CAISO Must-Offer Waivers Reveal Capacity Market Issues

The California Independent System Operator (CAISO) is looking at ways to refine the method by which it allows waivers to ?must-offer? requirements for generators. But some generator groups see tweaking waivers as just the tip of the iceberg regarding problems with the rules. Aiming to stop plants from withholding supplies, the federal rules require generators to offer power into the marketplace with some exceptions?thus the must-offer waiver. The Federal Energy Regulatory Commission implemented the rules in 2001, a move favored by the grid operator as a way to increase the availability of power and avoid economic withholding during the latter part of the energy crisis. The issue of changing must-offer waivers surfaced at a January 16 workshop on the matter. Before longer-term fixes are put in place, waivers could be made more efficient and user-friendly, according to Gregg Fishman, CAISO spokesperson. But the issues behind changing waiver rules are what pique generators? interest. Katie Kaplan, manager of state policy affairs for the Independent Energy Producers, said more transparency is needed as to what products the grid operator is actually looking for to stop ?capacity stealing.? According to IEP, this term refers to the requirement that units run at minimum load, while CAISO is given access to all capacity. Cost-shifting is another problem cited by stakeholders. Must-offer, in some instances, is used as a replacement for reliability must-run units throughout the state, Kaplan alleged. This means, for instance, that Pacific Gas & Electric customers might pay for units in Southern California that are required to run. Must-offer is used as a ?catch-all to mitigate any problem CAISO sees on the grid,? contended Kaplan. According to Western Power Trading Forum executive director Gary Ackerman, if a capacity market were in place, there would be no need for must-offer requirements. Suppliers would be paid for the value of capacity when the capacity is required. Resource-adequacy rules with teeth would resolve many must-offer problems, in part because capacity payments to generators would likely be established in contracts, said Kaplan. The California Public Utilities Commission has stalled on approving a resource-adequacy plan. Following this week's stakeholder meeting, CAISO hopes to have a draft proposal ready for public review by the end of the month.

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CAISO Must-Offer Waivers Reveal Capacity Market Issues

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