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Enron Mail |
---------------------- Forwarded by Richard Shapiro/NA/Enron on 04/16/2001
01:42 PM --------------------------- Steve Walton@ECT 03/12/2001 10:13 AM To: Alan Comnes/PDX/ECT@ECT, Richard Shapiro/NA/Enron@Enron cc: james d steffes@enron, jeff.dasovich@enron.com, mhain@enron.com, smara@enron.com, steve.walton@enron.com, tim.belden@enron.com Subject: Re: CAISO Market Stabilization Plant Alan, <<< Day-Ahead & Hour-Ahead Markets Market separation rules aside, we should resist any mandatory Day-Ahead Market. The results for day-ahead clearing markets have been bid gaming to influence price in the day-ahead market. In PJM and NY-ISO parties submit false load and generation schedules in set price (most often this is a low ball load estimate),then later the true load is scheduled. I think there is less of a problem with the hour-ahead market since the opportunity to submit a false bid to set price and then replace it later is very limited if not nonexistent. <<< Unbalance Schedules The general direction we are going for Eastern ISO's is to allow unbalance schedules in the real-time market. Tim indicated a few weeks ago that he still wants this feature. Normally there would be no imbalance penalties, however, when reserve margins are so slim that the system's security is in jeopardy, penalties would be triggered. The result is that parties can choose to use the real-time market or they can choose bilateral schedules or a combination. They are not compelled to do either. As long as reserves are adequate, then why should we care. <<< Unit Commitment Although not on your list, I think the primary problems that the Day-Ahead Market is trying to solve is unit commitment. While this may be the intended purpose, it hasn't worked very well. Centralized unit commitment would address the problem, but then the operator decisions have a large impact on prices without having any consequences. We need a proposal for making sure that resources will be on line and that the operator knows they will be in place. A possible approach may be as follows (as suggested by Mike Roan): The Operator publishes its expected real-time price for the next 48 hours based on information supplied by generators regarding their availability and bid price (one part) and the ISO's estimate of hourly loads. The estimates roll forward every hour to that a continuous two day outlook is provided to all market participants. The Operator provides the demand/supply curves to the market so everyone has the same information. As units are committed and load forecast is adjusted, the estimate of real-time prices changes, providing signals for units to use in deciding to commit units. As expected price rises, more units are committed and price goes down. At a given point in time, such as 4 hours ahead of real-time, the Operator locks units in as committed. If there are inadequate units committed, it pays to add capacity (call contracts). If not enough is voluntarily bid, the Operator orders units on under emergency rules contained in interconnection/integration agreements with the generators. The cost of the call contracts or of units ordered on is included in the cost of imbalance energy in real-time for the hours for which those costs were incurred. This procedure is a continuous bid type of approach, which provides signals and information to the market. It or some other procedure like it is needed to address the Operators concerns that it will be able to operate the system and to deal with the overly conservative tendencies of a not-for-profit ISO. Steve Alan Comnes 03/09/2001 01:10 PM To: james d steffes@enron, smara@enron.com, jeff.dasovich@enron.com, rick.shapiro@enron.com, tim.belden@enron.com, mhain@enron.com, steve.walton@enron.com cc: Subject: CAISO Market Stabilization Plant Here are some initial reactions and questions to the CAISO market stabilization plan, which is attached. Give me or Sue Mara your comments and then we can turn it into message points for media / advocacy folks. In addition to reviewing the plan, I listened in to part of a stakeholder call that occured Friday 10 a.m. PST. DRAFT MESSAGE POINTS: With limited exceptions, the plan does nothing to increase supply or decrease demand. It primarily addresses costs and market "stability" INTERESTING QUOTES: "Over the edge into cost based regulation" Duke Power Although the plan provides for cost control and for improving market "stability" (whatever that means), the ISO staffer (Byron Wortz) who presented the study admitted it "Will do nothing to increase supply this summer" A staffer, Lorenzo, stated (paraphrased)" all out of state suppliers are cost of service based and do not need to recieve market based rates ON SPECIFICS The Ugly: Resource-specific cost based bid caps (RSBC or bid caps): cost of service regulation that disincent supply The ISO will hold in-state resources hostage--cuts any exports when reserves fall below a stated critera Imports can only participate as price takers. Thus if the highest-cost in-state resource is below the opportunity cost of power, needed imports will not come in: <<this will decrease supply!! << Staffer stated ISO hopes to sign "longer term deals" if necessary to secure out-of-state power but acknowledged the proposal needs more work. The Bad: The ISO is considering pay as bid, which is complex and does not increase supply. However, on the call they said they are leaing to a single price auction. However, with bid caps the market will still be distorted. The Good?: The ISO wll implement an hourly day-ahead and hour-ahead market, essentially filling a void created by the PX's demise. <<( Enron has strongly advocated market seperation in the past but do we want to consider supporting a day ahead market?) Market separation rules (MSR). ISO is leaning towards option 2 in which SCs submit bundled schedules but that market seperation would be suspended after congestion process is conducted; i.e., final schedules may be imbalanced. <<What do we think of this? .
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