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California Moves to Improve Electric-NatGas Coordination

In response to FERC actions attempting to improve coordination between the electric and natural gas grids, the California grid operator has proposed some changes for this winter that will be discussed in a stakeholder conference call Tuesday.

Earlier this month, the California Independent System Operator (CAISO) released an issue paper on gas pipeline penalty recovery for power generators dispatching into the state's grid, in which two-thirds of the generation is gas-fired. Discussions are centered on establishing the circumstances under which CAISO market participants can recover gas pipeline penalties through the state grid operator's bid-cost recovery mechanism.

Tuesday's call will center on whether the existing policy on gas penalty recovery should be modified or extended, a CAISO spokesperson said. The issue paper looks at possible additions to existing policy, bid-cost recovery changes, and stakeholder initiatives being taken that impact penalty recovery. Written comments on the issue paper will be accepted through Oct. 8 (ofo@caiso.com).

"The original policy approved in 2012 allows generators to seek recovery under limited circumstances, and this issue merits further consideration because of changes in the CAISO markets and in electric/natural gas coordination [over the past two years]," the spokesperson said.

The Federal Energy Regulatory Commission last March issued a notice of proposed rulemaking on the power-gas coordination issue (see Daily GPI, March 20), addressing the complex coordination issues by revising the natural gas day. For starters, the "gas day" would start much earlier -- at 4 a.m. central clock time (CCT) instead of the current 9 a.m. -- under the FERC proposal. However, a different proposal expected to be offered to FERC by the end of the month from the North American Energy Standards Board (NAESB), while revising some of the nominations deadlines, does not change the 9 a.m. start of the gas day (see Daily GPI, Sept. 19).

In addition to the FERC action, CAISO said in its issue paper that Sempra Energy's Southern California Gas Co. (SoCalGas) utility has filed at the California Public Utilities Commission for authorization to implement a tiered operational flow order (OFO) process, including penalties, similar to what Pacific Gas and Electric Co. is already using.

The FERC and SoCalGas changes raise the question of whether the existing CAISO policy "is still appropriate, should be modified, or possibly expanded," the grid operator's issue paper said.

As the largest customers on the pipelines, the gas-fired generators often provide "the simplest, fastest tool" for addressing operational issues experienced by the pipelines. "By changing the consumption of a single generator, the pipeline can achieve relatively large changes in gas usage; however, attempting to do so without coordinating with the CAISO can result in the pipeline situations getting worse.

"This [report] discusses the issues leading CAISO to develop the original policy, and includes in the discussion gas pipeline reliability issues that became apparent during last year's implementation stakeholder process."

CAISO said in the issue paper that its original policy does not cover penalties resulting from emergency conditions on gas pipelines, such as existed last winter (see Daily GPI, Feb. 7). "The coordinated operations between CAISO and pipelines last winter during emergency conditions may warrant allowing for recovery of any penalties generators might incur for following dispatch instructions during these coordinated operations," the issue paper said.

The state grid operator's existing policy provides assurances to generators that they won't be forced to absorb gas penalty amounts that "they were completely unable to avoid or recover."

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