By Hudson Sangre

CAISO’s load conformance practices do not inappropriately deny generators shortage pricing, FERC said Thursday in response to a challenge by NRG Power Marketing (ER19-538-001).

FERC denied NRG’s request for a rehearing, which the company filed after FERC last February approved CAISO’s tariff revisions describing its load conformance practices, including its use of a load conformance limiter tool in its day-ahead and real-time markets. CAISO’s real-time market extends to balancing areas outside its territory as part of its Western Energy Imbalance Market. (See FERC OKs CAISO ‘Load Conformance’ Practices.)

“The markets use an automatically generated load forecast to clear supply bids against anticipated demand,” FERC explained. “For various reasons, the forecast may not match actual system conditions. If it does not, grid operators may make an adjustment to the load forecast (called a ‘load conformance’) so that the forecast better approximates actual conditions on CAISO’s system. Grid operators may conform the load in the residual unit commitment process that occurs after the close of the day-ahead market and in the real-time energy market.

“If a grid operator makes a load conformance decision that will affect more than one market interval, the conformance instruction may not precisely match the ramping capability of the affected generation resources,” it said. “In that circumstance, software called the load conformance limiter refines the conformance instructions to ensure that they do not exceed the system’s ramping capability, and thereby violate NERC reliability standards.

“Use of the load conformance limiter also limits the application of shortage pricing during intervals where an apparent shortage is due to a load conformance instruction, and actual supply is not needed.”

Objections Raised, Rejected

In its request for rehearing, NRG contended that CAISO ignores, for pricing purposes, the operator adjustments to automated load forecasts.

“It argues that load conformance decisions should be factored into real-time pricing, and that the load conformance limiter artificially prevents most load adjustments from triggering shortage pricing,” FERC said. “NRG disagrees with CAISO’s explanation that the load conformance limiter is designed to avoid triggering shortage pricing in times when there actually is no shortage in the market, arguing that by definition, shortage pricing signals are based on expectations of forthcoming system conditions.”

FERC rejected that argument.

“We disagree with NRG’s characterization of both the purpose of the load conformance limiter and how it operates,” FERC said. “The load conformance limiter considers the physical reality of adjusting generation levels between the time a conformance instruction is given and the time that a different level of output is necessary — which may be more than one interval away.

“It assumes that if a system operator making a load conformance knew the system’s precise ramping capability, then the operator would have refined the conformances to rely only on an amount of ramping capability necessary to meet the actual system conditions.”

FERC said the “limiter makes adjustments to ensure that a conformance instruction does not cause a power balance constraint violation in a given interval in which the coarse instruction exceeds the system ramping capability, but the supply is not needed in that interval.

“As the commission explained in the initial order, this functionality ‘is intended to detect intervals in which a shortage would be indicated due to an imprecise load conformance, but in which supply is not actually needed.’ In this way, the load conformance limiter will prevent the inappropriate use of shortage pricing,” FERC said.

The commission also rejected NRG’s arguments that the load conformance limiter “makes ex post pricing adjustments, when prices should properly be based on the load forecast,” and that its initial order “conflicted with commission precedent, including Order No. 825, because it does not require the use of shortage pricing in all instances in which a shortage is indicated.”

NRG’s argument, FERC said, “is premised on the assertion that the load conformance limiter makes retroactive pricing adjustments based on what occurred in real time. Contrary to NRG’s contention, the limiter’s adjustments to the load forecast take place before actual real-time supply and demand materialize.”

“CAISO employs the limiter before calculating prices and does not adjust prices after publication to account for the limiter’s effect,” FERC wrote. “Since the limiter’s effects occur before the market clears (i.e., before prices and dispatch instructions are published), it indicates an absence of shortage conditions in the affected interval. So rather than preventing the application of shortage pricing in an instance where a shortage is indicated, the limiter, when triggered, informs the market that shortage conditions do not exist.”