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Market Redesign and Technology Upgrade

Skip Navigation LinksPUC > Energy > Federal and Regional Energy Policy > California's Wholesale Market Design and Operations > Market Redesign and Technology Upgrade > Scarcity Pricing

Scarcity Pricing


Scarcity pricing allows generators to receive payments for Ancillary Services (AS, a defined set of energy reserves) above the bid cap when energy and/or AS reserves dip below a pre-specified AS level.  At that point, scarcity pricing should provide signals to generators that there is a need for additional energy and/or Ancillary Service supply.  The FERC has ordered CAISO to implement scarcity pricing within one year of the start of MRTU.  CPUC staff actively participate in the continuing development of the CAISO’s final scarcity pricing proposal to be submitted to FERC. 

The CPUC’s Position:

The CPUC is urging CAISO to implement a demand response program that incorporates price responsive demand simultaneously with scarcity pricing.  The CPUC rationale is that providing scarcity pricing without permitting demand resources to mitigate high scarcity prices impedes a primary goal of scarcity pricing: to allow end users to participate in CAISO markets as energy prices rise. The CPUC will continue to participate in CAISO’s scarcity pricing design, support changes as fitting, and file comments on CAISO’s scarcity pricing proposal until it is finalized.


Last Modified: 12/4/2008

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