On August 23rd of this year, the California Independent System Operator Corporation (CAISO) filed its Day-Ahead Market Enhancements (DAME) and Extended Day-Ahead Market (EDAM) proposal. Today, we approved this proposal unanimously.
CAISO’s proposal to improve the performance of its existing day-ahead market with new products, and to offer balancing authority areas (BAAs) outside CAISO’s current footprint the opportunity to participate in and benefit from a new day-ahead market, will create significant savings for consumers in Western states. I believe such efforts will enhance reliability, expand the savings and efficiencies that wholesale markets provide, and contribute to consumers’ bottom line.
According to CAISO, the estimated annual benefits of the proposal will range from $100 million to more than $1 billion, in addition to other benefits the Western Energy Imbalance Market (WEIM) will continue to provide.[1] I also note that CAISO’s Department of Market Monitoring in general supports this proposal. Furthermore, as noted in the order, CAISO has committed to continuously monitor the performance of EDAM and DAME and make improvements, incorporating the input of its stakeholders, if necessary.
Focusing on the DAME proposal, these reforms are necessary to ensure that the day-ahead market schedule has the ramping capability needed to respond to real time variations in net-load. It is currently difficult for CAISO to forecast net load in each real-time interval, and this task will become more challenging over time as the resource mix changes. Focusing on the EDAM and DAME proposal together, the unpredictable weather, the increased penetration of renewables and other changes such as the growing importance of storage and electrification (including electric vehicles) together increase complexity for grid operators and make it more challenging to ensure sufficient resources will be available to serve real-time needs. CAISO explained that it currently meets these needs outside of the market with manual interventions, which can be inefficient, raise costs to load, and distort market outcomes. I applaud CAISO for its efforts in this proposal to reduce such manual interventions and incorporate more of the system’s needs into the day-ahead market, thus enhancing transparency, price formation, and efficiency.
I understand some Western State Commissioners are concerned about the lack of communication between the stakeholders that are working on developing markets and the stakeholders focusing on transmission planning, and I strongly encourage greater communication and coordination among various stakeholders and regulators in future endeavors to expand participation in wholesale electricity markets. I believe that in the longer term, any seams issues should be discussed so that cost effective transactions can be facilitated through centralized and bilateral markets throughout the West.
I also recognize that there is a lot of activity in the West at the moment. States, utilities, and other stakeholders are evaluating possible participation in the Western Power Pool’s Western Resource Adequacy Program, the Southwest Power Pool, Inc.’s (SPP) RTO West, SPP’s Western Energy Imbalance Service, and SPP’s Markets+, in addition to WEIM and EDAM. Furthermore, some states are performing benefit-cost analyses regarding joining regional transmission organizations.
Establishing a day-ahead market for a larger geographic area is complicated and represents stakeholders’ significant efforts over the past few years to develop enhanced market mechanisms that jointly achieve reliability, affordability and sustainability for customers. I applaud these stakeholders for their efforts and believe the countless hours of work that went in to developing these proposals will deliver significant benefits to customers. Keep up the good work.
For these reasons, I respectfully concur.
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Willie Phillips
Chairman
[1] Transmittal at 12.