By Robert Mullin

The Balancing Area of Northern California (BANC) has signed an agreement with CAISO that puts the Sacramento Municipal Utilities District (SMUD) on track to join the Western Energy Imbalance Market (EIM) in spring 2019.

The implementation agreement comes four months after SMUD entered negotiations to join the West’s only real-time energy market — making it the first publicly owned utility to do so. (See Sacramento Utility to Join EIM; Other BANC Members May Follow.)

Another municipal utility, Seattle City Light, announced its interest in joining the market shortly after SMUD’s announcement and has already signed an agreement with the ISO, putting it on schedule to join up at the same time as the California utility. (See Seattle City Light Signs EIM Membership Agreement.)

The latest agreement calls for a “phased” approach for BANC members to join the EIM, with SMUD’s participation representing the first stage, followed by discussions regarding participation for other members, possibly including federal power marketing agency Western Area Power Administration’s Sierra Nevada region.

Regardless of whether WAPA eventually links up with the EIM, BANC members Modesto Irrigation District and the cities of Redding and Roseville are considering doing so. 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, according to Jim Shetler, BANC’s general manager.

The phased implementation hinges on SMUD being accounted for separately from other BANC members, including “having separate interchange as represented by e-tags, a separate area control error calculation, and separate revenue quality metering,” the EIM agreement states.

SMUD already has 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.

Another term spelled out in the agreement: CAISO acknowledges that as public entities, BANC members want to remain outside the jurisdiction of FERC.

BANC, in turn, accepts that its transmission-owning members will be required to amend their open access transmission tariffs to reflect the fact that the EIM’s operations are subject to FERC oversight.

“We believe the implementation agreement and our partnership with [the] ISO recognizes the unique situation of our public power members,” Shetler said in a statement. “We are pleased to begin the work that will enable our members to participate in the EIM if they choose to do so.”

Incorporation of other BANC members in the future will require that the agreement be amended, or that a completely new one be executed.

CAISO CEO Steve Berberich said he was pleased with the decision by BANC and SMUD.

“SMUD is one of the premiere community-owned utilities in the country that will benefit from access to low-cost resources from the entire EIM footprint,” Berberich said.

SMUD has cited the benefits of increased renewable integration, potentially reduced reliance on gas-fired generation and lower operational costs as its primary reasons for joining the market — although the first two benefits outweighed the latter in the utility’s decision-making, according to Shetler. A joint study conducted by BANC and the WAPA estimated that SMUD would gain $2.8 million in yearly net benefits from transacting in the market, possibly increasing to $5 million in about five years — a “small number” compared with the utility’s overall portfolio, he said.

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 contracts with SMUD to perform day-to-day balancing functions.