CAISO. Settlements & Billing. CRR Hourly Settlement CC 6700

CAISO Settlements & Billing CRR Hourly Settlement CC 6700

Table of Contents 1. Purpose of Document 3 2. Introduction 3 2.1 Background 3 2.2 Description 4 3. Charge Code Requirements 4 3.1 Business Rules 4 3.2 Predecessor Charge Codes 6 3.3 Successor Charge Codes 7 3.4 Inputs External Systems 7 3.5 Inputs - Predecessor Charge Codes or Pre-calculations 8 3.6 CAISO Formula 9 3.7 Outputs 13 CAISO, 2009 Page 2 of 14

1. Purpose of Document The purpose of this document is to capture the requirements and design specification for a SaMC Charge Code in one document. 2. Introduction 2.1 Background Consistent with the adoption of Locational Marginal Pricing (LMP) under the new market design in place of zonal pricing under the current zonal market design, the current Congestion hedging instrument, Firm Transmission Rights (FTR), will be replaced with a new instrument called Congestion Revenue Rights (CRRs). In effect, zones will be eliminated and the new instrument will make use of CRR source(s) and CRR sink(s) that are based on nodes or group of nodes. FERC orders have approved the ISO s proposal to allocate CRRs to Load-Serving Entities (LSEs) that serve customers located within the ISO control area, and to certain other parties described in the CAISO white paper on CRR Allocation Rules. The central principle behind allocation of CRRs to LSEs serving internal customers is that these customers have supported and continue to support the embedded costs of the transmission system through their payment of access charges, which entitles them to utilize the grid to bring power from their power sources to the points where they take power off the grid without being exposed to additional charges for such use of the grid. This principle is made operational by allocating financial hedging instruments CRRs that enable the LSE to hedge the charges for grid congestion that will be assessed in their regular Settlements with the ISO. [CAISO White Paper: CRR Allocation Rules, 06/14/05] CRRs may come from allocations by CAISO, given free of charge to select market participants. CRRs may also come from auctions by CAISO for any remaining available CRR capacities after the allocations. CRRs from auctions are bought at a Market Clearing Price. Furthermore, the CRRs can be subdivided and can be traded in the secondary market but no new CRRs will be released by CAISO in the secondary market. CAISO conducts an annual CRR Allocation once a year for the entire year. The annual CRR Allocation releases Seasonal CRRs for four seasonal periods. The CAISO also conducts monthly CRR Allocation twelve times a year in advance of each month. In addition, CAISO also conducts yearly and monthly CRR Auctions which can release monthly as well as seasonal CRRs. There is also a special type of CRRs - the Long-Term CRRs (LT-CRR) which have a validity of ten years as opposed to the short term ones. These LT-CRRs are seasonal in nature and are released via the annual CRR allocation process but not through CRR Auction. Ownership of a CRR may change hands. However, only one entity can own the CRR in any Trading Hour and CAISO will settle with that owner. The CRR charge codes, consisting of CC 6798 (CRR Auction Transaction Settlement), CC 6700 (CRR Hourly Settlement), CC 6790 (CRR Balancing Account), and CC 6791 (CRRBA Accrued Interest Allocation) shall conform to the Tariff language on CRR Settlements (Section 11.2.4) and Full Funding of CRRs (Section 36.2.8). CAISO, 2009 Page 3 of 14

CC 6700 settles the entitlement amounts (payments and charges) of all valid CRR holdings for each Trading Hour. This is funded by the CRR Balancing Account (CC 6790). The CRRBA is a daily account consisting of the IFM Congestion Fund, which is composed of hourly congestion revenues from Day-Ahead AS imports and Energy schedules and of CRR Charges. In addition, the CRRBA contains the net revenues from CRR Auctions applicable to each day. At the end of each day, the CRRBA is cleared through distribution of surplus or allocation of shortfall to Measured Demand excluding Measured Demand associated with valid ETC, TOR, and CVR Self-Schedules. Furthermore, at each monthend, accrued interest from investment of auction revenues shall be allocated to monthly Measured Demand excluding Measured Demand associated with valid ETC, TOR, and CVR Self-Schedules. 2.2 Description This Charge Code settles with CRR Holders for all their valid CRR holdings for each Trading Hour. A CRR is valid for a Trading Hour based on its start and end dates and its time of use attribute. Generally speaking, CRRs are financial instruments that give the Holder the right to receive or the obligation to pay a share of the total congestion revenue attributable to a given Trading Hour of the Day-Ahead Market. Consistent with the principle of full funding of CRRs, the settlement of CRRs for each Trading Hour shall reflect the full financial value of each CRR. CRR holders are either charged or paid the net entitlement amounts of all their CRR holdings. The entitlement amount per CRR holding is computed as: (a) the product of the MW quantity of the CRR multiplied by the marginal cost of congestion (MCC) associated with the sink node of the CRR, minus (b) the product of the MW quantity of the CRR multiplied by the marginal cost of congestion (MCC) associated with the source node of the CRR. This charge code also computes for the hourly CAISO congestion fund net CRR entitlement (also known as IFM congestion balance in this document) that eventually goes to the CRRBA. 3. Charge Code Requirements 3.1 Business Rules Bus Req ID 1.0 Business Rule CRR Hourly Settlement applies to CRR Holders, which have the right to receive revenue (refunds) from or the obligation to pay for congestion attributable to a given Trading hour of the Day-Ahead market, based on their CRR holdings. 1.0.1 This charge code must be computed daily on an hourly basis. 1.0.2 Actual CRR Holders are referenced by Business Associate ID, and CAISO settles with Business Associates (BA) through these IDs. (Fact) CAISO, 2009 Page 4 of 14

Bus Req ID 1.0.3 1.1 1.2 1.2.1 1.2.2 Business Rule The formulas adopt the convention that payments made by CAISO to BAs will be negative, while payments received by CAISO from BAs (charges to BAs) will be positive. The hourly settlement amount per hour per Business Associate (CRR Revenue Allocation) is the amount owed or paid to the CRR Holder on the Settlement Statement and Invoice. A CRR has a direction from its source(s) to its sink(s) PNodes/APNodes, MW amounts or quantities for these sources and sinks, a validity as defined by its start and end dates and its time of use, an external settlement attribute, and a hedge type (Option or Obligation) aka revenue stream type. Only CRRs valid for the Trading Day will be sent to Settlements by an external system. To determine whether a CRR is valid for a Trading Hour within a valid Trading Day, that CRR s time of use (TOU) attribute will be mapped by Settlements with standing data definition. 1.2.3 A point-to-point (PTP) CRR has a single source and a single sink. 1.2.4 1.2.5 1.2.6 2.0 2.1 2.1.1 2.2 2.2.1 2.3 A multi-point (MPT) CRR can have one or more sources and one or more sinks, but an MPT CRR can never have a single source and a single sink at the same time. (However, for computation purposes and in these business rules, a PTP will be treated as a special case of MPT.) Only CRRs tagged for external settlement shall be settled externally with Business Associates using this charge code. Each CRR quantity (MW amount) for a source/sink is constant for all the hours of a single day, and this constant daily value shall be used and replicated for all hours of the day in the hourly settlement calculations. A CRR can be either an Option or an Obligation, although MPT CRRs are only modeled as Obligations. A CRR Obligation Holder receives a CRR Payment if congestion is in the same direction as the CRR direction but receives a CRR Charge if congestion is in the opposite (counterflow) direction as the CRR direction. A CRR Option Holder receives a CRR Payment if Congestion is in the same direction as the CRR direction but receives no charge if congestion is in the opposite (counterflow) direction as the CRR direction. A CRR is said to be in the same direction as congestion if the Sink Congestion Amount is higher than the Source Congestion Amount. A CRR is said to be in the opposite (counterflow) direction as congestion if the Sink Congestion Amount is less than the Source Congestion Amount. The Sink Congestion Amount is the sum of the product of the sink quantity and the MCC at that sink for all sinks of the CRR. CAISO, 2009 Page 5 of 14

Bus Req ID 2.3.1 2.4 2.5 2.6 Business Rule The Source Congestion Amount is the sum of the product of the source quantity and the MCC at that source for all sources of the CRR. The prices for the CRR sinks and sources are the IFM provided Day Ahead MCCs (marginal congestion cost, a component of LMP) at the relevant sink and source nodes (PNodes/APNodes), respectively. The CRR Entitlement Amount for a CRR Obligation is the value of (Sink Congestion Amount Source Congestion Amount). The CRR Entitlement Amount for a CRR Option (also Payment Amount) is the maximum of zero and the value of (Sink Congestion Amount Source Congestion Amount). 3.0 The settlement amount per BA will be its full net CRR Entitlement amount. 3.1 3.2 3.3 4.0 5.0 6.0 The full net CRR Entitlement Amount per Business Associate per hour is the sum of all the CRR Entitlement amounts from its CRR Obligation holdings and the CRR Payments from its CRR Option holdings. The CAISO total full net CRR Entitlement amount is the sum of the full net CRR Entitlement amounts for all Business Associates per hour. In conformance with the Tariff, all CRR Entitlement Amounts shall be fully funded. (Fact) For every Trading Hour, the IFM Congestion Charge is the revenues from congestion charges attributable to the Day Ahead market for both Energy and Ancillary Services Imports less the reversals of congestion charges to ETC, TOR, and Converted Rights Holders. The CAISO hourly IFM congestion balance, which is the sum of IFM Congestion Charge and the CAISO total full net CRR entitlement amount for the Trading Hour, shall be computed, and used by a successor charge code. This amount is equivalent to IFM congestion charges and CRR Charges net CRR Payments and is the hourly IFM net congestion amount that goes to the CRR Balancing Account. CRR level computation for the full entitlement amount shall be provided for informational purposes. 3.2 Predecessor Charge Codes Charge Code/ Pre-calc Name CC 6011 - Day Ahead Energy, Congestion, Loss Settlement CC 6710 - Day Ahead Congestion - AS Spinning Reserve Import Settlement CC 6720 - Day Ahead Congestion - AS Non-Spinning Reserve Import Settlement CC 6750 - Day Ahead Congestion - AS Regulation Up Import Settlement CAISO, 2009 Page 6 of 14

Charge Code/ Pre-calc Name CC 6760 - Day Ahead Congestion - AS Regulation Down Import Settlement 3.3 Successor Charge Codes CC 6790 - CRR Balancing Account Charge Code/ Pre-calc Name 3.4 Inputs External Systems Row # 1 2 SourceQty Bj zt MH d Variable Name Or BADailyFinancialNodeCRRQty Bj zt MH d (with a positive value) SinkQty Bj zt'mh d Or BADailyFinancialNodeCRRQty Bj zt MH d (with a negative value) Description The MW quantity of source Pnode/APNode j of CRR z, Hedge Type H, CRR Holder Type M, Time of Use t, valid for the Trading Day d and is held by Business Associate B. The SourceQty Bj zt MH d is a positive value. This BD will be mapped to the alternative BD, BADailyFinancialNodeCRRQty Bj zt MH d as a positive value. Hedge type H = NO for Obligation, or YES for Option. Note that the change in keyword name from Resource to FinancialNode of this BD reflects at which locations the quantities and matching prices are to be settled. The MW quantity in sink PNode/APNode j of CRR z, Hedge Type H, CRR Holder Type M, time of use attribute t, valid for Trading Day d and is held by Business Associate B. The SinkQty Bj zt MH d is a positive value. This BD will be mapped to the alternative BD, BADailyFinancialNodeCRRQty Bj zt MH d with a negative value. CAISO, 2009 Page 7 of 14

Row # 3 Variable Name HourlyDAFinancialNodeMCCPrice j h 4 CRRSettlementExceptionFlag B 5 CRRHourlyTOU dh Description Hedge type H = NO for Obligation, or YES for Option. Marginal Cost of Congestion (MCC) for financial node ID j for Trading Hour h of the Day Ahead Market. This is mapped from Pnode/APnode Day-Ahead Energy MCC prices. ($/MWh) A flag indicating that Business Associate B shall be excluded from external settlement of CRRs. If the exception applies, then the flag will have a value of 1 (or TRUE). In particular, the BA ID B currently having this exception flag is a CAISO BA ID. This is needed to be able to compute entitlement amounts for certain CRRs not owned by market participants, mainly for analysis purposes related to CRR allocation. The CRR Time of Use for Trading Hour h of Trading Day d. This definition is kept in Masterfile with values ON (or 1 for onpeak hours) or OFF (or 0 for off-peak hours). This data will also be provided as part of the CAISO Bill Determinants file. 3.5 Inputs - Predecessor Charge Codes or Pre-calculations Row # 1 2 3 Variable Name CAISOTotalNetHourlyDAEner gycongestionnetofcreditsa mt h CAISOHourlyTotalDACongest ionspinamount h CAISOHourlyTotalDACongest ionnonspinamount h Predecessor Charge Code/ Pre-calc Configuration CC 6011 Day Ahead Energy, Congestion, Loss Settlement CC 6710 - Day Ahead Congestion - AS Spinning Reserve Import Settlement CC 6720 - Day Ahead Congestion - AS Non- Spinning Reserve Import Settlement CAISO, 2009 Page 8 of 14

Row # 4 5 Variable Name CAISOHourlyTotalDACongest ionregupamount h CAISOHourlyTotalDACongest ionregdownamount h Predecessor Charge Code/ Pre-calc Configuration CC 6750 - Day Ahead Congestion - AS Regulation Up Import Settlement CC 6760 - Day Ahead Congestion - AS Regulation Down Import Settlement 3.6 CAISO Formula 3.6.1 The CRR Settlement Amount per hour h BAHourlyCRRSettlementAmount Bh = BAHourlyTotalCRREntitlementAmount Bh Where CRRSettlementExceptionFlag B <> 1 (TRUE) 3.6.1.1 BAHourlySingleCRREntitlementAmount Bzt MH h = (BAHourlyCRRObligationEntitlement Bzt MH h + BAHourlyCRROptionEntitlementAmount Bzt MH h ) 3.6.1.1.1 Where BAHourlyCRRObligationEntitlementAmount Bzt MH h = BAHourlyCRREntitlementIntermediateAmount Bzt MH h WHERE Hedge Type (H ) = NO for Obligation 3.6.1.1.2 Where BAHourlyCRROptionEntitlementAmount Bzt MH h = Min(0, BAHourlyCRREntitlementIntermediateAmount Bzt MH h ) WHERE Hedge Type (H ) = YES for Option 3.6.1.1.3 And Where IF Time of Use attribute (t ) of BADailyFinancialNodeCRRQty Bj zt MH d = 1 CAISO, 2009 Page 9 of 14

THEN BAHourlyCRREntitlementIntermediateAmount Bzt MH h = [ CRRHourlyTOU dh * (HourlyDAFinancialNodeMCCPrice j h x BADailyFinancialNodeCRRQty Bj zt MH d ) ] ELSE BAHourlyCRREntitlementIntermediateAmount Bzt MH h = [ (1- CRRHourlyTOU dh ) * (HourlyDAFinancialNodeMCCPrice j h x BADailyFinancialNodeCRRQty Bj zt MH d ) ] END IF Implementation Note: In order to speed up CAISO processing time, this charge type, BAHourlyCRREntitlementIntermediateAmount Bzt MH h, is calculated outside of Configuration. It will be reflected in the Configuration Output file as a primary raw input. No change or minimal change is expected of market participants systems since the original data inputs are kept and will continue to be provided to market participants. 3.6.1.2 BAHourlyTotalCRREntitlementAmount Bh = z t ' M H ' BAHourlySingleCRREntitlementAmount Bzt MH h 3.6.1.3 CAISOHourlyTotalCRREntitlementAmount h = B z t ' M H ' BAHourlySingleCRREntitlementAmount Bzt MH h Where CRRSettlementExceptionFlag B <> 1 (TRUE) 3.6.1.4 CAISOHourlyIFMCongestionCharge h = (CAISOTotalNetHourlyDAEnergyCongestionNetOfCreditsAmt h CAISO, 2009 Page 10 of 14

+ CAISOHourlyTotalDACongestionSpinAmount h + CAISOHourlyTotalDACongestionNonSpinAmount h + CAISOHourlyTotalDACongestionRegUpAmount h + CAISOHourlyTotalDACongestionRegDownAmount h ) 3.6.2 CAISOHourlyIFMCongestionBalanceAmount h = (CAISOHourlyIFMCongestionCharge h + CAISOHourlyTotalCRREntitlementAmount h ) Note: The following are derivation of implementation formulas above, relating those formulas closer to the business rules. (1) BAHourlyCRRObligationEntitlementAmount Bzt MH h = [(-1) x ( Bj zt MH d)] = [ which is a - sin k which is a source which is a source - = [ which is a which is a source HourlyDAFinancialNodeMCCPrice j h x SinkQty Bj zt MH d HourlyDAFinancialNodeMCCPrice j h x SourceQty HourlyDAFinancialNodeMCCPrice j h x SourceQty Bj zt MH d sin k HourlyDAFinancialNodeMCCPrice j h x SinkQty Bj zt MH d ] (HourlyDAFinancialNodeMCCPrice j h x BADailyFinancialNodeCRRQty Bj zt MH d ) - which is a sin k (HourlyDAFinancialNodeMCCPrice j h x (- 1)*BADailyFinancialNodeCRRQty Bj zt MH d )] = [ which is a source (HourlyDAFinancialNodeMCCPrice j h x BADailyFinancialNodeCRRQty Bj zt MH d ) CAISO, 2009 Page 11 of 14

+ which is a sin k (HourlyDAFinancialNodeMCCPrice j h x BADailyFinancialNodeCRRQty Bj zt MH d )] = Bj zt MH d ) (HourlyDAFinancialNodeMCCPrice j h x BADailyFinancialNodeCRRQty which is summed over all sources and sinks (node) j of CRR z. Where H = NO for Obligation Where CRR z is valid for Trading Hour h based on CRR z s time of use (TOU) t attribute definition (Refer to business rule 1.2.2). (2) BAHourlyCRROptionEntitlementAmount Bzt MH h = [(-1) x Max(0, which is a sin k HourlyDAFinancialNodeMCCPrice j h x SinkQty Bj zt MH d Bj zt MH d)] - which is a source = Min(0, [ which is a source HourlyDAFinancialNodeMCCPrice j h x SourceQty HourlyDAFinancialNodeMCCPrice j h x SourceQty Bj zt MH d - which is a sin k HourlyDAFinancialNodeMCCPrice j h x SinkQty Bj zt MH d ]) which can be simplified to the following formula because only PTP CRRs (no MPT CRRs) can be Options and since PTP CRRs can only have a single source and a single sink, = Min[0, ((HourlyDAFinancialNodeMCCPrice j h x SourceQty Bj zt MH d ) - (HourlyDAFinancialNodeMCCPrice j h x SinkQty Bj zt MH d ))] Similar to the previous formula derivation, using BADailyFinancialNodeCRRQty for both SourceQty and SinkQty but with a negative sign for the SinkQty, the above formula is equivalent to: CAISO, 2009 Page 12 of 14

= Min[0, (HourlyDAFinancialNodeMCCPrice j h x BADailyFinancialNodeCRRQty Bj zt MH d ) ] which is summed over the source and sink nodes j of CRR z. 3.7 Outputs. Output Req ID Where H = YES for Option Where CRR z is valid for Trading Hour h based on CRR z s time of use (TOU) t attribute definition (Refer to business rule 1.2.2). Name In addition to any outputs listed below, all inputs shall be included as outputs. 1 BAHourlyCRRSettlementAmount Bh 2 3 4 BAHourlySingleCRREntitlementAmount Bzt MH h BAHourlyTotalCRREntitlementAmount Bh CAISOHourlyTotalCRREntitlementAmo unt h Description The net settlement amount paid to or owed by Business Associate B for all its CRR holding (either Obligation or Option) for hour h. This is the actual settlement amount for this charge code. The full entitlement amount for a single CRR with CRR ID z, time of use t, CRR Holder Type M, Hedge Type H for Trading Hour h. The sum of all the entitlement amounts from CRR Obligation holdings and all the CRR Payments from CRR Option holdings of Business Associate B for Trading Hour h. The sum of all BAHourlyTotalCRREntitlementAmount over all BAs. 5 CAISOHourlyIFMCongestionCharge h Energy and AS in the Day Ahead The net congestion revenues from market. 6 BAHourlyCRRObligationEntitlementAm ount Bzt MH h The full entitlement amount from an obligation CRR. This pertains to CRR z, time of use t, CRR Holder Type M, Hedge Type H, held by BA ID B for Trading Hour h. CAISO, 2009 Page 13 of 14

Output Req ID 7 8 9 Name BAHourlyCRROptionEntitlementAmount Bzt MH h BAHourlyCRREntitlementIntermediateA mount Bzt MH h CAISOHourlyIFMCongestionBalanceAm ount h Description The full entitlement amount from an option CRR. This pertains to CRR z, time of use t, CRR Holder Type M, Hedge Type H, held by BA ID B for Trading Hour h. The full entitlement amount from an Obligation CRR or the BAHourlyCRROptionEntitlementInterm ediateamount from an Option CRR. This pertains to CRR z, time of use t, CRR Holder Type M, Hedge Type H, held by BA ID B for Trading Hour h. The hourly IFM net congestion revenues amount that goes to the CRR Balancing Account. CAISO, 2009 Page 14 of 14