CAISO Pitches RMR Changes to Improve Playing Field

The grid operator is proposing to add must offer obligations to its reliability must run mechanism to ameliorate protests over the deals it signed last year.

During a Jan. 30 stakeholder meeting, California Independent System Operator staff proposed revising its controversial RMR contracting mechanism to put contracts on par with utility resource adequacy agreements.

Utilities buy supply cushions as part of the California Public Utilities Commission’s resource adequacy requirement, which includes must offer obligations. Reliability must run contracts fill in remaining capacity holes determined by CAISO. Thus, according to Keith Johnson, CAISO infrastructure and regulatory policy manager, “it is appropriate to update the RMR paradigm to include a must offer obligations for energy and ancillary services.”

The revision, according to CAISO, would remove restrictions on the market participation of generators with costly RMR designations paid for by utilities, which CAISO determines are needed to address power gaps not filled by resource adequacy deals.

The current RMR tariff includes severe market restrictions on generators, which are “inefficient, distort overall market prices, undermine the CAISO’s automated market power mitigation procedures, and are unjust and unreasonable for consumers,” CAISO complained in a filing at the Federal Energy Regulatory Commission last November.

With the rise of utility resource adequacy deals, launched a few years after the CAISO’s reliability mechanism was initiated, the number of the RMR deals fell off. Then in 2017, there was an increase in RMR agreements CAISO determined were needed to ensure reliability.

“There has been an uptick in the number of units under RMR due to policies and emerging trends in the energy industry that are fundamentally altering the resource procurement and [Resource Adequacy] landscape,” states a grid operator Issue Paper released Jan. 23.

Over considerable objections from Pacific Gas & Electric, last year the grid operator designated year-long deals with Calpine for 47 MW each from its Yuba City and Feather River plants, and for 593 MW from its Metcalf facility. It also approved a RMR contract with Dynegy’s 165 MW Oakland plant.

The rub is that although CAISO calls the shots on grid needs, the private utilities pick up the tab for RMR contracts. The cost of the four deals in 2017 fell on PG&E, which objected to the claimed need and costs.

Calpine’s Mark Smith was queried during the Tuesday meeting as to why his company sought RMR deals. He pointed out that the RMR designations for three Calpine plants were sought because “the energy market is not a provider of a predictable and reasonable revenue stream for us.”

During the Tuesday meeting, the grid operator faced considerable push back on its controversial reliability must run mechanism, particularly from investor-owned utility representatives, for lack of clarity.

“Terms have been vague,” admitted CAISO’s Riddhi Ray.

Grid operator’s staff is reviewing problems in its RMR program and seeking improvements in two phases with stakeholder input. Johnson said the hope is to get FERC to approve a revised tariff before the start of 2019. — Elizabeth McCarthy

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CAISO Pitches RMR Changes to Improve Playing Field

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