As an extension of its hotly debated proposed new market design, the California Independent System Operator (CAISO) last week circulated a working document on beefing up its authority next year. The ISO’s “conceptual proposal” will require input from stakeholders and will eventually include published market-sensitive information on a delayed basis. The CAISO will examine the proposal Sept. 19. Eventually some of the plan would have to be approved by the Federal Energy Regulatory Commission, according to a CAISO spokesperson.

The 42-page proposal under the grid operator’s “oversight and investigations activities review” is available on the Internet (www.casiso.com ). The report in its current state could “bring up other questions,” according to the CAISO officials who view this as a “work in progress” in which input is actively being sought from stakeholders.

CAISO’s compliance unit thinks that by making public on a 51-day delayed basis data that now is kept confidential there will be more leverage to gain compliance among participants. Initial reaction from some of the participants has been positive. The new rules and procedures would include a two-tier penalty process — the first tier being less severe and within the CAISO’s local jurisdiction; the second tier would be more severe and require FERC’s written approval to apply.

“Even without MD02 (the new market design proposal) there has been some concern that we haven’t had the authority to act or react quickly when we have noticed problems,” said Gregg Fishman, CAISO’s spokesperson. “And in some cases we have had the authority, and in others, we haven’t had.

“Market participants have complained that some of the market rules have not been entirely clear. So, this is an effort to clarify things, and in some cases to give some specific examples, and in other areas to say a certain activity is broadly prohibited and clearly lay out the process in which we can impose penalties and/or sanctions.”

The bottom line for the grid operator, according to its draft proposal, is to “reduce incentives [for participants] to engage in gaming or market manipulation” while safeguarding the state’s electricity system reliability. CAISO states in the draft that the need for the procedures, rules and penalties has taken on “more urgency” since the “revelation of gaming and other strategic behaviors aimed at manipulating market outcomes,” some of which it acknowledged have hurt system reliability.

The CAISO’s draft proposes to apply Tier 1 penalties to violations of rules and obligations that can be verified on objective information available through the normal course of operations and settlement. Tier 2 penalties are for more severe violations that cannot be imposed before written FERC approval; they would require significant time and expense, as the CAISO now envisions them.

With rules on gaming and market manipulations from FERC’s proposed standard market design, CAISO intends to follow next week’s board of governors action with a published schedule for draft tariffs, further stakeholder review and a FERC filing, perhaps as early as Sept. 20. Then next month, it intends to publish a draft tariff, complete collection of stakeholder comments and brief the CAISO board before filing final tariff language.

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