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Meet
Keith Casey, California's
new market monitor
Keith who? Casey has been with the department of market monitoring
as a staff economist since late 1997 so he can remember the wild days.
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he became manager of analysis and mitigation and now heads the department
as director.
He has a PhD in agricultural economics
from the University of California at Davis.
What does he see as he monitors?
The California ISO's markets do a good
job giving traders transparent price signals but some costs aren't as
clear as they could be, Casey told us.
Some "out-of-market" costs can't
be shown through price signals and just aren't transparent enough, he
explained.
Look at the costs of reliability must-run
(RMR) deals and committing units in the day-ahead market to meet real-time
reliability needs.
Markets have settled down from the height
of the energy crisis, Casey noted.
They've been relatively steady the past
four years in terms of price and overall competitiveness, he added.
But that doesn't mean the ISO's footprint
is problem free.
Casey is worried about the lack of generation
being built -- especially in the South.
That's where use is growing faster and
a lot of plants needed for summer reliability are extremely old.
With high levels of imports serving Southern
California, a significant event -- such as a grid line failing -- could
make big problems for the whole region.
New local generation would be a big help,
Casey said.
Long-term contracts are "imperative"
for the ISO's market, he declared.
They're the most accepted market-power
mitigation tool around, Casey said.
Higher levels of long-term pacts have
done more to moderate prices than anything else Casey could think of
as they cut traders' spot market exposure and lowered spot trading volumes.
That lowers the incentive to withhold
or game the spot market since only a few deals would be impacted --
lowering too potential profits from gaming.
Long-term contracts put the spot-market
risk on suppliers too, Casey observed.
Suppliers may find themselves short for
contracted deliveries and may actually need to buy in the spot market
to fill their needs.
They won't want those spot prices to be
too high then, he noted.
Long-term contracts help get generation
built too, he added.
California IOUs are to buy all their power
on long-term contracts under new PUC resource adequacy rules (RT,
12/13).
Casey and his staff have spent a lot of time talking with market monitors in eastern RTOs where LMPs are used.
It's been really helpful, Casey told us.
A west-wide bid cap is appropriate from a market-design standpoint, said Casey.
He thinks a soft bid cap -- where generators can bid over the cap where justified by costs -- makes sense.
He ultimately wonders how binding a hard cap is when a generation asset is needed for reliability.
Hard caps are more appropriate in the East, he added, where bid caps are higher -- some even topping $1,000/mwh.
He doubts many generators could justify costs above that limit.
The ISO's bid cap is only $400.
The ISO had wanted to change it from a soft cap to a hard cap but FERC favored using a soft cap for the time being (RT, 1/18).
The ISO is to change to a hard cap that rises to $500 and then $1,000 under MRTU (RT, 1/5).
Eastern RTOs have found virtual (convergence) bidding to be a useful tool to get day-ahead and real-time prices to converge, Casey noted.
It's a type of arbitrage where traders can take advantage of price differences between the day-ahead and real-time markets.
It's a financial deal that doesn't include physical delivery of power.
The ISO is open to a close examination of its merits, Casey said.
Some generators have urged the ISO to include virtual bidding in the first phase of MRTU (RT, 2/24), but that would delay MRTU's start, the ISO has said. Originally published in Restructuring Today on April 4, 2006
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| CONFERENCE LINKS |
NEM 2006 National Energy Restructuring Conference
When: 04/25/06 - 04/26/06
Where: Marriott at Metro Center
www.energymarketers.com/agenda/2006/April/April2006.htm
Pike & Fischer's 2nd Annual Broadband Policy
Summit 2006: Charting the Road Ahead
When: 05/11/06 , 8:00 AM - 5:00 PM Eastern
Where: University of Southern Maine
www.broadbandpolicysummit.com/registration.htm
CHP: Reducing Energy Costs Through Recycled Energy
When: 05/11/06 , 8:00 AM - 5:00 PM Eastern
Where: University of Southern Maine
www.northeastchp.org/nechpi/calendar/events/nechpi052006.htm
UTC TELECOM 2006
When: May 21 – 24, 2006
Where: Tampa Convention Center, FL
www.UTCTELECOM2006.utc.org
Survival Skills for a New Era
When: 05/26/06 , 12:00 PM - 1:30 PM Eastern
Where: Your home, work or cell phone
www.restructuringtoday.com/conferences/survival.html
NET-ATHOME™
-- The world’s most international connected home event
When: September 26 & 27, 2006
Where: Hilton Hotel -- Cannes, France
www.net-athome.com/
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