Monday, March 18, 2019

FERC Again Rejects CAISO ‘Market Values’ Plan

By Hudson Sangree

FERC on Thursday again rejected CAISO’s proposal to change the way generators register their capabilities with the ISO, denying rehearing on a plan the commission said could allow participants to withhold electricity and exercise market power (ER18-1169-002).

CAISO currently requires participants to submit information about the operational and technical constraints of their generating resources in an electronic repository called the Master File.

Last year, the ISO asked FERC to allow resources to register “market values” instead of physical parameters in the Master File. It would allow a resource to register a maximum number of daily start-ups, ramp rates and other parameters that don’t reflect a resource’s design capability.

FERC said generators should register their physical characteristics, not “market values,” with CAISO to avoid withholding.

The ISO said the change would provide “myriad benefits” — encouraging participation by resources without capacity must-offer obligations, reducing the need for exceptional dispatch and reducing wear and tear on resources — that “manifestly outweigh the remote risk of additional market abuses.”

To protect against withholding and gaming behavior, CAISO required generators to state they could start up at least twice daily to meet the ISO’s steep morning and evening ramps. The ISO proposed several other additional restrictions to alleviate concerns about reliability and market manipulation.

FERC rejected the plan in June, saying the ISO’s proposed safeguards were insufficient. (See FERC Partially OKs CAISO Commitment Cost Enhancements.)

In denying rehearing Thursday, the commission said the ISO “has not responded to our specific concern regarding the absence of any mechanism in CAISO’s Tariff that could be used to mitigate a resource’s physical parameters in addition to its energy bid if CAISO finds the potential for market power.”

“Despite the existing safeguards, we again find that CAISO’s market values proposal presents a new opportunity for market participants to exercise market power that CAISO has not sufficiently addressed,” FERC said.

“Absent some form of mitigation,” the commission continued, “we reiterate that allowing market participants to register desired or preferred market values for physical operating parameters may create opportunities to benefit from physical withholding by earning higher uplift payments or raising market prices.

“A market participant could restrict a resource’s daily start-ups or ramp rates to appear less flexible than it actually is, resulting in the market not being able to access the resource’s full capacity,” FERC said.

“Given these shortcomings, we find CAISO’s argument that it crafted the market values proposal carefully to include restrictions that reinforce existing resource adequacy-related rules to be irrelevant,” the commission concluded.

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