CAISO Software Flaw Leads to Massive Uplift Charges

By Published On: April 2, 2005

A flaw in the California Independent System Operator?s software used to settle imported energy has led to whopping costs and a special request to the Federal Energy Regulatory Commission for a tariff modification effective March 24. The settlements resulted in charges to schedulers that have been 1,000-fold higher than the previous method, according to one market participant. While the charges were instituted in October 2004, the three-month lag time in settlements meant that schedulers did not see the problem until recently. While the grid operator wouldn?t disclose who benefited from the huge price increase, Powerex confirmed that it has received uplift payments for power delivered since October. The issue is in dispatching imports from the interties, such as hydroelectric power from the Pacific Northwest. However, the bid?s price is set on an hourly basis, but the clearing price can fluctuate, so they may get dispatched at a bid of $40, but because CAISO dispatches 45 minutes before the hour, the clearing price might be $5 less. Then CAISO?s other schedulers have to chip in an ?uplift? fee to make up the difference between the clearing price and the seller?s actual cost. Resources inside California do not receive the uplift because they are not predispatched and thus can set their own ?floor? with the bids they submit. In its March 31 board meeting, CAISO discussed long-term solutions to keep imports coming into the state. Currently on the table are settling the price at an average of quarter-hour payments, settling at quarter-hour prices with an uplift charge, and continuing to use the old method with as-bid prices. No decision was made.

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