interties, not just the last path to get to the ISO
• EIM transfers, when not constrained by balancing area import/export

limitations, represent a fairly large pool of economy energy whose resource-specific offers compete with offers across all balancing

• areas. Balancing area import/export constraints limit participating

resources’ competitive usefulness in HASP, FMM, and RTD.

Page 4

CAISO Public

Available transmission beyond our border or available supply may be less than our import capability

Page 5

CAISO Public

Available transmission beyond our border or available supply may be less than our import capability

Page 6

Bid volume available above intertie available capacity

CAISO Public

Binding EIM transfers for triggering system market power mitigation test

• Using binding intertie scheduling limits had drawbacks

– Does not recognize competition from EIM transfers on other interties – Suppliers may not have access to the transmission beyond our border – There may not be more supply available to ISO demand

• Using EIM transfers to trigger the test resolved these drawbacks

– Recognizes potential competition from EIM transfer on all interfaces – A measure of limitations on external supply ISO demand can readily access within the hour

• While the trigger itself is not based on all import offers at the ISO’s

interties, the pivotal supplier test does account for these competitive

• ffers

Page 7

CAISO Public

The ISO was in the highest priced EIM region 26.4%

• f all fifteen-minute market intervals in 2019, most
• ften occurring during winter and spring net load peak

hours

Page 8

200 400 600 800 1000 1200 1400 1600 1 2 3 4 5 6 7 8 9 10 11 12

Number of fifteen-minute intervals test triggers Month of year

Month of year when CAISO is in the highest priced constrained EIM region

100 200 300 400 500 600 700 800 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Number of fifteen-minute intervals test triggers Hour of day

Hour of day when CAISO is in the highest priced constrained EIM region

CAISO Public

Distribution of CAISO prices in the constrained 26.4%

• f intervals

Page 9

Distribution of CAISO prices when there are multiple priced regions in the EIM and the CAISO is in the highest priced region versus its prices otherwise

500 1000 1500 2000 2500

Number of fifteen-minute intervals in each price range Price range

Frequency of CAISO Price When Trigger Condition Is Met

4.5% of constrained intervals have prices greater than $100

CAISO Public

The price difference between Tier 1 and Tier 2 is much higher when Tier 2 has negative prices or when the highest priced region is greater than $100

• The average price difference between Tier 1 and Tier 2 is $17.84

when the test would have been triggered – In 95.6% of these intervals, the Tier 2 price is positive

• The average price difference between Tier 1 and tier 2 in these

intervals is $12.89

– In 4.4% of triggered intervals, the Tier 2 price is negative

• In many of these intervals, the Tier 2 price is near the price floor

causing the average price difference between Tier 1 and tier 2 in these intervals to be $115.19

• The average price difference between Tier 1 and Tier 2 is $70.90

when Tier 1 prices were greater than $100

Page 10

CAISO Public

ISO is constrained up from the rest of the EIM by more than $20 in approximately 3% of intervals

Page 11

$- $100.00 $200.00 $300.00 $400.00 $500.00 $600.00 $700.00 $800.00 $900.00 $1,000.00 1 27 53 79 105 131 157 183 209 235 261 287 313 339 365 391 417 443 469 495 521 547 573 599 625 651 677 703 729 755 781 807 833 859 885 911 937 963 989 1015

Tier 1 to Tier 2 Price Differences Interval Number

Tier 1 to Tier 2 price differences greater than $20 when Tier 2 prices are positive

CAISO Public

A single balancing area was constrained-down from the CAISO price region in 31% of the intervals in which the test would have triggered, occurring more often between February and June

Page 12

Months of the year when there are multiple priced regions in the EIM and the CAISO is in the highest priced region

200 400 600 800 1000 1200 1400 1600 1 2 3 4 5 6 7 8 9 10 11 12

Number of intervals in month Month of year

Month of year when test triggers with a single BAA constrained-down

All other triggered intervals Intervals when single BAA Constrained Down

CAISO Public

Possible improvements to the trigger

• Consider using a minimum price threshold to better target high

impact intervals

– Could it make sense to only trigger the pivotal supplier test when prices are above $100?

• Consider using a minimum price difference threshold between Tier 1

and Tier 2 to avoid mitigation process for low dollar differences

– Does it make sense to trigger the pivotal supplier test when Tier 1 is constrained up by $0.20?

• Additional considerations for when only one balancing area is

constrained down

– Does it make sense to trigger the pivotal supplier test when only one balancing area is constrained down?

Page 13

CAISO Public

Hourly block imports can increase competitiveness of the fifteen-minute market to a certain extent but cannot alleviate market power in ramping capability

• ISO has two sources of directly competitive fifteen-minute supply

– EIM transfers resulting from optimizing participating resources – 15-minute economic import offers at its import locations

• Hourly block imports offered in HASP increase competition in FMM

to the extent that they unload non-pivotal ramping supply

– Hourly block energy can unload non-pivotal ramping capability if awarded an energy schedule in HASP – Within the hour, the fifteen-minute market can still be uncompetitive regardless of how much import suppliers offer into HASP or how much intertie capability is available

Page 14

CAISO Public

ISO proposed to only mitigate jointly pivotal suppliers within the CAISO balancing area

• Non-pivotal suppliers do not have an incentive to exercise market power

– Mitigate resource offers from any supplier when in combination with the two largest suppliers are required to meet demand

• Some stakeholders are concerned that the amount of mitigated supply

would not be enough to meet demand

– Is it appropriate that when a structural competitiveness test fails, unmitigated bids could set the price?

• Some stakeholders are concerned that an internal CAISO supplier may be

affiliated with participating resources in the EIM as well as import offers on the CAISO interties

– The test could consider these supplies as pivotal when the supplier affiliate is

• ne of the three largest suppliers

– However, it is not clear how offer mitigation could work if the affiliate group is jointly pivotal

Page 15

CAISO Public

ADDITIONAL INFORMATION

Page 16

CAISO Public

The ISO is rarely alone or grouped with fewer than 5 balancing areas in the highest-priced constrained region

Page 17

Geographic scope of the highest priced region that includes the CAISO in 2019

When the CAISO is in the highest priced constrained region, the region includes 5 BAAs 17% of the time.

CAISO Public

When CAISO is import constrained in the EIM, it is

• ften grouped with AZPS, NEVP, IPCO, PACE, and

BANCSMUD

Page 18

Entity % of intervals that entity is in Tier 1 with CAISO AZPS 96.1% IPCO 93.2% PACE 91.3% NEVP 88.6% BANCSMUD 68.3% PACW 38.3% PSEI 34.7% PGE 33.1% BCHA 22.7% Entities in the highest priced region that includes the CAISO in 2019

CAISO Public

In most of the intervals where one BAA is constrained down, the constrained-down BAA had a positive energy price

Page 19

• A single balancing area was in the lower priced region in 31.1% of

the intervals when there were two price regions and the ISO was in the highest priced region

• In 87% of these intervals, the constrained-down balancing area had

a positive energy price

– In these intervals, the average price difference between price tier 1 and price tier two is $9.87

• In 13% of these intervals, the constrained-down balancing area had

a negative energy price, generally close to the price floor

– Because the constrained-down balancing area is generally close to the price floor, the price difference between price tier 1 and price tier 2 is generally very large

CAISO Public

CAISO is constrained up from the rest of the EIM by more than $20 in approximately 3% of intervals

Page 20

$- $50.00 $100.00 $150.00 $200.00 $250.00 $300.00 $350.00 $400.00 $450.00 $500.00 $550.00 $600.00 $650.00 $700.00 $750.00 $800.00 $850.00 $900.00 $950.00 $1,000.00 1 36 71 106 141 176 211 246 281 316 351 386 421 456 491 526 561 596 631 666 701 736 771 806 841 876 911 946 981 1016 1051 1086 1121 1156 1191 1226 1261 1296 1331 1366

Tier 1 to Tier 2 price difference Interval Number

Tier 1 to Tier 2 price differences greater than $20 including intervals with negative Tier 2 prices

Generally, intervals where Tier 2 price is negative and Tier 1 price is low

CAISO Public

CAISO is constrained up from the rest of the EIM by more than $20 in approximately 3% of intervals

Page 21

$- $100.00 $200.00 $300.00 $400.00 $500.00 $600.00 $700.00 $800.00 $900.00 $1,000.00 1 27 53 79 105 131 157 183 209 235 261 287 313 339 365 391 417 443 469 495 521 547 573 599 625 651 677 703 729 755 781 807 833 859 885 911 937 963 989 1015

Tier 1 to Tier 2 Price Differences Interval Number

Tier 1 to Tier 2 price differences greater than $20 when Tier 2 prices are positive