By Robert Mullin

CAISO last week began work on a plan to extend participation in the western Energy Imbalance Market to resources located outside the market’s footprint.

The move comes a month after FERC rejected CAISO’s proposal to indefinitely prohibit EIM participants from implementing economic bidding at the market’s interties until the ISO could develop procedures to manage the practice. (See FERC Order Prods CAISO to Allow EIM Intertie Bidding.)

In its June 30 decision, the commission found the ISO’s open-ended timeframe for producing a bidding solution to be “inappropriate” and directed FERC staff to convene a technical conference to explore the issue.

At an Aug. 4 Regional Issues Forum held at Idaho Power’s headquarters in Boise, CAISO Vice President for Market Quality and Renewable Integration Mark Rothleder floated a set of principles for allowing external resources to bid into the EIM.

Rothleder first laid out what CAISO considers to be the challenges in managing bids at the market’s seams. “It’s important to understand how resources participate in the EIM,” he said.

The EIM requires the ISO to accurately model physical flows across the market for every five- and15-minute interval, Rothleder said. The model factors in variables such as EIM demand, expected output from internal and pseudo-tied resources (including short-term forecasts from renewables); and dynamic import schedules.

“Accurate flow-based modeling means we can do accurate congestion management,” which helps minimize the ISO’s uplift costs, Rothleder said.

Less Granularity

Fifteen-minute scheduling of imports at the EIM’s interties doesn’t provide the same granularity. The ISO doesn’t know the exact source of imports, which “can have an impact when something changes at the source level.”

And Rothleder pointed out the distinction between bidding and scheduling at the EIM’s interties.

Bidding is “an offering into the market. That means the market is determining when [the generation is] dispatched,” he said. “The expectation is that, if it’s dispatched, it delivers.”

Still, even a “generic” — or system — bid at the seams “does not have the same type of accuracy as an internal market bid,” Rothleder said.

“Frankly speaking, if it were up to us, we’d want to know where those [external] sources are coming from and accurately model them,” Rothleder said. “Uplift costs can be significant. We don’t want to extend that inefficiency to the EIM without knowing what we’re doing.”

Fifteen-minute “generic” bids at the seams have another shortcoming. That’s because the EIM dispatches beyond that interval down to the five-minute level, where resources can provide services other than just energy, such as flexible ramping capability to account for uncertainty from renewable output forecasts.

“The point is, generic bidding at a 15-minute level might not be offering all the services we need,” Rothleder said.

Economic intertie bidding poses additional challenges for the market:

• Intertie bids are currently not subject to market power mitigation, but mitigation and default energy bids — which reflect a unit’s marginal operating costs — are required by the EIM.
• Uncertainties regarding the transmission policy and compensation scheme required to facilitate EIM participation by external resources.
• Lack of metering, greenhouse gas accounting, responsiveness monitoring and control of external resources.

The first step in addressing those challenges: stakeholder agreement on the principles underpinning a solution.

“If everyone agrees to discuss the principles, we think we can find a way to extend EIM participation to other areas,” Rothleder said.

Participation Voluntary

He emphasized that any solution must first recognize that participation in the EIM is voluntary — external resources are not subject to a must-offer obligation. Balancing authorities outside the market must retain their ability to dispatch resources, serve load and balance their own areas.

The proposal must also address the transmission requirements for external resources to participate in the market. And while compatibility with the region’s existing system of bilateral trades is considered another key principle, so is compatibility with the EIM’s current process — which would entail the kind of flow-based modeling of resources necessary to manage congestion.

CAISO also wants external resources to be comparable to those already participating in the EIM. That would require those resources having 15-minute scheduling and five-minute dispatch capability, as well as meeting data exchange, settlements and metering requirements in order to verify delivery.

External resource participation must also avoid “undue operational risks, administrative burden and implementation costs” for both source non-EIM balancing authority areas and sink EIM BAAs.

That last principle was a key concern for Brad Albert, general manager of resource management at Arizona Public Service.

“I didn’t sign up to be a market operator; I signed up to be a market participant,” Albert said. “I want to know if this is going to present another burden on us and [if we’ll] be compensated for it. This is something we’re going to pay close attention to.”

‘Free Riders’

Albert also expressed concern about “free riders” on the EIM system but said CAISO had “caught the high-level principles” needed to formulate a proposal.

Clay MacArthur, assistant vice president for power marketing and contracts at Deseret Power, wondered whether “both the positive and negative effect” of intertie bidding could be modeled in the EIM’s current market construct.

“In my mind, it’s volume and frequency,” Rothleder replied. “If there were a large volume of intertie bids, you’re faced with managing it. We feel a lot more comfortable if we have the physical location [of the resource] right. Then we have metering.”

“You’re going to need a significant amount of information from that resource that’s going to get bid,” said Tony Braun, a consultant and member of the EIM transitional committee. “How much would be required?”

“I think the level of information is probably comparable to a participating resource” in the EIM, Rothleder replied. “I don’t see that as a technical hurdle here.” Policy issues are more of a concern, he added.

“I don’t see anything that isn’t workable,” said Bob Kahn, executive director of the Northwest & Intermountain Power Producers Coalition, which supports increased regionalization of the western electricity market. “There’s clearly a responsibility for those of us who’d like to effectuate this.”

While FERC’s June ruling leaves open the option for each EIM BAA to develop its own plan for external participation, CAISO is seeking uniformity.

“We thought that this would be something that could be adopted by all EIM entities,” Rothleder said. “That’s why what we’re proposing would be a generic solution.”