Implementation of the California
Independent System Operator
Farrokh Albuyeh, Senior Member, IEEE
Ziad Alaywan, Member, IEEE
ABB Energy Information Systems
Santa Clara, CA. 95050 USA
California ISO
Folsom, CA. 95630 USA
Abstract: The Assembly Bill 1890, signed in September 1996,
opening the California Electricity Industry to open competition,
required the creation of an Independent System Operator and a
Power Exchange. The first contract for the implementation of the
California ISO was signed in December of 1996, and subsequent
contracts were signed on March 31, 1997. The California ISO
started commercial operation on March 31, 1998 and in its first few
months of operation has proven its viability. This paper provides an
overview of the California ISO.
The implementation of the California ISO was a “from-theground-up” effort. It included (a) the formation of the project
management teams, (b) the implementation of the
hardware/software systems for the ISO, the communications
systems, and the metering system, and (c) the basic ISO
infrastructure. It also included the hiring of the ISO staff, and
the selection and outfitting of the primary and backup sites
in, respectively, Folsom and Alhambra, California.
Keywords: Electric Industry Restructuring, Open Transmission
Access, Independent System Operator, Power Exchange, Electric
Energy Trading, Ancillary Services.
The following sections describe the structure and functions of
the ISO. More information can be obtained from [1].
I. INTRODUCTION
The de-regulation of the electric power industry in the state of
California began with the ruling by the California Public
Utilities Commission (CPUC) in April of 1994.
Subsequently, the passage of Assembly Bill (AB) 1890 in
September of 1996 required the establishment of an
Independent System Operator (ISO) to coordinate safe and
reliable delivery of power and to provide open access to the
providers and consumers of electric energy. AB 1890 also
required the creation of an Independent Power Exchange to
create a spot market for energy. The first contract for the
implementation of a Power Management System (PMS) as a
part of the ISO was awarded in December of 1996. The
contracts for the remaining parts of the ISO, including the
Scheduling Infrastructure (SI), Scheduling Applications (SA)
and the Balance of Business Systems (BBS) were awarded by
the end of March 1997. It was also required that the ISO
commence operation on January 1, 1998; allowing less than 9
months for the development, integration, testing, and training
of the market participants in using the system.
II. THE CALIFORNIA MARKET STRUCTURE
The main elements of the California electric market are the
ISO, the Power Exchange (PX), and the Scheduling
Coordinators (SC). The responsibilities of each entity are
defined next.
A. The Independent System Operator
The primary responsibilities of the ISO are:







Ensure grid reliability
Provide non-discriminatory and open access to the grid
Schedule all power through the grid, and balance the grid
operation
Manage transmission congestion and constraints
Competitively procure and operate ancillary services
Provide information to market participants
Settle the real-time energy and ancillary services
markets.
Additionally, the ISO is in the process of setting up a market
for transmission capacity. As a part of this new service, the
ISO will auction transmission capacity on interfaces between
the major congestion zones and interfaces with external
systems. The transmission capacity rights, referred to as the
Firm Transmission Rights (FTR), will be used as a hedge
against congestion on specified paths, and will entitle the
FTR owner to priority scheduling rights and a share of the
transmission-use revenues.
Efforts are also underway, to extend the inter-SC trades to
include trades of ancillary services among SCs.
B. The Power Exchange
The main responsibilities of the PX are:





E. Market Overview
Provide a competitive spot market for energy
Determine day-ahead and hour-ahead market clearing
price for energy based on a least-cost balanced schedule
Procure adequate ancillary services on a least cost basis
Act as Scheduling Coordinator for PX Participants
Perform settlements process for the market.
C. The Scheduling Coordinator
To qualify as an SC, certain financial and technical
requirements must be met. In addition, the SC must have
access to and commitment from the resources, both supply
and demand, that it is representing. The responsibilities of the
SCs are very similar to those of the PX.
D. The Markets and Market Commodities
Initially, three separate physical markets were defined. These
included the Day-Ahead, Hour-Ahead, and Balancing (realtime) markets. The Day-Ahead market is composed of 24
hourly markets for energy and ancillary services. The Hour
Ahead market includes markets for energy, ancillary services
and balancing energy. The Balancing market, as the name
implies, is for balancing energy.
The commodities traded in these markets include energy,
ancillary services, and supplemental energy. The energy
commodity includes load, generation, imports, exports, and
trades of energy among SCs. The ancillary services handled
by the California market include spinning reserve, nonspinning reserve (dispatchable load and generation),
replacement reserve (dispatchable load and generation),
regulation, reactive power and voltage control, and black start
capability. The markets for the last two ancillary services,
reactive power and black start, are handled manually.
As was mentioned before, currently, the California ISO is in
the process of upgrading the system to create a long term
(yearly) and short term (day-ahead and hour ahead) market
for transmission capacity or the Firm Transmission Rights.
ISO
• Transmission Security
• System Dispatch
• Ancillary Services
Ancillary Bids
• Balanced Schedules,
• Ancillary Bids
Energy Bids
Load Bids
Power Exchange
• Scheduling
• Market Clearing Price
Scheduling Coordinator
In the California market the Power Exchange (PX) and the
Scheduling Coordinators (SC) create the spot market for
electric energy. All energy supply and demand in the system
must be bid through the PX or the SCs. There is a
requirement that, for the first five years of operation, the
generation owned by the existing three investor-owned
utilities (Pacific gas & Electric, Southern California Edison,
and San Diego Gas & Electric) can only be bid through the
Power Exchange. The PX and the SCs must submit balanced
portfolios for energy to the ISO.
A balanced portfolio for energy includes schedules for
generation, load, imports, exports, and trades of energy with
other SCs. Losses are accounted for in the generation
schedules. The SCs and the PX determine the amount of
losses using the so-called Generator Meter Multipliers
(GMM) that are similar to traditional generator penalty
factors and are calculated and published ahead of time by the
ISO.
The ISO Market Participants (MP) may choose to selfprovide for the ancillary services that are required to support
their energy schedules. They may also opt for the ISO to
procure the required ancillary services on their behalf.
The ISO creates a market for ancillary services. It first
determines the requirements for additional ancillary services
beyond those already provided by the PX and the SCs as self
provision, and it then selects and prices the most economical
services from the bids submitted by the SCs.
III. THE CALIFORNIA ISO OVERVIEW
The basic structure of the California ISO is shown in Figure
2.
The California ISO system is composed of five major
components including the Metering System, Scheduling
Infrastructure (SI), Scheduling Applications (SA), Balance of
Business Systems (BBS), and the Power Management System
(PMS). These components are described in the following
sections.
• Bilateral Deals
A. The Metering Data Acquisition System (MDAS)
EMS
SCADA
GenCo
ESP
UDC
Power
Marketer
Aggregator
Municipal
Utility
IOU
Figure 1 shows an overview of the California electric market
structure.
Commercial & Industrial
Fig. 1. Overview of the California Market Structure
The function of the metering system is collect the revenue
metering data related to all resources that are scheduled
Intranet
WEnet))
(WEnet
Scheduling Infrastructure
Bidding & Schedule
Management
Market Information
Publishing
Balance of Business Systems
Settlements
•Metering
Billing & Credit
Master File
Admin. Systems
Scheduling Applications
Ancillary Services
Scheduling & Pricing
Power Mgmnt System
Congestion Mgmnt
& Pricing
Network Security
Over Gen. Mitigation
Balancing Market &
Ex-Post Pricing
Transmission
Assessment
System Dispatch
Market Information Publishing: This module publishes
the market information to the market participants.
Information such as forecasted loads, generator meter
multipliers, forecasted congestion conditions, forecasted loop
flows are made available to the market participants.
C. Scheduling Applications (SA)
The Scheduling Applications constitute the decision support
system of the ISO. The main modules of the SA are:
ICCP
ACCs
Fig. 2. Overview of the California ISO
through the system by the PX and by the SCs. These include
all loads, generations, imports, and exports.
B. The Scheduling Infrastructure (SI)
The primary interface between the ISO and the market
participants (PX and the SCs) is through a private intranet
called WENET. Some public market information is also
posted on the public Internet.
The Market Participants interface to the system using
standard browsers such the Netscape navigator or the
Microsoft Explorer using ISO-supplied templates and web
pages.
All schedules and bids are received, validated, and processed
by the SI. If errors are found, they are reported back to the
market participants. When schedules are adjusted as a result
of the congestion management process, the adjusted
schedules are communicated back to the MPs, who will in
turn, submit their revised schedules. The design objectives for
the SI are security, performance, and reliability.
The SI provides the database platform to maintain and to
process the schedules and the facilities to provide the
interface with the MPs. The main modules of the SI are
described below:
Bidding & Schedule Management: This module analyzes
the incoming schedules, performs two phases of validation,
and informs the MPs of any errors that are found. In the first
validation phase, schedules are checked for syntax. In the
second phase, they are checked for inter-related data such as
consistency, balance, etc. Once schedules are evaluated, the
MPs are informed of the acceptance of the schedules. In cases
where the initial schedules are adjusted by the ISO, the MPs
are informed of such adjustments. The module, through the
use of Java Applets, will also inform the MPs of various
market events such as the opening and closing of markets and
approaching deadliness.
Ancillary Service Scheduling & Pricing: This module
analyses the submitted schedules and forecasted conditions
and determines the required levels of ancillary services of
each type. The module will then select the most economical
set of ancillary services from the submitted A/S bids to
satisfy the requirements. In cases where there are congestion,
the module will treat each congestion zone separately.
Currently the system is being modified to allow the trade of
A/S among the SCs.
Congestion Management & Pricing: The ISO service area
is currently divided into four major congestion zones.
External parts of the system are also identified as congestion
zones. In all, there are 23 congestion zones defined in the
California ISO service area. A two step process is used to
mitigate congestion. Inter-Zone congestion management
process is concerned with congestion between major
congestion zones. A DC Optimal Power Flow-based method
is used to adjust the submitted schedules to remove flow limit
violations on the interfaces connecting the congestion zones.
The function calculates the incremental prices for each bus of
each zone and then calculates the average of the bus prices in
each zone to arrive at the zonal marginal prices. The
difference between marginal prices of two connecting zones
is the transmission usage charge for transferring energy on
the connecting path.
Intra-Zone congestion management, on the other hand, is
concerned with congestion within each zone. An AC Optimal
Power Flow-based solution method is used to adjust
schedules to ensure that branch flow limits and bus voltage
limits are respected. During the Intra-zonal congestion
management process, the terminal conditions at the
boundaries of the congestion zone are fixed at the values
calculated by the Inter-zonal congestion management
process.
In both Inter and Intra-zonal congestion management, a set of
so-called “market separation constraints” are enforced. The
market separation constraints ensure that the balance of the
SC’s portfolios is maintained during the schedule adjustment
process [2,3].
Over-Generation Mitigation: In the initial design of the SA,
a process to deal with situations where there existed excess
generation in the system was envisioned. The function of the
Over-generation Mitigation function was to back down
generation in a pre-defined priority order, in order to provide
balance between load and generation. However, this
provision was eliminated by the FERC from the filing that
was approved in October of 1997 and the function was
disabled in the ISO.
Billing & Credit: This module is responsible to keep track of
the MP’s credit information and to provide the mechanism to
generate bills and billing statements.
Balancing Energy & Ex-Post Pricing: The objective of this
module is to schedule resources to meet real-time imbalances
between actual and scheduled load and generation. The
resources include spinning, non-spinning, and replacement
reserves arranged in the day-ahead and hour-ahead markets
and supplemental energy bids. The module orders and selects
resources according to prices to meet energy imbalances.
This module interfaces with the on-line Automatic
Generation Control function to communicate the real-time
dispatch instructions to generating units that have provided
spinning, non-spinning, and replacement reserves as well as
supplemental energy bids.
Master File: The master file contains up-to date information
regarding the current market place. Information such as who
are the current scheduling coordinators, what resources they
are responsible for scheduling, and where these resources are
located are maintained in the master file. The master file is
updated every day at midnight and is then propagated to the
Metering System and the Scheduling Infrastructure.
Transmission Assessment: The transmission assessment
functions in the Scheduling Applications include:
 Available Transfer Capability- to calculate the
simultaneous power transfer capability on major
interfaces in the system;
 Voltage Collapse Analysis- to analyze the voltage profile
of the system and to determine margins to voltage
collapse in selected parts of the system;
 Transient Stability Analysis- to analyze stability of the
system;
 Contingency Analysis- to analyze the security of the
system against a large set of possible outages;
 Transmission Loss Rate Calculation- to calculated the
sensitivity of system losses to changes in generation,
import, and export patterns and to calculate the
Generator Meter Multipliers.
 Other supporting functions such as load forecasting,
outage scheduling, network topology processing, power
flow calculation, bus load scheduling, and interchange
scheduling.
D. Balance of Business Systems (BBS)
The Balance of Business Systems handle the financial and
administrative tasks of the ISO. The main modules of the
BBS are:
Settlements: The ISO is required to settle to zero. That is, all
income must equal to the payouts. The Settlements module
analyzes data obtained from the metering subsystem and uses
the final committed schedules and prices to calculate the
settlement reports. The mathematics of the Settlements
subsystem are very straight forward: billable quantities are
multiplied by the appropriate prices to calculate the amount
to be billed or to be paid out. The main difficulty is to keep
track of all the details that are involved,
Administrative Systems: These include general office
automation packages such as word-processing, spreadsheets,
project planning, human resources packages etc.
E. Power Management System (PMS)
The Power Management System is a conventional
SCADA/EMS. The main Modules of the PMS are the System
Dispatch functions, and the Network Security functions. The
dispatch functions include Automatic Generation Control,
Resource Scheduler, and Merit Order Dispatch. Network
Security functions include Network Topology Processor,
State Estimation, Security & Stability Validation, Optimal
Power Flow, Dispatcher Power Flow, and Network
Sensitivity calculations.
The PMS is connected to the existing Area Control Centers
through ICCP links. In the initial phase of the operation, a
hierarchical automatic generation control scheme was used
where the ISO dispatched generation on a system-wide basis
and sent the area requirements to the area control centers that,
in turn, performed load frequency control and sent dispatch
signals to the generating units. Subsequently, in the second
phase of the operation a centralized generation control is
being used. The ISO performs all the automatic generation
control functions on a system-wide basis and dispatch
instructions are sent to the generating units via the area
control centers.
Another salient feature of the centralized AGC process is the
interface with the Scheduling Applications and the method by
which the Balancing Energy & Ex-Post Pricing function
calculates the supplementary energy bids and ancillary
services in support of the AGC function.
IV. HARDWARE ARCHITECTURE
The primary site for the ISO is situated in the Folsom area
near Sacramento and the backup facility is situated in
Alhambra near Los Angeles. The backup facility is fully
manned, round the clock, and is kept in synchronism with the
primary site. To ensure integrity of the database, a
centralized, and fully redundant, hardware architecture was
adopted. Figure 3. shows the overview of the hardware
structure and Figure 4. shows the detail of the hardware
structure for the Scheduling Applications.
Scheduling
Applications
Primary Site
Folsom
(North)
Scheduling
Infrastructure
TrueCluster
and OPS
R/T DB
A
Business Systems
B
A
A
Power Mgmt
System
Avanti
Oracle
B
A
A
FDDI
T3
100 MBE
100 MBE
FDDI
PMS
SI
SA
A
A
A
R/T DB
Oracle
R/T DB
Fig. 3. Overall Hardware
Struicture
The hardware structure for the Scheduling Infrastructure,
Balance of Business Systems and the PMS are very similar to
the structure for the Scheduling Applications shown in Figure
4.
Mirrored
Disks
ALPHASERVER
8200 5/350
The California ISO was implemented in record time and
against all odds. A major part of the system had to be
designed from the ground up. The system started commercial
operation on March 31, 1998, three months behind the
original schedule. There were a number of reasons for this
delay as outlined below:
B
100 MBE
100 MBE
Backup Site
Alhambra
(South)
VI. CONCLUSIONS
ALPHASERVER
8200 5/350
Interface With the Power Exchange: In order to avoid the
appearance of any special treatment of the Power Exchange
as compared with other SCs, it was mandated that there be
little or no contact between ISO and the PX. This lack of
communication resulted in a number of inconsistencies in the
interfaces between the two entities that were subsequently
corrected.
FERC Filing Approval and Changes: The final filing to
FERC was approved at the end of October, 1998; several
days before the scheduled start of the operational dry runs.
FERC’s approval mandated a number of changes to the
system that required modifications to the software.
Additional Training & Testing: The fact that the ISO deals
with large sums of money required a perfect operation on day
one. Also, the Market Participants needed additional training
to be able to use the system. Time and effort was spent to
perform more detailed tests and to provide the additional
training that was required.
In the few months since the start of its operation, the
California ISO has proven itself beyond all expectations.
Current information can be obtained from CAISO’s web site
at [4].
Memory Channel
FDDI
LAN A
VII. REFERENCES
LAN B
Schedulers Console
(X12)
ALPHASTATION 600
Admin. & Developers
Workstation
(X2)
ALPHASTATION 600
ISO Area
(X4)
PENTIUM PC
B&W and Color
Printers
Fig. 4. Scheduling Applications
Hardware Structure
V. FUTURE
The California ISO hardware and software was designed with
ample space for expansion and for new functions in the
future.
The California ISO is currently evolving to meet the new
requirements for the market. As an example, new structures
and facilities are being put in place to support the creation
and operation of the market for transmission capacity.
Existing functionality is also being refined as more
experience is gained with the electricity market.
[1] FERC Electric Tariff, "California Independent System
Operator Corporation", Volume 1, Issued June 1, 1998.
[2] Harry Singh, Shangyou Hao, Alex Papalexopoulos, "
Transmission Congestion Management in Competitive
Electricity Markets", IEEE PES Conference paper,
Winter 1997.
[3] Paul R. Gribik, George A. Angelidis, Ross R. Kovacs,
"Transmission Access and Pricing with Multiple
Separate Energy Forward Markets", IEEE PES
Conference paper, Winter 1998.
[4] ISO Web Site is www.caiso.com/pubinfo
VIII. BIOGRAPHY
Farrokh Albuyeh (SM) received the B.S, M.S. and Ph.D.
degrees in Electrical Engineering from the University of
Wisconsin-Madison. He is currently the Director of Product
Management and Marketing at ABB Energy Information
Systems in Santa Clara, California. Prior to joining ABB in
1985, he worked as a Senior Consultant with Energy &
Control Consultants, Inc. in San Jose, California and as the
Manager of Power Systems Development at Control Data
Corporation in Minneapolis, Minnesota.
Ziad Alaywan (M) received his B.S. and M.S. degrees in
Electrical Engineering from Montana State University. He
joined Pacific Gas & Electric Company where he held
various positions in System Operations, Power Plant
Operations and Planning.
During 1996 he lead the effort in designing the "Blue-Print"
of the California ISO “Market Rules and Protocols” and was
responsible for implementing the bidding, scheduling and
settlement systems. Currently, he is Director, Market
Operations at the California ISO.