13. Convergence Bidding

SCE proposes modifications to its existing convergence bidding authorization. (SCE Opening Brief at 20-23.) The Commission authorized the utilities to participate in convergence bidding in the CAISO markets in December, 2010 in D.10-12-034.¹¹

The authority granted to the utilities was both interim and specifically limited:

This interim authority is subject to a uniform set of three authorized bidding strategies for all IOUs. Uniform rules will provide broad consistency among the IOUs where applicable. Each IOU will have the discretion to allocate their bidding activities among these three bidding strategy categories. (D.10-12-034 at 2.)

Because convergence bidding was new, and this was the first time that the utilities have been authorized to participate in convergence bidding in CAISO markets, the Commission made it clear that it would be looking for information to revise the interim authority, based on the experience gained:

Finally, we identify metrics and IOU reporting requirements by which the Commission and non-market participants can evaluate the effects of convergence bidding. This reporting is required because we are only granting interim authority for IOU participation in convergence bidding. These reports will provide the Commission with the information necessary to make any changes to IOU convergence bidding authority in any subsequent decision extending or modifying such authority. (Id. at 3.)

We recognize that the outcome of IOU participation in convergence bidding activities is uncertain. However, the authority granted through this decision is only interim authority, and will continue to be reviewed. The ultimate scope of IOU authority, whether in this proceeding or a subsequent proceeding, may increase or decrease the authority granted here based on the experience gained during this interim period. (Id. at 12.)

SCE is asking for broader authority for convergence bidding, relaxing the existing Commission-established limits on locations, strategies, and reporting requirements. Specifically, SCE requests that the Commission:

(1) remove the Commission-authorized strategy specific limitation on SCE's participation in convergence bidding, but still subject SCE's strategies to PRG review prior to implementation; (2) revise the eligible locations for submission of convergence bids to comport with SCE's physical supply, physical load, transmission assets (including CRRs), or transmission usage; and (3) limit SCE's reporting requirements to information associated with its cleared (as opposed to all submitted) convergence bidding transactions. (SCE Opening Brief at 21.)

Under this proposal, SCE would be allowed to bid at a much wider range of locations, for a much wider range of purposes, and would provide less information about its convergence bidding activities.

DRA opposes SCE's request, arguing that it is too soon to be making changes to the convergence bidding program. According to DRA, the Commission should wait until there has been at least one year's experience under the interim authority to provide an informed basis for any significant changes or modifications to that authority. (DRA Opening Brief at 23-27.)

DRA is correct. It is simply too soon to be changing the fundamental rules of convergence bidding. We need to gain a more thorough understanding of how convergence bidding works in practice before we make significant changes to this program, especially changes as significant as those proposed by SCE. We do not address the merits of SCE's proposed changes, but rather decline to consider them at this time. SCE (and other parties) may seek appropriate changes to the convergence bidding rules in the future.

¹¹ In D.11-06-004, the Commission granted a Petition to Modify from PG&E, seeking limited clarification of D.10-12-034.