3. Background
3.1. FERC Order to Implement
Convergence Bidding
In November 2009, after completing its stakeholder process, CAISO filed, at FERC, its proposal for convergence bidding and motion seeking an extension of time in which to implement convergence biding.5 On February 18, 2010, FERC conditionally accepted CAISO's proposal and ordered CAISO to open its energy market to convergence bidding by February 2011.6
In June 2010, CAISO submitted a tariff modification to FERC to implement convergence bidding in the CAISO's markets.7 On October 15, 2010 FERC conditionally accepted CAISO's tariff revisions, approving the majority of the proposed tariff.8 Notably, the FERC order accepts the CAISO's revised 12 month phase-in period for position limits at internal trading nodes and 16 month position limits at the interties.9 The order accepts the CAISO's cost allocation methodology for convergence bidding, netting convergence bids to determine market impacts, finding that it reasonably balances cost-causation principles with administrative feasibility.10 The order also approves CAISO's authority to suspend convergence bidding that detrimentally affects system reliability or grid operations, and in the event of market disruption.11
The FERC order, however, requires CAISO to revise the tariff provisions to clarify the circumstances in which CAISO may suspend convergence bidding in the event of "unwarranted" price divergence between the markets.12 The order approves the CAISO's congestion revenue rights (CRR) settlement rule aimed at deterring the use of convergence bidding to increase the value of a bidder's CRRs. The order acknowledges the potential for affiliates to use convergence bidding to manipulate CRR values for the benefit of a related entity, but finds that this must be addressed on a case by case basis through referrals from the CAISO's Department of Market Monitoring to FERC.13
3.2. Record of the Proceeding
The record for this decision was developed through written comments and proposals by the investor-owned utilities (IOUs). No evidentiary hearings were held. The Division of Ratepayer Advocates (DRA), Californians for Renewable Energy and Solutions for Utilities (CARE), Pacific Energy (PE), The Utility Reform Network (TURN), L Jan Reid (Reid), Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE), and San Diego Gas & Electric (SDG&E) filed timely written comments.
A number of parties indicated at a Prehearing Conference (PHC) held on June 12, 2010, and in the PHC comments, that resolving issues about IOU participation in convergence bidding in the CAISO energy markets is important for this proceeding.14 At least one IOU indicated the intention to seek authorization from the Commission to engage in convergence bidding activities.15
On July 1, 2010, Administrative Law Judge (ALJ) Victoria S. Kolakowski issued a ruling (July 1 Ruling) setting a procedural schedule including public workshops, IOU submittal of convergence bidding proposals, party comments, and reply comments. The July 1 Ruling included 20 questions to guide the development of the record, and directed interested parties to file proposals explaining how IOUs might participate in convergence bidding, any constraints or limitations that should be placed on such IOU participation, and how such participation should be considered in the risk management strategies of the IOUs in their bundled procurement plans.
On July 9, 2010, PG&E, SDG&E, TURN and DRA filed a joint motion requesting modification of the schedule set forth in the July 1 Ruling and requested expedited consideration of the motion. In response, ALJ Kolakowski sent an electronic mail message to the Service List on July 9, 2010, stating that the motion for expedited treatment would be granted. The electronic mail message directed parties to respond to the motion by July 12, 2010.
ALJ Kolakowski issued a ruling on July 16, 2010 (July 16 Ruling) granting the motion by PG&E, SDG&E, TURN, and DRA. The July 16 Ruling set a revised schedule for workshops and for parties to file comments.
On July 19, 2010, the CAISO, CARE, DRA, PG&E, SCE, SDG&E, and the Solution for Utilities, Inc. filed comments responding to the issues and questions raised in the July 1 Ruling. CARE and the Solution for Utilities, Inc. filed comments jointly.
On July 26, 2010, the Commission's Energy Division held a technical session on convergence bidding, with CAISO staff presenting an overview of CAISO's convergence bidding proposal.
On July 30, 2010, DRA, PE, SDG&E, and TURN filed supplemental comments responding to the July 1 Ruling questions.
On August 16, 2010, PG&E, SCE, SDG&E filed proposals regarding their respective participation in convergence bidding. Subsequently, Energy Division staff held a second workshop on August 23, 2010 to allow the IOUs to explain the scope and parameters of their proposals, and allow interested parties to ask clarifying questions.
On August 30, 2010, CARE, DRA, Reid, PE, PG&E, and TURN filed opening comments on the IOUs' convergence bidding proposals. In response to parties' comments, PG&E, SCE, and SDG&E filed reply comments on September 7, 2010.
3.3. No Need for Evidentiary Hearings
The July 16 Ruling ordered that any request for evidentiary hearings on convergence bidding was to be filed and served in writing by August 20, 2010, with response to such requests served by August 25, 2010.
On August 20, 2010, DRA timely served a request for evidentiary hearing. DRA contends that there are six areas of factual investigation necessary for the Commission to decide whether to authorize the IOUs to participate in convergence bidding. DRA was concerned that ratepayers would bear the full liability for IOU bidding activity, and that experience in other markets with similar systems may not provide adequate information to assess the risks associated with IOU participation in this particular market. DRA further raised questions about scope of IOU participation, limitations on bidding authority, as well as market oversight and monitoring.
On August 25, 2010, PG&E and SCE filed timely responses to DRA's request for evidentiary hearing, and argued that DRA's request be denied. PG&E and SCE each argued that DRA had not raised specific issues of disputed fact, and contended that a combination of discovery and written comments would be adequate to address DRA's concerns regarding the record of the proceeding.
On September 9, 2010, ALJ Kolakowski issued a ruling finding that DRA had not raised specific areas of disputed fact, and therefore denied DRA's request. We affirm that ruling herein.
5 CAISO November 20, 2009 Convergence Bidding Design Filing, Docket No.
ER10-300-00.
6 Cal. Indep. Sys. Operator v. FERC, 130 FERC ¶ 61,222, at par. 24 (2010).
7 Cal. Indep. Sys. Operator Corp., 133 FERC ¶ 61,039, at par. 5 (2010).
8 Id.
9 Id. at par. 91-129
10 Id. at par. 22-69
11 Id. at par. 160-195.
12 Id.
13 Id. at 135-59
14 DRA June 4th 2010 Comments at 11, DRA July 2nd 2010 Comments at 3, PG&E June 4th Comments at 5, SCE June 4th 2010 Comments at 16, TURN June 25th 2010 Comments at 7, WPTF June 4th 2010 Comments at 7.
15 SCE June 4th 2010 Comments at 16.
