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Market rule requiring automated bids for certain CAISO power imports gets axed

The California ISO received Federal Energy Regulatory Commission approval to toss a market rule requiring automated bid generation in the real-time market for certain power imports that help the region with resource adequacy.

The ISO argued that nixing the rule, which was never put into practice, avoids the potential for costly out-of-market actions and reliability concerns tied to making a real-time award based on an ISO-generated bid for an imported resource that is physically unable to deliver energy to the region.

California’s resource adequacy, or RA, program ensures sufficient resources are available to meet the ISO’s electricity demand needs, and at times relies on capacity located outside of the ISO's balancing authority area.

Some imports are tied to a single generation resource. Other power imports come from groups of generation resources that are modeled on CAISO’s systems as single resources at given interties. Those imports are designated as non-resource-specific system resources providing resource adequacy capacity, or NRS-RA resources.

Since the inception of its nodal market in 2009, the ISO has had the authority to generate bids on behalf of RA resources that fail to bid in line with their RA must-offer obligation. This ensures needed access to energy from RA resources, and that authority was expanded in 2011 to cover the day-ahead bidding of NRS-RA resources.

The grid operator later sought the ability to also generate economic bids up to the full RA capacity for NRS-RA resources in the real-time market, when such resources have a non-zero award in the day-ahead market. FERC approved tariff revisions that became effective in 2016 that “directly called for [Cal-ISO] to generate bids for NRS-RA resources whenever the resource failed to meet the must-offer obligation for either the day-ahead market or the real-time market,” the ISO recalled in an Oct. 11 filing with FERC.

But recent discussions with a market participant revealed that the ISO never altered “its systems to match the changed NRS-RA resource bid generation rules,” the grid operator told FERC. “Thus, [Cal-ISO] has only been generating a self-schedule for NRS-RA resources in the real-time market up to the quantity of the day-ahead award.”

An investigation of this matter led CAISO to reassess the market rule in question and the grid operator determined that the longstanding approach being employed was a “better policy” than the approach prescribed in the tariff. The ISO’s October filing proposed amending the tariff to align it with current practice.

Specifically, CAISO proposed removing bid generation for NRS-RA resources in the real-time market to “match market participants’ current expectations of how [Cal-ISO] implements its longstanding bid generation authority for NRS-RA resources.”

“Out-of-market actions … to plug the hole left by the undelivered import RA” could be avoided “by awarding that energy to internal resources or to other import resources that have inserted their own real-time bids,” CAISO said. “The energy awarded to those alternate resources through the market likely will be less expensive than the costs of the exceptional dispatch.”

No protests or adverse comments were filed with regard to the proposal, which FERC accepted Oct. 6, effective retroactive to Oct. 12.

“The tariff revisions provide that CAISO will not submit a generated bid, beyond their day-ahead market award, for NRS-RA resources that fail to meet their bidding obligation in the real-time market,” FERC said.

As the ISO explained in its filing, this protects the region from needless expense tied to out-of-market actions, such as the issuance of exceptional dispatches, if a real-time market award were given based on an ISO-generated bid for an NRS-RA resource that was “unable to secure transmission or otherwise [was] unable to deliver the incremental energy” to CAISO. (FERC docket ER20-94)

Jasmin Melvin is a reporter for S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.