FERC on June 27 denied a complaint alleging CAISO unlawfully terminated the full capacity deliverability rights associated with a Mexico-based gas-fired generating unit that previously was interconnected with the ISO’s grid (EL24-92).
At issue in the order was the CAISO deliverability status of Unit C, a 181.5-MW combustion turbine plant operated by energy conglomerate Saavi. Under California rules, a resource with full capacity deliverability rights is entitled to count 100% of its output as qualifying capacity in the state’s resource adequacy program.
According to the complaint, since 2003, Saavi has operated Unit C under a FERC-approved nonconforming participating generator agreement (PGA) that gave the company the right to dispatch the plant into either CAISO or the territory of the Federal Electricity Commission (CFE), Mexico’s state-owned utility and national grid operator. The PGA outlined a process by which the unit could switch its dispatch location, with the option to reconnect to the CAISO grid after a disconnection.
“Saavi explains that these nonconforming terms were negotiated to accommodate legal and jurisdictional issues, as well as electrical configuration issues, which are unique to Unit C’s situation as a generator normally connected to and serving the CAISO grid, but that is physically located in Mexico,” the commission wrote.
Saavi said that in 2017, after providing the required contractual notice, it disconnected Unit C from CAISO in order to connect the plant to CFE’s grid to address reliability issues. In subsequent years, the company provided the ISO with semiannual updates on the unit’s interconnection status and continued to extend its disconnection from the California grid.
The company said CAISO expressly approved each extension and that the approval letters stated the ISO would “permit the continued disconnection and future reconnection of [Unit C],” but it also noted that “during the time period it is connected to CFE, [Unit C] will no longer be available or eligible to meet resource adequacy requirements in the ISO balancing authority area.” At no time during Unit C’s connection to CFE did CAISO indicate the plant was at risk of losing its deliverability status, Saavi contended.
Replacement Generation
The complaint goes on to describe that, in 2022, Saavi began developing a battery electric storage system (BESS) that would be connected to the CAISO grid using the same 230-kV Saavi-owned transmission line that connects Unit C to the ISO, saying that the BESS would act as replacement generation for the plant. The first phase of that project, designed to provide 185 MW of power, would reach commercial operation in third quarter of 2027.
Saavi said it was during the initial discussions with CAISO about the BESS project that it learned that Unit C had lost its deliverability status in the ISO because it “has been disconnected from and has not been scheduled into the CAISO system nor operated at the capacity level associated with its rated deliverability for over three years, which is required to retain such rights,” a stipulation CAISO said is laid out in the reliability requirements section of it Business Practice Manuals (BPMs). But the plant still retained its interconnection service capacity rights, the ISO noted.
Saavi argued that CAISO’s termination of Unit C’s deliverability status was unlawful under the Federal Power Act because it contradicted the procedures laid out in the PGA to accommodate Unit C’s status as a grid-switching resource. The company contended that it well exceeded the notice requirements of the PGA because it regularly consulted with CAISO regarding Unit C’s status and that the ISO repeatedly approved the continued connection with CFE.
Saavi also contended CAISO misapplied the BPM language by finding that Unit C’s temporary connection to CFE amounted to a valid reason to terminate full deliverability status, in part because the manual stipulates that a plant will lose that status after being unable to operate at its rated level for three consecutive years.
“However, Saavi states that this BPM section also makes an exception for a holder of the deliverability priority to retain its rights after the expiration of the three-year period if it can demonstrate that it is actively engaged in the construction of replacement generation to be connected at the bus associated with the deliverability,” FERC noted.
CAISO Response
In an April 9 answer urging the commission to deny the complaint, CAISO argued that Saavi’s arguments are not supported by the language of the PGA, the ISO’s tariff and the BPM for reliability requirements. And while CAISO noted that the PGA stipulates that Saavi can disconnect and reconnect with the ISO grid after providing written notice, the agreement also states that it “will be subject to the requirements of the CAISO tariff at all times.” Included in those requirements is the obligation for a generating unit to maintain an association with a CAISO-certified scheduling coordinator, something Unit C failed to do after disconnecting from the ISO in 2017 through July 2020, meaning the unit could not have had deliverable output for the consecutive three-year period.
CAISO also argued it was Saavi’s responsibility to stay compliant with its obligations under the tariff and BPM, and therefore it should have known about the requirement to remain associated with a scheduling coordinator and that it would lose deliverability status after three years of not providing RA to California.
The ISO additionally contended that Saavi was mistaken in assuming the disconnection approval letters constituted an exemption from applicable tariff or BPM rules, or indicated continued deliverability status.
FERC Denial
In ruling in favor of CAISO, FERC found that in revoking Unit C’s full deliverability status, the ISO had not violated its tariff or unlawfully discriminated against Saavi.
“The tariff and the function of deliverability within the overall California resource adequacy framework support a finding that CAISO appropriately revoked Unit C’s deliverability rights after a three-year consecutive period of disconnection from the CAISO grid, during which time Saavi remained disassociated from any scheduling coordinator and was, therefore, incapable of operating in the CAISO markets,” the commission wrote.
The commission said it found “unpersuasive” Saavi’s contention that, in the CAISO BPM, the “capable of operating” provision for retaining deliverability “means merely that the generating unit can produce electric power up to its rated capacity, because this position ignores that, under the tariff, operating as a generating unit includes the ability to deliver the electric power that the generating unit produces to the CAISO grid.”
Rather, the commission found, the tariff “expressly links a resource’s deliverability to its eligibility to provide resource adequacy capacity.”
FERC additionally agreed with CAISO that revocation of Unit C’s deliverability rights did not violate the PGA because the agreement specified that the plant would be subject to ISO tariff requirements “at all times.”
The commission also said Saavi’s reliance on CAISO disconnection approval letters was “misplaced.”
“Nothing in these letters implies that Saavi was exempt from otherwise applicable requirements under the tariff and, therefore, cannot be interpreted as an affirmation of Unit C’s continued deliverability status,” it wrote.
The commission also agreed with CAISO that Unit C’s former deliverability allocation cannot be transferred to Saavi’s BESS project.
“First, as a practical matter, Unit C lost its deliverability in July 2020, three years after it disconnected from the CAISO grid and disassociated itself from its scheduling coordinator,” FERC said. “Consistent with its tariff, CAISO accounted for that development and reallocated the deliverability formerly associated with Unit C to other generators in the same electrical area. In essence, therefore, there is no deliverability available to transfer to the BESS.”
Second, FERC found, Saavi missed the window for starting such a discussion about replacement generation, which CAISO’s BPM stipulates must be initiated before expiration of the three-year period.
“Here, however, Saavi did not initiate discussions about the planned BESS until summer 2022, almost two full years after the three-year deliverability retention window closed,” the commission concluded.
