Cal-ISO concerned with gas storage impact on grid reliability heading into summer

Anticipating that tight gas supply conditions this summer will stem from Southern California Gas’ (SoCal Gas) limited use of its Aliso Canyon gas storage facility, the California ISO (Cal-ISO) is working with utilities and state agencies to try and minimize any market or grid reliability implications, the Cal-ISO noted in recent documents.

A well at the underground storage facility developed a leak last fall, which has since been sealed, but the limited use of the facility that is used to supply power plants could produce gas price increases or problems for generators trying to meet their unit commitment obligations, according to the Cal-ISO.

The Cal-ISO held a call with stakeholders March 23 and released an issue paper on March 17 outlining some of the steps it hopes to take to ease any grid reliability problems once summer demand for electricity picks up. SoCal Gas has limited ability to withdraw gas from the facility, the documents noted.

The Aliso Canyon storage facility is a key part of the gas system in the state, serving gas customers and gas-fired power plants in the Los Angeles Basin, the Cal-ISO noted in the issue paper. To assess the risks of limited operations at the facility, the Cal-ISO is participating in a task force with the California Energy Commission, the California Public Utilities Commission (PUC), the Los Angeles Department of Water and Power and SoCal Gas.

The Cal-ISO is aiming to evaluate how daily gas balancing requirements, which could make it more costly or challenging for gas-fired generators to nominate gas and stay within their required balancing limits, could affect generators’ ability to manage their assets, according to the March 23 presentation for the stakeholder call.

The grid operator also is striving to identify and develop market mechanisms or tools to support grid reliability and ensure markets are not adversely impacted this summer, according to the presentation.

Under strained gas conditions, such as increased use of operational flow orders and emergency flow orders, intraday gas costs will likely increase due to risks associated with managing gas supply in a daily tolerance band, the grid operator said in the issue paper.

In the summer, if existing practices are followed, “there is high risk of gas curtailments to gas-fired resources in Southern California,” and “depending on the magnitude and timing of such gas curtailment to the electric generators, there is increased risk to electric service reliability,” the Cal-ISO said.

To mitigate the risk of that happening, SoCal Gas and San Diego Gas & Electric (SDG&E), both of which are owned by Sempra Energy (NYSE:SRE) have sought an order from the PUC to establish daily balancing requirements and the ability to impose gas balancing penalties for deviations between nominated gas flows and actual gas used, outside a 5% tolerance band, the Cal-ISO noted.

In a March 14 filing with the PUC, the Cal-ISO said the proposed daily balancing requirements may help to ensure reliable operation of the gas system, which would support reliable power grid operations.

Although it supported the adoption of the daily balancing requirement, the Cal-ISO said the tolerance band proposed by the gas utilities “will create a significant operating constraint for gas-fired electric generation” in the Cal-ISO system.

In connection with the proposal, in which the utilities sought a May 1 effective date, the Cal-ISO said it “plans to initiate a stakeholder process to discuss what measures it should pursue to mitigate the impacts on gas-fired electric generation subject to daily balancing requirements.”