By Robert Mullin

FERC approved an agreement that will allow the Transmission Agency of Northern California (TANC) to convert capacity on a key transmission line into “option” congestion revenue rights in the CAISO market (ER20-398).

The agreement covers use of TANC’s California-Oregon Transmission Project (COTP), a 340-mile, 500-kV line capable of delivering up to 1,600 MW of energy from Southern Oregon into Northern California. The line is jointly owned by the Western Area Power Administration and members of the Balancing Authority of Northern California (BANC), the BA for a handful of publicly owned California utilities located outside CAISO’s territory, including Sacramento Municipal Utility District.

Completed in 1993, the COTP was built to parallel the older Pacific AC Intertie (PACI). Together the lines comprise the California-Oregon Intertie (COI), a 4,800-MW transmission corridor linking Northern California with the hydro- and wind-rich Pacific Northwest. In 2013, PacifiCorp executed a similar CRR agreement with CAISO over use of the PACI portion of the COI, which CAISO manages as transmission operator.

The new agreement grants TANC access to “option” CRRs, a financial instrument that enables its holder to collect a positive revenue stream for allowing use of transmission capacity. The more common “obligation” CRRs come with risks, namely that they can provide holders with either a positive or negative revenue stream depending on the congestion pattern on a line.

The agreement stipulates that TANC will notify CAISO 30 days ahead of each calendar month regarding the volume of COTP transmission capacity the agency will release for conversion to the special type of CRRs. Capacity will be released on a directional basis (either north-to-south or south-to-north). CAISO will then issue TANC option CRRs that will source and sink at either Bonneville Power Administration’s Captain Jack substation or the Tracy 500-kV CAISO scheduling point, depending on the direction of the release.

The ISO will settle TANC’s CRRs as option CRR payments for intervals when the day-ahead market shows a congestion price difference between the source and sink, but payments will not be issued for real-time congestion. TANC capacity not converted to CRRs will remain as transactions subject to TANC’s transmission tariff.

CAISO’s Nov. 18 filing touted the broad benefits of the agreement for its market participants.

“To the extent that TANC releases portions of the TANC capacity on the COTP for use by the CAISO, the ability of CAISO market participants to schedule transactions on the COI will increase and the CAISO will be able to address congestion more efficiently and reliably,” CAISO wrote. “The agreement provides CAISO market participants more transfer capability from the Pacific Northwest and an alternate path to the PACI. This is a more efficient outcome that increases flexibility.”

CAISO also said the agreement would not affect the financial position of existing CRR holders.

“The total amount of capacity that potentially could become TANC CRRs is equal to the total amount of capacity reserved for the TANC capacity. The agreement simply makes the available capacity easier to use by the entire CAISO market,” the ISO said.

PG&E Concerns Rebuffed

In approving the agreement on Jan. 31, FERC dismissed the concerns of Pacific Gas and Electric, which acknowledged the benefits for CAISO participants, while also contending that the monthly nature of the agreement differed from that of the deal with PacifiCorp and could incentivize TANC to release capacity in a manner that will maximize its own financial benefit.

The commission found no “meaningful distinction” between the TANC and PacifiCorp agreements despite that difference.

“As CAISO notes, the agreement provides an incentive to TANC to release transmission capacity during months when congestion revenue rights are most valuable, and it is during these months that the transmission capacity has the greatest potential to benefit market participants,” the commission said. “Further, TANC must commit to the capacity being released for the entire period.”

FERC also rebuffed PG&E’s argument that the agreement is predicated on modeling transmission capacity in a way that would effectively give priority to TANC to elect its CRR allocation before other participants in the normal election process. The commission noted that the agreement’s modeling of CRR options is consistent with how CAISO models options in the PacifiCorp agreement.

The commission additionally rejected PG&E’s request that the TANC agreement be limited to a two-year term and declined the utility’s recommendation for annual reporting to FERC.

“In light of the information on released transmission capacity available through CAISO’s OASIS, we find no need for CAISO to file similar information with the commission,” FERC concluded.