Commissioner James Danly Statement
July 15, 2021
Docket No. ER21-998-001
I concur with the decision to accept this latest California Independent System Operator Corporation (CAISO) Reliability Must-Run Service Agreement (RMR Agreement), this time with Midway Sunset Cogeneration Company (Midway). Given the reliability crisis CAISO faced in August, 2020, there does not appear to be any question that CAISO requires Midway to ensure resource adequacy in the immediate future. But this is an example of a short-term fix that is almost certain to exacerbate the long-term problem.
As I have previously written, RMR agreements are a product of market failure and they themselves cause markets to fail.[1] The reliability crisis of last summer demonstrated beyond cavil that CAISO’s markets are failing. In December, 2020, I voted to initiate a section 206 investigation into the CAISO markets, but the Commission failed to support that action.[2] One of the key issues I had hoped to investigate in that section 206 proceeding was whether pricing and other market reforms could be adopted to ensure that needed resources would not be forced into early retirement or compensated outside the market in RMR agreements. CAISO recently filed market reforms which are currently pending before the Commission, but in the meantime, here we are ruling on yet another RMR agreement.[3] Rather than RMRs being the last resort that Commission precedent demands,[4] it appears that the instant RMR Agreement with Midway is CAISO’s first resort to address its failure to ensure that it acquires and retains sufficient capacity.
I also previously expressed my concerns about the broad RMR authority CAISO sought and the Commission approved in 2019.[5] I agreed with now-Chairman Glick’s partial dissent in that case that the Commission granted CAISO unacceptably “broad authority to perform an end-run around the Commission-approved market structures in order to retain particular resources” without being “required to justify its decision to enter an RMR agreement in a filing before the Commission.”[6]
This latest RMR Agreement neatly highlights Chairman Glick’s concerns. Unlike recent CAISO RMR agreements addressing local concerns, Midway “is required for the ISO to meet the 2021 system-wide reliability needs, due to capacity insufficiency at the net peak hour during the months July-September, 2021.”[7] While the CAISO tariff prohibits CAISO from “us[ing] its RMR authority to address Resource Adequacy deficiencies,”[8] CAISO’s studies showed that Midway was needed to maintain contingency reserve requirements of BAL-002-WECC-2a.[9] It also appears that Midway is needed for resource adequacy. CAISO’s tariff, however, does not require CAISO to justify its RMR designation at the Commission.
Given the cited reliability concerns and the Commission’s limited role in “approving” CAISO’s RMR agreements, I agree that the Commission must accept the filing before us. But CAISO really should fix its markets.
For these reasons, I respectfully concur.
[1] Greenleaf Energy Unit 2, LLC, 172 FERC ¶ 61,111 (2020) (Danly, Comm’r, concurring).
[2] See Staff Presentation on California Independent System Operator (EL21-19-000), FERC (Dec. 17, 2020), https://www.ferc.gov/news-events/news/staff-presentation-california-independent-system-operator-el21-19-000.
[3] See Cal. Indep. Sys. Operator Corp., Filing, Docket No. ER21-1536-000 (filed March 26, 2021); Cal. Indep. Sys. Operator Corp., Filing, Docket No. ER21-1551-000 (filed March 29, 2021).
[4] See, e.g., N.Y. Indep. Sys. Operator, Inc., 150 FERC ¶ 61,116, at P 16 (2015), order on compliance and reh’g, 155 FERC ¶ 61,076 (2016), order on compliance and reh’g, 161 FERC ¶ 61,189 (2017), order on clarification and reh’g, 163 FERC ¶ 61,047 (2018); Midwest Indep. Transmission Sys. Operator, Inc., 140 FERC ¶ 61,237, at P 10 (2012).
[5] See Greenleaf Energy Unit 2, LLC, 172 FERC ¶ 61,111 (Danly, Comm’r, concurring at PP 4-5).
[6] Cal. Indep. Sys. Operator Corp., 168 FERC ¶ 61,199 (2019) (Glick, Comm’r, dissenting in part at P 3).
[7] Midway January 29, 2021 Filing, attach. G at 3 (“Memorandum from CAISO Staff to CAISO Board of Governors” on RMR designation) (emphasis added); see also Midway Sunset Cogeneration Co., 175 FERC ¶ 61,003, at PP 5, 14 (2021) (protestors noted same).
[8] CAISO Tariff § 41.3.
[9] Midway Sunset Cogeneration Co., 175 FERC ¶ 61,003 at P 14.