CAISO Day-Ahead Market Enhancements (DAME) Market Products Technical Guide

1. Executive Overview & Market Context

The California Independent System Operator (CAISO) operates a multi-stage wholesale power market consisting of the Integrated Forward Market (IFM), Residual Unit Commitment (RUC) process, Four-Stage Real-Time Market (FMM (15-Minute Market) and Real-Time Dispatch RTD (5-Minute)), and Extended Day-Ahead Market (EDAM).

On May 1, 2026, CAISO officially launched the Day-Ahead Market Enhancements (DAME). DAME fundamentally modernized the Day-Ahead Market by introducing four flexible capacity products, Imbalance Reserve Up (IRU), Imbalance Reserve Down (IRD), Reliability Capacity Up (RCU), and Reliability Capacity Down (RCD), designed to procure flexible capability and physical reliability ahead of real-time flow.

This document provides a single, unified reference for CAISO energy, conventional Ancillary Services (AS), flexible-ramp, and DAME capacity products. It clarifies the operational, market, and settlement distinctions among the Day-Ahead Market (DAM) and the real-time Fifteen-Minute Market (FMM) and Real-Time Dispatch (RTD), and explains how products are cleared through CAISO’s two day-ahead market optimization processes, the Integrated Forward Market (IFM) and Residual Unit Commitment (RUC). It also distinguishes the associated market capacity products, including IRU/IRD and RCU/RCD, from real-time energy and ancillary-service products.

(AI Market Prediction System) continuously updates and evolves its data infrastructure, AI models, and forecasting capabilities to meet the evolving requirements of power markets worldwide. Probabilistic AI forecasts are available for all DAME products, both as individual single forecasts or multi-product joint distributions. Contact [email protected].

2. Process vs. Product Matrix & Complete Taxonomy

2.1 CAISO Market & Processes

DAME (Day-Ahead Market Enhancements): An internal market design upgrade to the Day-Ahead Market. It introduced two primary uncertainty products:

• Imbalance Reserves (IR): Co-optimized inside the IFM step.
• Reliability Capacity (RC): Evaluated inside the RUC step.

2.1.1 Day-Ahead Market (DAM)

(Total Day-Ahead Optimization Framework executed on Day T-1)

Market participants submit physical generation, demand, virtual bids, and ancillary service offers by 10:00 AM on the day before power delivery T-1. Two co-optimization engines or processes occur in DAM. The main financial market runs in DAM. The process had 2 parallel branches we review next:

• Engine 1: Integrated Forward Market (IFM)
  • Purpose: Co-optimizes Energy, Ancillary Services, and Imbalance Reserves.
  • Products and Published Price Outputs:
    • DAM Energy LMP ($/MWh)
    • RegUp / RegDown ASMP ($/MW-h)
    • Spin / NonSpin ASMP ($/MW-h)
    • IRUMP ($/MW-h)
    • IRDMP ($/MW-h)

• Engine 2: Residual Unit Commitment (RUC)
  • Purpose: Evaluates IFM cleared supply against CAISO’s physical load forecast.
  • Products and Published Price Outputs:
    • RCUMP ($/MW-h)
    • RCDMP ($/MW-h)

2.1.2. Real-Time Market (RTM)

(Total Real-Time Operational Framework executed on Operating Day T)

• Engine 3: Fifteen-Minute Market (FMM)
  • Timing: Executes every 15 minutes at T-37.5m prior to flow.
  • Products and Published Price Outputs:
    • FMM Energy LMP ($/MWh)
    • FMM AS Re-rate ASMP (RegUp / RegDown, Spin / NonSpin) ($/MW-h)
    • FRU / FRD Capacity Price ($/MW-h)
• Engine 4: Real-Time Dispatch (RTD)
  • Timing: Executes every 5 minutes at T-7.5m prior to flow.
  • Products and Published Price Outputs & Energy Dispatches:
    • RTD Energy LMP ($/MWh)
    • Dispatches Physical Energy for:
      • Real-Time Imbalance (vs DA Schedule)
      • Reg/Spin/NonSpin Activation
      • IRU / IRD / RCU / RCD Must-Offer Obligations and Subsequent Dispatch

2.2 Summary Taxonomy Matrix

Recall:

Integrated Forward Market (IFM)

RT markets: FMM (15m) & RTD (5m)

3. Product Specifications & Trading Mechanics

3. Wholesale Energy Products

3.1 Day-Ahead Energy (IFM Energy)

3.1.1 Bidding Mechanism

• System: Submitted via SIBR before the Day-Ahead Market deadline (10:00 AM on Day T-1).
• Structure: Monotonically increasing 10-segment price/quantity curve (MW vs. $/MWh) per hour for 24 hours.
• Self-Schedules: Participants can submit Price-Taker bids (ETC, TOR, Regulatory Must-Run, or standard Price-Taker) to force clearing.

3.1.2 Delivery Mechanism

• Clearing: Cleared hourly in the Integrated Forward Market (IFM).
• Obligation: Creates a financially binding forward schedule. The awarded MW value (P_DA) is locked at the hourly Day-Ahead Locational Marginal Price (LMP_DA).

Real-Time Transition:

• Day-Ahead energy schedules automatically pass into the Real-Time Market as the baseline physical operating reference.

3.1.3 Settlement Pricing:

Locational Marginal Price (LMP) at the resource node, comprising three additive components:

LMP=MEC+MCC+MLC

(Where MEC=Marginal Energy Cost, MCC=Marginal Congestion Cost, MLC=Marginal Loss Cost).

3.2 Real-Time Energy (FMM & RTD Energy)

3.2.1 Bidding Mechanism

• System: Submitted/updated via SIBR up to 75 minutes prior to the operating hour (T-75m).
• Rules
  • Day-Ahead binding (cleared) schedules cannot be modified, undone or canceled at T-75m.
  • FMM Evaluation (T-37.5m) : FMM engine runs and the remaining uncleared Day-Ahead energy bid curves can undergo two paths:
    • Participants did not make any changes at T-75 m, then the Day-Ahead energy bids automatically carry over into FMM.
    • Participants modified price/quantity segments at T-75m for un-cleared or available capacity.

In both cases, the latest bid price ≤ LMP_FMM are cleared for FMM. Uncleared remaining bids move automatically to the RTD market discussed next.

• Rolling to RTD: RTD does not have a bidding process. Remaining uncleared FMM energy bid curves automatically carry over into RTD market, and the participant cannot modify the price nor the quantity. That is, CAISO can call this remaining MW capacity at the LMP_RTD price if the bid price ≤ LMP_RTD.

3.2.2 Delivery Mechanism

• Fifteen-Minute Market (FMM): Clears 37.5 minutes prior to flow; issues binding 15-minute financial schedules.
• Real-Time Dispatch (RTD): Clears 7.5 minutes prior to flow; issues 5-minute automated dispatch instructions (DOT / Target MW) sent directly to plant Control Centers / AGC.

3.2.3 Settlement

Settled strictly as Financial Energy Imbalance:

Settlement_{RT_Energy} = (P_RTD – P_DA) * LMP_RTD * (5/60)

3.3 Example

DAM

• 10:00 AM (T-1) — DAM Closes: You bid 100 MW @ $50/MWh.
• 01:00 PM (T-1) — DAM Results Published: 60 MW clears @ $50/MWh. 40 MW un-cleared.

RT: Overnight / Morning of operation day

• 11:45 AM (T), T-75m DEADLINE for Operating Hour 13 (1:00 PM – 2:00 PM). This is your LAST chance to rebid the remaining 40 MW.

You have 2 options:

• Keep the ($50, 40 MW) bid and the system automatically carries it over to the FMM bidding.
• You log into SIBR and change the bid, e.g., to ($75, 40 MW). We continue with this bid.

• 12:22 PM (T), FMM Runs (T-38m): Evaluates your latest bid, e.g., ($75, 40 MW), against 15-minute LMP_FMM

Case A: All 40 MW Clears in FMM (100 M Total Schedule)

• FMM Clearing (T-37.5m):
  • The FMM clears all 40 MW at the 15-minute LMP_FMM.
  • Financial Position: You are financially locked into delivering

100 MW (60 MW_DA + 40 MW_FMM)

• RTD Execution (T-7.5m):
  • If RTD dispatches 100 MW: Your target dispatch is 100 MW.
  • Settlement: CAISO pays you

60 MW_DA * LMP_DAM + 40 MW_FMM * LMP_FMM

• If RTD Moves You Intra-Hour (e.g., dispatches 90 MW instead of 100 MW):
  • You are instructed to back off to 90 MW due to real-time grid conditions.
  • Settlement: You keep your full 60 MW_DA and 40 MW_FMM payments, but you pay back a -10 MW real-time energy imbalance at the 5-minute LMP_RTD price:

60 MW_DA * LMP_DAM + 40 MW_FMM * LMP_FMM + (90 – 100) LMP_RTD * (5/60)

Case B: 30 MW Clears in FMM (90 MW Total Schedule, 10 MW Left Over)

• FMM Clearing (T-37.5m):
  • The FMM clears 30 MW at LMP_FMM.
  • Financial Position: Your binding 15-minute schedule is

90 MW = 60 MW_DA * + 30 MW_FMM

• What Happens to the Remaining 10 MW in RTD (T-7.5m)?
  • Your un-cleared 10 MW bid automatically rolls into the 5-Minute Real-Time Dispatch (RTD) engine.
  • Scenario B1 (RTD does NOT call the 10 MW}:
    • Either because it is not needed, or the 10 MW FMM bid price > LMP_RTD.
    • Your physical target dispatch remains 90 MW, and get paid

60 MW_DA * LMP_DAM + 30 MW_FMM + LMP_FMM

• Scenario B2 (RTD calls the extra 10 MW due to a 5-minute spike): RTD issues a dispatch instruction (DOT) for 100 MW.
• Settlement:

60 MW_DA * LMP_DAM + 30 MW_FMM * LMP_FMM + (100 – 90) * LMP_RTD * (5/60)

3.4 Imbalance in Delivery

You cleared 60 MW in DAM, but physically delivered only 35 MW? If you deliver 35 MW when you have a binding 60 MW Day-Ahead schedule, you have a −25 MW physical short-fall / deviation.

Settlement & Penalty Rules:

• Real-Time Imbalance Charge (Uninstructed Imbalance Energy , UIE):
  • You keep your Day-Ahead payment for the full 60 MW at LMP_DA.
  • However, you must buy back the missing 25 MW in Real Time at the 5-minute Real-Time price (LMP_RTD):

    Imbalance Settlement = −25 MW * LMP_RTD * (5/60).

  • Financial Impact: If Real-Time prices spike (e.g., to $500/MWh) while you are under-delivering, buying back 25 MW causes severe financial loss.
• Residual Imbalance Difference (UDP / De-rate Penalty):
  • Excused Delivery. If you failed to deliver because the asset tripped or de-rated, you must log an Outage/De-rate in OMS (Outage Management System) immediately.
  • If unexcused physical under-generation exceeds CAISO’s Uninstructed Deviation Tolerance Band (typically ±3% of resource capacity or 5 MW), CAISO assesses Uninstructed Deviation Penalties (UDP) and may claw back capacity payments if that 60 MW was supporting an Ancillary Service or DAME Must-Offer Obligation.

4 Legacy / Conventional Ancillary Services

Ancillary Services are co-optimized with Day-Ahead Energy in the IFM and re-optimized in the Real-Time Market (FMM).

4.1 Regulation Up (RegUp) & Regulation Down (RegDown)

• Definition

Unlike Spinning or Non-Spinning reserves, which sit in standby mode waiting for a grid emergency, Regulation is a continuously active service. CAISO uses Regulation to keep grid frequency locked at exactly 60 Hz on a second-by-second basis.

• Regulation Up (RegUp): Reserves capacity to increase output (or reduce charging) when grid frequency drops below 60 Hz.
• Regulation Down (RegDown): Reserves capacity to decrease output (or increase charging) when grid frequency rises above 60 Hz.

To participate, a plant must be certified for Regulation, equipped with rapid-response control hardware, and directly connected to CAISO’s Automatic Generation Control (AGC) software via Remote Terminal Units (RTUs).

• The Two-Part Bidding Mechanism in SIBR

When submitting a bid for RegUp or RegDown (before 10:00 AM for the Day-Ahead Market or before T-75m for the Real-Time Market), market participants submit two distinct pricing components:

Component 1: Capacity Offer (bid price stated on a $/MW basis; resulting market price is time-normalized)

• What it is: The price you demand to hold capacity in reserve for one hour.
• Example: Bidding $15/MWh of RegUp means a plant operator wants $150 /hour just to reserve 10 MW of physical room on its plant, keeping it available for CAISO’s control system.

Component 2: Mileage Offer (separate mileage price/quantity component)

• What it is: “Mileage” measures the total absolute change in output requested by CAISO as it moves your asset’s generation up and down during the hour.
• Why it exists: Fast-responding assets (like batteries) perform significant physical work moving up and down to stabilize the grid. The mileage payment compensates for this wear, tear, and throughput.
• Example: If CAISO moves your asset up by 2 MW, down by 3 MW, and up by 1 MW in an hour, the total mileage traveled is:

  Mileage = |2| + | -3| + |1| = 6 MW of mileage

• Market Clearing & Holding Payment

When the market engine (IFM or FMM) runs, it co-optimizes Regulation bids alongside Energy offers:

• Capacity Award: If your bid clears, CAISO awards you a Regulation capacity quantity (e.g., 10MW RegUp for Hour 14) and publishes the Ancillary Service Marginal Price (ASMP).
• Guaranteed Capacity Payment: You are paid the capacity price regardless of how much CAISO actually moves your plant:

Capacity Revenue = Awarded MW * ASMP

• Physical Headroom Reservation: Your plant controller must reserve that awarded MW headroom. For example, if a 100 MW generator clears a 60 MW energy schedule and a 10 MW RegUp award, its base operating point is set to 60 MW, leaving the top 10 MW clear for AGC commands.

• Real-Time Delivery & The 4-Second AGC Signal

Once the operating hour begins, human operators step aside, and CAISO’s computerized Energy Management System (EMS) takes direct control of your plant.

• Every 4 Seconds: CAISO’s EMS measures real-time grid frequency across California. Every 4 seconds, it sends a direct setpoint command (an AGC signal) to your plant’s control system.
• Automated Response: Your plant’s automated control system receives the signal and instantly adjusts output (e.g., ramping from 60 MW up to 64 M within your awarded regulation band.
• High-Frequency Telemetry: Your plant sends 4-second telemetry back to CAISO verifying that its actual output matches the requested AGC target.

• Settlement Mechanics (Two Separate Checks)

At the end of the operating hour, your total settlement for Regulation consists of two distinct payments:

Conceptual regulation settlement = capacity component + performance/mileage component, subject to the applicable CAISO settlement rules.

Gross capacity-payment concept = Awarded MW × applicable ASMP. Actual settlement is governed by the applicable CAISO settlement charge codes.

Mileage Settlement. CAISO totals the 4-second movement requested during the hour (Instructed Mileage) and multiplies it by the Mileage Clearing Price (PCP_{_mileage}):

Mileage Payment = Instructed Mileage MW * PCP_{_mileage}

• Accuracy & Performance Adjustments

To ensure resources follow instructions accurately, CAISO monitors an Accuracy Score comparing actual 4-second output against the 4-second AGC signal:

• High Accuracy ≥ 70: You receive 100% of your calculated mileage payment.
• Low Accuracy < 7): Your mileage payment is prorated downward based on your performance score. Persistent failure to follow the 4-second AGC signal can lead to uncertifying the asset for Regulation.

4.2 Spinning Reserve (Spin)

Spinning Reserve is a synchronized upward contingency reserve designed to protect the electric grid against sudden, severe unexpected outages, such as a large nuclear power plant tripping offline or a major high-voltage transmission tie-line failing.

Unlike Regulation, which moves continuously every 4 seconds to balance normal frequency fluctuations, Spinning Reserve sits on standby mode. It does not generate extra physical energy during normal operations; it holds offline capacity in reserve, ready to ramp up immediately when an explicit contingency emergency is declared by the CAISO Reliability Coordinator.

To qualify as Spinning Reserve, a resource must meet three strict physical criteria:

• Synchronized to the Grid: The generator or inverter must already be online, electrically synchronized to the 60 Hz grid, and running at a baseline operating point.
• 10-Minute Response Time: The resource must be capable of reaching its full awarded Spinning Reserve megawatt (MW) capacity within 10 minutes of receiving a contingency dispatch instruction.
• Sustained Output: The resource must be capable of sustaining that full extra output for at least 30 minutes.

4.2.1 Bidding Mechanism in SIBR

Market participants submit bids for Spinning Reserve into the Scheduling Infrastructure and Business Rules (SIBR) system prior to 10:00 AM on Day T-1 for the Day-Ahead Market (IFM) or up to T-75 minutes prior to the operating hour for the Real-Time Market (FMM).

Single-Component Bidding

Unlike Regulation (which requires a two-part capacity and mileage bid), Spinning Reserve requires only a single capacity bid.

• Capacity Offer ($/MW-h): The price per megawatt-hour you demand to keep physical headroom available on your online asset.
• Example: Bidding $5.00/MW-h for 20 MW of Spinning Reserve means you demand $100.00 per hour just to keep 20 MW of synchronized capacity open and available, waiting for an emergency call.

Market Clearing & Cascading Market Logic

During the market optimization run (IFM in Day-Ahead or FMM in Real-Time), the market engine co-optimizes Spinning Reserve alongside Energy, Regulation, and Non-Spinning Reserve.

Cascading Market Substitution

CAISO applies a cascading market logic across Ancillary Services to optimize grid costs. Higher-quality reserves can satisfy requirements for lower-quality reserves if it is economically optimal:

• Regulation Up can satisfy Spinning Reserve or Non-Spinning Reserve requirements.
• Spinning Reserve can satisfy Non-Spinning Reserve requirements.
• Non-Spinning Reserve cannot satisfy Spinning Reserve or Regulation requirements (because Non-Spin or offline assets do not meet the synchronized online rule).

4.2.3 Clearing & Capacity Revenue

If your Spinning Reserve bid clears:

• You receive an awarded capacity quantity (R_Spin in MW).
• The market publishes the Ancillary Service Marginal Price for Spin (ASMP) for that node/region.
• You receive a guaranteed capacity payment for reserving the capacity, whether a grid emergency occurs or not:

Capacity Revenue = R_Spin * ASMP

4.2.4 Physical Delivery & Headroom Reservation

When you win a Spinning Reserve award, your plant’s Control Center / Supervisory Control and Data Acquisition (SCADA) system must enforce physical headroom reservation:

• Example Baseline: Suppose you have a 100 MW online natural gas turbine or battery system.
• Clearing: You clear 70 MW of Day-Ahead Energy and 20 MW of Spinning Reserve.
• Physical Setup: Your plant’s base physical operating schedule is set to 70 MW. Your control system caps your base dispatch at 70 MW, reserving the top band (70 MW to 90 MW) as empty, synchronized headroom.
• Fuel/State-of-Charge Rule: The asset must maintain sufficient physical fuel pressure or battery State-of-Charge (SoC) to deliver that full 20 MW for 30 minutes if called upon.

4.2.5 Real-Time Emergency Activation & Settlement

Because Spinning Reserve is a contingency product, it is activated only during grid emergencies.

• Emergency Declaration & Dispatch Target

When a major grid loss occurs (e.g., a transmission line trips), CAISO issues an Unanticipated Contingency Dispatch. CAISO’s automated system sends an updated Automated Dispatch Instruction (DOT / Target MW) directly to your plant’s Control Center.

• Ramping Requirement

Your asset must immediately begin ramping upward from its 70 MW base schedule toward 90 MW, reaching the full 90 MW target within 10 minutes or less.

• Two-Part Total Settlement

If your Spinning Reserve is called for energy during an emergency, your total financial settlement combines your capacity holding payment with a real-time energy payment:

Conceptual Spin settlement = capacity reservation component + applicable real-time energy settlement when dispatched.

• Capacity Reservation Payment: You keep your full capacity award payment for holding the headroom available

R_Spin * ASMP

• Activated Energy Revenue: The extra physical MWh generated during the contingency call is settled as Real-Time Imbalance Energy at the prevailing Real-Time Dispatch Locational Marginal Price (RTD LMP):

Activated Energy Revenue = Dispatched Energy MWh * LMP_RTD

4.2.6 Non-Compliance Penalties

If a resource fails to respond within 10 minutes when dispatched for a contingency:

• No Energy Payment: You receive no energy revenue for the undelivered portion.
• Capacity Payment Clawback (No-Pay): CAISO assesses a “No-Pay” penalty, rescinding the capacity holding payment (ASMP) for the un-delivered MWs for that operating interval.
• Rescission & De-certification: Repeated failure to respond to contingency calls results in temporary or permanent de-certification of the asset for Ancillary Services participation in CAISO.

4.3 Non-Spinning Reserve (NonSpin)

Non-Spinning Reserve is an upward contingency reserve designed to protect the electric grid against sudden, major system outages (such as unexpected generator trips or line failures).

Unlike Spinning Reserve, which requires an asset to already be online and synchronized, Non-Spinning Reserve allows offline, fast-starting resources or drop-able demand-response loads to participate without burning fuel or idling online.

To qualify for Non-Spinning Reserve, an asset or load must meet three core physical criteria:

• Fast-Start / Fast-Drop Capability: If offline, the resource must be capable of starting up, synchronizing to the grid, and reaching its full awarded MW capacity within 10 minutes. If a load, it must be able to drop power draw within 10 minutes.
• 10-Minute Response Time: Must ramp from 0 MW (or current offline state) to its full awarded capacity within 10 minutes of receiving an emergency dispatch instruction.
• Sustained Output: Must be capable of maintaining that full output (or load drop) for at least 30 minutes.

4.3.1 Bidding Mechanism in SIBR

Market participants submit bids for Non-Spinning Reserve into SIBR prior to 10:00 AM on Day T-1 for the Day-Ahead Market (IFM) or up to T-75 minutes prior to the operating hour for the Real-Time Market (FMM).

Capacity Offer ($/MW-h): Single capacity bid representing the payment demanded to keep cold-start capability or demand drop available on 10-minute standby.

Example: Bidding $3.00/MW for 15MW of Non-Spinning Reserve means you demand $45.00 per hour to keep 15 MW of offline fast-start capacity ready to ignite on a 10-minute notice.

4.3.2 Market Clearing, Cascading Logic & Capacity Revenue

During market optimization (IFM or FMM), CAISO co-optimizes Non-Spinning Reserve alongside Energy, Regulation, and Spinning Reserve.

• Cascading Logic: Higher-quality reserves (Regulation Up and Spinning Reserve) can automatically clear in place of Non-Spinning Reserve if it lowers total system cost. However, Non-Spinning Reserve can never substitute for Spinning Reserve or Regulation because offline units do not meet the synchronized online rule.
• Capacity Revenue: Cleared awards receive a capacity holding payment at the Ancillary Service Marginal Price for Non-Spin (ASMP):

Capacity Revenue = Awarded NonSpin MW * ASMP

4.3.3 Physical Delivery & Standby Setup

When awarded Non-Spinning Reserve:

• Offline Generators: The unit sits offline (0 MW output), but plant automation maintains pre-start systems (e.g., lube oil temperature, fuel pressure) so the turbine can complete ignition, synchronization, and full ramp within 10 minutes.
• Demand Response / Load Drop: The industrial load operates normally but holds automated breakers ready to shed 15 MW of demand within 10 minutes of a signal.

4.3.4 Real-Time Emergency Activation & Settlement

Non-Spinning Reserve is activated only during grid contingencies.

• Emergency Call & Start Instruction: When a contingency occurs, CAISO issues an Unanticipated Contingency Dispatch. The automated system sends a Start-Up / Dispatch Instruction (DOT) to the offline asset’s Control Center.
• 10-Minute Ignition & Ramp: The asset automatically ignites, synchronizes to the grid, and ramps up to the target MW output within 10 minutes.
• Total Settlement: Conceptual NonSpin settlement = capacity reservation component + applicable real-time energy settlement when dispatched.

• Capacity Payment: Retained regardless of whether an emergency occurs

R_NonSpin * ASMP.

• Activated Energy Revenue: Dispatched MWh generated during the contingency is paid at the prevailing Real-Time Dispatch Locational Marginal Price (RTD LMP).

R_{NonSpinActivated} * LMP_RTD.

• Non-Compliance Penalties: If an offline fast-start unit fails to ignite, synchronize, and hit its target output within 10 minutes, CAISO issues a No-Pay capacity payment clawback and assesses uninstructed deviation penalties.

4.3.5 Step by step Example

Consider a Spinning Reserve resource (an online gas turbine) and a Non-Spinning Reserve resource (a quick-start peaker plant). Both are awarded 50 MW of reserve capacity in the Day-Ahead Market for Hour Ending 14:00.

• The Capacity Phase (Already Settled)
• Both units receive their hourly capacity payment based on the Day-Ahead Ancillary Service Marginal Price ASMP.
• Spinning Resource:

  50 MW * $10 (ASMP_Spinning $/MWh) = $500 capacity payment.

• Non-Spinning Resource:

  50 MW * $6 (ASMPN_NonSpinning $/MWh) = $300 capacity payment.

• The Activation Phase (The Contingency Event)

At 13:30, a large transmission line trips offline. CAISO issues an immediate contingency dispatch instruction. The Real-Time LMP (LMP_RTD) spikes to $120/MWh due to the emergency shortage.

• Spinning Reserve Unit: Because it is already online, it instantly ramps up its uncommitted headroom and delivers 50 MWh of energy over the interval.
• Non-Spinning Reserve Unit: Because it was offline, it successfully starts up, synchronizes, and ramps to full output, delivering 40 MWh over the interval.
• The Activation Settlement Calculation:
  • Spinning Reserve Activation Payout:

    50 MWh * $120 (LMP_RTD) = $6,000

  • Non-Spinning Reserve Activation Payout:

    40 MWh * $120 (LMP_RTD) = $4,800

• Capacity payment adjustment for Non-Spinning delivery failure

(40 – 50) MW x $6 (ASMPN_NonSpinning $/MWh) = – $60

5 Day-Ahead Market Enhancements (DAME) Capacity Products

DAME introduces four distinct capacity products split between two Day-Ahead market processes: Integrated Forward Market (IFM) and Residual Unit Commitment (RUC).

+———————————————————————————–+

| CAISO DAME DAY-AHEAD TIMELINE |

+———————————————————————————–+

| 10:00 AM (T-1) — Bids Close (SIBR) |

|                                                                                   |

| 1:00 PM (T-1) — IFM Execution (Co-Optimizes Energy + AS + IRU + IRD) |

| ├── Clears Firm Energy Schedules|

| ├── Clears Conventional AS (Reg, Spin, NonSpin) |

| └─── Clears Imbalance Reserves (IRU & IRD) |

|                                                                                   |

| 1:30 PM (T-1) — RUC Process Execution (Evaluates Cleared Supply vs Load) |

| ├── Assesses IFM Cleared Energy vs CAISO Load Forecast |

| └── Clears Reliability Capacity (RCU & RCD) |

+———————————————————————————–+

5.1 Imbalance Reserve Up (IRU) & Imbalance Reserve Down (IRD)

5.1.1 What are Imbalance Reserves?

Imbalance Reserves are flexible capacity products introduced under the Day-Ahead Market Enhancements (DAME). They are designed to hold physical ramping capability in the Integrated Forward Market (IFM) to manage net-load forecast uncertainty that develops between the Day-Ahead Market run (T-1) and Real-Time operations (T).

• Imbalance Reserve Up (IRU): Holds upward physical capacity to cover unexpected net-load spikes (e.g., solar/wind generation underperforming or Real-Time demand surging above Day-Ahead forecasts).
• Imbalance Reserve Down (IRD): Holds downward physical absorption capacity to cover net-load drops (e.g., renewable generation overperforming or demand dropping suddenly).

5.1.2 Bidding Mechanism in SIBR

• Submission Window: Bids are submitted into SIBR prior to 10:00 AM on Day T-1.
• Bid Components: A capacity offer ($/MW-h) submitted alongside the standard 10-segment Day-Ahead energy offer curve.
• Energy Bid Linkage: To offer IRU or IRD, the resource must submit an accompanying economic energy bid into the IFM. The available capacity for IRU is bounded by the asset’s certified ramp rate over a 30-minute interval and its maximum physical operating limit P_max.

5.1.3 Market Clearing & Co-Optimization

• Procuring Engine: Cleared directly inside the Integrated Forward Market (IFM).
• Simultaneous Co-Optimization: The IFM solver simultaneously evaluates Energy, Conventional Ancillary Services (Reg, Spin, NonSpin), and Imbalance Reserves (IRU/IRD). This ensures that capacity assigned to IRU cannot be double-booked for Spinning Reserve or Day-Ahead Energy schedules.
• Clearing Price: Produces the Imbalance Reserve Up Marginal Price (IRUMP) and Imbalance Reserve Down Marginal Price (IRDMP) published per hourly interval ($MW-h).

5.1.4 Real-Time Delivery & Must-Offer Obligation (MOO)

Winning an IRU or IRD award creates a mandatory bridge into the Real-Time Market:

• Guaranteed Holding Payment: The resource receives an immediate capacity holding payment:

Gross capacity-payment concept = Awarded IRU MW × IRUMP. Actual participant settlement is calculated through the applicable CAISO IR settlement charge codes, including applicable allocations and adjustments.

• Real-Time Must-Offer Obligation (MOO): An award of IRU obligates the Scheduling Coordinator to submit an Economic Energy Bid into the Real-Time Market for that awarded MW quantity by the T-75m deadline.
• Automated Default Bids: If the participant fails to submit a Real-Time energy offer by T-75m, SIBR automatically generates a default energy bid covering the awarded IRU capacity.
• Real-Time Activation & Energy Settlement: When the 15-Minute Market (FMM) or 5-Minute Real-Time Dispatch (RTD) calls upon that capacity, the resulting physical energy dispatch is settled as Real-Time Energy Imbalance at the prevailing Real-Time LMP:

Activated Energy Revenue = (Real-Time Dispatched MW} – Day-Ahead Schedule MW) * LMP_RTD * 5/60

5.2 Reliability Capacity Up (RCU) & Reliability Capacity Down (RCD)

5.2.1 What is Reliability Capacity?

Reliability Capacity products replace the legacy unpriced Residual Unit Commitment (RUC) availability mechanics. They are procured when the physical energy cleared in the IFM financial market does not match CAISO’s official physical load forecast.

• Reliability Capacity Up (RCU): Physical upward capacity committed to bridge the gap when total IFM cleared energy is less than the CAISO physical demand forecast.
• Reliability Capacity Down (RCD): Downward capability committed when total IFM cleared energy is greater than the CAISO physical demand forecast.

5.2.2 Bidding Mechanism in SIBR

• Submission Window: Bids are submitted into SIBR prior to 10:00 AM on Day T-1 specifically for evaluation in the RUC process.
• Bid Structure: Separate capacity offers ($/MW-h) for RCU and RCD.
• Resource Eligibility: Available to physical generation, storage assets, and eligible demand response. Resources that cleared full energy capacity in the IFM cannot offer RCU because no physical headroom remains.

5.2.3 Procuring Process (The RUC Run)

• Procuring Engine: Executed inside the Residual Unit Commitment (RUC) process, which runs at approximately 1:30 PM on Day T-1 immediately after IFM results are published.
• Clearing Mechanics: RUC evaluates physical system requirements. If no RCU capacity is required, the cleared RCU quantity is zero. The applicable clearing-price result should be taken from the published CAISO RUC market result rather than assuming a fixed price. If a gap exists, RUC clears RCU/RCD capacity to secure physical unit commitment.
• Clearing Price: Produces the Reliability Capacity Up Marginal Price (RCUMP) and Reliability Capacity Down Marginal Price (RCDMP) ($/MW-h).

5.2.4 Delivery & Real-Time Must-Offer Obligation

• Capacity Holding Settlement: Cleared MW awards receive explicit capacity payments:

Gross capacity-payment concept = Awarded RCU MW × RCUMP. Actual participant settlement is calculated through the applicable CAISO RCU settlement charge codes, including applicable allocations and adjustments.

• Real-Time Must-Offer Obligation (MOO): Winning an RCU award creates a strict physical commitment. The asset must submit (or allow SIBR to auto-generate) an economic energy bid for that capacity into the Real-Time Market prior to T-75m.
• Commitment & Minimum Run Times: If RCU commits an offline long-start or multi-stage generator, the resource must honor the commitment instruction, start up, and achieve minimum load.
• Energy Settlement: If dispatched for energy in Real Time, the energy is paid at the prevailing Real-Time Dispatch LMP (RTD LMP).

Activated RCU Revenue = Dispatched RCU MW * LMP_RTD * 5/60

5.2.5 Reliability Capacity Up (RCU)

• Procuring Process: Cleared during the Residual Unit Commitment (RUC) process following the IFM run.
• Direction: Upward reliability capacity.
• Core Purpose: Procures physical upward capacity when total IFM-cleared energy supply is insufficient to meet CAISO’s official physical load forecast.
• Offer Structure: Capacity Bid ($/MW.h) submitted for RUC execution.
• Settlement Rule:
  • Awarded MWs receive an explicit capacity payment equal to

Cleared RCU capacity () * Reliability Capacity Up Marginal Price ().

• Cleared RCU also imposes a Real-Time Must-Offer Obligation (MOO) into the Real-Time Market. If dispatched in Real-Time under this obligation, energy is settled at the Real-Time LMP.

Activated RCD Energy Revenue = Dispatched RCU MW * LMP_RTD * 5/60

5.2.6 Reliability Capacity Down (RCD)

• Procuring Process: Cleared during the Residual Unit Commitment (RUC) process.
• Direction: Downward reliability capacity.
• Core Purpose: Procures downward capacity when IFM-cleared energy supply exceeds CAISO’s physical load forecast.
• Offer Structure: Capacity Bid ($/MW.h) submitted for RUC execution.
• Settlement Rule: Awarded MWs receive an explicit capacity payment equal to cleared

RCD capacity () * Reliability Capacity Down Marginal Price ().

• Cleared RCD also imposes a Real-Time Must-Offer Obligation (MOO) into the Real-Time Market. If dispatched in Real-Time under this obligation, energy is settled at the Real-Time LMP.

Activated RCD Energy Revenue = Dispatched RCD MW * LMP_RTD * 5/60

6. Real-Time Flexible Ramping Products (FRU / FRD)

6.1 What are Flexible Ramping Products

Flexible Ramp Up (FRU) and Flexible Ramp Down (FRD) are 15-minute and 5-minute Real-Time operational ramping products. They are designed to manage short-term net-load ramping volatility and supply uncertainty between execution intervals in the Real-Time Market.

6.2 Bidding Mechanism: No Direct Bidding

• No Explicit Bids: Market participants do not submit capacity bids for FRU or FRD.
• Automated Allocation: The real-time optimization engines (FMM and RTD) automatically calculate and award FRU/FRD to online resources based on their submitted energy bid curves, physical ramp rates, and economic opportunity costs.

6.3 Procuring Process & Dynamic Derivation

• Procuring Engines: Executed every 15 minutes in the Fifteen-Minute Market (FMM) and every 5 minutes in the Real-Time Dispatch (RTD).
• Opportunity Cost Pricing: The market solver evaluates the opportunity cost of reserving a resource’s ramping capability versus dispatching it for energy. If reserving 5 MW of ramp on a battery prevents it from clearing $100/MWh energy, the Flexible Ramp Marginal Price reflects that foregone energy margin.

6.4 Delivery & Interval Settlement

• Holding Capacity: The resource holds the requested 5-minute or 15-minute ramping headroom.
• Capacity Settlement: Cleared capacity is paid at the published Flexible Ramp Marginal Price (FRMP) for that specific 15-minute or 5-minute interval:

FRU/FRD settlement is composed of separate flexible-ramping settlement components, including uncertainty-capacity and forecasted-movement components, under the applicable CAISO settlement charge codes.

• No Separate Energy Call: Unlike Ancillary Services or DAME products, Flexible Ramp is strictly a ramp reservation between intervals. In the subsequent interval, the reserved ramp naturally becomes available energy capacity in the RTD optimization run.

7. Official CAISO References

CAISO Settlements: CAISO Settlements

CAISO DAME/EDAM settlements release — Tier 1 technical documents: DAME/EDAM Settlements Release — Tier 1 Technical Documents

CAISO DAME/EDAM settlements refresher training — April 21, 2026: DAME/EDAM Settlements Refresher Training — April 21, 2026

CAISO Flexible Ramping Product — May 2026 Market Performance Report: Flexible Ramping Product — May 2026 Market Performance Report

CAISO OASIS: CAISO OASIS

CAISO Developer Site: CAISO Developer Site

DAME Business Requirements Specification: Business Requirements Specification — Day-Ahead Market Enhancement (DAME)

DAME Business Practice Summary: Business Practice Summary — Day-Ahead Market Enhancement (DAME)

DAME Market Instruments BPM: Business Practice Manual — Market Instruments (DAME)

Daily EDAM Report example: Daily Extended Day-Ahead Market (EDAM) Report — May 11, 2026

DAME/EDAM launch report: Monthly Extended Day-Ahead Market (EDAM) Performance Report — May 2026

DAME/EDAM settlements technical documents: DAME/EDAM Settlements — Incremental Updated Technical Documents