Reliability Demand Response Product February 25, 2011

John GoodinLead, Demand ResponseMarket Design & Regulatory Policy

Jill PowersManagerEnergy Measurement, Acquisition and Analysis

Today’s Discussion

• Why the Reliability Demand Response Product (RDRP)

• Product Foundation- Proxy Demand Resource Product

• What is RDRP and How is it being Implemented?

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WHY RDRP?Today’s Discussion

RDRP addresses long standing concerns with emergency demand response programs.

• Emergency demand response programs can only be utilized under extreme conditions but account for a significant amount of resource adequacy requirements (nearly 4%).

• Dispatching these resources outside of ISO markets and systems can suppress price signals.

Slide 4

CPUC initiated a settlement proceeding as part of its demand response efforts to address these concerns.

The settlement resolved these concerns and defined requirements for reliability demand response product.

• Limits the quantity that can satisfy the resource adequacy requirement to 2% of the ISO all-time system peak.

– Transitions from the current ˜ 4% to the 2% limit as follows:

• Allows emergency resources to be available at a Warning Notice in advance of a Stage 1 or Stage 2 emergency.

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RA Qualifying Emergency Demand Response

2012 2013 2014 & Beyond

3% 2.5% 2%

RDRP integrates emergency DR programs into the ISO market.

• Product can be offered by any demand response provider

• Eligible to set the locational marginal price

• Like a generator, dispatched by location and MW quantity

• Enables economic energy bids in the day-ahead

• In real-time, bids limited to ISO bid cap and 95% of bid cap

• Sets availability limits of 15 times and/or 48 hours per term

Slide 6

RDRP helps complete package of solutions for wholesale market demand response.

Slide 7

PRODUCT FOUNDATION-PROXY DEMAND RESOURCE

Today’s Discussion

Participating Load ProductLong-standing CAISO DR Model

Slide 9

DLAP

• Load Serving Entity (LSE) and Demand Response Provider (DRP) act as single entity

• PL “Load” scheduled and settled at Custom LAP (CLAP)

• “Pseudo gen” used to offer A/S capacity and RT energy resource at CLAP

• PL load and pseudo generation resources treated independently in the DA scheduling process

PL(CLAP)

LSE(Default LAP)

Didn’t satisfy FERC Order 719 that enabled the LSE and DRP to be distinct entities

CAISO Needed New Demand Response Solutions

• Integrate DR into the CAISO Market– Enable easier integration of retail DR programs– Increase DR participation in the wholesale markets

• Provide a Model that Enabled “Direct Participation”– Allow Demand Response Provider (DRP) to participate

independent of the load-serving entity (LSE)– Comparable treatment allowing Day-Ahead, Real-Time

Energy and Ancillary Service (AS) market participation– Enable DR all hours/days of the year

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Proxy Demand Resource (PDR)New Demand Response model Launched August 10, 2010

• Load serving entities (LSE) load continues to forecast bid at the DLAP.

• Demand response provider (DRP) bids the demand response portion of the load into the ISO markets as a separately defined proxy demand resource (pseudo generator).

• The LSE and the DRP could be the same entity or two separate entities.

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DRPPDR

LSEDLAP

Proxy Demand Resource

Provides Direct Participation and Simplification of Forecasting/Scheduling

Proxy Demand Resource Implementation Elements

• CAISO Agreement• Establish Resources• Registration• Market Participation• Baseline

– Measurement of PDR Performance• Settlement

– Demand Response Provider– Load Serving Entity

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Slide 13

Proxy Demand Resource ImplementationHigh-Level Process Integration

New DR System to Support PDRLeveraging UISOL’s DRBizNet Framework

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Manage PDR/RDRP registration process

High-Level PDR Resource Registration Process Flow with DRS Enhanced LSE /UDC Review Process Functionality

CAISO

CAISO

UDC

UDC

LSELSE

DRP

DRP

YES

NO

YES

NO

UDC Reviews Registration Detailwith opportunity to

provide review comments

Additional information

Needed by CAISO from DRP

CAISO Deny

LSE Reviews Registration Detailwith opportunity to

provide review comments

Provide PDR Resource ID

to DRP

Update Master File & notify DRP of Effective Date

Auto Complete Review

CAISO Approves

CAISO Review

Review Complete before 10

business days

DRP begins Baseline Meter Data Submittal

DRP submits Registration for

Review

DRP begins RDT Process

DRP Enters/Edits

Resource Registration

Data

Begin Registration

All events are available on

the DRS event search screen

Track underlying load locations

PDR/RDRP interval meter data management

Consolidated PDR/RDRP events (outages, awards, dispatches)

Automated baseline calculations

Performance Measurement calculations and Default Load Aggregation (DLA) management

Market

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Market Participation

DailyMeter Data

Submission for PDR or DA

RDRP; after the fact for RT only

RDRP resources

BaselinePerformance Measurement

Default Load Adjustment

Settlement

Post-Market Activities

PDR/RDRP ProcessesHigh Level Sequential Activity Flow

Secure Agreements

Registration Process

Begin: Provideend use load location info

End: ReceiveMarket Resource ID

for PDR

AccessDRS

DemandResponse System

Submit 45 days of historic meter dataEstablishing PDR

Baseline

Pre-Market Activities

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Agreements

• Demand Response Provider establishes agreements prior to participating in the ISO Wholesale Energy Markets– Agreement with Load Serving Entity (LSE) – Agreement with Utility Distribution Company (UDC)– Agreement with ISO (DRP and SC)

“Above the Line” – Within the CAISO

“Below the Line” – Outside the CAISO

Wholesale Market Participation as PDR or RDRPSettlement of PDR or RDRP Performance with DRPSettlement of DLAP Load incorporating DLA with LSE

Any Other Contractual Arrangements Between the DRP & LSE

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– A Registration is composed of one or more locations in a single Sub-Lap

– Location refers to a retail customer location uniquely identified by a UDC account number

– LSE and UDC have opportunity to review Registration information through DR System and provide CAISO with input on its accuracy

– CAISO makes final approval of registration

Manage Registration Process

DRP creates Registrations to establish a PDR or RDR resource

DRP uses the DR System to submit service locations and registration information for LSE/UDC review and ISO approval.

PDR/RDRR Constrained to Single Sub-LAP

Sub-LAPs

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• 23 Sub-LAPs within CAISO Control Area

• Low to no congestion between PNodes within Sub-LAP

• Historically, congestion interfaces between Sub-LAPs

WHAT IS RDRP AND HOW IS IT BEING IMPLEMENTED?

Today’s Discussion

RDRP Qualifications

• Availability

– All year/24x7, as resource is available

– Summer and winter terms

– 15 events and/or 48 hours/per term

– Min run time ≤ 1 hour and max run time ≥ 4 hours

– Advance notice + ramp to max curtailment must be ≤ 40 minutes

• RDRP resources:

– Min load reduction (single or aggregate) of 0.5 MW

– Contained within a sub-LAP

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RDRP Qualifications (cont’d)

• Dispatch– Real-time: based on emergency operating procedures

• Operating reserve shortage (ISO market/dispatch)• CAISO transmission emergency (ISO market/dispatch)• Local T&D emergency (utility dispatch/ISO notification)

– Marginal market clearing and dispatch– Discrete or “block” dispatch option available

•Address “firm service level” interruptible customers• Metering

– Hourly interval data for Day-ahead participation– Up to 15 minute interval ‘reads” for real-time participation

•Must be provided to ISO as 5-minute SQMD

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RDRP Market Participation

• RDRR can bid into the following markets:– Day-Ahead energy market (economic bids)

• Marginal clearing only in day-ahead– Real-Time market (reliability dispatch only)

• Marginal Dispatch, or• Discrete dispatch option available in real-time

– No A/S or Residual Unit Commitment participation

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Market Systems used for bidding as well as for collecting market results and receiving dispatch instructions in Real-Time.

RDR Resource (RDRR) ModelingMarket Systems and Applications

RDRR/PDR modeled in the network as a generator

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Pre-defined RDRR in Sub-LAP

• Pre-modeled and pre-assigned a Generation Distribution Factor (GDF) by the CAISO

Custom RDRR in Sub-LAP

• DRP submits for a customized RDRR by selecting buses and defining the GDF to the selected buses

Baseline Methodology

• RDRR Meter Data Submission Process – Day-Ahead participation- requires daily submission

• Including initial 45 days of historical usage for establishing initial baseline data

– Real-time participation only- requires submission of all current and historic meter data after the event by T+5B

• Performance of the RDRR is determined using a customer baseline calculation– 10-in-10 non event day baseline methodology– Rules for selection of baseline days – Symmetrical 20% multiplicative adjustment

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DRS used for Meter Data Submission, Baseline Calculations, DR Performance Measurement and DLA

Settlement Process

• DRS source of DR Performance Measurement used by SaMC for settlement of DRP’s RDR resources

• Default Load Adjustment provided by DRS to SaMC for settlement of LSE’s DLAP Load

• RDRR settled as a proxy generator– PDR paid at Day-Ahead or Real-Time LMP

• Market Participants receive a settlement statement 7 business days after the trade date

Slide 25

Simple Settlement Example with Default Load Adjustment

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Settlement Assumptions:

RDRR Performance MeasurementAdj Baseline – Actual = 2MW

2 MWDLA2 MW

LSE Adjusted Meter Quantity 2 MW DLA + 8 MW Actual

= 10 MW

8 MW

Add RDRRPerformance to LSE

DLAP

LSE paid for 0 MW (Scheduled – Actual)

DRP paid for 2 MW (Expected = Performed)

No Double Payment for Demand Response

LSE DA Schedule = 10MWRDRR DA Award = 2MW

DLA

ACTUAL

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RDRP to be Implemented Spring 2012PDR experiences that carry over to RDRP implementation

• Multiple User Accessibility to DRS

• Real Time Adjustment to DR Performance Measurement– Conversion of “Hourly Baseline DR Performance Measurement” to a 10

minute performance measurement for RT market activity

Challenges – Candid Comments from CAISO Implementation Team

Request greater visibility of calculation information

Updating API to allow greater upload/download functionality

DRS Enhancements – Always wanting more…

Request for more/different baseline types; part of CAISO Tariff

Challenge to assess need and best fit

Baseline Methodology – Desire for more options

Contact Information

John GoodinLead, Demand Response

Market Design & Regulatory Policy(916) 608-7154

jgoodin@caiso.com

Jill PowersManager, Energy Measurement Acquisition & Analysis

Market Services(916) 608-5781

jpowers@caiso.com

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