You may not realize it, but the California ISO does not operate a day-ahead spot market. They have only a real-time market and only a few percent of the State’s load is transacted through that market. Anything hedged on a day-ahead basis (or longer) is handled through informal, bilateral mechanisms.
But on February 1, 2008 they will be implementing a new day-ahead market, and converting from a zonal to a nodal pricing mechanism for generators, and implementing a bunch of other stuff, including a tradable transmission congestion product.
The ETRM Community Blog has a nice roundup summarizing some of the changes both California and Texas are implementing. Here’s their California summary:
California ISO – “MRTU”
The California ISO’s Market Redesign and Technology Upgrade (MRTU) program is currently forecasting a “go live” date of February 1st, 2008. As the CAISO describes it, the MRTU is “a comprehensive program that enhances grid reliability and fixes flaws in the ISO markets. It keeps California compatible with market designs that are working throughout North America and replaces aging technology with modern computer systems that keep pace with the dynamic needs of California’s energy industry”. For market participants, it entails a multitude of changes to the market structure, the most interesting of which are the move from zonal pricing to nodal pricing and the development of new day-ahead markets for energy, ancillary services and transmission management, with co-optimization, that is offerings including both energy and ancillary services in that day-ahead market.Additional changes of note include the development of a new congestion revenue rights (CRR) product, increased credit monitoring of market participants, and new penalties and enforcement procedures for deviations from the ISO dispatch instructions.