CAISO’s Department of Market Monitoring urged the ISO to replace its interim congestion revenue allocation rules under its forthcoming Extended Day-Ahead Market “as soon as practicable.”

EDAM’s interim congestion revenue allocation (CRA) rules will apply initially to PacifiCorp, the market’s first participant in May. But these rules can create incentives to self-schedule resources, which can have detrimental market impacts, CAISO’s DMM said in March 9 comments to the ISO’s EDAM initiative.

In 2025, CAISO began work on new CRA rules in cases of parallel — or loop — flows, after Powerex published a paper contending the EDAM model contained a “design flaw” with potentially $1 billion in unjustifiable charges at stake. (See Powerex Paper Sparks Dispute over EDAM ‘Design Flaw’.)

The ISO kicked off an expedited allocation design process in March 2025, resulting in a FERC-approved interim design in August 2025. (See CAISO’s EDAM Scores Simultaneous Wins at FERC.)

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The need to replace the interim CRA rules will only become “more important as additional balancing areas join EDAM and increase the potential for cross-BAA congestion impacts within the EDAM,” DMM said.

“There may be several options to replace the interim CRA [and] whichever option is chosen, the replacement allocation should not be tied to the actual schedules in the market, including schedules resulting from cleared economics offers,” DMM said.

Certain CRA designs can create incentives for market participants to submit offers not consistent with their true marginal costs, which “can undermine the purpose of the market and potentially lead to market dysfunction,” DMM said. A CRA replacement process should therefore ensure that a CRA is not tied to cleared schedules in the EDAM, DMM said.

The interim design could incent self-scheduling rather than economic bidding of generation in certain circumstances, CAISO Policy Development Manager Milos Bosanac, told RTO Insider on March 24. The extent to which market participants will exercise their transmission rights through a self-schedule to fully limit their congestion cost exposure is something that will be monitored through operational experience, Bosanac said.

The ISO is committed to transparent and frequent reporting on congestion in the EDAM footprint, bidding patterns and congestion allocation among EDAM balancing areas, he added.

CAISO is in Phase 2 of its CRA design for EDAM, which is looking at how to eliminate or reduce self-schedule incentives and ensure symmetry in allocation of parallel flow congestion revenues for CAISO balancing areas.

Phase 2 will result in a new long-term CRA design to congestion revenue allocation. CAISO plans to release this Phase 2 proposal by Q2 2027, Bosanac said.

CRA design should ensure that revenues are distributed equitably to avoid cost shifts between EDAM BAAs, CAISO staff said in a February presentation on the subject. The new design should also support transmission customers’ firm transmission rights or CRRs so they can manage and hedge congestion risk exposure, staff said.

In January, the California Public Utilities Commission asked CAISO to pause CRAs in EDAM if participants begin to game the market through extensive self-scheduling. (See CPUC Urges ‘Stop the Brakes’ Tool for EDAM Congestion Revenue Approach.)

CAISO must continue to improve its understanding and modeling of unscheduled parallel flows on its system associated with all Balancing Authority Areas (BAA) in the WECC, Justin Cockrell, assistant general counsel with DC Energy California, said in March 9 comments to the ISO.

“This improved understanding and modeling is essential both for developing more accurate CRR auction models and other related CRR enhancements in the CAISO and for developing durable approaches to congestion revenue allocation and seams issues as EDAM expands and evolves,” Cockrell said.