FERC Votes 2-1 Against Interfering in CAISO Market

17 Dec 2020

The California grid operator dodged a bullet Dec. 17 when federal regulators voted down an order that would have required the California Independent System Operator to prove its mid-August outages were not caused by an unreasonable market tariff.

Federal Energy Regulatory Commission member Rich Glick said FERC has already exacerbated problems in three eastern regional transmission organizations and shouldn’t intervene in California’s market, which integrates large amounts of renewable power.

In a rare alignment, Commissioner Neil Chatterjee voted with Glick. They agreed that instead of interfering with CAISO’s market, FERC should allow it to continue working with state energy agencies to increase grid resiliency at times of extreme heat or other high-stress conditions.

CAISO is working with the California Public Utilities Commission to increase its reserve requirement next summer to 20%, from the current 15%, Chatterjee noted. In addition, CAISO, the CPUC and California Energy Commission expect to release their final root cause analysis of last summer’s blackouts around the end of this year.

Climate change, and the resulting western heat storm and wildfires, were the main cause of the grid imbalance last August, Glick said. Increased market regionalization is needed, he added, noting CAISO is moving in that direction with the western expansion of its Energy Imbalance Market into the far larger day-ahead market.

FERC’s order to show cause would have required the California grid operator to prove that its tariff for resource adequacy, forward scheduling and reliability must-run contracts were not discriminatory. The adequacy of the CPUC’s requisite resource adequacy level has been a source of contention because it focuses on peak demand rather than on the hours when demand continues to rise as the sun sets and solar and wind resources decrease, which is known as net peak demand.

Commission Chair James Danly, who replaced Chatterjee last month after the presidential election, said the outages raised important matters “requiring Commission attention.” He was the sole supporter of the order directing CAISO prove its tariff was not unjust and unreasonable.

The newest Commissioner, Allison Clements, attended her first meeting Thursday but declined to vote or comment on this or other issues before FERC. She said she was still getting up to speed.

After the vote, CAISO spokesperson Vonette Fontaine stated the grid operator continues “to work expeditiously and in coordination with the CPUC, CEC, as well as other local regulatory authorities on a variety of efforts including resource adequacy and other planning and market design changes.”

FERC finds fault with California grid management

In an analysis presented Thursday, FERC staff highlighted known shortcomings during the California outages. That includes the drop in solar and wind resources, insufficiency of demand response and the sudden loss of electricity from gas power plants at critical times on Aug. 14-15 and in subsequent days. Over the six days examined, demand response fell short by a third of expected megawatts dispatched, FERC noted.

Staff also pointed to CAISO’s own report released in November that found California overestimated available resource adequacy capacity during critical early evening hours.  

Later on Thursday, the CAISO board approved a 250 MW reliability must run contract with the Midway Sunset Cogeneration plant to provide energy and resource adequacy capacity next summer. The contract must be approved by FERC.

Commissioner Glick, with Chair Danley’s backing, proposed holding a technical conference on last summer’s outage.

In other news, FERC on a 3-0 vote agreed to consider incentives for utilities to voluntarily increase system protections against growing cybersecurity threats in areas not currently mandated to do so. Threats are rising with increased digitization of the power system.

Glick and Danly questioned whether the incentives would actually accomplish the goal of increasing system reliability and cyber protections beyond the federal minimum requirements. Both want the North American Electric Reliability Corporation to take a more active role in the matter.

FERC directed NERC to submit information by 2022 on the potential for cloud computing to perform bulk electric system operations.

On a 2-1 vote, the commissioner also voted to allow certain fuel cells to qualify as co-generation facilities under the revised Public Utilities Regulatory Policy Act. Fuel cells with integrated steam hydrocarbon reformation processes could be considered qualifying facilities under PURPA.

PURPA, passed in 1978, required utilities to purchase energy from other energy producers, including from renewable energy projects to help reduce the power of utility monopolies.

Elizabeth McCarthy

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