I am cheered to see Dow Jones reporting on the ISO's illegal practices.  Below are some CAISO citations I found that forbid the ISO from making OOM purchases from CDWR.  Interestingly, the ISO's OOM purchases would constitute "gaming" under the CAISO tariff's Market Monitoring and Information Protocol (MMIP).  We should consider having IEP request that the Market Monitoring division of the ISO investigate whether the ISO is in violation of its Tariff.  Perhaps the ISO would acknowledge its errors; more likely not, but such action would only give more evidence to FERC that the ISO's governing board lacks independence.


CAISO Tariff Section 2.5.8:

"The ISO shall operate a competitive Day-ahead and Hour-Ahead market to procure Ancillary Services.  It shall purchase Ancillary Services capacity at least cost to End-Use Customers consistent with maintaining system reliability. . . ."

CAISO Tariff Section 2.5.1:

". . .Those Ancillary Services which the ISO requires to be available but which are not being self provided will be competitively procured by the ISO from Scheduling Coordinators in the Day-ahead Market, the Hour-Ahead Market and in real time or by longer term contracts.  

CAISO Tariff Section 2.5.12(a):

"The ISO shall not differentiate between bidders other than through price and capability to provide the [ancillary] service, and the required locational mix of services;. . . ."

CAISO Dispatch Protocol sections:

DP 8.1.1  "During real time Dispatch, the ISO will be responsible for dispatching Generating Units, Curtailable Demands and Interconnection schedules to meet real time imbalances between actual and scheduled Demand and Generation and to relieve Congestions, if necessary, to ensure System Reliability and to maintain Applicable Reliability Crister.

DP 8.2.  "To achieve this, the ISO Control Center will utilize the merit order stack of available resources prepared pursuant to the SP through BEEP."

DP 8.6.3 (c):  "the ISO shall select the Generating Units, Curtailable Demands and Interconnection schedules to be dispatched to meet its balancing Energy requirements based on the merit order stack of Energy bid prices produced by BEEP;"

DP 10.2.3 (b)  "The ISO will not intervene in the operation of the Day-Ahead Market unless there has been a total or major collapseof the ISO Controlled Grid and the ISO is in the process of restoring it."

CAISO's Operating Procedures for Balancing Energy and Ex-Post Pricing, Section 2.2, Out of Market Request Log Example:  

"This type of request [OOM purchase---sch] should not be used unless there is a valid reason, such as system emergency or rapidly deteriorating system conditions.  It is important that ALL information be logged, including the reason this Generating Unit was chosen over other Generating Units."  


ISO Market Monitoring and Information Protocol (MMIP)

MMIP 1.3.1:	"The MMIP applies to. . .The ISO."

Practices Subject to Scrutiny:
MMIP 2.1.1.3:  "unusual trades or transactions;"
MMIP 2.1.1.4:  "pricing and bidding patterns that are inconsistent with prevailing supply and demand conditions,. . ."
MMIP 2.1.2:    "Where Generating Units are determined by the ISO to be Reliability Must-Run Units, circumstances indicate that such Generating Units are being operated in a manner that will adversely affect the competitive nature and efficient workings of the ISO Markets."  [The Mohave Ramp-down might fall under this prohibition.]
MMIP 2.1.3 		"Gaming," or taking unfair advantage of the rules and procedures set forth in the PX or ISO Tariffs, Protocols or Activity Rules,. . .to the detriment of the efficiency of, and consumers in, the ISO Markets.

---Steve


-----Original Message-----
From: Mara, Susan 
Sent: Friday, September 07, 2001 5:31 PM
To: Palmer, Mark A. (PR); Denne, Karen; Dasovich, Jeff; Comnes, Alan;
Hall, Steve C. (Legal); Steffes, James D.; Alvarez, Ray; Shapiro,
Richard
Subject: FW: Cal-ISO Violating Fed Law By Making Utils Buy State Pwr


See story below

-----Original Message-----
From: Andy Brown [mailto:ABB@eslawfirm.com]
Sent: Friday, September 07, 2001 5:00 PM
To: 'Sue Mara'
Subject: FW: Cal-ISO Violating Fed Law By Making Utils Buy State Pwr


what I mentioned.

Also, during the meeting (and during next Tues' FERC call) I mentioned that
we need more info from companies for pursuing a complaint.  We have some
other elements now with these articles.  We've also asked to meet with price
waterhouse coopers on the CAISO audit (Alan called about that & we've traded
voicemail.)

Things will get pretty curious.  

Have a wkend.  ABB

Andrew B. Brown
Ellison, Schneider & Harris, LLP
2015 H Street
Sacramento, CA  95814
Phone: (916) 447-2166
Fax: (916) 447-3512
mailto:abb@eslawfirm.com

CONFIDENTIALITY NOTICE:  This communication and any accompanying document(s)
are confidential and privileged.  They are intended for the sole use of the
addressee.  If you receive this transmission in error, you are advised that
any disclosure, copying, distribution, or the taking of any action in
reliance upon the communication is strictly prohibited.  Moreover, any such
inadvertent disclosure shall not compromise or waive the attorney-client
privilege as to this communication or otherwise.  If you have received this
communication in error, please contact the sender at the internet address
indicated or by telephone at (916)447-2166. Thank you.


-----Original Message-----
From: cwilson@gcpn.com [mailto:cwilson@gcpn.com]
Sent: Friday, September 07, 2001 4:15 PM
To: duke_press_conferences@porternovelli.com
Cc: sbrown@gcpn.com
Subject: Cal-ISO Violating Fed Law By Making Utils Buy State Pwr


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| By Jason Leopold                                  |
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| Of DOW JONES NEWSWIRES                            |
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| LOS ANGELES (Dow Jones)--California's grid        |
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| operator may be in violation of federal           |
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| regulations by forcing utilities to buy expensive |
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| power the state secured under long- and           |
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| short-term contracts in place of electricity that |
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| is available from their own low-cost power        |
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| plants.                                           |
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|                                                   |
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|                                                   |
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| The California Independent System Operator, the   |
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| agency that operates the real-time electricity    |
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| market and maintains reliability of the grid in   |
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| the state, has given priority during the past     |
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| three months to power the state Department of     |
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| Water Resources locked in under the $43 billion   |
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| of long-term contracts before utilizing           |
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| electricity from low-cost power plants, according |
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| to several executives at the agency.              |
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|                                                   |
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| Greg Fishman, an ISO spokesman, said "there are   |
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| times, this doesn't happen much, when because of  |
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| varying ramp rates, we take a bid out of          |
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| sequence, meaning when one plant has a bid of     |
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| let's say $50 a megawatt-hour and another has a   |
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| $60 bid, we may take the $60 bid because it would |
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| take longer to deliver the $50 power."            |
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|                                                   |
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|                                                   |
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| Fishman said the "market is not working as it is  |
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| designed to."                                     |
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| "Since the demise of the California Power         |
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| Exchange, we, the industry, have been forced to   |
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| make the market function given the tools that we  |
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| have," Fishman said. "The PX was a major portion  |
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| of the market. Without it, we are left trying to  |
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| put the market back into shape given the current  |
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| players in the market."                           |
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|                                                   |
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|                                                   |
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| However, the ISO's federal tariff states that the |
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| agency must use the cheapest electricity          |
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| available in the wholesale market before          |
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| dispatching the more expensive electricity to     |
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| generators and retail customers.                  |
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|                                                   |
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|                                                   |
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| "The ISO shall dispatch generating units...to     |
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| meet its imbalance energy requirements based on   |
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| order of energy bid prices," reads a section of   |
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| the rules approved by the Federal Energy          |
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| Regulatory Commission. "The ISO shall not         |
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| discriminate between generating units, system     |
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| units, loads and system resources other than      |
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| based on price and the effectiveness (location    |
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| and ramp rate) of the resource concerned to       |
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| respond to the fluctuation in demand or           |
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| generation."                                      |
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|                                                   |
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| Fishman acknowledged that the "market is not      |
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| working as it is designed to," but he said the    |
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| ISO would not respond to specific questions       |
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| related to the possibility that the agency has    |
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| violated its federal tariff or other issues       |
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| related to the operation of the ISO market.       |
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|                                                   |
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| "We are looking into a variety of issues          |
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| surrounding that dysfunction and in due course we |
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| will answer those issues," he said.               |
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| Agency Fails To Reveal Price Data For DWR Power   |
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| Moreover, the ISO has failed to disclose on its   |
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| web site the price of the DWR power, which is     |
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| also required under federal regulations.          |
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| Jan Smutny-Jones, executive director of the       |
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| Independent Energy Producers Association, a trade |
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| group representing large and small power          |
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| producers, said there is "absolutely no           |
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| transparency in the ISO market. No one knows what |
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| they're paying for."                              |
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|                                                   |
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|                                                   |
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| The DWR, which started buying power in lieu of    |
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| California's ailing utilities in January, signed  |
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| $43 billion in long-term supply contracts over    |
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| the past six months at prices that now exceed the |
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| spot market price for electricity.                |
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|                                                   |
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|                                                   |
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| The DWR at times has had a surplus of electricity |
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| and has sold some of it into the spot market at a |
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| $115 million loss over the last three months. As  |
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| a result, the ISO has ordered the Mohave          |
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| Generating Station, a coal-fired power plant in   |
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| Nevada capable of producing electricity at        |
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| roughly 2 cents a kilowatt-hour, to reduce output |
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| at the facility, Fishman said.                    |
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| The 1,500-megawatt Mohave unit is majority owned  |
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| by Edison International (EIX, news, msgs) unit    |
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| Southern California Edison.                       |
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|                                                   |
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|                                                   |
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| Fishman said last week that the ISO is            |
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| investigating the circumstances that led the grid |
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| operator to order the units to "ramp down."       |
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|                                                   |
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|                                                   |
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| -By Jason Leopold, Dow Jones Newswires;           |
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| 323-658-3874; jason.leopold@dowjones.com          |
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