FERC grants California ISO waiver of EIM pricing parameters

FERC on July 29 issued an order granting the California ISO another limited waiver of pricing parameters for initial operations of the energy imbalance market with PacifiCorp last year.

The waiver applies to operations from the start of the EIM on Nov. 1, 2014, through Nov. 13, 2014, to address transitional conditions in the EIM that the California ISO claimed caused transmission and system energy-balance constraints to bind more frequently than expected. The unusual conditions resulted in “high prices that were not always indicative of actual physical conditions on the system,” the California ISO claimed in its waiver request.

The California ISO also claimed that the resulting high prices reflected challenges in providing timely and complete data to ensure system visibility under the new EIM procedures, which were intensified by limitations on the resources available to PacifiCorp for use in the EIM as well as several forced outages of large EIM participating resources.

Last December, FERC granted the California ISO a limited waiver of pricing parameters for EIM operations from Nov. 14, 2014, to Feb. 12, 2015. The waiver overrides a tariff provision that establishes the price for energy at an energy bid cap of $1,000/MWh when relief is needed to clear transmission constraints or system energy-balance shortages, and allows the California ISO to price energy in PacifiCorp’s balancing area using the economic pricing that usually governs when effective economic bids are sufficient to allow a feasible market solution.

According to FERC’s July 29 order, the California ISO did not initially seek a waiver for the Nov. 1 to Nov. 13 period in 2014 because some of the pricing anomalies could have been subject to correction under the California ISO’s existing price correction procedures, which “may have mitigated the impacts of pricing anomalies experienced during the first two weeks of EIM operations.”

The California ISO said in its waiver request for the Nov. 1, 2014, to Nov. 13, 2014, period that, after the California ISO completed correcting prices for the period, prices continued to remain high and not reflective of actual market and operational conditions because a large portion of the pricing anomalies were not subject to price mitigation through the price correction procedures. The California ISO claimed that it did not know the full effect of the pricing anomalies on all parties at the time that it submitted the first waiver request, and claimed that extending the previously granted waiver to cover the 13-day period “is necessary to prevent undue harm to affected entities.”

FERC, in its order, agreed with the California ISO, saying that the requested waiver “constitutes the sole vehicle for remedying the concrete problem of the pricing anomalies experienced during the [13-day] period.”

FERC also said that PacifiCorp, which is the only party that will be responsible for refunds resulting from the waiver, supported granting the waiver.

In a separate July 29 order, FERC denied a request for rehearing of its Dec. 1, 2014, order granting the California ISO a limited waiver for the Nov. 14, 2014, to Feb. 12, 2015, period.

Utah Associated Municipal Power Systems and Deseret Generation and Transmission Cooperative d/b/a Deseret Power last December filed separate requests for rehearing of FERC’s Dec. 1, 2014, order seeking an extension of the waiver to cover the Nov. 1, 2014, to Nov. 13, 2014, period.

FERC said in its July 29 order that, in light of its order granting the California ISO’s request to extend the waiver to the first 13 days of initial EIM operations, the requests for rehearing “are moot.”

FERC, in a May 16 order, instituted an investigation into the justness and reasonableness of the EIM pricing provisions of the California ISO’s tariff related to the imbalance energy price spikes in PacifiCorp’s balancing area. As part of that order, FERC concluded that readiness safeguards were immediately necessary prior to full activation of any new EIM entity into the EIM, and directed the California ISO to submit a compliance filing incorporating requirements in its tariff to ensure readiness prior to new entities commencing operations in the EIM.

In a May 6 compliance filing, the California ISO proposed the addition of two new guidelines in its tariff that establish the readiness requirements for potential EIM entities. The proposed guidelines provide that the California ISO will determine, at least 30 days prior to a potential EIM entity’s implementation date, whether the potential EIM entity’s systems and processes are ready for participation in the EIM. In addition, the guidelines require the California ISO to develop criteria through a stakeholder process to determine the readiness of a potential EIM entity’s systems and processes to commence participation in the EIM.

FERC on July 21 issued an order conditionally accepting, subject to a further compliance filing, the California ISO’s readiness provisions. In that order, FERC said that the California ISO’s provisions do not establish any measures or criteria that an EIM entity must achieve for EIM entry. FERC directed the California ISO to submit a further compliance filing within 60 days of the order providing additional information to establish transparent, meaningful and measurable standards by which to judge the readiness of potential EIM entities.

Three balancing authorities — NV Energy, Puget Sound Energy and Arizona Public Service Co. — have signed agreements with the California ISO under which they will become EIM entities and participate in the EIM. NV Energy will begin participation next October, and PSE and APS intend to join the EIM in October 2016.

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at Jennifer.Runyon@ClarionEvents.com.

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