CAISO and CPUC Butt Heads over Resource Adequacy

With the California Public Utilities Commission delaying final rules on resource adequacy, the California Independent System Operator is debating what role it should play in influencing electricity reserves. At CAISO?s February 26 board meeting, there was much discussion of the grid operator?s dilemma of taking action while being stuck between different agencies and jurisdictional agendas. ?We are at the cusp of a really big problem,? said CAISO board chair Michael Kahn. ?The legislature, the governor, and [the Federal Energy Regulatory Commission] all have a play here, and their hands are around our necks.? CAISO had its own plans to help ensure that there is enough power plant capacity reserve to prevent blackouts?called the ?available capacity obligation??but those were postponed in favor of a CPUC decision. But when that decision was issued in December, regulators ended up delaying action for a year. Sean Gallagher, CPUC staff attorney, reiterated statements commission president Michael Peevey made in a February 25 letter to CAISO. Gallagher told the board his agency was working on filling the gaps in its proposed resource adequacy blueprint released in January. Workshops will be held over March and April to answer many of the unresolved issues, including demand forecasting, resource deliverability, demand response, reporting, and penalties for noncompliance. The CPUC plans to release a decision this summer. CAISO assumes, however, that is an unrealistic date because of the complexity and disagreements over the underlying issues. ?Timing is the most vexing issue,? said Steven Greenleaf, CAISO director of regulatory policy. He said the board had to decide what role it should play in the short term and long term regarding supply adequacy, noting that top concerns are plant retirements and players exiting the market. ?Now is the time to lock up additional capacity, since there is currently an excess supply in the West,? said Elena Schmidt, vice president, strategic development. Two proposed avenues were backing down and letting others take accountability and the more traditional proactive method of carrot and stick?using mostly stick. Board member Tim Gage urged CAISO not to preempt the CPUC process. ?We all have a collective responsibility to make sure the issue is addressed.? He added, ?At the end of the day, ISO staff will have to judge whether what the CPUC adopts is adequate to fulfill the task? and should develop a backstop to protect consumers. Gallagher insisted the load-serving entities, such as utilities, be held ultimately responsible for resource adequacy. That may be fine in theory, replied Kahn, but those entities need rules to allow them to sign long-term contracts to avoid buying on the spot market. CAISO did not vote on the matter.

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CAISO and CPUC Butt Heads over Resource Adequacy

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