California sets imbalance market readiness norms

OREANDA-NEWS. The California Independent System Operator is setting readiness norms for future participants in the western US energy imbalance market to prevent the recurrence of problems that resulted in price volatility and operational problems when imbalance trading first started in November 2014.

The California grid operator manages the structure, which together with PacifiCorp covers six western states. Participating entities trade their ability to adjust generation up or down over five-minute or 15-minute intervals to balance load changes.

The Federal Energy Regulatory Commission told the grid operator in March that any expansion of the imbalance market will have to be preceded by a "robust market simulation and appropriate period of parallel operation" to ensure that the complex dispatch model software works properly and all market participants are aware of possible operational glitches.

The California grid operator has discovered several major glitches and inconsistencies in its imbalance market dispatch software. The imbalance market dispatch model does not recognize PacifiCorp units that are held back for regulatory and contingency reserves so dispatchers may believe there is a scarcity of supply when there is none.

The grid operator has promised to fix the existing kinks in the dispatch model by late August. It also amended its tariff to set new readiness requirements for balancing authorities that want to participate in imbalance trading. Federal energy regulators have to rule whether the proposed tariff change meets their expectation.

The grid operator under the proposal will have to certify 30 days before the market expansion that all processes are ready to accept the new participant. The requirement is significant because it opens the prospect of refunds if market operations do not go as expected.

The operator also undertook to develop very specific readiness benchmarks for new entities to meet, in consultation with stakeholders. The grid operator will have to conduct market simulations and operate the market in a parallel, non-binding environment before any transactions become financially binding.

Nevada's NV Energy and Puget Sound Energy in Washington State are expected to join the imbalance market in October 2015 and October 2016, respectively. Arizona Public Service has informed state regulators that it is weighing the benefits of membership.