External Business Requirements Specification

(1)

External Business Requirements

Specification

Changes to Bidding and Mitigation of Commitment Cost

Version 1.0

(2)

The purpose of this document is to capture and record a description of what the Users and Business Stakeholders of the project wish to obtain by providing high-level business requirements. This document establishes the basis for the bilateral agreement between the initiators and implementers of the project. The information in this document serves as input to determining the scope of Information Systems projects and to all Business Process Modeling and System Requirements Specifications efforts.

These requirements are intended for submission to the Information Technology Services (ITS) department and will serve as the initial set of business unit requirements for the appropriate software application/systems development effort. It is understood that ITS will perform additional requirements and systems analysis and may produce “To Be” Business Process Models, System Requirements Specifications, and Use Cases to serve as the set of requirements documents used by the ITS development teams to buy, modify, or build the necessary software and hardware systems. The Business Unit(s) involved in the project will have an

opportunity to review and approve all ITS requirements documentation produced.

The purposes for implementing the changes to bidding and mitigation of commitment costs are described in detail in the draft final proposal posted on the CAISO public website. The ISO anticipates that this Project will involve enhancing existing ISO-developed software applications (Master File etc.), enhancing existing vendor-purchased software applications (SIBR etc.), defining new processes and/or changes to existing business processes.

1.2 References

All references represent external requirements documents or stakeholder requests developed and submitted by the Business Units.

1. Policy-related documents, including the Draft Final Proposal and stakeholder comments are located on the “Bidding and Mitigation of Commitment Costs” Stakeholder Initiatives web page at:

http://www.caiso.com/23d9/23d9c75e22ab0.html .

2. Business Practice manual for Market Instruments is available at

https://bpm.caiso.com/bpm/bpm/version/000000000000093

3. Business Practice manual for Market operation is available at

https://bpm.caiso.com/bpm/bpm/version/000000000000094

4. CAISO Tariff references

4.1 The Gas Price components of the projected Proxy Cost is described in the CAISO Tariff in section 39.6.1.6.1

4.2 Operations and Maintenance (O&M) cost for generating units is described in section 39.7.1.1.2 4.3 CAISO’s July 29 tariff filling for the mitigation of MSG transition cost can be found at

(5)

2. Details of Business Need/Problem

2.1 Description

2.1.1 Start-Up, Minimum Load

The new market design bases the decision to commit a generating unit on several factors including Start-Up (SU) and Minimum Load (ML) costs. Currently, market participants bidding generating resources in the CAISO markets submit their SU and ML costs to the ISO Master File where those values are static for 30 days. In the CAISO market modeling, the SU curve can be up to three segments, the dollar values of which correspond to hot, warm, and cold starts of the generating unit. ML is single $/Hour value that is incurred for hours in which the ISO dispatches the unit to its PMin and the unit reaches that output level.

Market participants can specify one of two options for the SU and ML values they have in the ISO Master File (MF): either the Proxy Cost option or the Registered Cost option, which are described below.

2.1.1.1 Proxy Cost Option

For natural gas fired resources, the Proxy Cost option for SU costs is comprised of two elements: an indexed value that changes daily depending on the natural gas price (or, for units for which that is not applicable, on the energy price), and a fixed natural gas transport adder. The Proxy Cost option for ML costs of natural gas fired resources is based on the same natural gas and gas transport component as is the proxy SU

calculation, and also includes a per MWh operations and maintenance (O&M) adder. The O&M adder is a fixed $/MWh value that is added to the Proxy Cost value for ML. That value is $4/MWh for combustion turbine or reciprocating engine technology, and $2/MWh for all others. There is also the option to negotiate a per MWh value for ML with the Independent Entity as part of a Negotiated Default Energy Bid. It is important to note that none of the generating resources currently in the ISO Master File have negotiated O&M costs.

For all other resources, the Proxy Cost option is based on the relevant cost information of the particular resource, which will be provided to the CAISO by the Scheduling Coordinator and maintained in the Master File.

2.1.1.2 Registered Cost Option

As an alternative to the Proxy Cost option, market participants can elect the Registered Cost option which enables them to submit SU and ML values up to 200% of the proxy-cost calculated value. The advantage of this option is that it gives the market participant bidding that resource into the market, the ability to specify costs for the unit that take into account their knowledge of and experience with that unit. The Registered Cost option does not, however, meet the needs of many market participants as they are averse to being exposed to fuel-price risk. For natural gas fired generators, the calculation of the cap at 200% of the Proxy Cost uses the applicable monthly gas price index calculated by the Model & Contract Implementation (MCI) team every month by averaging the future gas price trading at an established gas exchange {CME (Chicago Mercantile Exchange CME), NGX (Natural Gas Exchange), etc.} for the first 21 days of the month. The registered SU and ML are stored in the MF and can only be changed every 30 days.

2.1.1.3 General changes to SU and ML cost rules

The following enhancements to existing software applications have been requested under the current project. These enhancements have been requested by the stakeholders and approved by the CAISO board of governors.

(6)

2.1.1.3.1 Allow market participants to independently elect the Proxy Cost option or the Registered Cost option for their SU and ML costs. The current election applies to both startup and ML costs. These elections will still be fixed for 30 days;

2.1.1.3.2 Enable market participants to submit bids on a daily basis for SU and ML values when they have elected the Proxy Cost option. The bids must be limited to a minimum of zero to a maximum of the calculated proxy value. Under the current rules, no daily bidding is allowed;

2.1.1.3.3 Change the natural gas delivery point to City gate from Border for Southern California to better reflect the price of delivered natural gas when calculating SU, ML and transition costs under the Proxy Cost option for resources located in southern California. This change will similarly improve the calculation of the cap on Registered Costs which is based on the calculated Proxy Cost option using the monthly gas price index; and

2.1.1.3.4 Evaluate the default operations and maintenance (O&M) adder values that are used in the proxy calculation for ML every three years. Currently the default O&M values for ML are fixed and no review cycle is specified.

2.1.2 General enhancements to the Master File System

SCs who submit the MF data updates via application programming interface (API) do not have an ability to submit any comments either at the batch level or at individual item level. MF system shall be enhanced to allow the submission of comments via API. Additionally, the comments submitted within the RDT worksheets (using the comments column) shall be extracted and stored by the MF system in the MF database. Currently the MCI team has to open up individual excel files to check if there are any comments that were submitted for the items included in the submitted RDT.

Market Participants (MPs) have long requested a feature to perform comparative analysis of their data in the Master File database. This capability to compare submitted data with the approved data already exists for the MCI team. Currently, the MPs have to request a comparison report from the MCI team via email. By implementing this enhancement, the MF development team aims to allow the MPs to view and / or download similar comparison report that will compare the MP’s submitted batch with the previously approved data present in the MF database and highlight the data items that are different. If after reviewing the comparison report, the MP would like to cancel the submitted batch, the MP would still be required to notify the MCI team and request the cancellation of the submitted batch.

Currently, the ISO does not have a way to inform MPs who submit batch updates to the MCI team in the event that their submission failed validation. The MCI team has to send an email to the submitter illustrating the failed validations and the details related to those issues. The MF system shall be enhanced to

automatically notify the submitter that the validations on their submission have failed and additionally the system shall provide a way to describe what validation failed. An SC shall be allowed to opt-out of the automatic notification from the MF system.

When a market participant submits a change to the MF, the system changes the status of batch to “submitted successfully”. This is misleading as none of the validation performed manually and during bulk loading has been performed. This shall be changed to “submitted pending review” so that the submitter understand that the batch needs further review and validation and s/he will be notified if that the batch has passed manual and bulk-loading validation.

The MPs have requested that three data flags be added to the MF RDT so that the MPs can incorporate them into their shadow settlement results. Currently the only way for an MP to find out the correct value of the following flags is to contact a member of the CAISO MCI team via email or phone:

(7)

 HR_PRE_DISP_FF – The need for accurately providing the hourly pre-dispatch flag arose from the

A/S HASP project. This flag is currently present in SIBR payload, but it is always set to “N” which is erroneous in some instances. Market Participants (in particular clients using Ventyx nMarket software) use the Hourly Pre-Dispatch Flag for settlements. The Pre-Dispatch Flag is defined in the settlement BPMs as a condition for triggering certain charge codes (e.g. CC 6051). If the ISO data reflects an “N”, then the charge code calculations do not get triggered properly. Participants prefer to use ISO data for their estimates, but charge codes that require the Pre-Dispatch Flag to be set correctly do not trigger during this estimate run. This forces Participants to run another set of estimates where the Pre-Dispatch flag has been manually configured/over-ridden to get these charge codes to estimate. Depending on the client’s business process, running multiple estimates causes issues with their business processes.

 CERT_DAM - The need for providing the DAM Certification flag to MPs arose from the PDR project.

Currently, MPs must contact the CAISO to determine if this is set correctly.

 CERT_RTM - The need for providing the RTM Certification flag to MPs arose from the PDR project.

(8)

3. Business Process Impacts

3.1 High Level Business Process

3.1.1 Description

Implementing the changes to commitment costs will impact the following existing business processes:

 Maintain Master File Data

The cost option (registered or proxy) of a generator is submitted by the SC to the Master File (MF) via Market File User Interface (UI) or the application programming interface (API). With the changes

proposed in this project, the SC will be able to independently elect cost option for startup and ML. In order to accommodate these changes, the Master File application (RDT and API) and database at the CAISO will be enhanced to allow individual flag (similar to the COST_BASIS_TYPE) for SU and ML cost. The MF system will be enhanced to accommodate the addition of validation rules and other

enhancements listed in section 3.1.2.

For the purposes of setting the maximum startup and ML cost that may be registered by natural gas fired resources under the Registered Cost option, CAISO calculates the projected proxy cost for the upcoming calendar month using daily prices (averaged for the first 21 days of the month) for futures contracts for basis swaps at identified California delivery points1. The price at delivery point SoCal Border will be replaced by SoCal CityGate in the calculation for the projected proxy cost.

In addition to the above items, the Maintain Master File Data business process will be enhanced to provide comparison and validation reports to the MP.

 Submit Bids

Potomac Economics calculates a gas price index (GPI) for each gas flow day for each fuel region using the gas prices2 available through various industry vendors. These GPIs are used in the calculation of generated bids including SU and ML costs. Each fuel region south of path 15 (SP15) uses the gas price at the SoCal Border delivery points. It is proposed that Potomac’s calculation of GPI be enhanced to use the SoCal CityGate delivery point on all its calculation except RMR contracts.

Currently, if a market participant chooses the Proxy Cost option for SU and ML, the Scheduling and Interchange Business Rules (SIBR) software calculates the daily value for those commitment costs using the applicable daily gas price index that it receives from Potomac Economics via Reference Level Calculator (RLC). Registered Costs, by contrast, are passed directly from MF to market systems (DA or RTM) without modification. -SIBR will be enhanced to accommodate the independent election of SU and ML cost in MF so that only those commitment costs for which the Proxy Cost option is elected float with the daily gas price index.

 Validate Day-Ahead Market Bids

After the close of the Day-Ahead Market (DAM) and Real Time Market (RTM), SIBR sends clean bids to IFM and RTM respectively. As part of this project, the SIBR system will be enhanced to validate and store daily bids of the SU and ML costs submitted by the Scheduling Coordinators (SCs) of the

1_{Please note that there are several other inputs to the calculation of projected proxy cost. Please refer to Attachment G}

of the BPM for the market instruments for more information.

2_{Please note that there are several other inputs to the calculation of the GPI for any gas flow day. Gas price is just one}

(9)

generating units who chose Proxy Cost option in the MF. The daily bids submitted by SCs shall be between 0 and calculated proxy cost for SU and ML.

 Review Default O&M values

In addition to the above changes, a new business process will be defined to evaluate the default operations and maintenance (O&M) adder values that are used in the proxy calculation for ML, every three years. Currently the default O&M values for ML are fixed and no review cycle is specified. These values are stored in the MF database.

In addition to the functional system changes described above, the BPM for Market Instruments and Market Operations will be updated.

3.2 Justification

The changes included in this project have been requested by several ISO Market Participants. These changes will allow owners of the generating resources recover their operating costs in a more efficient manner. Additional enhancements to the MF system will provide enhanced user experience. It is the overall intent that implementation of the changes requested in this project will result in improved efficiency, reduced cost and enhanced customer experience.

(10)

4. Business Requirements

The sections below describe the Business Processes and the associated Business Requirements involved in the project. These may represent high level functional, non-functional, reporting and/or infrastructure

requirements. These business requirements directly relate to the high level scope items determined for the project.

The two systems that are impacted by the proposed changes are

 Master file (MF)

 Scheduling Infrastructure and Business Rules (SIBR)

Please refer to section 4.1 to get further details about how these above systems are impacted.

4.1 Business Process: Maintain Master File Data

4.1.1 Business Requirements

ID# Business Feature

Requirement Type

Potential Application(s) Impacted

CC-BRQ001. The system shall enable the scheduling coordinators of generation resources to elect the Proxy Cost or Registered Cost option for Start-Up or Minimum Load independently. A Scheduling Coordinator electing either the Proxy Cost option or Registered Cost option for SU Costs may make a different election for Minimum Load Costs. For MSG, the Start-Up Cost and Minimum Load Cost elections shall apply to all registered configurations.

Core, Tariff section 30.4

Master File, SIBR

CC-BRQ002. Startup (SU) costs for a generating resource shall be either a

 Proxy Cost or

 Registered Cost

Master File, SIBR

CC-BRQ003. The election of cost (proxy or registered) option for startup cost for a generator shall remain static for 30 days in the Master file. The MP for the GENERATOR shall have an option to change the startup cost of a GENERATOR every 30 days.

Process Change

CC-BRQ004. Minimum load (ML) cost for each GENERATOR can be either a

 Proxy Cost or

 Registered Cost

(11)

ID# Business Feature Requirement Type Potential Application(s) Impacted

CC-BRQ005. The election of cost option (proxy or registered) for a generator’s ML cost shall remain static for 30 days in the Master file. The MP for the GENERATOR shall have an option to change the cost option of ML cost of a GENERATOR every 30 days.

Process Change

CC-BRQ006. In Case of an MSG, the election of Proxy Cost or Registered Cost for SU and/or ML shall remain the same for all configurations of the MSG and must match the election chosen at the resource level. In other words, an MSG is not allowed to have Proxy Cost option for SU of one

configuration and Registered Cost option for SU cost for another configuration. The same restriction shall apply for ML.

Core,

Tariff sections 30.4.1.1, 30.4.1.2

Master File

CC-BRQ007. CAISO’s monthly manual GPI calculation of the upcoming month’s projected Proxy Cost shall drop SoCal Border Gas Delivery Point and replace it with SoCal City Gate for generators located south of path 15 (SP15).

Core, Policy

Master File

CC-BRQ008. CAISO shall review the default O&M values that are used in the proxy calculation for minimum load every three years and revise the default values as needed.

Core Policy

Business Process change.

CC-BRQ009. MF system shall allow the MPs to submit a batch-level comment when the MP submits the data via the API

Core Master File

CC-BRQ010. MF API shall be enhanced to allow the MP to submit the comments for each resource listed in the RDT.

Core Master File

CC-BRQ011. The MF system shall allow the MPs to compare their submitted updates to the data already approved and stored in the Master File.

Optional Master File

CC-BRQ012. MF system shall provide the users with a validation report whenever the batch

submitted via API or RDT fails MF validation. The detailed validation report shall be available on the MF user interface.

Optional Master File

CC-BRQ013. Three new flags must be added to the RDT

 HR_PRE_DISP_FF

 CERT_DAM

 CERT_RTM

(12)

ID# Business Feature Requirement Type Potential Application(s) Impacted

CC-BRQ014. The heat rate values submitted via UI / API shall be rounded to the three (3) decimal points whenever the heat rate submitted by the SC via RDT or API exceeds the 3 decimal places.

Core Master File

CC-BRQ015. Market participants that submit data via UI or API shall be allowed to opt-in and opt-out for notification on the status of their batch submissions.

Core Master File

CC-BRQ016. If the submitter opts-in for a notification, the submitter of an RDT batch in the MF must be notified every time the status of his or her batch changes significantly. Significant changes include

 Ready to Approve

 Failed

 Rejected

 Approved.

Core Master File

CC-BRQ017. When an RDT batch is first submitted, the message, the status of the submission shall be “submitted pending further manual or automatic review”. This is a language / verbiage only change.

Core Master File

4.2 Business Process: Validate Bids

4.2.1 Business Requirements

ID# Business Feature

Requirement Type Business Unit(s) Affected Potential Application(s ) Impacted

CC-BRQ018. For generating resources, the system shall accommodate the independent election of the cost option of Start-Up (SU) or Minimum Load (ML) in MF and calculate the individual SU or ML accordingly. Core, Tariff section 30.4 PSTO, System Operation s SIBR

CC-BRQ019. The system shall allow market participants to submit daily bids for Start-up for a resource provided that they have elected the Proxy Cost option and those daily bids greater than or equal to $0 per start and less than or equal to the calculated Proxy Cost value.

Core, Tariff sections 30.7.9 PSTO, System Operation s SIBR

(13)

ID# Business Feature Requirement Type Business Unit(s) Affected Potential Application(s ) Impacted

CC-BRQ020. The system shall allow market participants to submit daily bids for minimum load cost for a resource provided that they have elected the Proxy Cost option and those daily bids are greater than or equal to $0/hr and less than or equal to the calculated Proxy Cost value.

Core, Tariff sections 30.7.10 PSTO, System Operation s SIBR

CC-BRQ021. For a resource that has elected the Registered Cost option, if a value is

submitted in a bid for Start-up or ML, it shall be overwritten by the Registered Cost reflected in the MF. Core, Tariff section 30.7.9 PSTO, System Operation s Master File, SIBR

CC-BRQ022. Potomac’s calculation of GPIs for various fuel regions in SP15 shall replace SoCal Border Gas Delivery Point with SoCal City Gate for calculation except RMR contracts.

Core, Policy PSTO, System Operation s RLC

External Business Requirements Specification