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Ariz., Nev. utilities ask FERC to reject CAISO proposal in reliability battle

The largest electric utilities in Arizona and Nevada are calling on federal energy regulators to reject a proposal from the California ISO meant to help prevent a repeat of the blackouts that hit the Golden State in August 2020, arguing that its envisioned tariff amendments would come at the expense of grid reliability across the U.S. West.

In a bid to bolster California's resource adequacy imports, CAISO on April 28 proposed (Docket No. ER21-1790) a series of tariff changes that included restrictions on "wheel throughs" of power from the Pacific Northwest, transmitted through California, to the Desert Southwest. But in two separate May 17 protests to the Federal Energy Regulatory Commission, five Arizona utilities — Pinnacle West Capital Corp. subsidiary Arizona Public Service Co., Fortis Inc. subsidiaries Tucson Electric Power Co. and UNS Electric Inc., the Salt River Project Agricultural Improvement and Power District and Arizona Electric Power Cooperative Inc. — and Nevada utility NV Energy Inc.'s two operating companies said the proposal discriminated against them and increased the risk of outages in their service territories and beyond.

Both the Nevada and Arizona utility filings requested that FERC reject the wheel-through provisions of CAISO's proposal after appeals to the California grid operator's board of governors and the governing body of the real-time Western Energy Imbalance Market, or EIM, which CAISO operates, went unheeded. Most of the utilities objecting to CAISO's proposal participate in the EIM.

The conflict highlights the challenges of resource-thin summer-peaking utilities in the drought-riddled Desert Southwest and California and their efforts to secure generating capacity from the winter-peaking, hydropower-rich Pacific Northwest.

"The proposal unfairly prioritizes transmission service for CAISO over transmission service used for the export of power and wheel-through of power to other utilities across the western United States and thus improperly jeopardizes the Arizona Utilities' ability to serve their load with firm purchases that they have already made," the five Arizona companies said.

"The CAISO should not be permitted to fix problems with its own market construct and resource adequacy by shifting its existing reliability risk to its neighboring geographic regions by de-prioritizing transmission used to serve non-California load and creating buyer market power for California [load-serving entities]," added Brian Cole, general manager of resource management at Arizona Public Service, in an affidavit attached to the Arizona utilities' filing.

Arizona utilities say their California counterparts would be able to buy power at a discount "because the balance between supply and demand will be skewed by trapping this capacity in the Pacific Northwest."

'Fundamentally unfair'

The proposal "would effectively block" Desert Southwest utilities from sourcing generation from the Pacific Northwest, or even from California, when supplies are tight, according to Cole.

"Such a result is fundamentally unfair, anti-competitive, and flies in the face of long-standing tenets of the Commission's open-access transmission policies, namely that firm service be allocated on a first-come, first-served basis," he said.

The Arizona utilities pointed to a recent resource adequacy report from the Western Electricity Coordinating Council that flagged Southern California and the Desert Southwest in particular as the western regions most at risk for outages, with capacity reserves expected to fall below their planning margins for the next several years. Rather than improving regional grid reliability, however, "CAISO's proposed tariff changes will exacerbate resource planning challenges," they said.

"Just two months before the summer, the CAISO's proposal would unilaterally impose changes that will have a significant impact throughout the region," added attorneys for NV Energy, an affiliate of Berkshire Hathaway Energy.

The proposal "can interfere with the ability of other balancing authorities and [load-serving entities], including NV Energy, to respond to unplanned outages or unexpected load demands and to meet their customers' needs in an economic and reliable manner," the utility said.