By Robert Mullin
CAISO market participants continue to seek more details about an “expedited” ISO proposal to procure black start resources.
During a Feb. 21 call to discuss the plan, stakeholders pressed ISO staff to provide more specific information on the expected technical requirements for black start units, how the procurement process would play out and the contract terms for selected resources.
The ISO developed the proposal after identifying a need for additional black start resources in the transmission-constrained San Francisco Bay Area, which falls within Pacific Gas and Electric’s service territory. (See CAISO Kicks off Initiative to Procure Black Start Resources.)
CAISO’s draft plan envisions significant collaboration between the ISO and an affected transmission owner to develop the specifications describing the requirements and selection criteria for the black start resource in the procurement process. The ISO would approve or reject the TO’s recommended resources. (See CAISO Proposes TO-focused Black Start Procurement.)
Ellen Wolfe, president of Resero Consulting, sought to know more about the history of black start procurement in California, questioning why CAISO was developing a new process.
“Historically, [TOs] have developed the restoration plans — is that correct?” Wolfe asked.
Neil Millar, CAISO executive director of infrastructure development, confirmed that utilities previously were solely responsible for devising black start plans. With the creation of CAISO, system restoration took on a collaborative approach in which the ISO “accumulates, reviews and can modify” plans if it identifies shortcomings.
“So it’s a layered approach, with the [TOs] taking a first cut and then the ISO looking at the aggregate of the various restoration plans and reviewing to make sure that there are adequate black start resources available,” Millar said, noting that the requirement for developing plans is now a “shared responsibility.”
Millar added that the ISO’s tariff allows for the acquisition of additional black start resources if needed.
“That’s the direction we see needing to move, but the question is how do we go about doing that and where should those costs actually fall?” he said.
Wolfe turned her focus to the proposed collaborative procurement process itself, asking whether the affected TO would get just the technical information from a resource bidding as black start capable, or cost information as well.
“We’re expecting that [the TO] would get all that information” from the bids, said Scott Vaughan, CAISO lead grid assets engineer. “Then they would provide a recommendation to the ISO and we would look at the analysis and either agree or not.”
Wolfe asked if the TO would effectively be acting as the “agent” for all the load-serving entities within its territory “in terms of making prudent financial choices as well.”
“The one point that we want to be clear on is that the ISO is ultimately procuring the additional service under our Tariff, so while we’re looking for the heavy participation of the [participating] TO to sort out which is the best resource, we ultimately have to wear our procurement decision,” Millar said.
Paul Nelson, electricity market design manager at Southern California Edison, sought more specifics on the potential length of the contracts and wondered whether entering multiyear arrangements with generators marked a “new area” for the ISO.
“Is this something you’ve done in the past?” Nelson asked.
CAISO currently has multiyear contracts for black start capability with TOs and generators, but they offer no compensation, explained Andrew Ulmer, the director of federal regulatory affairs at the ISO.
“So it’s a little different, because we’re talking about contracts with non-zero price terms now and figuring out a way to address that fact and allocate costs,” Ulmer said. “But [there is] no real difference in the structure of the contracts we have today.”
Ulmer added that the ISO is specifically seeking stakeholder feedback on the terms of the contracts.
Brian Theaker, director of market affairs at NRG Energy, asked if CAISO expected to publish a list of resources capable of meeting the black start requirements in the San Francisco area before conducting the solicitation.
“I think our expectation was that we would be able to define geographically the area that would help us meet the requirement, and that the generators themselves would be able to decide whether or not they were in or out,” Millar said.
Theaker raised the potential for a conflict of interest in the procurement.
“Is it possible that PG&E — in addition to being an entity that would review the offers into the solicitation process — would also be a party that would be participating in the solicitation process?” he asked.
Millar said it could happen, but it was unlikely because any black start-capable resource already owned by the utility is probably already included in the system restoration plan. “I think we’ll take your point that there needs to be some check and balance on a potential conflict there,” Millar added.
Alan Wecker, market design analyst at PG&E, said his company is “thinking through” the conflict-of-interest issue to ensure that it develops “walled-off procedures similar to how we run our [requests for offers] — such as the storage RFO — where we have our utility side participating as a bidder.”
CAISO is leaning toward a cost-of-service approach for compensating generators rather than providing a capacity-type payment sufficient to support the operation of an otherwise unprofitable resource. Under the current proposal, contracts — in which the ISO would be the counterparty — would run either five or 10 years with a clause requiring one year’s notice for termination.
On the issue of cost allocation, Wolfe asked if ISO staff had considered collecting the costs through CAISO’s transmission access charge. The ISO has proposed having individual TOs recover the expense from its customers through its reliability services rate schedule.
Ulmer said staff had considered the TAC alternative, and that the Tariff would allow the ISO to “peanut butter” the cost across all scheduling coordinators.
“But if we wanted to step back and make a more geographic, precise allocation of these costs, would that mechanism meet that requirement? We don’t think it would,” Ulmer said.
The ISO is seeking comments on the black start procurement proposal by Feb. 28 and plans to issue a draft final proposal by March 14. ISO management expects to submit a final plan to the Board of Governors approval in May.
