By Robert Mullin
CAISO last week released a final draft proposal to expand the definition of a “load-serving entity” to include organizations purchasing wholesale power to serve their own needs.
The ISO’s latest draft seeks to address market participants’ concerns that the wording of the initial proposal could subject them to unwanted obligations. (See CAISO Proposes Broadening LSE Definition.)
CAISO’s Tariff currently recognizes LSEs as only those entities that sell electricity or serve load to end users, a description that covers utilities, federal power marketing agencies and community choice aggregators. A special provision is made for the State Water Project (SWP), a California agency that directly engages the wholesale market to cover its own energy requirements.
The ISO seeks to broaden the definition to accommodate the San Francisco Bay Area Rapid Transit District (BART), which, like the SWP, serves its own load but does not meet the standard definition of an LSE. BART’s transmission contract rights on Pacific Gas and Electric’s network — which predate the existence of the ISO — are set to expire at the end of the year. Those rights will automatically convert to CAISO service, leaving the agency exposed to congestion charges.
A recognized LSE facing a similar circumstance can cover that exposure by seeking a free allocation of congestion revenue rights (CRRs) in the initial round of CAISO’s annual allocation process. In that case, the ISO would treat the expiring contract rights as if they were expiring annual CRRs.
Under current practice, BART is unable to seek that remedy because it does not meet the Tariff definition of an LSE.
For LSEs, the CRR benefit comes with a corresponding obligation: the need to procure enough resources to support their loads plus a reserve margin — the “resource adequacy” provision.
That requirement prompted unease for at least one ISO stakeholder — the Metropolitan Water District of Southern California. While the district is authorized to serve its own load, it currently relies on Southern California Edison to meet its energy needs under a long-term agreement.
During an Aug. 23 call to discuss the proposed definition change, a representative from the water district said his agency was concerned that it would face a resource adequacy obligation upon expiration of its transmission contract rights on SoCalEd’s system.
The latest draft attempts to address that concern by adjusting the language of the revised definition.
“The ISO clarified that an entity must be an end user, have the authority to serve its load through the wholesale purchase of power and choose to exercise its authority to serve its load through the wholesale purchase of power,” CAISO said.
The updated proposal addresses additional issues raised by market participants, including:
- Clarifying that the proposed definition applies only to entities serving their own load through the purchase of energy, and not to those generating power on site for their own use;
- Describing the CRR allocation impact under multiple scenarios related to entities with or without existing transmission contracts and ownership rights to demonstrate that there will be little or no impact to current CRR allocation participants; and
- Removing the term “California” from the definition to include entities such as Nevada-based Valley Electric Association, an existing ISO member.
CAISO has scheduled a Sept. 21 call to discuss the proposal and plans to submit a final amendment for approval to the Board of Governors in late October.
