Dive Brief:

• The California Independent System Operator (CAISO) on Monday issued a straw proposal addressing some of the key issues around providing day-ahead market services to the Western Energy Imbalance Market (EIM) participants.

• CAISO announced last September that it was initiating a stakeholder process to create the regional day-ahead market at the urging of EIM participants who estimated it could provide benefits of $119 million to $227 million annually.

• "There are so many different decision points that we have to get past before a market can be implemented in any RTO," Jennifer Gardner, a senior staff attorney with Western Resource Advocates (WRA), told Utility Dive. But the straw proposal is an important step, since it indicates that stakeholders are supporting CAISO's decision to offer this market service to the EIM entities.

Dive Insight:

The Extended Day-Ahead Market (EDAM) will be based on the same principles of the Western EIM, like voluntary participation of entities, no exit fees and low entry costs. Extending the day-ahead market to EIM participants will result in several benefits, CAISO said in its proposal, including reducing renewable resource integration costs, improving reliability and reducing curtailment of renewables. 

The real-time energy market has provided $919 million in economic benefits since 2014 as well as reducing more than 470,000 tons of carbon dioxide, according to the WRA.

"If designed right, this market really does offer pretty remarkable potential not only for the utilities themselves in terms of economic benefits, but also for greenhouse gas emission reductions," Gardner said. "This, in addition to the EIM's real-time market, will be critical for integrating larger penetration of renewable energy going forward."

In addition, there's the possibility that becoming more comfortable with operating in the day-ahead market would make Western utilities more open to the idea of an RTO market design, Gardner said. 

"[That's] the end goal certainly, from our perspective," she added. 

The proposal is part of the first phase of the effort, Vijay Satyal, senior energy market policy analyst at WRA, told Utility Dive. It addresses resource sufficiency issues, transmission provision and the cost allocation of energy transfer.

The next phase will look at greenhouse gas accounting and the inclusion of ancillary services, among others, while the third will focus on price formation, external resource participation and other questions. 

"EDAM is very critical from the public interest perspective. [It's] an incremental step in the path towards a larger regional market that the West deserves and can benefit from," Satyal said, adding that retail and wholesale customers would see benefits. 

CAISO intends to hold stakeholder meetings on the effort at the end of the month, and comments on the straw proposal are due Sept. 10. 

The process is still in very early stages and it could take a couple of years to get the market design finalized, Gardner said. A potentially contentious issue will involve addressing the greenhouse gas emission accounting mechanism, since states have different requirements on tracking emissions.

"The ultimate question is, what's the role of the market operator in providing that data? Is that something we want the market operator to track and provide to the participating utilities and their state regulators, or is that a function that's not the role of this market operator?" she said.