Benefits of Unified Regional Market Monitoring on behalf of

1. Benefits of Unified Regional Market Monitoring on behalf of Seams Steering Group - Western Interconnection Anjali Sheffrin, Ph.D. Director of Market Analysis California ISO November 1, 2001

2. Why is regional market monitoring necessary? What needs to be monitored? How will monitoring be done? Discuss Three Questions

3. Critical to ensuring full utilization of transmission and promoting efficiency of the RTO markets. Enables an RTO to identify early abuses of market power and market design flaws. Identifies other abuses that have the potential to undermine the effective functioning or the overall efficiency of the RTO markets. Why is market monitoring necessary for an RTO?

4. Electric markets are regional - mitigation measures must be applied to entire region to be effective. Many divergent factors affect wholesale market performance such as natural gas prices, emissions regulation, rules in retail markets. The RTOs in the western markets will have the information necessary to effectively monitor regional markets. Unified regional market monitoring can help promote efficient regional market designs. Why is unified regional market monitoring necessary?

5. Monitor all activities that affect the operation of the RTO market. Monitor anomalous market behavior - i.e., behavior that departs significantly from normal competitive market behavior. Detect the exercise of market power - physical and economic withholding in transmission and energy. Monitor for instances of taking unfair advantage of the rules and procedures set forth in the RTO Tariffs, Protocols, or transmission constraints in periods of congestion. What are some of the major responsibilities of market monitoring?

6. Early detection of market design flaws and inefficiencies inhibiting efficient market operations, including potential problems among the RTOs in the western markets. Investigation of market structure flaws such as undue concentrations of market power in transmission, generation, or other structural flaws. Identification of effective market power mitigation measures. Provide evidence to support changes in market design or implementation of market power mitigation measures. Additional responsibilities of market monitoring

7. Transmission service and congestion management Ancillary services markets Energy markets: day-ahead and real-time RTOs are best equipped and closest to the market WSCC-wide monitoring is necessary as FERC’s market power mitigation order for CA and WSCC indicate What markets should a monitoring group cover?

8. Better functioning markets Higher confidence among customers and consumers in those markets Ensure proper profit and incentives for suppliers These benefits will only accrue if reasonable actions are promptly taken upon identification of problems Summary of benefits of effective market monitoring

9. Promote efficient and convenient transmission scheduling across RTOs – Monitor should study the design and monitor operation of regional markets to identify potential inefficiencies Key discussions on organization – Coordinated or integrated monitoring for the entire WSCC region? Monitoring can promote resolution of seams issues

10. End Goal: Unified West-wide Monitoring Group Possible options: Three separate units with some coordination One Market Surveillance Committee with three separate units for each RTO Start with Unified unit Type of Organization?

11. Shared responsibilities with FERC RTO Market Monitoring Unit: Day to Day monitoring and immediate intervention FERC: Policy and long-term issues Monitoring Unit must be independent and have sufficient authority Independence and authority, possibly reporting to FERC directly Access to all data from the RTOs and authority to collect additional information from market participants Impose penalty based on Tariff Institute temporary urgent rule changes with the approval of the respective RTO Boards Division of Responsibilities?