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Western Grid Power Scheme May Dampen Gas Demand

July 8, 2013
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FERC has green lighted an agreement between the West's largest grid operators to create a real-time energy imbalance market (EIM) that promises substantial efficiencies and cost savings on the overall grid, and which could have lasting impacts on the region's natural gas demand.

Following the Federal Energy Regulatory Commission's approval, the California Independent System Operator (CAISO) last week issued a revised preliminary proposal for the structure and rules of the EIM, reflecting stakeholder feedback to the grid operator since it announced the deal with PacifiCorp early this year (see NGI, Feb. 18).

A CAISO spokesperson said FERC had determined that the agreement with PacifiCorp, a MidAmerican Energy Holdings Co. utility that operates two grid balancing areas covering six western states, was "reasonable and not unduly discriminatory or preferential."

The deal calls for the Portland, OR-based utility to pay $2.1 million in fixed start-up fees to participate in CAISO's EIM. Longer term, PacifiCorp expects to negotiate an agreement that would result in better reliability and increased cost savings from integrating increasing volumes of renewable-based power between the two grids, which may reduce overall the need for natural gas in the power sector, according to utility officials.

When the preliminary agreement was announced earlier this year, CAISO CEO Steve Berberich said the West's natural gas generation fleet remains "a largely critical element to be able to back up the increased use of renewable resources" anticipated in the years ahead.

He has said the expanded EIM would allow CAISO to make greater use of renewables and use the West's natural gas fleet more efficiently.

The revised market design proposal and adjustment to CAISO's stakeholder process does not affect the planned October 2014 start for the expanded EIM, the spokesperson said. "The EIM is intended to reduce operations expenses for both parties through more efficient dispatch of resources within and between balancing authorities" and there should be a reduced need for flexibility reserves and more efficient use of renewables.

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