By Robert Mullin

CAISO is seeking to create a new transmission access charge (TAC) area for a California load-serving entity that does not intend to become a participating transmission owner in the ISO.

The “one-off” proposal with the Metropolitan Water District of Southern California (MWD) would create an unorthodox relationship between the CAISO and an important transmission provider that seeks to retain rights over its own network, while also protecting the ISO’s access to key delivery points along the California-Nevada border.

MWD delivers water to 26 member agencies serving 19 million consumers in six Southern California counties. It owns about 300 miles of 230-kV transmission lines that feed five pumping plants moving water from the Colorado River Aqueduct and State Water Project into Southern California. At full power, the pumps consume 300 MW of load, which is served by the agency’s share of output from the Hoover and Parker dams.

Edison Agreement Ending

Southern California Edison has been operating MWD’s transmission under a decades-long agreement that predates the existence of the ISO. SoCalEd has declined to renew the agreement when it expires Sept. 30 because of the utility’s reduced allocations from the Hoover Dam.

As a result, MWD is seeking a similar arrangement with CAISO allowing it to preserve its transmission operating rights (TORs) while continuing to offload responsibility for operating its grid. The ISO late last year agreed to act as the water agency’s transmission planning coordinator in matters related to meeting NERC reliability requirements.

While MWD’s generating assets sit outside CAISO’s balancing authority area, its agreement with SoCalEd has firmly integrated the agency’s transmission network into the ISO’s operations. It has allowed the utility to take advantage of MWD’s regulation, ramping capability and capacity reserves. The utility has, in turn, used its own baseload resources to serve MWD’s 24/7 pump loads at a flat rate.

The agreement also requires MWD to turn over its excess transmission capacity to SoCalEd — and now CAISO — for market use. That last point is especially important, because MWD’s transmission broadens the ISO’s access to the key Mead wheeling point out of Nevada and provides the ISO market its only access to the Parker delivery point.

“The ISO has been working with MWD on an operations agreement, which is what we typically do with entities inside the ISO [balancing authority area] that are nonparticipating TOs, but still have a substantial system within the ISO,” Deb Le Vine, CAISO director of infrastructure contracts and management, said during a March 28 call to discuss the issue.

Self Sufficient

As Le Vine explained, MWD is positioned to interact with the ISO as a nonparticipating TO because of its self-sufficiency: The agency can completely serve its load with its own generation and transmission.

“MWD does not lean on the CAISO system at all,” Le Vine said. “They have sufficient generation to meet the [California Energy Commission’s] resource adequacy requirements.”

And the ISO will derive a key benefit from continued integration with MWD. “They are going to still let us use their excess transmission,” Le Vine said.

MWD does have an alternative to being required to join CAISO as a full member. It could instead turn control of its assets over to the Western Area Power Administration’s Lower Colorado balancing area, which would narrow the reach of the ISO’s market.

“We’d stay at Mead, but only with Southern California Edison’s transmission,” Le Vine said. “We would no longer have access to Parker. We’d no longer have MWD’s parallel transmission line [out of Nevada] and the ability to use their transmission.”

Resource Adequacy Requirements

The need to create a new TAC area for MWD is based on an “unfortunate” technicality rooted in the link between California’s resource adequacy (RA) requirements and the ISO’s TAC areas, according to Le Vine. In adopting the state’s RA framework, the ISO chose to use TAC areas as the basis for allocating requirements among LSEs.

“We just need to create this TAC area to account for [MWD’s] load-serving entity obligations separately from how they’ve been accounted for in the past, which was all part of the Edison arrangement under the existing contract,” said John Anders, CAISO assistant general counsel.

Creation of the area will allow MWD to cover the resource adequacy requirements for powering its pumps along the Colorado River Aqueduct system.

“Are they going to pay the same TAC that load everywhere else pays?” asked Susan Schneider of Phoenix Consulting.

“No, MWD has TORs,” replied Le Vine. “They own their own transmission system, so they have never paid the TAC since 1998,” when the ISO began operations.

Eric Little, manager of wholesale market and greenhouse gas market design with SoCalEd, asked if the ISO expected MWD to serve a “significant portion” of its RA requirement with its own pumping load, which can provide system RA in a demand response capacity. Little noted that CAISO’s Tariff exempts participating load from ISO penalties meant to guarantee the availability of resources. Entities that enter a participating load agreement with the ISO are entitled to self-supply to meet their requirements.

“Which means that if they were to use a significant portion of their pumping load to serve as their RA, they would meet RA without having a similar obligation as others because they wouldn’t be penalized if they didn’t meet the obligation,” Little said.

“Well, that’s a decision for MWD to make, and they’d need to be consistent with what’s in the ISO Tariff,” Le Vine said.

“I don’t think there is any other load-serving entity out there that is in that same boat,” Little said. “I think everybody else, if they’ve got participating load, [pumping load] is a very small proportion of their load.”

Le Vine disagreed.

“There’s a very large entity that has a significant amount of participating load that is pumping load that uses that as RA,” she countered, referring to the California Department of Water Resources.

“It’s concerning, but I guess that ship has already sailed,” Little responded.

CAISO wants stakeholders to submit comments on the proposal to create the MWD TAC area by April 11, and expects to seek Board of Governors approval on the measure in May.