Commissioner James Danly
July 31, 2020
Docket No. ER20-1947-000
I concur with the decision to accept, suspend, and set for hearing and settlement judge procedures the unexecuted Reliability Must-Run Service Agreement (RMR Agreement) between Greenleaf Energy Unit 2, LLC (Greenleaf Energy) and the California Independent System Operator Corporation (CAISO). I write to express my general concerns about the effect of RMR agreements on the organized markets and my specific concern that CAISO’s tariff fails to require sufficient justification of an underlying reliability need in support of CAISO’s RMR designations.
RMR agreements are a product of market failure, and they themselves cause markets to fail. This further failure arises as RMR agreements obscure the market signals that would create incentives for the very development that the markets are intended to deliver. I therefore agree with Commission precedent that RMR agreements should be a measure of last resort.[1] Given the scant reliability analysis provided by CAISO in support of its reliability need determination, I am not wholly confident that this RMR Agreement truly was a last resort.
This is the second RMR agreement out of CAISO in a month.[2] A third is pending.[3] CAISO provided a document briefly describing the reliability need for all three resources.[4]
While minimal, these brief justifications are all that CAISO’s tariff requires. The Commission approved new CAISO RMR rules last year.[5] Commissioner Glick dissented in part in that case, expressing concerns that the Commission was granting 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]
I agree with Commissioner Glick that greater support for RMR designations is called for to ensure that only truly critical units are designated, thereby guarding against yet further market failures. I would not have supported the RMR rules approved by the Commission last year but in this case, as in the last one, CAISO satisfied the requirements of its Commission-approved tariff and the RMR Agreement must be accepted.
For these reasons, I respectfully concur.
[1] 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).
[2] See Cal. State Univ.-Channel Islands Site Auth., 171 FERC ¶ 61,260 (2020).
[3] See EF Oxnard LLC, Filing, Docket No. ER20-1917-000 (filed May 28, 2020).
[4] See Cal. Indep. Sys. Operator Corp., Informational Report for Proposed New RMR Designations, Docket No. ER19-1641-001 (filed Mar. 30, 2020).
[5] Cal. Indep. Sys. Operator Corp., 168 FERC ¶ 61,199 (2019).
[6] Id. (Glick, Comm’r, dissenting in part at P 3).