Implementing Rational Buyer´s algorithm at California ISO

A cost-minimizing algorithm (called Rational Buyer´s algorithm) has been in production since August 1999 at the California ISO. Two years of real-time operation results have shown significant savings in overall cost of ancillary services procurement. By allowing ISO to procure higher quality services to meet the demand for lower quality services, when doing so reduces the overall procurement cost, the Rational Buyer´s algorithm minimizes the total cost of procuring ancillary services under the market rules. The minimum-cost procurement is found by a search through the domain defined by the market and cost-minimizing rules. While the theory behind the algorithm is very straightforward, the implementation of the algorithm has been a challenge. In this paper, a few key issues in implementing the algorithm as well as the operational experiences on the ancillary services market at the California ISO are introduced.