APX is pleased to present the current and future activities of the CAISO Market Redesign and Technology Upgrade (MRTU). This issue includes:

• MRTU Schedule
• Market Simulation Observations
• Market Simulation Going Forward
• APX MarketSuite

On August 5, 2008 The CAISO announced that insufficient progress had been made during market simulation to make the November 1 MRTU go-live target date. Among the various reasons that led to this conclusion was that system stability has not been consistent enough to accomplish all of the required testing to guarantee the successful completion of CAISO and market participant testing and readiness activities to meet a Fall 2008 go live date.

During August the CAISO plans to focus on stabilizing the MRTU software systems and revising the market simulation plan. These activities and their outcome will be a primary input to the Board of Governors at their meeting on September 9, 2008 discussing a new go-live date. The CAISO acknowledges that requests from the Market Participant community to avoid an MRTU start December 1 or January 1 will be considered during the discussion at the Board meeting, which makes the likelihood of a target start date prior to February 1, 2009 unlikely.

The MRTU market simulation, while making significant progress during June and July, did not meet the objectives established by the CAISO and market participants. While there was a significant improvement in executing the Day Ahead and Real-time markets within the prescribed timeframes during June and early July, degradation of this consistency towards the end of July prevented execution of the defined simulation scenarios. The degradation in performance has in part been attributed to “switching on” specific software functions that had been previously suppressed. Most notable among the features that were activated that may have contributed to the instability is a feature that avoids dispatching resources within forbidden regions. The instability and gaps created by this and other changes made it unreasonable to execute the operational scenarios due to the difficulty of determining if any anomalous scenario results were algorithmic errors or simply data errors. Both the CAISO and Market Participants agree that baseline execution of the markets must be stable before evaluating any operational scenarios.

Frequently the CAISO has been able to publish Day Ahead market results by the 1 PM deadline, but it hasn’t been uncommon to see delays of a few minutes to an hour or more. As of late, most of the delays have been attributed to problems with the Market Power Mitigation run that is executed prior to integrated market run. In real-time the market has been executing the five minute energy dispatch reasonably well when the preceding hour ahead scheduling process and 15 minute unit commitment processes solve. When the HASP and Unit Commitment processes don’t solve, the RT dispatch suffers and creates gaps in the data needed for settlements.

Consistent execution of settlement process within the five day turnaround for statements has occurred since mid June. The quality of the data within the statements has improved as well but is dependent on the upstream data from the markets. In addition to data gaps that are created when the real-time processes don’t run, data payloads from other upstream systems can fail which makes the settlement data inconsistent with bid and market results data. While the CAISO has recently made significant advances in the number of settlement Charge Codes they have validated, it is hard for Market Participants to do their own validation of these Charge Codes when there are gaps and inconsistencies in the simulation output.

The CAISO has devoted a significant amount of time to answering Market Participant questions about pricing during the simulation. Due to the initial conditions of the simulation runs the bids submitted by the Scheduling Coordinators participating in the market simulation, extreme prices and un-seemly volatility between hours and intervals has been occurring. The CAISO has taken the time to analyze these situations and discuss them at length with the Market Participants. These discussions are now incorporated into the weekly simulation debriefing calls at 9 AM on Fridays and are open for anyone who would like to listen in or participate in the discussion. Call details are noted on the CAISO website in the calendar section.

The CAISO suspended the market simulation as of Friday, August 08, 2008 to apply and regression test patches. SIBR, the scheduling interface for market participants was the first system taken off line and the post market interfaces including market results and settlements were taken of line on Wednesday, August 13. SIBR Lite, a replication of the scheduling interface, wzx available to Market Participants during the outage to allow continued testing of bid submittal and retrieval. The CAISO is continued to run the market during the outage which will provide access to additional settlement statements once market simulation resumes.

Market Simulation met the scheduled resumption goal of August 19, 2008. The CAISO is confident that the system is stable enough to resume market simulation, and the market interfaces have been reopened to Market Participants with the expectation that execution of the operational scenarios can resume. Successful execution of the market scenarios is one of the exit criteria established to move beyond the current phase of market simulation into a pre-production phase which will allow Market Participants to test their business processes and assure their readiness for go-live.

The actual implementation plan going forward and the target date for go-live will be informed by the successful resumption of market simulation, execution of the operational scenarios and traceability of data throughout the business process cycle, i.e. bid to bill. Given that the CAISO has recently completed validation of over 90 charge codes and took the shutdown of the systems to address data consistency and traceability, it is anticipated that these objectives can be met shortly after market simulation resumes.

Generally it is expected that once the CAISO and Market Participants agree that the system is operating consistently and producing traceable, expected results, there will be a period of 3 months of uninterrupted simulation. This period is designed to allow Market Participants to engage in the market simulation incorporating MRTU business practices and processes to determine their readiness for go-live. This period may also include 1 month of “parallel operations” where the CAISO mandates that Market Participants submit schedules consistent with their current operations. This one month period is expected to occur as a lead up to the go-live date.

If you have any questions regarding details of market simulation or the next steps, please contact Spence Gerber at sgerber@apx.com or (916) 351-9759.

The MarketSuite has been operating daily in the MRTU simulation environment since May. Day Ahead and Real-time scheduling, bidding and trading applications are in use to create, review and submit schedules to the CAISO meeting the objectives of Market Participant interaction established by the CAISO for market simulation. Market results and select settlement reports are also available to review simulation results.

With the information released with the recent Charge Code validation effort, APX has begun to focus on the development and testing of its Settlement Verification application. Settlement Verification will allow validation of CAISO settlement statements by gathering input data from sources independent of that delivered by the CAISO within the settlement file output. It is expected that an initial batch of Charge Codes will be available in the Market Suite by late October for client use.

For those who have not had an opportunity to learn about the APX Market Suite, please follow this link for more information http://www.apx.com/news/pr-APX-Launches-Transaction-Platform-for-North-American-Energy-Markets.asp

If there are any questions regarding access to or the use of the APX MarketSuite, please call Cris Gallegos or Spence Gerber. We are more than willing to provide your company with a refresher course and demonstration of the APX MRTU software.

Contact your Account Manager Cris Gallegos (408.517.2154) or Wendy Brown (281.489.7633) for more information.