By Jason Fordney

CAISO wholesale prices jumped 25% last year on higher natural gas costs stemming from tight supplies in Southern California, where the region’s main pipeline operator has no timetable for returning a critical line back into service.

The ISO’s total cost to serve load in 2017 was $9.3 billion, or $42/MWh, compared with $34/MWh in 2016, its Department of Market Monitoring estimated.

Regional spot gas prices increased 27% last year, helping to drive up electricity prices, the department said Thursday. It calculated the prices based on the average of the SoCal Citygate and Pacific Gas and Electric Citygate delivery hubs. Without factoring the gas price increases and greenhouse gas compliance costs, ISO prices rose by a much lower 4%.

Power prices received an additional boost from reduced energy supplies in the day-ahead market, a rising need for ancillary services and increased transmission congestion, the Monitor said in its 2017 Annual Report on Market Issues & Performance.

2017 wholesale prices “reflect the efficient and competitive conditions that exist during most hours of the year. However, DMM notes that the tightening of supply and demand conditions observed in 2017 has created the increased potential for uncompetitive market outcomes in 2018 and beyond.”

About 3,000 MW of gas-fired generation retired in 2017, the largest one-year volume in the ISO’s history. Another 600 MW has announced retirement in 2018, while about 770 MW of summer peak generating capacity was added, mostly solar.

The day-ahead market comprises most of the total wholesale market and remained structurally competitive, except for 36 hours, or 0.4% of intervals, when there was a single pivotal supplier needed to meet demand. The two largest suppliers were pivotal in 128 hours (1.6% of intervals), while the three largest suppliers were pivotal during 336 hours (3.8%).

Day-ahead prices spiked past $770/MWh on Sept. 1 and were greater than $200/MWh for a four-hour period.

“These high day-ahead prices reflect a tightening of supply conditions during peak ramping hours that DMM expects will continue in 2018 and the coming years,” the Monitor said. Conditions were also competitive in the Western Energy Imbalance Market and its expansion and performance improved efficiency for the CAISO real-time market and other balancing areas.

Ancillary service costs increased to $172 million from $119 million in 2016 and $62 million in 2015 on tight supply conditions and higher operating reserve requirements during the summer. CAISO this week described how a problem with solar inverters led to a need to increase operating. (See Solar Inverter Problem Leads CAISO to Boost Reserves.)

The DMM is continuing its campaign against CAISO’s congestion revenue rights auction, saying payouts to CRR holders exceeded auction revenues by more $100 million in 2017 and $42 million in the first quarter of 2018. The ISO is working to overhaul to the CRR auction process. (See CAISO Developing New CRR Proposal.)

SoCalGas Says ‘No Timetable’ for Line 235

Southern California’s tight gas supplies were largely driven by the loss of Southern California Gas’ Line 235-2, which ruptured on Oct. 1, 2017, also taking nearby Line 4000 out of service. The company told RTO Insider there is “no timeline” for the return to service of the pipe, characterized as a “backbone” facility at certain points in the region.

Another factor: a restriction on withdrawals at the Aliso Canyon storage field, leading SoCalGas to warn of possible supply problems and curtailments for gas-fired plants this summer. The company has been seeking to regain full use of the facility, which has been on restricted status since a large methane release in October 2015. (See CPUC OKs Temporary Increase in Aliso Canyon Injections.) Residents near the facility are pushing for its closure, saying they are still suffering negative health impacts, and Gov. Jerry Brown has also called for its eventual closure.

To study the capacity issue, CAISO, the California Public Utilities Commission, the California Energy Commission and others formed the Aliso Canyon Technical Assessment Group, which has determined about 500 MMcf of line capacity is missing per day compared with last year at this time, with about 2,655 MMcf available on May 1. The Line 235-2 outage will require SoCalGas to draw more from storage.

Those factors have led CAISO to warn of tight generation supplies this summer. SoCal Gas said that it has concerns the technical assessment done by the state agencies is “overly optimistic.”

“Service reductions or interruptions to electric generators may be necessary this summer and withdrawals from Aliso Canyon may be required to prevent more extensive customer outages,” the company said. No cause has been publicly identified for the Oct. 1 rupture and subsequent 5-acre fire, which occurred the day after the expiration of an CPUC-approved agreement between SoCalGas and CAISO that allowed the company to increase injections into Aliso Canyon.