I concur with this order[1] accepting a California Independent System Operator Corporation (CAISO) section 205 proposal[2] to change its filed rate to ensure that the CAISO market “more accurately reflects actual supply available . . . and mitigates the reliability risk of overscheduling . . . during tight supply conditions.”[3] This filing represents a critical incremental reliability improvement to CAISO’s markets and must be accepted. Though it scarcely bears stating, a just and reasonable market design should obviously “reflect actual supply available.”
I write separately to restate my serious concerns about the CAISO market and urge my colleagues to initiate a section 206 investigation to fulfill our statutory duty to ensure just and reasonable rates.[4] The CAISO market has been in a perpetual state of emergency since it experienced rolling blackouts in August 2020,[5] largely because of insufficient generation resources, distorted prices, and an over-reliance on less reliable renewable resources combined with out-of-market subsidies in support of the same.[6]
Notwithstanding several emergency orders,[7] and today’s latest order, news articles report this week that “California’s electricity grid faces a shortfall of 1,700 megawatts [MW] versus its planning goals during the hottest days this summer,” that “the projected supply shortfall will worsen over the next two years,” and “supply shortfalls could grow by another 4,600-5,600 MW this year and by as much as 8,800 MW more in 2025” if there is “extreme weather,” fire, or “continued supply chain backlogs delaying renewables and storage projects.”[8] So, business as usual in CAISO, since this is exactly the same circumstances we faced the last two summers.
In exchange for this reliability catastrophe-in-waiting, prices also are high and rising. “Bundled residential rates are forecasted to rise 70 percent for San Diego Gas & Electric customers above projected bill increases based on the rate of inflation since 2013 while customers of Pacific Gas & Electric will pay 40 percent more and Southern California Edison ratepayers will pay 20 percent more.”[9] Prices are somehow too low to retain critically needed generation resources[10] but also among the highest in the country. Perhaps it has something to do with the forced rapid conversion to a less-reliable renewables-only fleet?[11]
Meanwhile, California flouts basic reliability considerations like resource telemetry and metering data, excusing Distributed Energy Resources (DER) from such requirements even as vast quantities come online. A “California Public Utilities Commission administrative law judge recommended earlier this month that the [California Public Utilities Commission] take ‘immediate’ steps to bar distributed energy resources from being connected to the grid using a net-metering exemption in the commission’s existing interconnection rules that its staff says is causing safety and reliability risks.”[12] According to the administrative law judge, Kelly Hymes, “grid reliability is at risk” because CAISO “cannot keep track of DERs that interconnect with the grid using the net-metering exemption because that process does not require generators to provide telemetry and metering data as is normally required under CAISO’s default interconnection process.”[13] This DER black hole is on top of the “increasingly serious problem that intermittent resources largely are planned for, operated, and compensated as if they provide reliability benefits that they, in fact, are incapable of providing. Thus the term ‘intermittent.’ The bulk power markets should treat intermittent resources as they actually perform, not as we hope them to.”[14]
I have zero confidence in the CAISO market design. I will be shocked if there are not rolling blackouts or worse in California in the near future. The Commission must act pursuant to FPA section 206. I am as perplexed now by my colleagues’ refusal as I have been for the last two years.[15] Modest incremental reforms like those at issue in today’s order, while appropriately approved pursuant to FPA section 205, cannot cover the full rot of the CAISO markets.[16]
For these reasons, I respectfully concur.
[1] Cal. Indep. Sys. Operator Corp., 179 FERC ¶ 61,127 (2022).
[2] 16 U.S.C. § 824d.
[3] Transmittal at 1 (emphasis added).
[4] 16 U.S.C. § 824e.
[5] See Staff Presentation on Preliminary Observations on the August 2020 California Heat Storm (AD21-3-000), FERC (Dec. 17, 2020), https://www.ferc.gov/news-events/news/staff-presentation-preliminary-observations-august-2020-california-heat-storm-ad21; 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.
[6] See Transcript of the 1073rd Meeting, FERC, at 31 (Dec. 17, 2020) https://www.ferc.gov/news-events/events/december-17-2020-virtual-open-meeting-12172020 (“Overall, the August heat storm brought to life several potential shortcomings associated with the California planning processes, operating protocols, and market design.”); see also Cal. Indep. Sys. Operator Corp., 176 FERC ¶ 61,159 (2021) (Danly, Comm’r, dissenting at P 1) (“CAISO seeks this latest emergency relief because of the ongoing and persistent failure of its markets to attract and retain adequate resources to maintain reliability.”); id. (Danly, Comm’r, dissenting at PP 16-18); CAlifornians for Renewable Energy v. Cal. Indep. Sys. Operator Corp., 174 FERC ¶ 61,204 (Danly, Comm’r, concurring at PP 3-4) (the CAISO markets are failing because they “appear inadequate to allow dispatchable generation resources the opportunity to recover sufficient revenues to remain in operation or to invest in necessary equipment and upgrades” and because “subsidies for renewable power are doled out without sufficient consideration for their inferior reliability and security attributes, as compared to the generators they drive out of the market.”).
[7] See, e.g., Dep’t of Energy, Order No. 202-21-2 (issued Sept. 10, 2021) (emergency order issued pursuant to Federal Power Act (FPA) section 202(c), 16 U.S.C. § 824a(c), determining that an emergency exists in California due to a shortage of electric energy, a shortage of facilities for the generation of electric energy, and other causes and authorizing specific electric generation resources located within California to test and operate at their maximum generation output levels when directed to do so by CAISO notwithstanding air quality or other permit limitations through Nov. 9, 2021); Dep’t of Energy, Order No. 202-20-2 (issued Sept. 6, 2020) (FPA section 202(c), 16 U.S.C. § 824a(c), emergency order was issued to CAISO authorizing specific electric generating units located within the CAISO balancing authority area to operate at their maximum generation output levels due to an ongoing “Extreme Heat Event” and to preserve the reliability of bulk electric power system through Sept. 13, 2020); see also Cal. Indep. Sys. Operator Corp., 176 FERC ¶ 61,159 (granting waiver to allow CAISO to immediately interconnect two generating units to address potential capacity shortfalls and maintain reliability); Cal. Indep. Sys. Operator Corp., 175 FERC ¶ 61,245 (2021) (order accepting tariff revisions subject to further compliance filing to modify load, export, and wheeling priorities in the day-ahead and real-time optimization process and establish related market rules); Cal. Indep. Sys. Operator Corp., 175 FERC ¶ 61,168 (2021) (order on tariff revisions to enhance CAISO’s resource adequacy rules by: (1) adopting a minimum state of charge requirement for storage resources that provide resource adequacy capacity; (2) requiring substitute capacity for all maintenance outages of resource adequacy resources; (3) clarifying that extending the scope or duration of an existing outage requires a new outage request; and (4) updating the local capacity technical study criteria and permitting CAISO to designate capacity under the backstop capacity procurement mechanism if there are deficiencies relative to the revised criteria); Cal. Indep. Sys. Operator Corp., 175 FERC ¶ 61,167 (2021) (order on tariff revisions regarding the import capability allocation process); Cal. Indep. Sys. Operator Corp., 175 FERC ¶ 61,160 (2021) (order on tariff revisions to ensure CAISO has the appropriate operational tools and market rules to address tight supply conditions).
[8] Jeff Beattie, California officials foresee early-evening 1,700 MW grid shortfall this summer, Energy Daily, May 10, 2022, at 1, 3.
[9] Id. at 3.
[10] Californians for Green Nuclear Power, Inc. v. N. Am. Elec. Reliability Corp., 174 FERC ¶ 61,203 (Danly, Comm’r, concurring) (expressing concern about the retirement of Diablo Canyon’s 2,240 MW of nuclear energy given California’s supply problems).
[11] See Janet Wilson, California just shy of 100% powered by renewables for first time, Desert Sun, May 1, 2022, https://www.desertsun.com/story /news/environment/2022/05/01/california-100-percent-powered-renewables-first-time/9609975002/.
[12] John Siciliano, California DER net-metering exemption poses reliability risk—ALJ, Energy Daily, May 16, 2022, at 5.
[13] Id.
[14] Grid Resilience in Reg’l Transmission Orgs. & Indep. Sys. Operators, 174 FERC ¶ 61,111 (2021) (Danly, Comm’r, concurring in the result at P 5).
[15] See, e.g., Cal. Indep. Sys. Operator Corp., 176 FERC ¶ 61,159 (2021) (Danly, Comm’r, dissenting at PP 16-19) (refuting possible objections to a section 206 investigation).
[16] Cal. Indep. Sys. Operator Corp., 177 FERC ¶ 61,153 (2021) (Danly, Comm’r, concurring at P 3) (“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.”).