During a conference call today (Friday), the CAISO  announced a FERC Section 
206 "Market Stabilization Filing."? As of noon  today, the filing had not yet 
been posted on the CAISO web-site.? According  to the CAISO, the filings is 
designed to meet three objectives:? (1)  respond to the lack of a forward 
market in California, (2) respond to the  problem of underscheduling, and (3) 
protect consumers from the exercise of  market power.? Below is a brief 
description of the CAISO proposal/filing as  discussed on today's conference 
call.
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A summary of the CAISO proposal/filing is  as follows:

To protect consumers from the exercise of market  power, impose "Bid Caps" of 
$100/MWH.? Provide a means for generators to  justify higher bid caps based 
on their costs.? For generators/marketers  committing/selling 70% of their 
supply in the forward markets (presumedly  including the day ahead) to serve 
California load, then their would be no  bid-cap but the existing FERC 
approved $250/MWH "purchasers cap" would  apply.
To incent forward contracting, the UDCs would have  a requirement to 
procurement 85% of their supply in the forward  markets.
To incent forward scheduling and minimize  uninstructed deviations, the CAISO 
would impose a Real-Time Deficiency Charge  for schedulers outside a 
pre-specified bandwidth (e.g. 10% of your scheduled  supply/load).? The 
Real-Time Deficiency Charge, as yet unspecified, is  contemplated to be in 
the $25-$50/MWH range.? 

The CAISO indicated its  desire to bring these important issues to the FERC 
in?the form of a  proposal for its timely consideration.? Clearly, this 
proposal  raises a number of questions.? For example, how does the CAISO 
determine  that 70% of a generator/ESP supply has been offered in the forward 
markets (Do  you provide affidavits, contracts?).? How does the CAISO require 
UDCs to  buy in the forward markets?? How were the target levels determined 
(e.g.  70% sold forward as opposed to 60%).? 
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The IEP Market Response Project team members are  scheduled to have a 
conference call on Friday, October 27 to discuss this filing  (as well as 
other filings seemingly coming out of the  woodwork).