By Robert Mullin

CAISO’s Board of Governors on Monday approved Tariff measures that will enable the ISO to procure additional black start resources in the San Francisco Bay Area and create a new transmission access charge (TAC) zone in Southern California to accommodate a transmission owner that doesn’t intend to become a participating member.

Another amendment passed by the board clarifies the role of the Energy Imbalance Market (EIM) Governing Body in making changes to the market’s charter.

Black Start

The ISO launched the accelerated black start procurement initiative in January after identifying the need for additional emergency resources in the transmission-constrained Bay Area within Pacific Gas and Electric’s service territory. (See CAISO Kicks Off Effort to Procure Black Start Resources.)

The ISO’s plan entails significant involvement of the affected transmission owner — in this case PG&E — in drawing up technical specifications and vetting proposals from resources bidding into the solicitation. The ISO would have authority to accept or reject PG&E’s recommended resources.

Responding to stakeholder feedback, ISO staff settled on a cost-of-service approach to compensating selected resources, rather than providing a capacity-type payment sufficient to support the operation of an otherwise unprofitable generator.

Those aspects of the plan prompted concerns from at least one market participant, who otherwise expressed support for the proposal.

Andy Brown, an attorney representing Diamond Generating, said that California’s power market functions under a “hybrid” structure in which utility-owned generation benefits from a “life-of-asset” arrangement with a guaranteed revenue requirement, while independent power producers depend on power purchase agreements with relatively “truncated” terms. That would put IPPs at a disadvantage in bidding on a black start contract that only covers the cost of that service, he said.

“Our concern is that when it comes down to the evaluation period [for a black start resource], the commercial review is going to create a sort of unnecessary competitive advantage to [utility-owned generation] as opposed to those generators that might be under PPA terms, particularly if” the PPA is close to its expiration date, Brown said.

Scott Vaughan, a CAISO lead engineer, explained that ISO stakeholders generally agreed that a bidding resource’s existing PPA term should factor into the evaluation because upgrading a plant to black start capability would require capital expenditures to be recovered from ratepayers through reliability provisions in PG&E’s tariff.

Brown also sought assurances about the impartiality of an evaluation process that would heavily involve PG&E — a potentially competing supplier — in the selection process.

Keith Casey, CAISO vice president of market and infrastructure development, said that as the transmission owner, PG&E has a “Tariff-defined” role in providing black start services and must be part of the technical review of the effectiveness of proposed resources.

“There are steps that the company takes to wall off that function from other commercial functions within the company, and we’ll rely on that to ensure the integrity of the process,” Casey said.

“These studies involve sensitive and confidential NERC critical infrastructure,” said Eric Eisenman, director of ISO and FERC policy at PG&E. “It’s appropriate that only PG&E’s transmission operations as the transmission owner and the ISO as the transmission operator jointly conduct this effort.”

‘One-off’ TAC

The CAISO measure creating a TAC area for the Metropolitan Water District of California (MWD) met with little stakeholder concern and no objections as it sailed through the initiative process. (See CAISO to Create New TAC Area for Water District.)

Southern California Edison has been operating MWD’s transmission under a decades-long interchange agreement that provided the ISO with effective control of the agency’s transmission assets. However, the utility declined to renew the contract when it expires Sept. 30.

Under what CAISO has called a “one-off” proposal, the ISO will assume operation of MWD’s 230-kV network, while the district will retain its transmission operating rights. In justifying the unorthodox arrangement, ISO management has explained that the water agency possesses sufficient generation and transmission to serve its own load and does not at all lean on the grid operator.

The need to create a separate area stems from a technicality in which ISO uses TAC areas as a billing determinant to allocate costs for resource adequacy requirements among load-serving entities.

“This will allow MWD to stay within the ISO balancing authority area, which is good for us,” said Deb Le Vine, CAISO director of infrastructure contracts and management.

Among the benefits for CAISO: It will maintain its current level of access to key electricity delivery points along the California-Nevada border, including Mead. The ISO will also retain use of MWD’s excess transfer capacity, which includes 70 MW out of Hoover Dam.

MWD, which delivers water to 26 member agencies serving 19 million consumers in six counties, owns about 300 miles of transmission that deliver power to five pumping plants moving water from the Colorado River Aqueduct and State Water Project into Southern California.

‘Lessons Learned’

In approving a measure to define the EIM Governing Body’s role in making changes to the market’s governing charter, the ISO board formalized what has already become standard practice based on the body’s “advisory” function set out in a guidance document approved late last year. (See EIM Leaders OK Governance ‘Guidance’ Proposal.)

The measure came at the request of body Chair Kristine Schmidt, who earlier this year asked CAISO management to clarify her group’s responsibility over the charter, which previously stipulated only that any “substantive changes” to the charter be approved by the board.  (See EIM Changes Would Give Governing Body More Power.)

“Now that we have some experience and understanding under our belt, we’d like to propose some clarification,” Schmidt told the board, noting that the need for clarity was “just one of those lessons learned.”

Substantive modifications to the charter will now be presented to the Governing Body for its advisory input before being submitted to the ISO board — similar to the procedure for ISO market rule changes that also affect the EIM.

“I’ve read a couple articles where it said that the EIM Governing Body is looking to expand its authority — and it is not,” Schmidt told the board.

The measure does make explicit the Governing Body’s power to initiate changes to sections of the charter dealing with the EIM’s Body of State Regulators and Regional Issues Forum.