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Cal-ISO sends market enhancements for summer readiness to FERC for review

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Platts Market Data – Electric Power

Cal-ISO sends market enhancements for summer readiness to FERC for review

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Cal-ISO seeks effective date no later than June 15

Proposes tools, rules to address tight supply conditions

California Independent System Operator asked the Federal Energy Regulatory Commission to approve by May 25 a set of market enhancements the grid operator contends are necessary to maintain reliability for summer 2021 and avoid the rotating power outages seen last summer if prolonged heat waves return.

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The proposal reflects market rule and other enhancements that the grid operator said were feasible for it to implement by summer 2021, and arose from root cause analyses and stakeholder discussions stemming from the supply shortages and rotating outages the region experienced on Aug. 14 and 15.

"The proposed tariff revisions ... will help ensure [Cal-ISO] has the appropriate operational tools and market rules to address tight supply conditions this summer and beyond," Cal-ISO said in its March 26 filing (ER21-1536) with FERC.

"The measures will enhance [Cal-ISO's] market rules and processes to incentivize additional supply to be available during tight system conditions, better ensure each balancing authority area participates in the [energy imbalance market (EIM)] with sufficient resources, improve the dispatch of [reliability demand response resources (RDRRs)], and better ensure their [Cal-ISO] market prices reflect their dispatch," the grid operator said.

Cal-ISO requested an effective date no later than June 15 for the proposed tariff revisions. A FERC order clearing the new tariff language by May 25 would ensure that Cal-ISO and market participants have sufficient time to implement the changes, the grid operator said.

The proposed market enhancements fall into five categories, which Cal-ISO said were "separate and discrete from each other." As such, it urged FERC to evaluate each on individual merit and not allow potential concerns with one category of revisions to require rejection of the entire proposal.

Imports, demand response

The first category aims to incentivize incremental imports when conditions have prompted Cal-ISO to issue a notice of an anticipated or actual operating reserve shortage. It would "provide bid cost make-whole payments for hourly intertie block schedules" issued through the hour ahead scheduling process, or HASP, "that provide energy during tight system conditions," according to the filing.

The grid operator's existing import settlement rules clear hourly block economic imports based on HASP prices in the real-time market but settles those bids at 15-minute market prices, meaning that suppliers could be paid a price lower than their bid price, Cal-ISO said of the need for the make-whole payment provisions.

The second set of revisions pertains to improving the bidding, dispatch and pricing of RDRRs. Those resources are currently only dispatched in the five-minute market, creating challenges for RDRRs with operational constraints that require more notice and more static schedules.

New tariff language would extend to RDRRs the hourly block and 15-minute bidding and dispatch options already offered to intertie and proxy demand resources, and in turn "help RDRRs participate more effectively in [Cal-ISO's] real-time markets, thereby improving dispatch efficacy," the grid operator said.

EIM coordination

Regarding the EIM, the proposal would add an uncertainty requirement to the resource sufficiency evaluation to capture a balancing authority area's net load variability, requiring "BAAs to submit sufficient schedules and bids to account for their net load forecast uncertainty, in addition to sufficient schedules to cover their forecasted load," Cal-ISO said.

The proposal would also require EIM-participating BAAs to automate schedule updates for "mirror resources," which are resources designated as the source of imports at Cal-ISO's intertie scheduling points.

"Currently, it is optional for an EIM BAA to use the automated update functionality," Cal-ISO said. "This enhancement results from [Cal-ISO's] review of operational issues that occurred during last summer's heat event during which [Cal-ISO's] market systems and an EIM BAA used incorrect information in connection with updating a mirror resource's schedule. As a result, the market optimization relied on incorrect information about supply resources available to the EIM for dispatch. [Cal-ISO's] proposal addresses this modeling issue, and it will improve operational coordination between EIM BAAs."

Cal-ISO added in its filing that it plans to launch a stakeholder process later in the year to conduct a more comprehensive review of potential changes to the resource sufficiency evaluation and the consequences of failing the tests.

Pricing, interconnection

The fourth category of tariff revisions would price all operating reserves at the energy bid cap when dispatched to provide energy in a system emergency, as opposed to existing rules that limit that pricing to "contingency only" reserves.

"The current practice can cause real-time prices to decrease because the price of the energy bids can be below the current real-time market price, thereby suppressing prices even though the market needs to signal conditions are tight and more energy is needed," Cal-ISO said. It added that the proposal would "avoid deflating real-time prices during tight system conditions, [and] it should help attract additional supply when most needed and encourage load-serving entities to schedule demand in the day-ahead market."

Lastly, Cal-ISO proposed generation interconnection process improvements, including nixing a cap on on behind-the-meter expansion to "allow variable energy resources to hold excess energy when demand is low and then discharge that energy during the system peak," and authorizing the award of available interim deliverability on a temporary basis to "allow independent study interconnection customers to use available deliverability if they come online quickly, while preventing queue jumping for deliverability."