By Robert Mullin
Stakeholders last week voiced concerns about CAISO’s annual process for determining which “discretionary” policy initiatives the ISO should pursue in the coming year.
Critics expressed confusion about the criteria CAISO uses to rank the list of prospective initiatives, of which only a few will be ultimately incorporated into the 2017 stakeholder initiatives catalog and potentially become part of the ISO’s longer-term policy “roadmap.”
They also questioned how the ISO values their contributions to the effort, which factors in stakeholder input as a key variable to rank potential initiatives but does not subject proposals to an outright stakeholder vote.
During a Nov. 3 conference call to kick off the process, Neil Huber, an energy trader with XO Energy, noted that he’s provided comments on the initiatives for the past three or four years.
“The answer seems to come back each year that there’s not enough bandwidth to work on a substantial number of projects,” Huber said.
Brad Cooper, market design and regulatory policy lead at CAISO, said the policy initiative process can be broken into two steps.
The first step consists of revising the catalog by adding new proposed initiatives and deleting those that have become obsolete. Initiatives listed for the catalog then become candidates for the roadmap, although there’s no guarantee they will immediately become action items.
In the second step, ISO management and stakeholders rank discretionary initiatives in order to elevate the most popular for development and implementation based on their feasibility and potential benefits.
Benefits include reliability and market efficiency improvements, as well the ISO’s perception of the stakeholders’ desire for the change.
The feasibility category attempts to capture how much money and ISO and stakeholder resources it will take to implement the proposal.
Most initiatives already in the roadmap are considered “nondiscretionary,” meaning that they address “significant” reliability or market efficiency issues, represent previous commitments to stakeholders or the Board of Governors, or have been mandated by FERC.
‘Bandwidth’ Issue Addressed
Just a few discretionary initiatives can be slipped into the ISO’s roadmap each year. Cooper estimates there will be room for two or three next year, depending on the scope of the initiatives selected.
Greg Cook, the ISO’s director of market and infrastructure policy, responded to Huber’s concern about the lack of bandwidth to handle more stakeholder requests for initiatives.
“There’s a lot of resource constraints we take into account,” Cook said, noting that some stakeholders have told the ISO that “they can only handle a certain number of initiatives at any given time.” Smaller stakeholders are particularly constrained because of staff limitations, he said.
CAISO also considers the timeline for implementing a policy when deciding whether to prioritize it.
“We don’t want to schedule a policy development on an initiative that we’re not going to be able to implement for a number of years,” Cook said. “Likewise, if there’s an initiative that’s going to have a long time for the policy development that we want to implement by a certain time — that’s going to play in as well.”
Huber countered that — even as a small market participant — he has “bandwidth to work plenty of stuff I’m interested in.” He contended that a bigger issue for his company is that some of the smaller proposals that it requests never make it to the top half of the list of initiatives.
“So it seems like each year — specifically as a smaller entity — I just don’t make much progress,” Huber said.
Stakeholders had questions about the mechanics and philosophy behind the initiative ranking process.
Under the ranking system, the ISO assigns scores — 0, 3, 7 or 10 — to various benefits and feasibility categories of a potential initiative, the sum of which determines an initiative’s place in the overall standings (see chart).
CAISO has already published “first-cut” rankings showing that the current top six initiatives concern real-time market enhancements, generator risk-of-retirement issues, congestion revenue rights auction efficiency, donation of transmission capacity for EIM transfers, multiyear resource adequacy contracts and the altering of export charges.
Stakeholders were not asked to provide their own scores but were given the opportunity to formally comment on the list of potential initiatives — input that the ISO used to inform its formulation of the scores. Some meeting participants were especially curious about one ranking criteria: “desired by stakeholders.”
“Since you didn’t have stakeholders submit rankings prior to you doing your preliminary rankings, what was the input for ‘desired by stakeholders?’” asked Bonnie Blair, a consultant representing the Six Cities municipal utilities — Anaheim, Azusa, Banning, Colton, Pasadena and Riverside. “Was it just impressionistic?”
“We get input from stakeholders all the time,” Cooper responded. “I think we’ve a pretty good sense what’s desired by stakeholders,” adding that the scoring for the category “is based on our impressions of what we hear.”
‘Not That Scientific’
Cook pointed out that the category generally reflects whether an initiative is desired by a majority of stakeholders or just a few.
“It’s not that scientific,” Cook said.
Blair maintained that scoring of the category seemed vulnerable to skewing, particularly for initiatives representing the interests of a vocal minority — such as export charges.
Carrie Bentley, a consultant representing the Western Power Trading Forum, questioned how the ISO would adjust its rankings based on stakeholder input.
“We were envisioning this year people just submitting where they differed from us on our scores, just submitting written comments on how they think the scores should be revised and then providing the rationale for why,” Cooper said.
Bentley wondered whether the ISO would change the “desired by stakeholder” number just based on what people comment on.
“For example, if I don’t really want something and think it’s stupid, should I comment on it and say it’s stupid and do a zero, or should I just not say anything at all?” Bentley asked.
“Comment on it, say it’s stupid and do a zero, and we might have other people that agree with you and revise our score down,” Cooper said.
David Oliver, a managing consultant at Navigant Consulting, wondered why the ISO hadn’t chosen a simpler 1-4 scoring scale.
“I don’t recall exactly where the scale came from, but it’s just something we’ve been using,” Cook said. “This was just trying to have a little more separation in the rankings.”
Michael Rosenberg, principal trader for ETRACOM, asked whether the input of the ISO’s Department of Market Monitoring would be given more deference than that of other stakeholders.
“We don’t give more weight to one stakeholder over another,” Cook said. “We weight it by how well the arguments are stated.”
The ISO is seeking stakeholder comments on its initiative rankings by Nov. 17. An updated roadmap will be presented to the board Feb. 15, 2017.
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