Abstract :
The California Independent System Operator Corporation (CAISO) has embarked in a profound redesign of its electricity market. With its market launched on April 1st, 2009, the CAISO introduced new financial products to improve the efficiency of the markets and reliability of the system operation. The introduction of new products, compounded with the recent financial turmoil, has posed challenges for the CAISO to develop and implement credit policies to protect the interest of the market participants against financial risks. The credit policies, at the same time, should not create unnecessary barriers to entry for participating in the CAISOs markets. This paper describes the credit system the CAISO uses to manage financial risks. It discusses the financial products, such as Congestion Revenue Rights and Virtual Bidding the CAISO has or will have, the financial risks associated with the products, and the credit policies the CAISO developed to support the transactions of the financial products.
