California grid sees imbalance market improvements

OREANDA-NEWS. The California Independent System Operator (ISO) has asked federal energy regulators for more time to address recurring price volatility in the western US energy imbalance market.

The energy imbalance market launched on 1 November 2014. California's primary grid operator operates the structure, which includes PacifiCorp balancing areas. The market allows participating entities in six western states to trade their ability to adjust generation up or down over five-minute or 15-minute intervals to balance load changes.

Imbalance market operations started off with significant, unforeseen volatility in prices, especially for exchanges between PacifiCorp balancing areas in the Pacific northwest and Rocky Mountains regions.

The Federal Energy Regulatory Commission (FERC) in March launched a proceeding under section 206 of the Federal Power Act. The investigation could mean refunds to market participants if the inquiry determines that the California grid operator's imbalance market tariff provisions were not just and reasonable. The commission ordered refunds effective 22 June and held a technical conference on 9 April to discuss the underlying causes of imbalance price volatility.

The ISO has asked federal regulators to push back the refund effective date to 24 August. The market operator believes it has identified a major glitch in market operations that causes the price volatility and the proposed solution "will require software changes, additional operator and other staff training, and testing and validation of the new features" — all of which cannot be accomplished by 22 June, according to the ISO.

The ISO says its imbalance market dispatch model does not fully account for PacifiCorp units that are held back for regulatory and contingency reserves, and the projected market balance as a result is different from reality.

The market operator says it has changed the procedures that improved the visibility of these resources so that the frequency of price spikes fell in March. But it wants to implement an automated process for doing so, and wants FERC to give it until 24 August to do so.

The ISO staff at the technical conference FERC convened in April and at other forums have drawn parallels with the experience of the New York and Midcontinent Independent System Operator. Both had software glitches that translated power balance and ramp constraint violations into price spikes. Software fixes eventually solved that problem for the operators in New York and the midwest. The California ISO says its experience is no different.

But the California ISO still has to convince FERC that there are indeed no fundamental problems that result in the imbalance market price volatility. The question is relevant because federal energy regulators have ordered the ISO and future participants to give assurances that all operational issues are resolved before the imbalance market can expand.