PacifiCorp signs MOU to join Cal-ISO energy imbalance market

PacifiCorp and the California ISO (Cal-ISO) on Feb. 12 announced a memorandum of understanding (MOU) that commits the organizations to work toward incorporating PacifiCorp into an expanded real-time energy imbalance market (EIM) operated by the Cal-ISO by October 2014.

“Increased coordination of energy systems in the West is critical if we are to meet important challenges such as ensuring reliability, keeping costs down for customers and effectively integrating renewable resources,” Greg Abel, chairman and CEO of PacifiCorp, said. “We’re hopeful this agreement … signals a significant step toward broader coordination across the West.”

The agreement will give PacifiCorp access to the Cal-ISO’s existing market platform and its five-minute dispatch of electricity, which will help to more effectively integrate the region’s increasing amount of renewable generation.

“We are all on this concept march to integrate additional renewables onto the system while making sure we can maintain the best rates for our customers, and regional collaboration is critical to that,” Steve Berberich, president of the Cal-ISO, said during a conference call following the announcement. “We can ultimately share our resources much more effectively over a wider footprint.”

Both participants said the agreement would be beneficial to the customers of both organizations, as it will give them access to the lowest-cost resources.

“The EIM will increase coordination of the energy systems across the West, specifically allowing us to better manage the power grids and the ever-increasing integration of renewable energy resources, such as wind and solar,” Abel said.

Abel emphasized that PacifiCorp will not be joining the Cal-ISO and will maintain control of its assets, as well as its responsibilities for serving its customers across two balancing authorities in the West, primarily covering portions of six states, including part of Northern California. PacifiCorp serves approximately 1.7 million customers through its three business units, PacifiCorp Energy, Pacific Power, and Rocky Mountain Power.

The cost of incorporating into the Cal-ISO’s EIM is estimated at $2.1m, which Abel described as “relatively modest,” especially when compared to the “very significant” benefits that will accrue.

“We’re going to create a great example of the type of benefits we can deliver back to our customers while at the same time increasing the overall reliability of the system,” Abel said. “When you start to create a model like that, it will draw in other people.”

In fact, utilities across the West have been exploring an energy imbalance market for some time and, according to Berberich, have come to the realization that the Cal-ISO’s expanded EIM could provide benefits to other participants across the region without being California-centric.

Berberich added that he would welcome inquiries from any other utilities interested in joining an expanded EIM for the benefit of those utilities and their customers. He specifically mentioned the Bonneville Power Administration (BPA) and its efforts investigating EIM opportunities as part of the Northwest Power Pool, noting that the Cal-ISO’s platform is ready and available for BPA to leverage.

While acknowledging Cal-ISO and PacifiCorp’s desire to explore the value of an EIM, BPA officials said they must complete other projects that are already underway before they can consider an EIM.

“BPA remains committed to working with PacifiCorp and our other regional partners in the Northwest Power Pool market assessment committee effort to complete our collaborative analytical process and make an objective determination as to the best path forward to maintain system reliability and leverage opportunities afforded by our market design initiative,” Bill Drummond, BPA administrator, told TransmissionHub in an e-mail.

Berberich also noted that the ISO is performing a study with NV Energy (NYSE:NVE) to determine whether that company could benefit by participation in an expanded EIM.

Participants in the EIM voluntarily take advantage of generation resources across the entire EIM region, with the added benefit of more frequent dispatching in real time to optimize available energy supplies with actual power demand. Without an EIM, only generation assets within each balancing authority can be used to cover short-term gaps, Cal-ISO explained in a statement announcing the MOU.

The agreement between PacifiCorp and the Cal-ISO initiates a public input process as well as further analysis and negotiations between the parties, which must be done before full implementation of the expanded EIM. PacifiCorp will initiate a broader stakeholder process in late April to explore the tariff changes that will need to be made to implement the EIM. The company anticipates making those tariff filings later this year.

In addition, authorization to proceed with negotiating a formal agreement must still be obtained by the Cal-ISO board of governors. The board will consider the MOU at its general meeting in March, according to the ISO.

The MOU and its implementation do not preclude other similar discussions with industry groups in the West, and both the Cal-ISO and PacifiCorp remain supportive of efforts to broaden participation in this or similar regional energy imbalance markets in the future.

“We’re going to be able to leverage the existing resources we have now to have a more efficient dispatch, and it will enable us to leverage diverse resources like the renewables on the system, which is a powerful opportunity,” Berberich said.

While PacifiCorp is working with each of its states to demonstrate the underlying benefits associated with its participation in a joint EIM, the only formal portion of the approval process will be a filing with FERC the company will make in April.

“We don’t see any incremental [FERC] authority being introduced,” Abel said, noting that FERC already regulates the Cal-ISO markets, including its EIM.

Others industry members were quick to weigh in on the announcement. The American Wind Energy Association (AWEA) called the effort “the single most beneficial step that can be taken to use our existing power grid more efficiently.”

The group also applauded the organizations for embracing the available technology.

“In 2013, it is about time that electric companies that want to exchange electricity with their neighbors move beyond using telephone calls and manual processes to do so,” Rob Gramlich, AWEA’s interim CEO, said in a statement that also noted that much of the rest of the country already uses computers and automated processes.

For its part, the Cal-ISO hopes the agreement with PacifiCorp will encourage others to follow suit.

“There is extensive interest in EIM in the West, and I expect this [agreement] to make people look much harder at that as an option,” Berberich said.