CAISO Seeks Tariff Changes to Eliminate "Exploitation" of Bid Cost Recovery Rules

Email This Story

The California ISO has identified an "exploitation" of the existing bid cost recovery tariff rules which has caused load to overpay certain resources by $57 million, CAISO said in submitting tariff changes to prohibit the practice (ER11-3149).

The CAISO's bid cost recovery mechanism was created to ensure that where the ISO commits a resource, that resource will at least recover its fixed start-up and minimum load costs. Where a resource's energy market revenues are insufficient to cover those costs, the bid cost recovery mechanism provides resources with a make-whole payment.

Under the ISO's existing bid cost recovery tariff rules, the ISO subtracts the market revenues a resource receives from the resource's accepted bid costs to ensure that the bid cost recovery mechanism does not result in over payment of start-up, minimum load, and submitted energy bid costs. The current tariff rules require the ISO to consider market revenues for the delivered portions of the day-ahead schedule in calculating the market revenues the resource earned from the integrated forward market (IFM), which is part of the day-ahead market.

Recently, the ISO has observed the use of a specific bidding practice that forces the ISO to schedule a resource in the IFM at a high MW level and then to dispatch the resource at a much lower level in the real-time market. Under the bidding practice, CAISO said that parties are able to force their resources to get committed and scheduled at a relatively high level of energy in the IFM by submitting extremely negatively-priced energy bids. By then submitting significantly higher priced bids in the real-time market, their resources are dispatched at a much lower level or at minimum load in the real-time. This results in the under-accounting of IFM market revenues, and over payment of bid cost recovery to resources scheduled in the day-ahead market.

This bidding practice results in significant overpayment of bid cost recovery, and the $57 million in overpayment represents 43% of the total bid cost recovery payments from August 2010 through February 2011.

CAISO filed to modify Section 11.8.2.2 of its tariff to address this problem. This tariff section currently requires the ISO, for purposes of bid cost recovery, to calculate IFM market revenues based on delivered portions of the day-ahead schedule. The ISO's proposed revision specifies that, for resources that are dispatched at lower levels in real-time than in the day-ahead, calculation of IFM market revenues used to offset bid costs will be based on scheduled portions as opposed to delivered portions. The proposed rule change applies only in cases when a resource's real-time market dispatch is lower than its day-ahead market schedule. Consistent with a FERC order from September 2006, the ISO does not propose to base other aspects of bid cost recovery on measures other than delivered energy.

Email This Story

HOME

Copyright 2010-11 Energy Choice Matters.  If you wish to share this story, please email or post the website link; unauthorized copying, retransmission, or republication prohibited.

 

Be Seen By Energy Professionals in Retail and Wholesale Marketing

Run Ads with Energy Choice Matters

Call Paul Ring

954-205-1738

 

 

 

 

 

Energy Choice
                            

Matters