Arizona Public Service to participate in California ISO energy market

The California ISO on May 28 filed with FERC an agreement between the Cal-ISO and Arizona Public Service (APS) that sets out the terms under which APS will participate in the Western energy imbalance market (EIM) starting on Oct. 1, 2016.

According to the agreement, APS will pay a fixed implementation fee of $970,000, subject to completion of five specific milestones, for recovery of the portion of the estimated $19.6 million attributable to the Cal-ISO’s effort to configure its real-time market systems and incorporate APS into the EIM.

The agreement establishes the following project milestones and due dates:

·      Development and initiation of a final project management plan by July 1

·      Full network model expansion for APS by February 2016

·      APS connection to a non-production test system by April 2016

·      System construction, testing and training in preparation for market simulation by July 2016

·      System deployment and completion of APS tariff process by September 2016

Last November, the Cal-ISO launched financially binding EIM operations, with PacifiCorp as the initial participant. NV Energy plans to begin EIM participation in October, and Puget Sound Energy earlier this year signed an agreement with the Cal-ISO to join the EIM in October 2016.

PacifiCorp and NV Energy are units of Berkshire Hathaway.

The Cal-ISO said in its May 28 filing that full implementation of APS into the EIM will be subject to readiness requirements prepared by the Cal-ISO in response to a March 16 FERC order on proposed tariff provisions for the first year of operations for new entities joining the EIM.

In its March 16 order, FERC rejected the Cal-ISO’s proposed tariff provisions, but concluded that readiness safeguards are immediately necessary prior to full activation of any new EIM participant. FERC directed the Cal-ISO to submit a compliance filing to revise its tariff to include requirements that will ensure readiness prior to new EIM entities beginning market operations. FERC also directed the Cal-ISO to establish, through a stakeholder process, readiness criteria that will determine the readiness of EIM systems and processes for the Cal-ISO and new entrants.

In its May 6 compliance filing to FERC, the Cal-ISO proposed the addition of two new paragraphs to its tariff to address new EIM entrant readiness. The first paragraph establishes readiness requirements for a balancing authority that wishes to participate in the EIM, and the second paragraph requires the Cal-ISO and the potential new EIM entrant to certify readiness to FERC at least 30 days prior to the date on which the new entrant will begin participation.

The Cal-ISO said in its May 28 filing that, together with APS, it will measure and report progress towards readiness criteria, which are currently under development through a Cal-ISO stakeholder process. The criteria would apply to NV Energy’s EIM implementation later this year, followed by the concurrent APS and Puget Sound Energy implementations in October 2016.

“The [Cal-ISO] will consider lessons learned from the NV Energy implementation as well as any special circumstances associated with either the APS or Puget Sound Energy implementations,” the Cal-ISO said. “However, the readiness criteria currently under development will represent the baseline for measuring the readiness of each new EIM entity’s processes and systems.”

The Cal-ISO said APS will initiate a process with FERC to modify the current APS open access transmission tariff to accommodate the company’s EIM operations.

As TransmissionHub reported, an independent analysis by Energy and Environmental Economics (E3) determined that APS’ participation in the EIM could save customers between $7 million and $18 million per year by 2020.

According to E3’s analysis, dispatch efficiency savings would be $8.9 million per year, and flexibility reserves savings would range from $1 million to $3.2 million per year. In addition, across a range of scenarios modeled in the E3 analysis, APS’ participation in the EIM is estimated to produce a range of $2.2 million to $81.m per year in incremental savings for the current EIM participants as a result of improved dispatch efficiency and reduced flexibility reserve requirements.

In an April 30 quarterly report on EIM operations, the Cal-ISO estimated that the benefits of the EIM in 1Q15 reached about $5.3 million, bringing the total benefits since the launch of the EIM to more than $11 million.

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