On December 20, 2023, FERC approved the California Independent System Operator Corporation’s (“CAISO”) proposal to establish the Extended Day Ahead Market (“EDAM”), which allows external Balancing Authority Areas (“BAAs”) to participate in CAISO’s day-ahead market. FERC also approved CAISO’s Day Ahead Market Enhancements (“DAME”) proposal, which establishes two new day-ahead market products: Imbalance Reserves and Reliability Capacity. FERC approved the CAISO’s proposals but rejected the proposed EDAM access charge without prejudice. CAISO must submit a compliance filing addressing FERC’s conditions within sixty (60) days of the Order.

EDAM is an extension of CAISO’s existing day-ahead market, designed to build on the economic benefits realized in the real time Western Energy Imbalance Market (“WEIM”) that CAISO already administers. The EDAM will operate to settle loads and resources in the day-ahead market as well as imbalances between day-ahead and real time. In the pre-market timeframe, EDAM activities go towards ensuring that each participating BAA has sufficient resources to meet its needs (“Resource Sufficiency Evaluation”). During this time, EDAM Entities will offer their transmission rights to EDAM, which will optimize transmission, resource commitments, and energy transfers to meet demand across its footprint while respecting legacy transmission contracts. In the day-ahead timeframe, resources and load will submit economic bids or self-schedule, which EDAM then optimizes to meet demand across the footprint. Also during this time, EDAM extends the Greenhouse Gas (“GHG”) accounting framework from WEIM to permit recovery of compliance with state carbon pricing policies without embedding those costs in the Locational Marginal Prices (“LMP”) for demand areas outside such areas of regulation. In this way, EDAM will produce resource commitments and energy transfers that CAISO (as market operator) will settle and allocate to the appropriate scheduling coordinator for the BAA.

The purpose of the DAME is to minimize net load imbalances between the day-ahead and real-time markets and to ensure EDAM transfers are economic. The DAME proposal is applicable to both CAISO and EDAM Entities and introduces two new bi-directional products to be procured “on a co-optimized basis with energy.” The Imbalance Reserves product will address real-time ramping needs resulting from uncertainty in the day-ahead market’s net load forecast. The Reliability Capacity product will be used to meet differences between the integrated forward market’s (“IFM”) cleared physical supply and the day-ahead net load forecast.

FERC found both of the new products to be just and reasonable. Specifically, FERC approved CAISO’s proposals to procure Imbalance Reserves on a nodal basis and to implement a $55/MWh bid cap. However, the Commission conditioned acceptance on CAISO including additional detail in its tariff regarding the considerations it intends to use to adjust the Imbalance Reserves deployment factor and activate or deactivate transmission constraint parameters.

Regarding EDAM, the Commission found that voluntary participation by external BAAs and resources to be just and reasonable. FERC also approved CAISO’s proposed transmission framework as striking “an appropriate balance between preserving a transmission customer’s rights under an EDAM transmission service provider’s OATT and ensuring that there is confidence that EDAM transfers will be delivered.” Additionally, the Commission approved the Resource Sufficiency Evaluation, the GHG accounting framework, LMP formation components, voluntary virtual bidding, and CAISO’s congestion revenue and transfer revenue proposal. Though the Commission approved the EDAM settlements framework, it urged CAISO to work with stakeholders to determine the appropriate level of detail and data necessary to permit EDAM Entities to appropriately sub-allocate charges to their customers. However, FERC rejected the proposed EDAM access charge without prejudice to CAISO providing additional support and ordered further compliance. As proposed, the EDAM access charge would allow EDAM transmission owners to recover short-term transmission sales foregone due to EDAM participation. The compliance filing must remove the access charge, as well as revise market power mitigation provisions, and provide additional detail on deployment of Imbalance Reserves as discussed further in the Order.

A copy of FERC’s Order, issued in Docket No. ER23-2686, can be found here.