Southern California Edison Stakeholder Comments. PacifiCorp s Energy Imbalance Market (EIM) Entity Proposal Dated October 18, 2013

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1 Stakeholder Comments PacifiCorp s Energy Imbalance Market (EIM) Entity Proposal Dated October 18, 2013 Submitted by Company Date Submitted Paul Nelson (626) Jeff Nelson (626) Southern California Edison The following are Southern California Edison s (SCE) comments on PacifiCorp s Energy Imbalance Market (EIM) Entity Proposal (Proposal) issued September 13, SCE has a power purchase agreement with a wind generator located within PacifiCorp s balancing authority; therefore, SCE is an impacted stakeholder in PacifiCorp s process to implement the EIM. SCE appreciates PacifiCorp engaging impacted parties for feedback on the proposed process. SCE comments on the following issues: The requirement of long-term transmission may discourage EIM participation The requirement for long-term transmission will hinder participation from dispatchable variable energy resources (VERs) The requirement for long-term firm transmission rights and nomination for EIM use should be on a shorter basis PacifiCorp should provide more detail or clarify the details related to bidding, scheduling and settlement issues SCE is concerned the proposal to settle imbalances at the 5-minute EIM price may not be Just and Reasonable PacifiCorp should provide additional details on their Transmission and the interaction with BPA flow gates SCE has had limited time to review the information provided by PacifiCorp, and SCE continues to review other aspects of the PacifiCorp s proposal. Lack of comments on specific issues here does not constitute endorsement. 1. The requirement of long-term transmission may discourage EIM participation In the Proposal, it states that PacifiCorp will require all EIM Participating Resources (EPRs) within its BAAs to be long-term firm transmission customers of PacifiCorp, and EIM 1

2 use shall not exceed the customer's reserved capacity for long-term firm point-to-point transmission 2. PacifiCorp s stated reason for this requirement is cost recovery of transmission assets and prevention of free ridership. However, requiring long term transmission is overly restrictive and will discourage EIM participation. PacifiCorp s tariff includes pricing for long-term firm and short-term transmission which is necessary to recover the transmission revenue requirement. It is not necessary to restrict EIM customers from using the various tariff options to utilize PacifiCorp s transmission system. In addition, particularly given the existence of PacifiCorp s Unauthorized Use of Transmission Service penalty charge (UUTS), it is not necessary for potential EIM Participating Resources (EPRs) to acquire long-term transmission. By virtue of submitting energy schedules, transmission needs to be procured to match such schedules; and by virtue of the existence of UUTS, additional transmission needs to be procured to cover any energy generated above and beyond scheduled energy, otherwise the respective transmission customer faces severe penalty charges. If an EPR acquires non-firm transmission, and such transmission is curtailed, there will be market mechanisms to financially account for such EPR s failure to deliver; namely, the uninstructed imbalance energy and, potentially, the Uninstructed Deviation Charge. As for the operational mechanisms, since dispatch runs occur every five minutes, any resulting energy imbalance will be corrected vis-à-vis the marginal unit at such time as the unit with non-firm transmission can update their unit availability in the EIM process to reduce output. Allowing EPRs to use short-term transmission service would still allow the collection of the transmission revenue requirement and would not result in free-riders. Restricting the transmission options to one year or longer terms may reduce participation in the EIM, which leads to the existence of market power concerns. 2. The requirement for long-term transmission will hinder participation from dispatchable variable energy resources (VERs) Because many VERs are not dispatchable they could be a contributing factor to a Balancing Authority s imbalance. However, some VERs have the capability to limit their 2 Ibid, Section VIII.1.ii., page 29 2

3 output. Such dispatchable VERs can be a part of the solution to imbalance, for example, by submitting bids to decrement (DEC) generation. PacifiCorp should design its EIM related rules and tariffs to account for this possibility and, moreover, should not impose requirements that will hinder potential VER participation. 3 Given that the output of a VER vary from hour to hour and by season, it may be uneconomic to purchase a long-term block of transmission capacity when considering likely times of little-to-no wind production. Instead, a VER should be allowed to purchase shortterm transmission to cover the expected output of the VER plus the MW quantity to cover any EIM bid, each of which can change hour by hour. In addition, given that VER participation in EIM is more likely to submit DEC bids to decrease output, as opposed to submitting bids to increase output, the requirement for longterm transmission is questionable as they have already acquired transmission to submit their base schedule. When a VER decreases its output in response to a DEC award, less energy will flow on transmission lines; it follows that requiring long-term transmission is unnecessary. Even beyond VERs, all EPRs submitting DEC bids from their base schedule should be exempt from this requirement. In summary, the proposed transmission requirements would create a disincentive for VERs capable of dispatch to be a part of the solution to imbalance by placing an unnecessary burden on them and on non-vers who submit DEC bids. As a result, the rule should be modified as discussed herein. 3. The requirement for long-term firm transmission rights and nomination for EIM use should be on a shorter basis In addition to holding long-term transmission, Section VIII 1 ii states that customers must make an election to offer transmission for EIM use on a quarterly basis. It is unclear why this is needed from an operational or revenue collection requirement perspective. If this is deemed a requirement, SCE recommends this requirement be at the most monthly, to more closely match short-term procurement needs. Our preference would be for any transmission requirement to be hourly, but we realize this might create a minor implementation delay. 3 PacifiCorp clarified at the November 6, 2013, stakeholder meeting that the amount of transmission that needs to be acquired is the amount of intended EIM participation and not based upon EPR peak output. 3

4 4. PacifiCorp should provide more detail or clarify the details related to bidding, scheduling and settlement issues a. For non- EPRs, the last opportunity to make a schedule change is T-55, or T-40 if the EIM Market Operator has identified an infeasibility, what options do the non-epr have to manage their exposure to the EIM LMP for real-time deviations and the market cost allocations? b. The proposal uses the EIM locational market price (LMP) to settle imbalances for both EPR and non-epr. What will be the process for non-epr to request LMP price review and correction? In addition, what will be the process for a non-epr to receive LMP price correction notifications and how will a non-epr know when the resettlement has occurred? c. For EPR that will receive sub-allocated market charges from PacifiCorp, PacifiCorp should provide all supporting details as passed through from EIM Market Operator to enable the validation of these allocated costs. d. Settlement Dispute Process. What is the timeline and process for disputing the EIM market charges? Will an EPR be required to submit disputes to CAISO for direct settlement charges and to PacifiCorp for sub-allocated EIM market charges? For an EPR, if a dispute for imbalance charges also impact the sub-allocated EIM market charges (such as Flexible Ramping Constraint Cost Allocation based on 25% Negative Supply deviation), how will these related/cascaded disputes be streamlined and synchronized? e. For EPR, they will receive two sets of EIM settlements, one directly from the CAISO, and another set of sub-allocated market costs from the PacifiCorp. Will these two sets of settlements be synchronized such that the cost drivers of the allocation can be closely aligned and cross-referenced? SCE encourages PacifiCorp to consider a settlement design to help streamline the processing of two sets of EIM settlements. f. PacifiCorp has indicated that it intends on only invoicing transmission customers monthly based on the amounts in the T+12B Monthly Recalculation settlement. CAISO invoicing is weekly, presumably, PacifiCorp is obligated to make payments 4

5 every week, what is PacifiCorp s plan to reconcile the dollar difference between the weekly CAISO invoice payments and the monthly billings for EPR? Will there be interest charges be assessed? g. SCE assumes allocation of EIM settlements will be revenue neutral for PacifiCorp. When there is no clear assignment using cost causation principles, how will PacifiCorp allocate these costs to EPR? Will non-epr be allocated revenue neutrality costs? h. Please provide numerical examples of how variable energy resources (VERs) schedule output in the EIM under the Federal Energy Regulatory Commission (FERC) Order 764 rules mandating the availability of 15 minute scheduling optionality. Please provide examples for both EPR and non-epr VER resources. In addition to scheduling, please include settlement impacts in the examples. i. Please provide step-by-step detail describing the bidding and dispatch process, assuming a VER is submitting an economic DEC bid into the EIM. Included in this explanation, please address the following questions: Does the VER submit a bid quantity to DEC (a) the existing scheduled quantity, or (b) only the quantity being produced in excess of such energy schedules? If the economic DEC bid is accepted, when may the VER receive instruction to curtail its output accordingly? How often can this instruction change per hour? Given the variable nature of wind, but assuming the plant has capped it s production as per its accepted DEC bid, will there be any penalties or charges should the wind cause the VER s generation to dip below the sum of all energy schedules less any instructed DEC quantity? Can a VER submit an INC bid contingent on the award and dispatch of a DEC bid? 5. SCE is concerned the proposal to settle imbalances at the 5-minute EIM price may not be Just and Reasonable As currently structured, the CAISO proposes no regional market power mitigation for the EIM footprint. Without such mitigation, we question how the FERC can determine the rates in the EIM, and in turn the prices PacifiCorp propose to charge for imbalance energy, will be 5

6 just and reasonable. Even with market power mitigation, the voluntary nature of the EIM may result in situations where the EIM has insufficient bids to ensure just and reasonable prices. We encourage PacifiCorp to support measures by the CAISO, such as market power mitigation and possibly other additional measures, to ensure the EIM produces just and reasonable rates within PacifiCorp. In addition, PacifiCorp should develop an alternate settlement mechanism, such as that currently in place, for times when the EIM nodal price is not suitable for settling imbalances PacifiCorp should provide additional details on their Transmission and the interaction with BPA flow gates Bonneville Power Administration (BPA) recently noted that the EIM may impact some 11 flow gates within their balancing authority. In addition, the CAISO proposes dormant software to help address possible flow interaction between the PAC and CAISO balancing authorities. We are not clear on the interaction between the BPA flow gates and the transmission PacifiCorp will include for the EIM. Stakeholders would benefit from additional details on the interaction of PacifiCorp and BPA transmission. For example: Are the flow gates restrictions part of PacifiCorp s transmission rights on BPA system or are these associated with BPA s overall grid operations? Please provide details on PacifiCorp s "network rights" within BPA. Please provide more details on BPA s role in operating the California-Oregon Intertie (COI), and PacifiCorp s real-time (e.g. 15-minute and 5-minute) contractual rights and limitations on COI. Please provide details on the transmission rights and restrictions between PacifiCorp- East and PacifiCorp-West as it pertains to the EIM. 4 This would require coordination with the CAISO EIM Proposal to avoid the creation of two methodologies to settlement imbalances. Otherwise this would result in revenue neutrally issues for PacifiCorp. 6