FERC Filings
EPSA's Motion to Intervene and Comment in Support of Complaint to Implement Interim Reliability Capacity Services Tariff
Comments
Currently, the CAISO utilizes the MOO to commit and dispatch day-ahead and real-time units that are not otherwise scheduled to ensure the reliability of the CAISO-controlled grid. While EPSA acknowledges that the CAISO has an obligation to ensure such reliability, EPSA is concerned that, due to the use of MOO, the value of capacity is not being reflected in market prices in order to appropriately signal the need for new investment. EPSA agrees with IEP that generators providing capacity and reliability services to the CAISO must receive appropriate compensation in order to ensure appropriate investment in necessary infrastructure. Accordingly, for the reasons set forth below and more fully detailed in the IEP Complaint, the Commission should require the CAISO to replace the MOO with the RCST in order to promote reliability by sending proper market signals for investment and provide an opportunity for just and reasonable compensation to generators for the services that they provide. Furthermore, the Commission should act expeditiously to conduct the technical conference requested in the IEP Complaint so that implementation issues associated with RCST can be discussed and resolved.
A. The MOO Is Unjust And Unreasonable And Should be Replaced By The Proposed RCST As An Interim Measure
Despite clear evidence that the California energy markets are facing tight supply conditions, the CAISO continues to utilize the MOO and, hence, fails to provide generators with just and reasonable compensation that would serve as the foundation to resolve the current tight supply conditions. . Notwithstanding the imminent need for new capacity additions, market prices and over-mitigation of energy prices have in fact created disincentives to investment in new generation capacity in California.
As further explained in the IEP Complaint, the MOO is a significant contributor to a lack of infrastructure investment in California because it requires capacity that is needed for reliability to be available at below market prices. As a result, , the market is not getting accurate price signals as to the value of reliability services in the CAISO markets. Thus, there is no incentive for buyers to enter into forward contracts to provide assurances that new capacity will be brought into operation. Evidence also demonstrates that existing units likely will face early retirement due to insufficient net revenues received under the MOO. Accordingly, in an effort to remedy the unjust and unreasonableness of the MOO, EPSA requests that the Commission grant IEP’s Complaint and issue an order directing the CAISO to replace the existing MOO and related minimum load cost compensation tariff provisions with an interim set of RCST provisions, and to conduct a technical conference to address implementation issues associated with the RCST. These steps are necessary in light of the ongoing, but as yet, incomplete development of a Resource Adequacy program and complimentary capacity market mechanism by the CAISO and the California Public Utilities Commission (CPUC).
B. The Commission Should Approve IEP’s RCST Proposal
EPSA supports IEP’s proposal and reasoning behind the implementation of the RCST. As explained more fully in the IEP Complaint, RCST is designed to provide a CAISO market price signal for the value of capacity, and at the same time ensure that short-term compensation problems are avoided. The proposed RCST will eliminate the need for the CAISO to develop local capacity back-stop contracts, which would continue to distort market prices, and creates a strong incentive for buyers to forward contract in order to meet the CAISO’s reliability requirements. In addition, the RCST will signal to developers that there is a wholesale market pricing system in place that no longer obfuscates the true value of capacity needed to ensure reliability and, thereby, starts the process of resolving long-term pricing problems.
Moreover, EPSA supports IEP’s pro forma tariff sheets submitted concurrently with its Complaint to serve as the starting point for the development of the CAISO Tariff sheets that would implement the RCST proposal.