Long-Term Price Mitigation Proposed
In an effort to halt the exercise of significant market power in
the California bulk power markets, FERC staff has proposed that the
state-run Independent Operator System (Cal-ISO) be permitted to
mitigate prices on power transactions in its real-time markets
during periods of reserve deficiencies, such as Stage 3
"These hours are those which are extremely conducive to the
exercise of market power by suppliers" in the California bulk
electricity market," staff said in a March 9 report Friday, which
listed its recommendations for market monitoring and mitigation
measures in the out-of-control power market.
During such emergency periods, all units that have signed a
Participating Generator Agreement (PGA) with the Cal-ISO should be
required to offer all of their capacity that is available and not
scheduled to run for use in the California market, the FERC staff
proposed. In return, the PGA units would be paid the marginal cost
of the highest priced PGA unit called upon to run when reserves are
at a critical stage, staff said.
Likewise, staff believes load-serving entities (utilities)
should be required to report the price at which they will curtail
their loads, as well as identify which loads will be curtailed.
It further recommended that each generating unit be required to
have a "standing, confidential price based on its marginal costs"
to be used by the Cal-ISO to establish the real-time market
clearing price when mitigation is required, as well as an estimate
of the available capacity that could be counted on from each
generating unit. The Cal-ISO would have the option of choosing
between demand bids or the price-mitigation levels on file when
determining the market-clearing price during critical reserve
situations, according to the staff report.
Staff's proposed long-term mitigation/monitoring measures are
intended to replace the "soft" $150/MWh price cap that took effect
on Jan. 1 on certain transactions in the Cal-ISO and Cal-PX
markets. FERC expects to adopt a long-term mitigation/monitoring
approach by May 1.
Staff recommends that its price mitigation approach for the
California power market "sunset" in no more than one year. "We also
recommend that mitigation levels be adjusted within the time
period, if necessary, to help ensure new investments in
infrastructure are undertaken quickly."
The FERC staff report also seeks to give the Cal-ISO greater
authority over planned outage schedules for all generating plants.
The ISO's existing authority is limited to approving the outage
schedules for reliability must-run facilities. "The current ISO
authority may need to be strengthened to achieve greater systematic
control over all units (including those of the IOUs) that the ISO
must dispatch," it said.
"The procedures for coordination and outage control should be
coupled with reporting requirements to the Commission and expedited
review when disputes arise." It added that "questionable outages
should be immediately reported to the Commission."
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