Hogan, William W.Comments on the California ISO MRTU LMP Market Design.” In, 2005. Publisher's VersionAbstract

    Excerpt from the Executive SummaryL

    The California Independent System Operator (Cal ISO) proposal for its electricity Market Redesign and Technology Upgrade (MRTU) builds on basic principles of efficient use of electric networks and the associated locational marginal pricing (LMP). The present report reviews the details of the still evolving design to compare it against related features of other markets, identifies potential problems or internal inconsistencies, and suggests directions for future modifications. In addition to a review of the documents identified below, there has been extensive discussion with the CAISO as the design evolution has continued. The comments here reflect the MRTU design as specified in the documents we reviewed, as clarified in discussions with ISO staff.

    The starting principles of the MRTU embrace the essential foundations of a successful electricity market design including bid-based, security-constrained, economic dispatch with locational prices, license plate access charges, bilateral schedules, financial transmission rights, a consistent network model for commercial transactions recognizing actual physical conditions, consistent day-ahead and real-time markets, unit commitment with simultaneous optimization of energy and ancillary services, and a multi-settlement system. The MRTU will be a major and important reform needed to address the difficulties inherent in the original market design that is to be replaced. The MRTU is also a complex package with many interconnected details developed through a lengthy process of analysis and interaction with stakeholders. The present report highlights problematic features of several of these details, ranging from serious matters that require immediate attention to improvements that should be considered for future implementation. The critical problems can be fixed to produce a highly effective market design.

    Importantly, this evaluation is limited to the LMP market design and has not reviewed operational elements of the MRTU. In addition, this evaluation is limited to the conceptual description of the LMP market design and has not reviewed the proposed implementation of this market design.