By Robert Mullin

FERC on Thursday rejected CAISO’s proposal to prohibit Energy Imbalance Market participants from implementing economic bidding at the market’s external interties until the ISO can develop “appropriate rules and procedures” to manage the transactions (ER16-1518).

The ISO’s Tariff currently stipulates that each balancing authority area (BAA) that joins the EIM can determine for itself whether to allow resources located outside the market to submit economic bids at the BAA’s transmission seams.

CAISO sought to change its Tariff in part because EIM participants PacifiCorp and NV Energy had expressed concerns that implementing the practice would add complexity to their initial participation in the market.

The ISO cited another reason for the change: “The CAISO’s experience with 15-minute bidding at its own interties suggests that the extent of the benefits from allowing such bidding is questionable,” it said in an April filing with FERC that included a raft of other EIM-related Tariff changes. The ISO cited the low liquidity in the 15-minute market at the ISO’s own seams — suggesting a lack of market interest — and the potential for EIM participants to incur increased transaction costs from external bids.

CAISO also envisioned a “problematic” scenario in which EIM transmission flows could shift as a result of only one EIM participant requesting economic bidding at its interties. While the market consists only of three BAAs today, Arizona Public Service and Puget Sound Energy are scheduled to begin participating later this year, while Portland General Electric will join next year.

The Western Power Trading Forum (WPTF) — an industry group representing power marketers — filed the only protest against the proposal, calling the revision an “attempt to codify” an “effective roadblock to market evolution” that discriminated against third-party participation in the EIM. The organization accused CAISO and the other EIM participants of resisting making the changes required “to incorporate external resources [into] the EIM with efficient, flexible market-based mechanisms.”

The group also criticized the open-ended nature of the Tariff change, asking the commission to dismiss the proposal until the ISO provided a plan to implement EIM intertie bidding by a specific date. The organization suggested that FERC direct the ISO to undertake an “open and transparent” stakeholder process to develop the necessary rules and commit to implementation within a year.

Although the WPTF didn’t win the one-year deadline it sought, the group’s arguments largely found support with the commission.

“As an initial matter, we find it inappropriate for CAISO to include in its Tariff an indefinite placeholder,” the commission wrote, referring to CAISO’s failure to propose a timeline for resolving the intertie issue.

While acknowledging that CAISO “identified issues that warrant further evaluation,” the commission ruled that the ISO had not “sufficiently described” those issues or met its burden under the Federal Power Act to alter the Tariff in a way that would remove from EIM participants the discretion for implementing intertie bidding.

“Moreover, WPTF raised concerns about unduly delaying the ability of external resources to participate — concerns that CAISO does not full address,” the commission said.

WPTF won another concession: The commission called for further discussion of the issue, directing FERC staff to convene a technical conference to gather information about the challenges of implementing economic bidding at the EIM’s interties — with an eye to determining how to overcome impediments. Details for the conference will be set out in a subsequent notice.

The commission’s June 30 ruling did approve CAISO’s other proposed EIM-related Tariff revisions, which included:

• Modification of the ISO’s method for assigning congestion revenues to EIM participants to more accurately reflect those participants’ contributions to congestion at an intertie. The current rule allocates revenues based on the number of participants that share ownership of the intertie.
• A provision allowing CAISO to submit outage information to the regional reliability coordinator on behalf of each EIM participant.
• An alteration to the calculations underpinning the start-up/minimum load costs and default energy bids for EIM generators that would exclude CAISO’s grid management charge, which EIM-only generators do not pay. Instead, they pay EIM administrative charges, which they can continue to include in their costs.
• A requirement that EIM participants accept approved, pending and adjusted e-Tags as the only valid means to convey an import/export base schedule to another participant for the purposes of imbalance settlement.