Commissioner James Danly Concurrence Regarding California Independent System Operator Corporation

Commissioner James Danly Statement
November 30, 2021
Docket No. ER21-2853-000

I concur with this order because I agree that the California Independent System Operator Corporation (CAISO) proposed a just and reasonable method by which hybrid and co-located resources can participate in the markets CAISO administers.[1]  Enhanced participation of these resources is critical because CAISO faces serious reliability and resource adequacy problems. 

I wonder, however, whether CAISO should exempt hybrid resources from the Resource Adequacy Availability Incentive Mechanism (RAAIM) for system and local resource adequacy capacity.  RAAIM is designed to improve resource performance, so exempting another entire class of resources from it appears to be problematic on its face, especially in a region suffering an ongoing reliability crisis.  But our Federal Power Act standard of review is whether a proposal is just and reasonable, not whether there is a better idea.[2]  I am persuaded that there is a risk of “double penalties” under RAAIM for hybrid resources based on the inclusion of outage data in the original capacity factor calculation.  Based on this showing, I agree that exempting hybrid resources from RAAIM is just and reasonable.[3]

So while I agree with approving this proposal, I remain concerned that CAISO continues to use band-aids to address its ongoing reliability challenges rather than the emergency surgery that is actually required.  Each band-aid may mark a modest incremental improvement, but the patient is still bleeding to death.

Today’s order is a perfect example.  CAISO almost certainly can find ways to incorporate hybrids and variable resources into its markets without RAAIM exemptions or other potentially discriminatory measures.  I thus agree that it is wise to require CAISO to report within a year on whether the RAAIM exemption discriminates in favor of hybrid resources.[4]  I hope to see hard data on the actual performance of all resource types.  I also want to know the amounts of RAAIM incentives and penalties that would have applied to hybrid resources without this exemption.  The Commission can then fulfill its obligation to ensure that CAISO’s tariff results in just and reasonable markets without undue discrimination.

For these reasons, I respectfully concur.