Fourth Zone Suddenly Third Rail for CAISO

The California Independent System Operator?s (CAISO) plan to create a fourth transmission zone in order to lower costs was yanked from the board?s consideration December 4 as a bevy of transmission owners, generators, and a sister agency lined up to oppose it. The new zone was intended to facilitate generation coming in from the Southwest and Mexico, but unintended consequences waylaid the plan for the time being. ?Staff thought they had it baked and now they have to unbake it,? Michael Kahn, CAISO board chair, said. The flap over this issue portended larger problems. CAISO board members worried that their plan to move to locational pricing with many zones might cause policy gridlock. For instance, the change could cause Southern California Edison— which owns a substantial amount of transmission—to incur added costs up to $200 million a year, according to Gary Stern, Edison director of market monitoring and analysis. He added that less than half the power the utility has rights to from the Palo Verde nuclear facility would get through under CAISO?s plan. ?Essentially it just moves around financial consequences,? said Erik Saltmarsh, Electricity Oversight Board (EOB) director. He expected the onus to move from CAISO participants to utility ratepayers. While the move was put off for reconsideration, Ziad Alaywan, CAISO director of market operations, gave a plaintive appraisal of the current problem. ?We have more manual operations than automatic operations. I wish I had a crystal ball and saw what it will be like in a year, but it might end up . . . having more problems. It?s difficult to operate like this.? To avoid a repeat of the flap over the fourth zone, Kahn asked that stakeholders and staff both delve into the unintended consequences of CAISO?s plan for locational marginal pricing proposed in its market redesign?MD02. He also asked that the EOB be the liaison with Governor Arnold Schwarzenegger?s administration on the issue. One item that moved forward was a new way to pay for large generator interconnections to the grid. The board approved the submission of new rules to the Federal Energy Regulatory Commission that would put much of the economic burden of interconnection on the generator, not the transmission owner. CAISO would require all generators 20 MW and up to fund reliability- related transmission upgrades and, beyond that, allow generators to customize their connections, as long as they pay for it. Because they are providing a service to the grid for reliability purposes, however, generators will be able to get compensation through credits or firm transmission rights allocations. ?In most cases, the [credits or allocations] will be a large percentage, perhaps 100 percent,? of the cost, said Gregg Fishman, CAISO spokesperson. He added that the actual level will have to be determined on a per-project basis. The board is one member short as Frank Miramontes resigned his seat the day after Governor Gray Davis was recalled. ?The new governor stated he was going to bring in deregulation. I didn?t want to have anything to do with that,? he explained. He remains the president of Local 18 of the International Brotherhood of Electrical Workers union.

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Fourth Zone Suddenly Third Rail for CAISO

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