In what it dubs as a “synthesis” of proven operating steps in both eastern and western markets, California’s non-profit electricity transmission grid operator, Cal-ISO, last Wednesday released its draft 2002 Market Design Plan as a starting point that it plans to refine later this month with input from market participants. The plan’s overall objective for what eventually must be a federally approved blueprint is to shrink the grid operator’s real-time market and provide more future wholesale price stability, according to Cal-ISO’s chief architect for the plan.

“It is a starting place,” said Lorenzo Kristov, market design manager at Cal-ISO, who insisted the grid operator is “not reinventing the wheel, but drawing on its almost four years of experience operating the state’s grid system.”

The eventual plan will be implemented on a phased basis with at least two separate filings to the Federal Energy Regulatory Commission. The first phase is aimed at Sept. 30 when FERC’s current wholesale price mitigation plan expires.

“We realize there is a certain urgency about identifying those issues that need to be in place by Sept. 30 so we assure continuity and stability in the markets and in operating our system,” said Kristov, noting that Cal-ISO is approaching the project by first providing a comprehensive design proposal that it will eventually implement over the next 12 to 15 months.

Kristov broke down the ultimate market design plan into four large pieces:

Kristov said he envisions the forward, day-ahead market as being 10% or less of the eventual deliveries. He also said that the establishment of an available capacity obligation is “one of the most important steps” in assuring more price stability. “The lesson we learned from last year’s crisis is that too much reliance on spot markets leads to increased volatility,” Kristov said.

In response to a question about how the proposal intends to cut down on potential gaming of the market, Kristov said that the plan attempts to make operation of the grid consistent in either real-time or on a forward basis, and that should eliminate opportunities for gaming.

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