By Robert Mullin
The Sacramento Municipal Utilities District (SMUD) will join the Western Energy Imbalance Market (EIM) in spring 2019 at the earliest, according to the head of the joint powers agency of which the utility is the largest member.
“As you might guess, this is a very intense technical project,” Jim Shetler, general manager of the Balancing Authority of Northern California (BANC), told RTO Insider.
The four utilities that have joined the EIM to date have required 18 to 24 months to begin operating in the EIM after signing an implementation agreement with CAISO, the market’s operator.
SMUD will likely sign such an agreement early next year, Shetler said. “We’re just starting to meet with the ISO to lay out project plans.”
The utility announced its intention to join the EIM on Oct. 21, citing the benefits of increased renewable integration, potentially reduced reliance on gas-fired generation and lower operational costs. (See Sacramento Utility to Join EIM; Other BANC Members May Follow.)
SMUD would be a first municipal utility to sign up for the market — a status that could potentially complicate its efforts to join. Municipal utilities are not subject to FERC jurisdiction — but the EIM is. (See Co-ops, MISO, SPP Urge FERC Restraint with Nonpublic Utilities.)
“With FERC oversight, we’re trying to understand what that would mean,” Shetler said. “SMUD has an open access transmission tariff that was approved by its board, but not by FERC.”
SMUD already operates under an agreement that enables the utility to bid power into CAISO through a single hub in which one proxy price is selected to represent all connection points between the two areas.
A joint study conducted by BANC and the Western Area Power Administration estimated that SMUD would gain $2.8 million in yearly net benefits from transacting in the market — a figure that nets out an estimated $6.7 million in implementation fees and $2.6 million in annual operations costs.
Shetler said that SMUD’s annual benefit could increase to about $5 million after five years, once the utility has paid down startup costs.
“It’s a big number, but a small number compared with their energy resource portfolio,” Shetler said. The real value will come in integrating the increased number of variable resources needed to meet California’s 50% by 2030 renewable energy mandate, he noted.
SMUD would be breaking ground for possible future EIM participation by BANC’s other municipal utility members, including Modesto Irrigation District and the cities of Redding and Roseville.
Two other members — the city of Shasta Lake and Trinity Public Utilities District — own no generating resources and would therefore derive no benefit from joining the market, Shetler said. Trinity, a “full requirements” customer of WAPA, receives all of its energy from the federal agency.
Could other BANC members piggy-back on SMUD’s efforts and reduce their costs to join the EIM?
“We’re hoping that’s the case,” Shetler said. “We think there is some scale there.
“Not that it would be on the backs of SMUD or its ratepayers,” he added.
Established in 2011, BANC is the third largest balancing area in California and the 16th largest of the 38 balancing areas in the Western Electricity Coordinating Council. The agency is responsible for balancing load among its members, as well as coordinating system operations with neighboring balancing areas.
BANC contracts with SMUD to perform day-to-day balancing functions.
The BANC-WAPA study spelling out EIM benefits is slated to be released to the public in late November.
