By Robert Mullin

CAISO’s Board of Governors last week approved an ISO plan to temporarily alter market operations in response to natural gas pipeline restrictions stemming from the closure of the Aliso Canyon storage facility.

The proposal calls for new market rules to help Southern California’s gas-fired generators better manage their burns to avoid system-balancing penalties expected to go into effect June 1 — just ahead of the state’s peak season for electricity consumption.

Under the new requirements, Southern California Gas customers face penalties as high as 150% of daily gas indices when their daily burn deviates from nominated flows by more than 5%. The region’s gas-fired generators say the costs could make them unprofitable when ISO dispatch instructions require their units to burn more — or less — gas than planned for on a given operating day.

“We want to ensure the generation can get” into Southern California, Cathleen Colbert, CAISO senior market design and regulatory policy developer, told a Market Surveillance Committee meeting last month. “That’s why deliverability was the focus.”

Thus, CAISO’s plan takes a systemwide response to gas restrictions, although provisions for recovery of penalty costs are included in the proposal.

When gas flows are restricted the ISO would enforce a gas availability market constraint for generators in a constrained region. The constraint would use the day-ahead or real-time market to cap the gas burn in the affected area below system limitations set out by SoCalGas. Any additional generation needed would only be dispatched through out-of-market operations coordinated with the pipeline operator.

The ISO would also implement a protocol to reserve capacity on the Path 26 transmission line in advance of potential gas shortages, a measure intended to leave enough of a buffer to ensure delivery of energy and contingency reserves into the Los Angeles basin when local resources face curtailment. CAISO decided against implementing a similar procedure along the interties into California because of the current low volume of real-time transfers on those lines.

Additional operational measures proposed by the ISO include:

• Reducing the amount of ancillary services procured from Southern California resources based on expected gas and electric system conditions;
• Deeming selected internal transmission constraints uncompetitive when the proposed gas availability constraint is in effect, thereby freeing up resources to serve the affected region; and
• Clarifying CAISO’s authority to suspend virtual bidding when it identifies potential market inefficiencies.

The ISO is also proposing to allow an affected generator to recover increased gas costs by adjusting the gas component of its day-ahead commitment cost bid cap to up to 175% of the gas index price, compared with 125% today. Gas cost caps included in default energy bids used in the real-time market would be increased from 125% to 200% of the index.

CAISO must now seek FERC approval for the plan. All proposals are set to sunset Nov. 30.