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CAISO Halts Work on NatGas Pipeline Penalty Recovery

Citing ongoing changes on the federal and state level regarding natural gas and electricity system coordination, the California grid operator plans to defer action on a gas pipeline penalty recovery initiative to update some of its work from two years ago.

A stakeholder conference call with the California Independent System Operator (CAISO) is to be held Friday, and the grid operator plans to take more comments on the deferral through Dec. 1. CAISO wants to further assess the developing situation at FERC and elsewhere next year.

Last year, the CAISO implemented several board-approved changes in its 2012 cost refinements, but it did not implement the part of the proposals that would allow generators to seek bid cost recovery under limited circumstances for natural gas pipeline penalties they incur.

Earlier this year, CAISO reconsidered the issue because of "changes in the CAISO markets and electric/natural gas coordination." It started a stakeholder initiative to re-examine gas pipeline penalty recovery, and collected written stakeholder comments in early October.

"After careful consideration of stakeholder comments, CAISO is deferring action on the pipeline penalty recovery stakeholder initiative due to a number of changes to the natural gas system currently underway," the grid operator said in a market notice Friday. The unfolding changes "would need to be considered before assessing amendments to the CAISO tariff, and the electricity suppliers increased focus on gas price volatility rather than penalties.”

CAISO said it may be premature to take action, giving the examples of a potential additional gas nomination cycle to be added as part of the Federal Energy Regulatory Commission’s (FERC) electric-gas coordination efforts, and a potential new operation flow order penalty structure that may be established for Sempra Energy's Southern California Gas Co.

After these developments more fully unfold, CAISO said it would assess whether any action is warranted next year.

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