FERC examines California blackouts but lacks votes to launch probe into market rules

Washington — Following the presentation of a staff report on the mid-August heat wave and rolling blackouts in California, members of the Federal Energy Regulatory Commission agreed Dec. 17 that urgent work is needed to prevent a similar situation next summer but voted against the chairman to block a formal probe into the matter that would have restricted FERC's dialogue with the grid operator and stakeholders.

During a nearly week-long heat wave in the West, California Independent System Operator was forced to order rotating outages Aug. 14 and 15 to maintain grid reliability. A preliminary root cause analysis issued Oct. 6 by Cal-ISO, the California Public Utilities Commission and the California Energy Commission pointed to three broad factors that contributed to the outages, including climate change-induced extreme heat storms, outdated resource planning targets and certain day-ahead energy market practices.

FERC staff, during the commission's open monthly meeting Dec. 17, detailed the conditions and grid operator actions leading up to, during and after the load shedding events.

Staff also teed up a draft order to show cause that would have initiated a Federal Power Act Section 206 proceeding to determine whether Cal-ISO's tariff is unjust and unreasonable and requires revisions. The draft order made a preliminary finding that the mid-August heat events may indicate that Cal-ISO's tariff is inadequate to ensure sufficient resources are available to meet load and maintain system reliability.

The draft show-cause order had the backing and support of Chairman James Danly, but was defeated by two "no" votes from Commissioners Neil Chatterjee and Richard Glick. Commissioner Allison Clements, participating in her first FERC meeting since being confirmed by the Senate Nov. 30, did not vote as she lacked adequate time to review the records of the matters on the Dec. 17 meeting agenda.

A distraction

"I believe Cal-ISO needs to undertake intense, targeted efforts prior to the coming summer and on a longer-term basis to address resource adequacy," Chatterjee said at the virtual meeting. "A broad 206 proceeding at this time would distract from the current efforts Cal-ISO and its stakeholders are making. What's more, due to our ex parte rules, it would also reduce FERC's effectiveness by prohibiting commissioners and staff from providing assistance to and engaging in an open dialogue with Cal-ISO as it works on solutions."

Chatterjee pointed to proactive steps the grid operator has already taken, including a proposed increase of the planning reserve margin to 20% from 15% for the months of June through October in 2021 that is pending before the California Public Utility Commission. Cal-ISO also plans to launch a review of its scarcity pricing and has initiated a resource adequacy enhancement initiative to consider future measures, he said.

"I want to stress I remain concerned that we could face more reliability concerns in California this summer, but I think the fastest and most effective way to address the challenges California faces right now is through collaborative engagement with Cal-ISO and its stakeholders, and not this particular 206 proceeding," Chatterjee said.

Glick warned against the commission using FPA Section 206 to force its own will on a state, particularly after what he referred to as FERC's "bungling effort" that "made a complete mess of the resource adequacy construct in the three Eastern [regional transmission organizations]."

"Are we really now going to do the same thing to the West," he said, adding that this could jeopardize the "baby steps towards more regional cooperation" underway in the region and prompt stakeholders "to run back to their corners and not emerge again for years."

Technical conference

Glick said FERC could play a supportive role in addressing legitimate concerns over what the changing generation mix means for resource adequacy, and called for a technical conference with regional stakeholders and state regulators to discuss possible paths for resolving resource adequacy concerns.

Danly had argued there was "an urgent need for action," as he made a case for the draft show-cause order.

"It's not merely the fact that there was a load shedding event, it's the fact that the events that led to it are not unlikely to be replicated," he said. "Our job is to ensure that rates are just and reasonable, and I think that given the experience in Cal-ISO, it is necessary for us to ask the question as to whether or not, in our oversight responsibilities, it is necessary to inquire as to the fitness of the tariff they currently have."

As the draft show-cause order failed to garner approval, with a 2-1 vote against it, Danly conceded: "Your points are taken, and I for one am perfectly fine with the idea of having a technical conference because the more attention that is brought to bear on this, the better; and the faster we do it, the better."