**1.0 Executive Summary**

In this white paper, we describe the proposed design of Grid West
Transmission Rights Reconfiguration Service (RCS) which is intended to
facilitate acquisition and trading of transmission rights by Grid West
participants as well as to help Grid West with the operation of the Grid
West Managed Transmission System (GWMT) in cooperation with the Grid
West transmission owners.

The principal attributes of the proposed Grid West Reconfiguration
Service are as follows:

-   Transmission rights that are offered into RCS are first translated
    into standardized tradable instruments called \"Injection/Withdrawal
    Rights (IWRs)\" to facilitate their trading;

-   In RCS Grid West trades IWRs through a centralized flow based
    clearing auction that combines the IWR offers and the GWMT Available
    Flow Capacities (AFCs) to match IWR bids;

-   The RCS auction objective is to maximize the value of IWR trades;
    hence, priority to buy IWRs goes to those who value these IWRs the
    most (bid highest prices for them) and priority to sell IWRs to
    those who offer to sell them at lowest prices;

-   Grid West participants who choose not to participate in RCS, retain
    their existing transmission rights (ETRs) and their associated
    scheduling flexibilities, if applicable;

-   Grid West participants can choose not to offer their IWRs, whether
    voluntarily translated from their existing rights or acquired
    through other mechanisms, into RCS;

-   Grid West participants who voluntarily translate part or all of
    their existing rights into IWRs then choose not to offer such IWRs
    into RCS, retain their existing transmission rights and their
    associated scheduling flexibilities;

-   Grid West participants who hold existing scheduling flexibilities
    (ESFs) can offer all or part of those flexibilities directly into
    the Day-Ahead RCS process for trading;

-   In RCS, Grid West trades IWRs of various durations, from one hour to
    one year, through multiple RCS timelines in order to enable Grid
    West participants to acquire IWRs in a timely fashion;

-   RCS includes market rules that address known market power concerns;
    and

-   To the extent possible, RCS leverages existing business processes
    and technology solutions from existing RTOs and ISOs in order to
    minimize its overall cost of implementation and operation.

# 2.0 [Problem Statement]{.underline}

One of Grid West\'s primary region-wide responsibilities is to improve
the availability of transmission capacity to all transmission customers
in order to enable efficient power transactions within its regional
footprint. Given the fundamental requirement that all transactions that
schedule to use the Grid West Managed Transmission System (GWMT) must
have applicable physical transmission rights, it is then necessary for
Grid West to offer services that will greatly facilitate the trading of
transmission rights among willing Grid West participants. Grid West\'s
Reconfiguration Service (RCS) is the most important component of such
services.[^1]

# 3.0 [Objectives and Design Criteria]{.underline}

Reconfiguration service allows IWRs to be awarded to Grid West
Participants using the IWRs offered into the market by other Grid West
Participants as well as available capacity in the transmission system.
In order to provide reconfiguration services, Grid West will set up a
sequence of markets and operational protocols to match bids and offers
of IWRs with various time spans. The trading algorithm, a clearing
auction, is designed to match bids with offers and AFCs in the most
economically efficient manner[^2] while complying with all physical and
contractual constraints that govern the operation of the GWMT. The
critical design criteria for RCS are:

-   RCS should, to the extent possible, use standardized tradable
    instruments to facilitate trading of transmission rights;

-   RCS should use a centralized auction to facilitate trading of IWRs
    among Grid West participants by combining the IWR offers and the
    GWMT Available Flowgate Capacities (AFCs) to award IWR bids;

-   RCS should maximize the value of IWR trades as its objective;

-   RCS should allow the Grid West participants who choose not to
    participate in RCS to retain their existing transmission rights and
    their associated scheduling flexibilities;

-   RCS should allow Grid West participants to elect not to offer their
    IWRs, whether voluntarily translated from their existing rights or
    acquired through other mechanisms;

-   RCS should allow Grid West participants, who voluntarily translate
    part or all of their existing rights into IWRs then choose not to
    offer such IWRs into RCS, to retain their original existing
    transmission rights and their associated scheduling flexibilities;

-   RCS should allow Grid West participants to offer all or part of the
    existing scheduling flexibilities that they hold, for trading into
    RCS;[^3]

-   RCS should enable Grid West participants to acquire IWRs of desired
    durations and in a timely fashion;

-   RCS should include market rules that address known market power
    concerns; and

-   To the extent possible, RCS should leverage existing business
    processes and technology solutions from existing RTOs and ISOs.

The proposed RCS solution, as presented in this white paper, is intended
to satisfy all the above design objective and criteria.

# 4.0 [RCS Process and Methodology]{.underline}

RCS consists of processes and functions that allow Grid West
participants to voluntarily trade (acquire or release) physical
transmission rights within GWMT. A prerequisite for efficient trading of
physical transmission rights is the introduction of \"standardized
trading instruments\" that can be readily understood and traded in
primary and secondary markets by transmission customers.[^4] For this
purpose, Grid West has introduced Injection/Withdrawal Rights (IWRs) as
such standardized instruments. An IWR represents the right to inject
power at a scheduling point (bus or hub) in the GWMT and withdraw the
same power at another scheduling point (bus or hub) in the GWMT within
an applicable timeframe. A complete definition of IWRs along with other
definitions is presented in the Grid West Glossary document.

RCS consists of processes and functions for Grid West and transmission
operators that allow Grid West participants to acquire or release
physical transmission rights in GWMT in the form of IWRs. In each RCS
process, Grid West participants can offer for sale the applicable[^5]
IWRs that they own through any of the following means:

1.  IWRs that have been voluntarily translated based on all or parts of
    their existing rights;[^6]

2.  IWRs that have been acquired through transmission expansion
    projects;

3.  IWRs that have been bilaterally acquired and registered with Grid
    West; [^7]

4.  IWRs that have been voluntarily translated by the new owners of
    bilaterally traded existing transmission rights; and

5.  IWRs that have been acquired from previous RCS auctions.

Grid west combines all offered IWRs with the Available Flowgate
Capacities (AFC)[^8] of the GWMT to conduct its RCS auction. In addition
Grid West as part of Day-Ahead reconfiguration service allows its
participants to offer the existing scheduling flexibilities (ESFs) that
they hold into the IWR auction.

In order to allow for timely and efficient acquisition of IWRs, Grid
West performs the reconfiguration service on regular intervals through
the following processes:

-   Annual Reconfiguration Service (A-RCS): A-RCS is conducted once a
    year and is intended to trade monthly peak and off-peak IWRs (24
    products) for all 12 months of the operating year.

-   Monthly Reconfiguration Service (M-RCS): M-RCS is conducted once a
    month and is intended to trade monthly peak and off-pear IWRs for
    each of the remaining months of the operating year.

-   Intra-Monthly Reconfiguration Service (I-RCS): I-RCS is conducted on
    daily basis and is intended to trade daily peak and off-peak IWRs
    beginning with two days after the auction each of the days in the
    remainder of the operating month.

-   Day Ahead Reconfiguration Service (DA-RCS): DA-RCS is also conducted
    on daily basis and is intended to trade IWRs on an hourly basis for
    the 24 hours of the next day.

After the DA-RCS and up to scheduling deadline, IWRs may still be
bilaterally acquired without Grid West involvement but these IWR
ownership changes must be registered with Grid West before the
\"registration deadline\" if such bilaterally traded IWRs are to be used
for scheduling.[^9]

Figure 4a presents the relative sequence and timelines of the A-RCS,
M-RCS, I-RCS and DA-RCS processes.[^10]

***Figure 4a - RCS timelines***

The proposed process flow diagram for a typical RCS process is presented
in Figure 4b which applies to all four RCS timelines. Figure 4b also
shows the timeline for these processes which are as follow:

1.  Development of a Transmission Rights Basecase (TRB) by Grid West for
    each RCS auction. This process should be performed well in advance
    of each RCS auction: at least two weeks for A-RCS, one week for
    M-RCS, One day for I-RCS and 8 hours before DA-RCS.

2.  Calculation and Posting of Available Flow Capacities by Grid West
    for each RCS auction. This process is performed right after TRB is
    complete.

3.  Submittal of IWR offers and bids by Grid West participants through a
    secure web delivery system and during the applicable time window.
    Deadlines for such submittals are dependent on the RCS timeline and
    would vary from one day for the A-RCS and M-RCS to one hour for
    I-RCS and DA-RCS. Grid West participants may also offer the existing
    scheduling flexibility (ESF) that they hold into DA-RCS by
    submitting their Intended Retained Right (IRR). IRR would be
    presented as a set of injections and withdrawals (or a range of
    values for injections and withdrawals) at applicable scheduling
    points.

4.  Validation of IWR offers and bids by Grid West to ensure that all
    offers and bids are valid and comply with all rules of the RCS
    process. Bid and offer validation is performed virtually at the same
    time that the offers and bids are submitted. IRRs are also validated
    for DA-RCS to ensure that the IRRs correspond with the remaining
    existing scheduling flexibility of the associated right.

5.  Execution of IWR Auction by Grid West during the relevant time
    window for the specific auction.

6.  Posting of IWR auction awards and prices by Grid West no later than
    one hour after the auction is complete for DA-RCS and I-RCS and no
    later than a few days after the auction is completed for M-RCS and
    A-RCS.

7.  Updating of the Rights Data Translation Management (RDTM)
    Database[^11] with the updated IWR awards.

![](media/image3.wmf)

***Figure 4b - RCS Process Flow and Timeline***

RCS processes are described in greater detail in the sections that
follow. These processes are essentially the same for A-RCS, M-RCS and
I-RCS as they apply to the applicable auction scenarios within these
reconfiguration processes. However, there are several unique features to
DA-RCS that are covered in a Section 4.6 below.

## 4.1 Transmission Rights Basecase (TRB) Development

Transmission Rights Basecase (TRB) is the foundation of the IWR auction
process. The TRB not only provides the transmission system data used by
the IWR auction model but is also used to identify the AFC that the
model will use in conducting the auction.[^12] TRB is developed using
one or more \"power flow\" saved cases representing the WECC
transmission system under the applicable operating scenarios with
emphasis on the GWMT.[^13]

Starting from a full WECC case, Grid West will develop the base
transmission system data that will be used for each auction scenario
within various RCS processes. The data will include system topology
data, transmission line parameter data and the relevant load
distribution factors. For A-RCS and M-RCS, typical peak and off-peak
basecases are developed for the applicable monthly auction scenarios.
For I-RCS daily peak and off-peak basecases are developed for each
auction day. Alternatively the same peak and off-peak basecases can be
used for the all days covered in the I-RCS. Grid West can potentially
develop as many as 24 hourly basecases for DA-RCS. We expect, however,
that the same basecase will be by and large used for all 24 hours IWR
auctions.

## 4.2 AFC Calculation and Posting

Before IWR auctions, Grid West will compute and post AFCs and Path
Utilization Factors (\"PUFs\"). Grid West will perform this function in
two steps for A-RCS, M-RCS and I-RCS markets and in a single step for
DA-RCS. In Step 1, Grid West\'s goal is to account for subscribed
flowgate capacities due to Transmission Owner (TO) Obligations and ETRs.
Given its knowledge of historical GWMT use for TO obligations and ETRs,
Grid West will estimate the capacity requirements needed for these
subscriptions. This approach, called an X-factor discount, is presented
further below in this section. In Step 2, Grid West\'s goal is to
account for the subscribed flow gate capacities due to traded and
created IWRs. In this step Grid West assumes that IWRs will be used in
new ways after the auction by Grid West participants (i.e. there is no
historical use reference) and hence IWRs are treated as
\"non-simultaneous physical rights.\"[^14] Special power flow solutions
are used to determine the subscribed flowgate capacities due to IWRs.

The two steps of AFC calculation are presented in additional detail
below:

**Step 1:** Grid West will set up the power flow case using the TRB for
each auction scenario.[^15] All TO obligations and ETRs, adjusted for
active IWRs,[^16] are simultaneously modeled in this case. In modeling
adjusted TO obligations and ETRs for an auction scenario, we use their
expected configuration for that auction scenario as specified by the
corresponding TO and the corresponding ETR holder and adjust them for
active IWRs. The model accounts for counterflow effects of the adjusted
TO obligations and ETRs.

-   
-   
-   

The power flow analysis calculates the un-subscribed transmission
capacity on all transmission flowgates. Available flow capacities are
subsequently discounted based on the X-factor methodology which takes
into account historical use of the flowgate. X-factor approach is
summarily presented in Section 4.2.1 below. If, at this stage, a
transmission flowgate is oversubscribed, the AFC for that flowgate is
set to zero. Finally, the AFC in the opposite direction of the dominant
flow is always set equal to line TFC. The example of Appendix A
elucidates this step.

**Step 2:** This step of AFC calculation entails accounting for all
active IWRs. Another power flow analysis, in which all existing IWRs are
treated as non-simultaneous physical rights, will identify the
transmission system capacity subscriptions due to active IWRs and, as a
result, the AFC in both directions on all identified transmission
flowgates. Here again, if a transmission flowgate is oversubscribed in a
direction, the AFC for that flowgate is set to zero.[^17]

The power flow analysis will also calculate the Path Utilization Factors
(PUFs) for the set of monitored flowgates and identified scheduling
point (buses/hubs). For a monitored flowgate, each PUF signifies flow
contribution on that flowgate as a fraction of the injection (or
withdrawal) at a scheduling point within GWMT. The AFCs and PUFs
calculated in this fashion are used in the IWR auction process and will
be posted through Grid West market information system and all relevant
OASIS sites.[^18]

The example of Appendix A clarifies the process of Step 2.

## 4.2.1 X-Factor Methodology

X-factor methodology corresponds to discounting AFCs in Step 1 for
flowgates which have counterflow subscriptions with a fractional
multiplier (X-factor) specifically calculated for that flowgate. For
these flowgates, X-factors account for the fact that transactions based
on adjusted TO obligations and ETRs may not occur simultaneously at the
time of flowgate use and hence their full counterflow impact should be
discounted at such times.[^19]

For a flowgate where all the flows are predominantly in the same
direction, the X-factor can be greater than one (1) to account for the
fact that all these additive transactions may not occur simultaneously
either.

Flowgate X-factors are used to account for the following factors that
influence actual use of a flowgate versus the net subscriptions
calculated for that flowgate using the power flow analysis:

-   Simultaneity of the actual transactions whose transmission rights
    are used to calculate flowgate subscription; and

-   Flowgate capacity due to stochastic events such as system
    contingencies or loop flows.

X-factors are calculated based on comparing the historical flows with
the calculated subscription from the power flow analysis of Step 1 on
those flowgates. Under this methodology, every flowgate will have its
own X-factor value for each RCS process and auction scenario. X-factor
values should be updated on regular intervals using power flow studies
using historical use of the GWMT and the outcome of schedule
adjustment/curtailment process. If there are extensive schedule
adjustments and curtailments during the schedule adjustment/ curtailment
process, the X-factors should be reduced. If there are persistent unused
transmission capacities during the schedule adjustment/ curtailment
process, X-factors may be increased.

## 4.3 IWR Validation

IWR validation verifies IWR offers and bids before they are used in the
IWR auction. The IWR validation function entails verifying the following
attributes of the IWR:

-   Participant Validation: validate that the entity offering or bidding
    IWR is an authorized Grid West participant; and verify that the
    participant has the proper trading rights and meets credit
    requirements to fully or partially participate in the RCS.

-   IWR Value Validation: validate that the offered IWR actually exists
    based on the IWR inventory database.

-   Ownership Validation: validate that the entity offering IWR is the
    \"registered owner\" of the IWR per Grid West inventory database.

-   Timeframe Validation: validate that the offered IWR is applicable to
    the timeframe of the auction. Timeframe applies both to the scenario
    dimension as well as the duration dimension of the IWR.

-   Syntax Validation: validate data entry syntax errors.

-   IRR Validation: validate that the submitted intended retained rights
    (IRRs) for DA-RCS by verifying that an IRR falls within the
    remaining ESF of the corresponding transmission right.[^20]

Only IWRs offers and bids that pass all these validation steps will be
allowed in and used in the IWR auction.

## 4.4 IWR Auction 

The IWR auction uses a linearized Optimal Power Flow (OPF) [^21] model
that represents the physical characteristics of the transmission system
in a DC power flow framework and uses it to perform the auction.[^22]
The auction matches IWR offers and bids and AFCs with the objective of
maximizing the value of traded transmission rights subject to all
contractual and physical constraints of the transmission system.[^23]

An IWR auction is conducted for each relevant auction scenarios; for
example, there are 24 auction scenarios (monthly peak and off-peak for
the next 12 months) for the annual RCS. Auction scenarios are either
solved separately or tied together if IWR offers or bids require it. For
example, if one or more Grid West participants offer to sell or bid to
buy 24 equal IWRs for all of the 24 auction scenarios in the annual RCS
(IWR annual strip or block), the auction model will tie all 24 auction
scenarios together for the annual RCS.[^24] The same principles apply to
monthly RCS except that, rather than solving for each month of the 12
months of the year, it is done for each month for the remaining month(s)
of the year

In intra-monthly RCS auctions, peak and off-peak IWRs are auctioned on a
daily basis for the remaining days of the month (balance of the month
starting from the second day after the auction).[^25] Hence, for a
particular intra-monthly RCS, there could be as many as 62 peak and
off-peak auction scenarios, depending on the length of the months and
the day when the auction is performed. IWRs translated from existing
rights, either awarded through previous annual and monthly RCS processes
or acquired through bilateral trades, and registered with Grid West, can
be offered in the intra-monthly auction as daily peak and off-peak IWRs,
if applicable.[^26]

In DA-RCS process, IWRs are auctioned on an hourly basis for the next
business day[^27] (24 auction scenarios). IWRs translated from existing
rights, either awarded through previous annual, monthly and
intra-monthly RCS processes or acquired through bilateral trades, can be
offered in the Day Ahead auction as a string of hourly IWRs, when
applicable.[^28]

IWR sellers will receive the difference in clearing prices at the
relevant scheduling points for the awarded IWRs. Clearing prices are
standard output of the same DC-OPF model that is used for the IWR
auction. Buyers of IWRs will pay difference in clearing prices at the
relevant scheduling points for the IWRs purchased through the IWR
auction.

Those who release ESF into DA-RCS will receive payment equivalent to the
value of the AFCs that they make available on congested or congesting
flowgates. This value is calculated as the product of the capacity
released on the flowgate(s) due to ESF release multiplied by shadow
price of the flowgate(s).[^29]

## 4.5 Auction Results Posting

All IWR awards will be [privately]{.underline} communicated through
timely posting on the Grid West website. Clearing prices for scheduling
points, used for pricing IWRs, and the total quantities awarded in the
auction, however, will be posted on the Grid West market information
system and all the applicable OASIS sites. The same information is also
deposited into the RDTM database for use in the next rounds of the RCS
or for operational purpose.

## 4.6 DA-RCS Distinctive Features

There are several features in the DA-RCS process that are distinct from
those of the other RCS processes. These distinct features of the DA-RCS
are:

-   TO obligations and translated ETRs are modeled with full range of
    their scheduling flexibility during the DA-RCS auction as opposed to
    their expected value as was done for other RCS processes;

-   AFCs and PUFs are calculated in a single step and based on the
    assumption that , translated ETRs and IWRs can create counterflow
    flowgate subscriptions (X-factors are again used to account for the
    fact the counter flows may not be simultaneous); and

-   Existing scheduling flexibilities (ESFs) are allowed to be offered
    into DA-RCS by allowing ESF holders to submit their intended
    retained right (IRRs) into DA-RCS.

To accommodate these features, the DA-RCS auction model, although still
DC OPF based, will use some form of an \"internal dispatch model\" to
account for rights scheduling flexibility. The example of Appendix B
should help elucidate these specific features.

# 5.0 [Inputs & Outputs]{.underline}

All RCS processes have similar input and output data. DA-RCS has a few
additional input data requirements. Figure 4b showed the data flow
diagram for a typical RCS process. In the following tables, we define
each one of the inputs and outputs of these processes and present
specific details for individual RCS timelines.

## 5.1 RCS Input

Table 5.1 presents the inputs to the RCS process.

Table 5.1 - Inputs to the RCS process

+----------+------------------------+---------------------------------+
| Input    | Description            | Timeline Differentiators        |
+----------+------------------------+---------------------------------+
| TO       | All transmission       | A-RCS: Expected monthly         |
| ob       | obligations of the TOs | peak/off-peak I/W obligation    |
| ligation | (stemming from         | values at all relevant          |
|          | existing contracts,    | scheduling points for every     |
|          | coordination           | month of the year.              |
|          | agreements, treatise,  |                                 |
|          | etc.) presented as the | M-RCS: Expected monthly         |
|          | expected I/W           | peak/off-peak I/W obligation    |
|          | obligation values (or  | values at all relevant          |
|          | range of values) at    | scheduling points for the       |
|          | all relevant           | remaining months of the year.   |
|          | scheduling points and  |                                 |
|          | for the relevant       | I-RCS: Expected TO obligation   |
|          | auction scenario.      | daily peak/off-peak I/W values  |
|          |                        | at all relevant scheduling      |
|          |                        | points for the remaining days   |
|          |                        | of the month.                   |
|          |                        |                                 |
|          |                        | DA-RCS: Actual TO obligation    |
|          |                        | peak/off-peak I/W values or     |
|          |                        | range of values at all relevant |
|          |                        | scheduling points.              |
+----------+------------------------+---------------------------------+
| ETR      | Existing Transmission  |                                 |
|          | Rights of Grid West    |                                 |
|          | participants           |                                 |
|          | translated for the     |                                 |
|          | purpose of offering    |                                 |
|          | ESF into DA-RCS and    |                                 |
|          | presented as the I/W   |                                 |
|          | right values or value  |                                 |
|          | ranges at all relevant |                                 |
|          | scheduling points as   |                                 |
|          | well as overall rights |                                 |
|          | constraint for the     |                                 |
|          | ETR.[^30]              |                                 |
+----------+------------------------+---------------------------------+
| IWRs     | Injection right value  | A-RCS: Monthly peak/off-peak    |
|          | at one scheduling      | IWRs for every month of the     |
|          | point (bus/hub) and an | year.                           |
|          | equal withdrawal right |                                 |
|          | value at another       | M-RCS: Monthly peak/off-peak    |
|          | scheduling point       | IWRs for the remaining months   |
|          | (bus/hub) for each of  | of the year.                    |
|          | the applicable auction |                                 |
|          | scenarios.             | I-RCS: Daily peak/off-peak IWRs |
|          |                        | for the remaining days of the   |
|          |                        | month.                          |
|          |                        |                                 |
|          |                        | DA-RCS: Hourly IWRs for the     |
|          |                        | next business day.              |
+----------+------------------------+---------------------------------+
| Tran     | \"Power flow\" type    | A-RCS: System topology,         |
| smission | data for the WECC      | transformer and phase shifter   |
| System   | transmission systems.  | tap positions, and X-factors    |
| Data     | All GWMT to be         | for the 24 auction scenarios.   |
|          | presented. WECC system |                                 |
|          | outside GWF may be     | M-RCS: System topology;         |
|          | presented in full or   | transformer and phase shifter   |
|          | converted into an      | tap positions; and X-factors    |
|          | equivalent model for   | for the auction scenarios of    |
|          | ease of analysis.      | the remaining months of the     |
|          | Other transmission     | year.                           |
|          | related data include   |                                 |
|          | the appropriate        | I-RCS: System topology;         |
|          | flowgate flow limits   | transformer and phase shifter   |
|          | from the AFC           | tap positions; and X-factors    |
|          | calculation and outage | for the auction scenarios of    |
|          | schedules.             | the remaining days of the year. |
|          |                        |                                 |
|          | X-factors for all      | DA-RCS: System topology;        |
|          | \"monitored\"          | transformer and phase shifter   |
|          | flowgates calculated   | tap positions; and X-factors    |
|          | based on offline       | for the next business day.      |
|          | studies is included as |                                 |
|          | part of this           |                                 |
|          | information.           |                                 |
+----------+------------------------+---------------------------------+
| Offers   | Injection right and    | A-RCS: Monthly peak/off-peak    |
| to sell  | withdrawal right       | IWR offers for every month of   |
| IWR      | values (equal values)  | the year.                       |
|          | at two specific        |                                 |
|          | scheduling points      | M-RCS: Monthly peak/off-peak    |
|          | (bus/hub) in the       | IWR offers for the remaining    |
|          | system that            | months of the year.             |
|          | corresponds with the   |                                 |
|          | IWRs owned by the      | I-RCS: Daily peak/off-peak IWR  |
|          | offering entity per    | offers for the remaining days   |
|          | RDTM database.         | of the month.                   |
|          |                        |                                 |
|          |                        | DA-RCS: Hourly IWR offers for   |
|          |                        | the next business day.          |
+----------+------------------------+---------------------------------+
| Intended | For DA-RCS these       |                                 |
| Retained | represent the intended |                                 |
| Rights   | retained rights (IRRs) |                                 |
|          | by Grid West           |                                 |
|          | participants who hold  |                                 |
|          | the ESFs in the ETRs.  |                                 |
|          | IRRs are specified by  |                                 |
|          | the range of intended  |                                 |
|          | schedules (I/W values  |                                 |
|          | or range of values) at |                                 |
|          | one or more applicable |                                 |
|          | scheduling points.     |                                 |
|          | Alternatively a flag   |                                 |
|          | to Grid West           |                                 |
|          | requesting Grid West   |                                 |
|          | to choose the IRR for  |                                 |
|          | the ESF holders such   |                                 |
|          | that maximum AFC from  |                                 |
|          | ESF can be released    |                                 |
|          | into DA-RCS.           |                                 |
+----------+------------------------+---------------------------------+
| Bids to  | Injection right and    | A-RCS: Monthly peak and/or      |
| buy IWRs | withdrawal right       | off-peak IWR bids for one or    |
|          | values (equal values)  | more month of the year.         |
|          | at two specific        |                                 |
|          | transmission points in | M-RCS: Monthly peak and/or      |
|          | the system.            | off-peak IWR bids for one or    |
|          |                        | more months in the remaining    |
|          |                        | months of the year.             |
|          |                        |                                 |
|          |                        | I-RCS: Daily peak/off-peak IWR  |
|          |                        | bids for one or more days in    |
|          |                        | the remaining days of the       |
|          |                        | month.                          |
|          |                        |                                 |
|          |                        | DA-RCS: Hourly IWR bids for one |
|          |                        | or more hours of the next       |
|          |                        | business day.                   |
+----------+------------------------+---------------------------------+

## 5.2 RCS Output

Table 5.2 presents the outputs of a typical RCS process.

Table 5.2 - Outputs of the RCS process

+----------+------------------------+---------------------------------+
| Output   | Description            | Timeline Differentiators        |
+----------+------------------------+---------------------------------+
| AFCs &   | Available flow         | A-RCS: AFCs & PUFs for annual   |
| PUFs     | capacity for the       | auction scenarios.              |
|          | \"identified           |                                 |
|          | flowgates\" in the GWF | M-RCS: AFCs & PUFs for monthly  |
|          | transmission system as | auction scenarios.              |
|          | well as PUFs for the   |                                 |
|          | same flowgates and     | I-RCS: AFCs & PUFs for          |
|          | identified scheduling  | intra-monthly auction           |
|          | points (buses/bubs).   | scenarios.                      |
|          |                        |                                 |
|          |                        | DA-RCS: AFCs & PUFs for daily   |
|          |                        | auction scenarios.              |
+----------+------------------------+---------------------------------+
| Awarded  | The                    | A-RCS: Monthly peak/off-peak    |
| IWRs     | \"                     | IWR awards for every month of   |
|          | matched/reconfigured\" | the year.                       |
|          | IWRs (injection and    |                                 |
|          | withdrawal right       | M-RCS: Monthly peak/off-peak    |
|          | values at the          | IWR awards for the remaining    |
|          | requested points) and  | months of the year.             |
|          | the corresponding      |                                 |
|          | prices.                | I-RCS: Daily peak/off-peak IWR  |
|          |                        | awards for the remaining days   |
|          |                        | of the month.                   |
|          |                        |                                 |
|          |                        | DA-RCS: Hourly IWR awards for   |
|          |                        | the next business day.          |
+----------+------------------------+---------------------------------+
| Awarded  | The final retained     |                                 |
| Sc       | right (RR) range per   |                                 |
| heduling | scheduling point and   |                                 |
| Fle      | the payment amount for |                                 |
| xibility | the flexibility        |                                 |
|          | released into DA-RCS.  |                                 |
+----------+------------------------+---------------------------------+
| IWR      | IWR clearing prices    | A-RCS: Monthly peak/off-peak    |
| Prices   |                        | clearing prices for all IWR     |
|          |                        | scheduling points for all       |
|          |                        | scheduling points for every     |
|          |                        | month of the year.              |
|          |                        |                                 |
|          |                        | M-RCS: Monthly peak/off-peak    |
|          |                        | clearing prices for all IWR     |
|          |                        | scheduling points for all       |
|          |                        | scheduling points for the       |
|          |                        | remaining months of the year.   |
|          |                        |                                 |
|          |                        | I-RCS: Daily peak/off-peak      |
|          |                        | clearing prices for all IWR     |
|          |                        | scheduling points for all       |
|          |                        | scheduling points for the       |
|          |                        | remaining days of the month.    |
|          |                        |                                 |
|          |                        | DA-RCS: Hourly clearing prices  |
|          |                        | for all IWR scheduling points   |
|          |                        | for the next business day.      |
+----------+------------------------+---------------------------------+
| Auction  | AFCs, total awarded MW | A-RCS: Monthly peak/off-peak    |
| summary  | for each flowgate, LCP | AFCs, total awarded MW for each |
|          | prices for all         | flowgate, clearing prices for   |
|          | scheduling points plus | all scheduling points plus      |
|          | other summary          | other summary information for   |
|          | information for the    | all months of the year.         |
|          | applicable auction     |                                 |
|          | scenarios will be      | M-RCS: Monthly peak/off-peak    |
|          | posted onto market     | AFCs, total awarded MW for each |
|          | information system     | flowgate, clearing prices for   |
|          | MIS.                   | all scheduling points plus      |
|          |                        | other summary information for   |
|          |                        | the remaining months of the     |
|          |                        | year.                           |
|          |                        |                                 |
|          |                        | I-RCS: Daily peak/off-peak      |
|          |                        | AFCs, total awarded MW for each |
|          |                        | flowgate, clearing prices for   |
|          |                        | all scheduling points plus      |
|          |                        | other summary information for   |
|          |                        | the remaining days of the       |
|          |                        | month.                          |
|          |                        |                                 |
|          |                        | DA-RCS: Hourly AFCs, total      |
|          |                        | awarded MW for each flowgate,   |
|          |                        | clearing prices for all         |
|          |                        | scheduling points plus other    |
|          |                        | summary information for the     |
|          |                        | next business day.              |
+----------+------------------------+---------------------------------+

# 6.0 [Roles & Responsibilities]{.underline}

Table 6 describes the roles and responsibilities of Grid West and its
participants in the RCS process.

Table 6 - Grid West and its participants\' roles and responsibilities in
RCS

+---------+--------------------+-------------------+------------------+
| RCS     | Grid West          | Transmission      | Grid West        |
| T       |                    | Owners            | Participants     |
| imeline |                    |                   |                  |
+---------+--------------------+-------------------+------------------+
| Pre-    | -   Develop TRB    | -   Provide data  | -   Monitor      |
| Auction |     basecase       |     and assist    |                  |
|         |                    |     with building |                  |
|         | -   Publish        |     TRB and       |                  |
|         |     basecase       |     calculation   |                  |
|         |                    |     of AFCs and   |                  |
|         | -   Post AFCs      |     PUFs          |                  |
|         |                    |     calculations  |                  |
|         |                    |                   |                  |
|         |                    | -   Provide base  |                  |
|         |                    |     data used for |                  |
|         |                    |     validation    |                  |
+---------+--------------------+-------------------+------------------+
| Auction | -   Validate       | -   Monitor       | -   Submit IWR   |
|         |     bids/offers    |                   |     bids/offers  |
|         |                    |                   |                  |
|         | -   Execute        |                   | -   Submit IRRs  |
|         |     auction        |                   |     for DA-RCS   |
+---------+--------------------+-------------------+------------------+
| Post    | -   Post IWR       | -   Monitor       | -   Download     |
| Auction |     awards and     |                   |     market       |
|         |     prices and     |                   |     results      |
|         |     other market   |                   |                  |
|         |     information    |                   |                  |
|         |                    |                   |                  |
|         | -   Post retained  |                   |                  |
|         |     rights and     |                   |                  |
|         |     payments for   |                   |                  |
|         |     DA-RCS         |                   |                  |
+---------+--------------------+-------------------+------------------+

7.0 Revenue Allocation

IWR auction over a period is expected to produce net revenue for Grid
West due to the sale of AFCs as part of the IWR auction. Such net
revenues, if any, will be used to reduce Regional Revenue Requirement
Adjustment account (R3A).

8.0 Market Power & Market Efficiency Considerations

Market monitoring processes and mitigation rules are integral parts of
all competitive markets. Market mitigation measures have been used
proactively (market rules) and reactively (sanctions and penalties) to
ensure that markets are free of market power abuses. On the negative
side, market mitigation measures, whether proactive or reactive, have
the tendency to limit the competitiveness of the markets, so there
should be a balance between rules to mitigate market power and the need
for the market to behave \"competitively\" without undue administrative
interventions.

The Grid West reconfiguration service, as presented in this white paper,
is intended to complement existing transmission rights trading in GWF.
As such we do not foresee that RCS itself would create additional
opportunities for market power abuses. Nevertheless, the following
market mitigation processes should be considered for the Grid West RCS
to address any lingering concerns:

-   Monitoring and potentially limiting of IWR ownership concentration
    among Grid West participants especially for those with dominant
    energy positions;

-   Monitoring of purchase, resale and use patterns of IWRs by Grid West
    participants especially for those with dominant energy positions;
    and

-   Monitoring IWR auction participation, awards and prices, with the
    possibility of instituting price caps and/or other mitigation
    measures if needed to address identified problems.

9.0 Market Benchmarks

The underlying approach that Grid West uses to account for transmission
rights is different from those of the existing RTOs and ISOs in North
America. At the heart of this difference is that transmission rights in
existing RTOs and ISOs are solely intended to provide a financial hedge
against ex-post congestion charges. Hence, market participants in these
RTOs and ISOs do not need to own transmission rights in order to
schedule their transactions with their RTO or ISO.[^31]

Since most FTRs offered by existing RTOs and ISOs are purely financial
instruments, practically every MW of the transmission system capacity is
available for the FTR auction (and later for the Day Ahead energy
auction). Hence, the FTR auctions are normally performed in segments
where portions of the available transmission capacity are auctioned off.
In addition, due to the financial nature of FTRs, most existing RTOs and
ISOs only conduct annual and monthly FTR auction for seasonal or monthly
peak and off-peak FTRs.[^32]

Furthermore, Grid West\'s DA-RCS process, which allows ESFs to be
offered into the IWR auction, is not comparable to any transmission
rights trading mechanism used in existing RTOs and ISOs.

Despite these dissimilarities in the fundamental application of
transmission rights, there are several similarities in the processes
used for administering transmission rights by Grid West and existing
RTOs and ISOs. These similarities that are presented in table 9a allow
the same computational techniques and tools used by these RTOs and ISOs
for FTR auctions to be, by and large, usable for Grid West in its
various RCS processes. Even the DA-RCS with its unique feature of
accounting for scheduling flexibilities can be, by and large, managed
using these same computational techniques and tools - modified to model
scheduling flexibilities.

Table 9a - Comparison of Grid West RCS process and FTR trading by
existing RTOs/ISOs

+----------------+--------------+----------------+--------------------+
| Auction        | PJM          | ERCOT          | MISO               |
| Attribute      |              |                |                    |
+----------------+--------------+----------------+--------------------+
| Auction        | -   Similar  |                |                    |
| Mechanism      |     to Grid  |                |                    |
|                |     West,    |                |                    |
|                |     PJM,     |                |                    |
|                |     ERCOT    |                |                    |
|                |     and MISO |                |                    |
|                |     (in the  |                |                    |
|                |     near     |                |                    |
|                |     future)  |                |                    |
|                |     use      |                |                    |
|                |              |                |                    |
|                | Simultaneous |                |                    |
|                |              |                |                    |
|                |  Feasibility |                |                    |
|                |     Test     |                |                    |
|                |     (SFT)    |                |                    |
|                |     with the |                |                    |
|                |              |                |                    |
|                |    objective |                |                    |
|                |     of       |                |                    |
|                |              |                |                    |
|                |   maximizing |                |                    |
|                |     market   |                |                    |
|                |     value    |                |                    |
|                |     for      |                |                    |
|                |              |                |                    |
|                |   conducting |                |                    |
|                |     their    |                |                    |
|                |     FTR      |                |                    |
|                |     au       |                |                    |
|                | ctions.[^33] |                |                    |
+----------------+--------------+----------------+--------------------+
| Auction        | -   Similar  |                |                    |
| Pricing        |     to Grid  |                |                    |
|                |     West,    |                |                    |
|                |     PJM,     |                |                    |
|                |     ERCOT    |                |                    |
|                |     and MISO |                |                    |
|                |     (in the  |                |                    |
|                |     near     |                |                    |
|                |     future)  |                |                    |
|                |     use      |                |                    |
|                |     uniform  |                |                    |
|                |     MCP for  |                |                    |
|                |     auction  |                |                    |
|                |     pricing. |                |                    |
+----------------+--------------+----------------+--------------------+
| Revenue        | -   Similar  |                |                    |
| Allocation     |     to Grid  |                |                    |
|                |     West,    |                |                    |
|                |     PJM,     |                |                    |
|                |     ERCOT    |                |                    |
|                |     and MISO |                |                    |
|                |     (in the  |                |                    |
|                |     near     |                |                    |
|                |     future)  |                |                    |
|                |     use any  |                |                    |
|                |     net      |                |                    |
|                |     revenue  |                |                    |
|                |     to go    |                |                    |
|                |     towards  |                |                    |
|                |     paying   |                |                    |
|                |     off the  |                |                    |
|                |     embedded |                |                    |
|                |     cost of  |                |                    |
|                |     the      |                |                    |
|                |              |                |                    |
|                | transmission |                |                    |
|                |              |                |                    |
|                | system.[^34] |                |                    |
+----------------+--------------+----------------+--------------------+

Table 9b shows the FTR products and the frequency of trading these
products by some of the existing RTOs and ISOs.

Table 9b - FTR products and their Frequency of Trading

+-----------------------+-----------------------+-----------------------+
| RTO/ISO               | Frequency of FTR      | FTR Duration (Months) |
|                       | Auction               |                       |
+-----------------------+-----------------------+-----------------------+
| MISO                  | Annual                | 12                    |
|                       |                       |                       |
|                       | Monthly               | 1                     |
+-----------------------+-----------------------+-----------------------+
| ISO-NE                | Annual                | 12                    |
|                       |                       |                       |
|                       | Monthly               | 1                     |
+-----------------------+-----------------------+-----------------------+
| NYISO                 | Semi Annual           | 6 - 12                |
|                       |                       |                       |
|                       | Monthly               | 1                     |
|                       |                       |                       |
|                       |                       | 60                    |
+-----------------------+-----------------------+-----------------------+
| PJM                   | Annual                | 12                    |
|                       |                       |                       |
|                       | Monthly               | 1                     |
+-----------------------+-----------------------+-----------------------+
| ERCOT                 | Annual                | 12                    |
|                       |                       |                       |
|                       | Monthly               | 1                     |
+-----------------------+-----------------------+-----------------------+
| Grid West (IWR        | Annual (A-RCS)        | 12                    |
| Trading)              |                       |                       |
|                       | Monthly (M-RCS)       | 1                     |
|                       |                       |                       |
|                       | Daily (I-RCS)         | 1 day                 |
|                       |                       |                       |
|                       | Hourly (DA-RCS)       | 1 hour                |
+-----------------------+-----------------------+-----------------------+

10.0 Technology Solutions

As described earlier the technologies required for the RCS
implementation are by and large already available and are in use by the
industry. Relational databases that would house the transmission owner
obligations and translated transmission rights data (RDTM database) can
be readily procured and designed. Transmission System Database is a
standard construct of most power flow solution vendors. Standard secure
web interfaces can be used to exchange private and public input and
output data with Grid West participants.

Participants\' input data validation process uses straightforward
algorithms and relies on the RDTM database. In addition, IWR auction
model for A-RCS, M-RCS and I-RCS is rather a very complex model (Option
Based SFT) but such a model is already in use by existing RTOs and ISOs.

Grid West\'s DA-RCS auction process, on the other hand, has the unique
feature of accounting for scheduling flexibilities and as such requires
special new modeling features that we believe can be readily added to
the existing auction models offered by the industry.

11.0 Organization Requirements

Table 10 presents the resource requirements for the operation and
support of RCS business processes and technologies.[^35]

Table 11 - RCS Staff Requirements

+---------------+--------------+---------+----------------------------+
| Division      | Department   | Role    | Responsibility             |
+---------------+--------------+---------+----------------------------+
| Market        | Forward      | Manager | -   RCS Management         |
| Operations    | Markets      |         |                            |
+---------------+--------------+---------+----------------------------+
| Market        | Forward      | Analyst | -   Basecase Development   |
| Operations    | Markets      | (2)     |                            |
+---------------+--------------+---------+----------------------------+
| Market        | Forward      | Analyst | -   AFC/PUF Calculation    |
| Operations    | Markets      | (5)     |     and Posting            |
|               |              |         |                            |
|               |              |         | -   IWR Validation         |
|               |              |         |                            |
|               |              |         | -   IWR Auction & Posting  |
+---------------+--------------+---------+----------------------------+
| Information   | Market       | Analyst | -   Application Support    |
| Technology    | Systems      | (2)     |                            |
+---------------+--------------+---------+----------------------------+
| Information   | Market       | Analyst | -   Database Support       |
| Technology    | Systems      | (1)     |                            |
+---------------+--------------+---------+----------------------------+

12.0 Cost Drivers

We have already identified some of the cost drivers that would impact
the setting up and operation of the RCS for Grid West. A preliminary
list of such cost drivers include:

-   System Redundancy: Redundant systems improve market response;
    however, they can be costly. For market solutions, such as RCS, one
    could use cold standby and non-clustered solution to reduce cost. No
    redundancy should be required for the Secondary (fail-over) site of
    the RCS operation. In addition, ASP or outsourcing services for some
    systems can further reduce startup and potentially ongoing costs.
    Data redundancy can also be provided in a cold stand-by mode so far
    as near-synchronous data replication is in place between primary and
    backup system in Primary site and to the system in the Secondary
    site.

-   Staff Redundancy: Staff redundancy ensures smooth and long-term
    operation of RCS. Redundancy of staff can be minimized if timing of
    various RCS auction functions is planned to ensure that same
    resources can cover multiple functions.

-   RCS Operation Timing: Limiting the time of RCS to business hours on
    weekdays will reduce resource (staff and applications and
    infrastructure) requirements and will help manage startup and
    ongoing costs.

-   Complexity of Solution: A careful balance should be extended against
    rigor with which the application models are built and run and cost
    of attaining such a rigorous solution (that may still only be an
    approximation of the reality). For the RCS process consistency is
    just as important as accuracy. One area for savings is the use of DC
    versus AC power flow based solutions for RCS auctions.

-   Market Monitoring: The more extensive the market monitoring scope,
    especially the scope of after the fact surveillance, the higher the
    cost of the underlying system. If the bulk of market monitoring is
    in the form of preventive and auditable market rules, less effort
    will be extended for market monitoring.

-   Participants System Access: The more direct and high speed access
    into Grid West is provided to Grid West participants, the more the
    infrastructure and application costs. Internet, once properly
    secured through straightforward measures, offers a very reliable and
    inexpensive access media for market participants in the RCS auction.

-   Multi-purpose System Use: Various RCS processes (A-RCS, M-RCS, I-OCS
    and DA-RCS) can use the same system and staff resources. In order to
    achieve this goal it is imperative that the timing of various RCS
    auctions be carefully aligned so that the same resources can be used
    for all RCS auctions. Table 12 presents one such timing arrangement.

Table 11 - RCS execution time

  -------------------- ------------------------- -------------------------
  RCS Timeline         Run Date                  Run Date

  Annual RCS           Once a Year (non-Friday   2-5 PM (potentially
                       weekday in June)          repeated multiple times)

  Monthly RCS          Once a month (a           11AM-1PM (potentially
                       non-Friday weekday in the repeated multiple times)
                       last full week of the     
                       month)                    

  Intra-monthly RCS    Daily on business days    9AM - 10AM

  Day-Ahead RCS        Daily on business days    7 AM - 8 AM
  -------------------- ------------------------- -------------------------

Appendix A - Example of RCS

In this appendix we will present a simple end-to-end example that covers
the principal functions of the RCS process. This example is applicable
to A-RCS, M-RCS and I-RCS. The example of DA-RCS is presented in
Appendix B. All of these examples assume that the reader has a basic
acquaintance with the calculation of power flows in a simple network.
For non-technical readers unfamiliar with such calculations, Appendix C
has been provided as an introduction to the basic concepts used.
Non-technical readers may find it beneficial to read Appendix C before
reading with the other two appendices.

**[Pre-Auction:]{.underline}**

Figure A-a shows a 3 bus system with 3 equal impedance transmission
flowgates (paths). The Total Flow Capacity (TFC) is also shown on each
flowgate.

Figure A-a - Transmission Rights Basecase

Let\'s assume that these are three existing transmission rights
(ETRs)[^36] - all are point to point:

-   ETR1: 60 MW from bus A to bus C

-   ETR2: 60 MW from bus C to bus B

```{=html}
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```
-   ETR3: 60 MW from bus A to bus B

Now let\'s assume that ETR3 has been voluntarily translated by its owner
into an IWR of the same magnitude from bus A to bus B. Also let\'s also
assume that 30 MW of the translated IWR has been sold in a previous RCS
process.

**Step 1** of the AFC calculation process involves simulating non
translated existing rights ETR1 and ETR2 and the non-traded portion of
ETR3 as shown in Figure A-b.

Figure A-b - ETR Flowgate Subscriptions

Table A-a presents the process of calculating AFCs using the methodology
described in Section 4.2. In this and all subsequent tables "AFC^+^"
refers to AFC in the direction of the arrow shown and "AFC^-^" refers to
AFC in the opposite direction to the arrow. The same convention is used
for subscriptions (Sub) in this and all subsequent figures.

Table A-a - AFC after accounting for ETRs

  ---------- ------------ --------- -------- -------- ---------- ---------- ----------
  Flowgate   TFC in both  Net ETR   AFC^+^   AFC^-^   X-Factor   AFC^+^     AFC^-^
             directions   Sub^+^                      for AFC^+^ after      after
                                                                 X-Factor   X-Factor

  A - B      90 MW        60 MW     30 MW    90 MW    1.0        30 MW      90 MW

  A - C      120 MW       30 MW     90 MW    120 MW   0.9        81 MW      120 MW

  C - B      120 MW       30 MW     90 MW    120 MW   0.9        81 MW      120 MW
  ---------- ------------ --------- -------- -------- ---------- ---------- ----------

**Step 2** in the calculation of AFCs involves accounting for traded,
awarded or acquired IWRs (namely, all rights that have not been
considered so far). Let\'s assume that in addition to the portion of
ETR3 that had been traded as IWR (IWR1), there is another IWR (IWR2)
from bus C to Bus B for 30 MW (acquired previously). The two new IWRs
are

-   IWR1: 30 MW from bus A to bus B

-   IWR2: 30 MW from bus C to bus B

Figure A-c offers the IWRs and their flowgate usage. Note that in this
figure the counterflow contribution of IWR2 on flowgate A-C has been
ignored while all same direction flow contributions are added up. Table
A-b presents the process of calculating the final AFCs. Table A-c
presents table of PUFs for this example.

Figure Ac - IWR Flowgate Subscriptions

Table Ab - AFC after accounting for IWRs

  ---------- ---------- ---------- --------- --------- --------- ----------
  Flowgate   AFC^+^     AFC^-^     Net IWR   Net IWR   AFC^+^    AFC^-^
             before     before     Sub^+^    Sub^-^    after     after IWRs
             IWRs       IWRs                           IWRs      

  A - B      30 MW      90 MW      30 MW     0 MW      0 MW      90 MW

  A - C      81 MW      120 MW     10 MW     10 MW     71 MW     110 MW

  C - B      81 MW      120 MW     30 MW     0 MW      51 MW     120 MW
  ---------- ---------- ---------- --------- --------- --------- ----------

Table A-c - PUFs for the example system (Bus C is the Reference/Slack
Bus)

  ------------- ---------------- ----------------- -----------------------
  Flowgate      Bus A            Bus B             Bus C

  A - B         1/3              -1/3              0

  A - C         2/3              1/3               0

  C - B         -1/3             -2/3              0
  ------------- ---------------- ----------------- -----------------------

In Table A-c PUFs represent the flow contribution on a flowgate due to
injection of 1 MW at a bus. For example, this table shows that if 1 MW
is injected at Bus B, 1/3 of a MW will flow on Flowgate A-B in the
opposite direction (from B to A), 1/3 MW will flow on Flowgate A-C and
2/3 MW will flow on Flowgate C-B in the opposite direction (from B to
C) - please note that Bus C is the reference bus, i.e. every MW injected
at Bus B ends up at Bus C. Table A-c helps with predicting flow
contribution due to an IWR. Suppose a Grid West participant wants to buy
30 MW IWR from Bus A to Bus B. This participant calculates its
contribution on every flowgate as follows:

-   Flowgate A-B: 30 \* \[(1/3) - (-1/3)\] = 20 MW

-   Flowgate A-C: 30 \* \[(2/3) - (1/3)\] = 10 MW

-   Flowgate C-B: 30 \* \[(-1/3) - (-2/3)\] = 10 MW

**[Auction Example 1:]{.underline}**

Entering into the auction we assume that that there are 2 bidders for
IWRs in the IWR auction:

-   Bid1: 50 MW from bus A to bus B at \$20/MW

-   Bid2: 50 MW from bus C to bus B at \$15/MW

Let\'s also assume that the owner of IWR1 offers the IWR as follows:

-   IWR1 offer: 15 MW IWR as price taker

Figure A-d presents the network diagram for this bidding scenario.
Please note that the arrows for the offered IWRs are reversed to show
that they are offered for sale to free up capacity for new IWR buy bids.
Also note that AFCs from the last round are included on the diagram.

Figure A-d - IWR Auction Offers and Bids

Figure A-e presents the IWR auction results. The auction outcome has
been attained based on maximizing the overall value of the IWR trades
(total value of the bids minus the total cost of offers) which awards
the offered IWRs to Bidder 2, even though Bidder 2 bid a lower per MW
price, since for every one MW of IWR1 offered, Bidder 2 can buy two MWs
due to network configuration. For this auction award, the overall market
value is:[^37]

-   30 MW \* \$15/MW - 15 MW \* \$0/MW = \$450

If Bidder 1 was selected, the overall market value would have only been:

-   15 MW \* \$20/MW - 15 MW \* \$0/MW = \$300

Figure A-e - IWR Auction Results

In this example Bid2 is at margin and sets clearing prices at all buses.
Please note that the negative clearing price at Bus A is a result of
setting the reference price bus at zero. The negative price does not
signify anything in an IWR auction as only the differences in bus
clearing prices are meaningful in such an auction.

Table A-d presents the settlement amounts. Please note that in this
scenario although the value trades is \$450, Grid West will be revenue
neutral (difference of the awarded IWR charges and awarded IWR credits).

Table A-d - IWR auction awards and settlement results

  --------------- ---------------- ----------------- ---------------------
  Participant     Award Amount     IWR Price         Charge or (Credit)

  IWR1            15 MW            \$30/MW           (\$450)

  Bidder 1        0                0                 0

  Bidder 2        30 MW            \$15/MW           \$450
  --------------- ---------------- ----------------- ---------------------

**[Auction Example 2:]{.underline}**

In this example let\'s assume that the owner of IWR2 offers the IWR as
follows:

-   IWR1 offer: 30 MW IWR as price taker

Figure A-f presents the network diagram for this bidding scenario.

Figure A-f - IWR Auction Offers and Bids

Figure A-g presents the IWR auction results. The auction outcome has
been attained based on maximizing the overall value of the IWR trades
(total value of the bids minus the total cost of offers). In this
example Bid1 is at margin and sets the clearing prices at all buses.

Figure A-g - IWR Auction Results

Table A-e presents the settlement results for this example.

Table A-e - IWR auction awards and settlement results

  --------------- ---------------- ----------------- ---------------------
  Participant     Award Amount     IWR Price         Charge or (Credit)

  IWR1            30 MW            \$20/MW           (\$600)

  Bidder 1        5 MW             \$20/MW           \$100

  Bidder 2        50 MW            \$10/MW           \$500
  --------------- ---------------- ----------------- ---------------------

Appendix B - Example of DA-RCS

In this appendix we will present a simple end-to-end example that covers
the principal functions of the DA-RCS process. As noted earlier the many
of the steps in DA-RCS process are distinct from those of other RCS
processes.

**[Pre-Auction:]{.underline}**

Figure B-a shows a 3 bus system that will be used to present the example
of DA-RCS. Total Flowgate Capacities (TFCs) are also shown in this
figure.

Figure B-a - Transmission Rights Basecase

Let\'s assume that these is one multipoint to multipoint ETR, with
existing scheduling flexibility (ESF) as shown, and one IWR in this
system - Figure B-b:

Figure B-a - Existing Rights Configuration

Table B-a presents the process of calculating AFCs for DA-RCS. As
described in Section 4.6, for DA-RCS:

-   The entire scheduling flexibility is taken into consideration in
    evaluating flowgate subscription due to an ESFs;

-   Counterflows due to ETRs and IWRs are allowed; and

-   AFCs are modified based on X-factors after subscriptions are netted
    out.

Table B-a - AFC calculation for DA-RCS

  ---------- ------ --------- ------- -------- -------- ---------- ------------- --------
  Flowgate   TFC    Net Sub           AFC               X-factor   AFC after X\  
             (MW)   by                Before                       (MW)          
                    ESF/IWR           X\                                         
                    (MW)              (MW)                                       

                    \+        \-      \+       \-                  \+            \-

  A-B        300    50        -50     250      300      0.9        225           270

  A-C        300    250       0       50       300      1.0        50            300

  B-C        300    300       0       0        300      1.0        **Zero(0)**   300
  ---------- ------ --------- ------- -------- -------- ---------- ------------- --------

Note that based on this right configuration, there is no AFC on flowgate
B-C from B to C; hence, no new rights can be awarded (issued) based on
AFCs in the system.

**[Auction:]{.underline}**

Entering into the DA-RCS auction we assume that the ESF holder offers to
release its flexibility as a price taker and IWR2 is a new bid to buy
capacity as shown in Figure B-b below. In this figure ESF holder submits
an intended retained right configuration will less flexibility than the
original right allowed and as such releases the extra flexibility into
DA-RCS auction. IWR1 maintains its position unchanged.

Figure B-b - DA-RCS IWR Auction Offers and Bids

Table B-b presents the AFCs before the auction and after ESF1 holder has
offered some of its flexibility.

Table B-b - AFCs after ESF1 holder offered some of its flexibility

  ---------- ------ --------- ------- -------- -------- ---------- -------- --------
  Flowgate   TFC    Net Sub           AFC               X-factor   AFC      
             (MW)   by                Before                       after X\ 
                    ESF/IWR           X\                           (MW)     
                    (MW)              (MW)                                  

                    \+        \-      \+       \-                  \+       \-

  A-B        300    50        50      250      250      0.9        225      225

  A-C        300    250       0       50       300      1.0        50       300

  B-C        300    250       0       50       300      1.0        **50**   300
  ---------- ------ --------- ------- -------- -------- ---------- -------- --------

Note that due to ESF1 flexibility offer, Flowgate B-C\'s AFC increases
from zero to 50 MW. During the auction this 50 MW AFC is used to award
75 MW to IWR2 as shown in Figure B-c which contains the auction outcome.

Figure B-c - IWR Auction Results

In this example IWR2 is at margin and sets clearing prices at all buses.

The settlement results are presented in the following:

-   IWR2 pays: 75 \* (\$10 - \$0) = \$750

-   ESF1 receives: 50 \* \$15 = \$750

Note that ESF1 holder is paid based on the value of the 50MW AFC that it
has released into DA-RCS - product of released AFC on B-C flowgate (50
MW) and the shadow price of that flowgate (\$15/MW).

-   
-   
-   
-   
-   

**Appendix C --** **[An Introduction to the Calculation of Power-Flows
for the Non-Technical Reader]{.underline}**

In the examples given in Appendices A and B, simple three bus (node)
networks are used. The Appendix demonstrates how the power flows may be
calculated for these simple networks. This material is provided to
assist non-technical readers of the white paper in understanding the
flow shown in the examples for various injections and withdrawals.

In an electrical network, the flow on any given line, due to the
injection of power at one point and a matching withdrawal of power at
another point, is based that given line's relative impedance[^38]
compared to the impedance of other lines. The simplest case for
illustrating this principle is shown in Figure C-a, which has only two
buses A and C and two parallel lines between these buses. The impedance
of Line 2 is twice that of Line 1, so Line 1 will carry twice the power
flow of Line 2.[^39]

![](media/image4.wmf){width="5.064583333333333in" height="3.55in"}

Figure C-a -- A Two Bus Model

If we take Line 2, cut it in half and add another bus B at the cut and
then reconnect the system, the result in shown in Figure C-b.

![](media/image5.wmf){width="4.995138888888889in"
height="3.3555555555555556in"}

Figure C-b -- Adding Another Bus

What was Line 2 in Figure C-a is now divided into Lines A-B and B-C,
while Line 1 is now called Line A-C. The impedance (Z) of each of the
lines is shown in Figure C-b. Line A-B and Line B-C each have are ½ of
the impedance of Line 2 since they are each one half of that line.
Because these two line segments are in series with each other, line
impedances add together to give the resultant impedance for the
combination of lines A-B and B-C. The resulting relative impedance of
Line A-C to the rest of the system is unchanged, so the distribution of
power flows is unchanged. Note that with the addition of Bus B, all the
line segments have the same impedance, Z = 0.05. We can redraw the
diagram as shown in Figure C-c.

![](media/image6.wmf){width="4.7652777777777775in"
height="2.3986111111111112in"}

Figure C-c -- A Three Bus Model

Although the impedances are no longer shown in Figure C-c, they remain
the same for each segment, i.e., Z = 0.05. The flows are unchanged, only
the shape of the drawing is changed. Figure C-c is now in the form used
for all the three bus models in Appendices A and B above, with equal
impedance in each line segment. Now suppose that instead of injecting
power at Bus A, we decide to inject power at Bus B instead and at the
same time change the injection to 60 MW. The result is shown in Figure
C-d.

![](media/image7.wmf){width="4.725in" height="2.2944444444444443in"}

Figure C-d -- Changing the Injections and Withdrawals

Again the impedance of the lines from B-A and A-C add together to give Z
= 0.10, or twice the impedance of line B-C. The result will be twice as
much flow on line B-C, so again the flows split on a 1/3 to 2/3 basis,
with 40 MW on the line with lower impedance and 20 MW on the other line.

Now suppose you want to do add both transactions at the same time, that
is transfer 30 MW from Bus A to Bus C and 60 MW from Bus B to Bus C -
equivalent to 30 injection at Bus A, 60 MW injection at Bus B and a 90
MW withdrawal at Bus C. For simple models like those used in for this
paper's illustrations, the principle of superposition applies, that is
the solution show in Figure C-c and Figures C-d can be "superimposed" on
each other, that is added together to get a net result.

![](media/image8.wmf){width="5.264583333333333in"
height="2.488888888888889in"}

Figure C-e -- Multiple Injections at Different Buses

The additive nature of the flows is shown in Figure C-e above on lines
A-C and B-C. For instance, the flow on line B-C in Figure C-c was 40 MW
for 60 MW injected at B and withdrawn at C. The flow on line B-C was 10
MW for the 30 MW injected at Bus A and withdrawn at Bus C. Because we
can add the two individual cases, we get 40 + 10 = 50 MW for the
combined case. The use of superposition principle allows the solution of
simpler problems that can then be added together to get to the net
result.[^40]

Another important principle is show in Figure C-e, namely, that all the
flows into and out of any given bus must be zero. For instance at Bus A,
there is a net 10 MW flowing in from Bus B, 30 MW is injected by
generation, so 40 MW flows out toward Bus C. If we give a negative sign
to out flow, then 10 + 30 -- 40 = 0.

In the illustrations of the principles of transmission right
reconfiguration in Appendices A and B, the injection and withdrawal
rights are treated as physical injections and flow result can be
computed as show above. Because the impedances are equal for all the
line segments in the papers examples, 1/3s of an injection will that the
"long route" and 2/3s with take the "short route" for the reasons
described above.

[^1]: Anther major Grid West service that supports transmission rights
    trading is Rights Data Translation and Management (RDTM). RDTM is
    presented in a companion white paper.

[^2]: For our purposes, economic efficiency refers to maximizing value
    of transmission rights trade whereby available transmission
    resources are allocated those who has the most valuation of such
    resources. This objective is also known as maximizing \"social
    welfare\" or \"market surplus.\"

[^3]: Remaining flexibility is applicable to cases where ETRs are
    voluntarily translated into IWRs and parts of such IWRs are traded
    either through a previous RCS process or via a registered bilateral
    trade. The accompanying paper on Rights Translation (to be
    developed) will describe this process in greater detail.

[^4]: While standardized trading is the main benefits of adopting IWRs,
    Grid West initially moved towards IWRs for two practical reasons:
    (1) better alignment between accepting schedules and system impact
    should improve reliability, and (2) elimination of the dual
    constraint of maintaining schedules and actuals separately within
    limits should improve throughput. Once flow-based scheduling was
    decided upon, the use of IWRs was a natural consequence. The need to
    specify IWRs in a way that produces standardized products was then
    recognized.

[^5]: Applicability applies to the timeframe and time format of the IWR
    vis-à-vis the specific RCS timeline. For example monthly peak IWRs
    can be offered in annual and monthly IWR auctions; however, they
    cannot be offered into the daily IWR auction.

[^6]: The process of translating existing rights into IWRs is covered in
    an accompanying white paper on Rights Translation.

[^7]: ETR scheduling flexibility can be readily bilaterally traded once
    the ETR is traded.

[^8]: Available flow capacity refers to the capacity on transmission
    flowgates that are not reserved by existing transmission rights or
    reserved by IWRs acquired through all available means of acquiring
    IWRs including previous RCS auctions.

[^9]: During the same time period Grid West participants should be able
    to also acquire non-firm rights to use for their energy schedules.

[^10]: In this paper and in Figure 1, we have assumed that annual RCS
    process is based on the \"water year\" (September 1^st^ through
    August 31^st^). Other alternative annual duration can readily be
    used.

[^11]: Please refer to the accompanying Rights Data Translation
    Management (RDTM) white paper for the detail of such data.

[^12]: The RCS processes presented in this white paper are based on
    study of the system under normal operating conditions and a
    linearized network model (DC Power Flow). Alternatively, these
    studies can be performed by including system contingency conditions
    and/or with an AC Power Flow model.

[^13]: The WECC transmission system beyond GWF may be represented in
    full or with a simplified equivalent model. A full WECC network
    model provides more complete solution regarding loop flows within
    WECC; however, it will also require frequent information updates
    from neighboring transmission operators (directly or through WECC)
    and an enhanced computing capability.

[^14]: Non-simultaneous physical rights refer to rights whose
    counterflow subscriptions on a flowgate are ignored while their same
    direction subscriptions on a flowgate are additive. This
    characteristic of non-simultaneous physical rights is similar to
    Option FTRs traded and used in the PJM market.

[^15]: A DC Power Flow model is used for distribution flow analysis.

[^16]: Active IWRs are those awarded as part of a previous IWR auction,
    traded through bilateral markets and registered with Grid West, and
    those translated IWRs that are offered into the current RCS process.
    All long-term IWRs acquired as part of the Grid West capacity
    expansion service are also counted as part of the Active IWRs.
    Adjustment to account for active IWRs corresponds to taking out the
    rights associated with active IWRs from TO obligations and ETRs.

[^17]: Given the IWR auction methodology, over-subscription at this
    stage should not happen unless there are changes in system
    configuration since the last IWR auction. There is no need to
    account for X-factor in these calculations.

[^18]: It is expected that all existing OASIS sites that cover GWMT will
    be consolidated into Grid West market information system (MIS).

[^19]: In practice rather than discounting the AFC after accounting for
    ETR subscriptions, the X-factor may be used to discount the
    counterflows when calculating the subscription. The value of
    X-factor for a flowgate that is used in this fashion will be
    different from the X-factor which is calculated in process above and
    can be calculated using off-line power flow studies based on
    historical use of GWMT.

[^20]: This remaining ESF is determined by \"taking out\" from the full
    ESF all those IWRs that have been translated and sold by the ETR
    owner as part of the previous RCS processes or through a registered
    bilateral trade.

[^21]: One form of model that is well established and may be used is a
    DC Optimal Power Flow which simulates flow distribution effects
    without adding the complexity of modeling nonlinear AC effects.

[^22]: Losses are ignored in the IWR auction.

[^23]: The solution methodology is essentially the same as the
    Simultaneous Feasibility Test (SFT) used by other RTOs and ISOs for
    auctioning Option based Financial Transmission Rights (FTRs). SFT
    uses an optimal power flow model (usually a DC OPF) for the FTRs
    auction to ensure that the awarded FTRs, if actually realized as
    physical transactions, do not violate system operating constraints
    (i.e. there is no over-subscription of transmission flowgates). The
    goal of the SFT in these FTR auction markets is to ensure revenue
    adequacy for the RTO/ISO as the RTO/ISO has to pay owners of the
    FTR, MCP based congestion revenue rights based on congestion
    revenues in the DA energy market. In Grid West\'s case, the
    objective of the IWR auction is to ensure that maximum IWR awards
    are made and identified transmission flowgates are not
    oversubscribed. Given that all actual transactions need to show
    transmission rights or IWRs before scheduling, this should prevent
    over-scheduling of these flowgates.

[^24]: Solving all scenarios together adds computational complexity to
    the solution algorithm.

[^25]: Note that these auctions will be performed on weekdays only.

[^26]: Here, applicability refers to the timeframe of the offered
    monthly IWR.

[^27]: Note that these auctions will be performed on weekdays only. As a
    result, if daily auctions are desired for weekend days, three daily
    auctions will be performed on Fridays (one for the next Saturday,
    one for the next Sunday and one for the next Monday).

[^28]: Here applicability refers to the timeframe of the offered monthly
    or daily IWRs.

[^29]: Shadow price of a flowgate is the value of increasing the
    capacity of the flowgate capacity by one MW and is a normal
    by-product of the DC-OPF that performs the IWR auction.

[^30]: Please refer to the accompanying Rights Data Translation
    Management (RDTM) white paper for the detail of such data.

[^31]: Financial rights in these RTOs and ISOs are referred to as
    Financial Transmission Rights (FTRs) and they are normally in the
    form of point-to-point (a point may be a bus, a zone or a hub)
    Obligation FTRs. Only CAISO and ERCOT currently offer transmission
    rights which are slightly different. In the case of CAISO, the
    transmission right (called Firm Transmission Right) provides its
    holder with scheduling priority as well. In ERCOT transmission
    rights (called Transmission Congestion Rights) are Flowgate rights.
    Holders of FTRs receive payment equal to the amount right ownership
    and the value of FTR as determined by Locational Marginal Prices or
    LMPs. The funds to pay FTR holder are collected as congestion
    charges from market participants in the RTO/ISO Day-Ahead (DA)
    energy market. In rare instances, an Obligation FTR holder may have
    to pay for transmission system congestion if his/her right is in the
    direction of counterflow on a congested flowgate. In the process of
    transmission rights administration by these RTOs and ISOs, holders
    of existing rights, such as LSEs or direct retail customers, are
    often offered Auction Revenue Rights (ARRs) and/or FTRs equivalent
    for their existing rights to account for their existing rights.

[^32]: Since Grid West participants do need transmission rights for
    scheduling purposes, Grid West needs to conduct additional auctions
    close to scheduling timeline in order to ensure that market
    participants have access to sufficient mechanisms (e.g., RCS
    processes) to purchase transmission rights.

[^33]: Some of the existing RTOs/ISOs use AC OPF solution.

[^34]: Grid West pays these net revenues towards R3A and other RTOs and
    ISOs pay the net revenues directly to ARR holders or those who own
    existing rights (LSEs).

[^35]: We assume that Grid West will acquire, rather than build, all the
    technology resources needed for the RCS functionality. This
    assumption is essential in resourcing the operation of the RCS
    process and its technologies. We have not included administrative
    requirements in this table. We have not included the infrastructure
    (LAN/WAN, office automation, etc.) support requirements either. The
    Division and Departments will be further defined in the
    Organizational Design process.

[^36]: For the purpose of these examples we have interchangeably used
    ETRs and TO obligations.

[^37]: Note that market value calculation and actual settlements
    calculations are two completely separate processes. Auction value
    simply determines who is awarded in the auction based on their offer
    and bid prices.

[^38]: Impedance is a general term used to describe the opposition of a
    line operating in an AC network to a change in power flow.

[^39]: Based on laws of physics, also know as the Ohms Law, lower
    impedance for a line means that more power flow will go through that
    line with the magnitude of the flow proportional to the inverse of
    the impedance. This is analogous to having a pair of pipes connected
    to a common water source with one pipe having twice the cross
    sectional area of the other pipe. In this water analogy, the larger
    pipe has the half the impedance of the other pipe and therefore
    admits twice as much water. Path Utilization Factors (PUFs)
    essentially give the same information. They show how of an injection
    at a bus will flow on a line based on the impedance of that line
    compared to impedances of all lines in the system.

[^40]: The assumption of linearity for an AC network is reasonable for
    normal operating conditions.