Calif. asks FERC to help with price fluctuations in new market

Source: Debra Kahn, E&E reporter • Posted: Monday, November 17, 2014

The California grid operator requested a federal waiver yesterday from electricity-pricing rules because of price fluctuations in a new market intended to accommodate rising amounts of renewable energy.

The California Independent System Operator filed a¬†petition¬†yesterday asking the Federal Energy Regulatory Commission for an immediate 90-day exemption from rules governing the settlement of energy prices because of software glitches and other issues that spurred price increases in the West’s new energy imbalance market.

The market, which gives Western buyers the option to purchase electricity in five-minute increments, is intended to improve electricity schedulers’ ability to fold in renewable energy. Rather than having power plants on reserve, ready to ramp up production to compensate for declining wind and solar, utilities can draw on resources regionwide that may be cheaper than their neighboring plants (EnergyWire, Sept. 30).

The market currently covers the service territories of CAISO, which includes about 80 percent of California and part of Nevada, and PacifiCorp, which has 1.8 million electricity customers in six states: California, Idaho, Oregon, Utah, Washington and Wyoming. Nevada utility NV Energy is expected to join in October.

CAISO reported last week that the market had some software problems at its startup Nov. 1 that caused electricity prices to vary by as much as $1,000 per megawatt-hour (EnergyWire, Nov. 4). Now the agency is asking permission to manually settle prices in PacifiCorp territory to remove the excess charges, rather than relying on its automated software.

“Granting the requested waiver will avoid subjecting market participants to unnecessary and unrepresentative high prices while continuing the overall successful launch of the Energy Imbalance Market,” the waiver request says. “The CAISO’s first priority is to spare market participants the continued financial harm caused by the price excursions.”

CAISO’s filing says issues go beyond software problems. CAISO said it had not modeled all possible conditions during market testing; that some energy resources in neighboring utility PacifiCorp’s territory need metering upgrades to be able to participate; and that PacifiCorp has also had outages in its territory that have contributed to supply constraints in the market.

Suspending the market entirely isn’t necessary, CAISO attorneys said, as problems haven’t affected grid reliability to the point of concern.

“The more extreme step of suspending implementation of the Energy Imbalance Market until the issues noted above are resolved is neither appropriate nor necessary,” they wrote. “The CAISO and PacifiCorp will be better able to identify solutions while the Energy Imbalance Market continues to operate.”

Officials continued to profess confidence in the market, saying the malfunctions are not atypical.

“We continue to be pleased at the overall functioning of the EIM,” said Natalie Hocken, PacifiCorp’s senior vice president for transmission and system operations. “Effectively linking the two largest grids in the West is a big undertaking, and we will continue to fine-tune and adjust to operating in a brand new market during these early weeks.”