FERC Suspends CAISO Virtual Bidding Intertie Prohibition, Subject to Technical Conference

FERC accepted but suspended the California ISO's tariffs to eliminate convergence bidding at intertie locations, finding that the proposal may be unjust, unreasonable, unduly discriminatory, or preferential, and ordered a technical conference (ER11-4580).

CAISO sought the prohibition after arguing that convergence bidding on the interties increases market uplifts by increasing the real-time imbalance energy offset.

"The Commission has previously acknowledged, in accepting convergence bidding, that it is likely that 'the benefits of allowing virtual bidding (and the operational problems caused by the absence of virtual bidding) may outweigh the costs and possible short-term learning curve associated with implementation of virtual bidding.' CAISO argues here that the offsetting bids submitted by scheduling coordinators have contributed to the increased real-time imbalance energy offset charges since the implementation of convergence bidding, and protesters do not challenge these allegations. The Commission continues to recognize the benefits of convergence bidding but also recognizes the concerns of financial harm experienced from convergence bidding at interties as a cost and part of the 'learning curve' associated with implementation of virtual bidding. Although CAISO may not have found that the implementation of convergence bidding at interties was as successful as CAISO initially anticipated, we must evaluate the potential issues and benefits attributed to convergence bidding at interties, and the associated costs and potential solutions for any such issues at greater length in order to determine whether they warrant its indefinite elimination," FERC said in its order.

"We note that CAISO proposes to totally eliminate rather than temporarily suspend convergence bidding at intertie locations. Although CAISO commits to addressing the underlying cause of the real-time imbalance energy offset and the price divergence in a stakeholder process, CAISO estimates that such a stakeholder process will take two to three years to complete. Following the conclusion of that stakeholder process, CAISO states that it may decide to evaluate whether to reinstitute convergence bidding at intertie locations. Given the indefinite nature of CAISO's proposal, we find that it is critical to evaluate when CAISO will address the underlying cause of the problem, as well as the potential issues and benefits attributed to convergence bidding at interties, and the associated costs and potential solutions for any such issues at greater length. These and any related issues would benefit from further examination by Commission staff and the parties at the technical conference," FERC added.

The Commission further noted that the technical conference will provide parties with an opportunity to present cost/benefit data of convergence bidding, which has been disputed.

The technical conference shall also address potential alternatives to the CAISO proposal, with FERC noting that, "We find that the question of when CAISO will address the underlying cause [of price divergence] is an important one in considering CAISO's proposal to eliminate convergence bidding at interties."