Puget Sound Energy Reports to the Washington UTC on the Progress of its Efforts to Join the CAISO Energy Imbalance Market; CAISO Releases Study Chronicling Benefits of a Regional Energy Market

Jul 28 2016

Puget Sound Energy (“PSE”) recently presented to the Washington Utilities and Transportation Commission (“WUTC”) regarding the steps it is taking to join the California-based Energy Imbalance Market (“EIM”) this coming fall. WUTC Docket No. 151425 (July 20, 2016). The EIM is a new energy market overseen by the California state energy balancing authority – the California Independent System Operator (“CAISO”) – that came online in November 2014. It is intended to increase reliability and other benefits for affected costumers by coordinating the dispatch of energy generation and transmission from utilities across an expanded geographic footprint that is expected to encompass significant portions of eight western states by the end 2018. As of the end of the second quarter this year, CAISO estimates that the EIM has resulted in a $65 million gross benefit for its participants to-date.

On October 1st, PSE is scheduled to become the third out-of-state utility to join the EIM, benefiting from the earlier integration efforts of PacifiCorp (November 2014) and NV Energy (December 2015). It will then soon be followed by Arizona Public Services (2016), Portland General Electric (2017), and Idaho Power (2018), which are each at various stages along an EIM integration process that can take from 18-24 months to complete. As PSE reported at the July 20th WUTC hearing, the process requires working toward 34 separate readiness criteria that must be evidenced in a “Readiness Certification” delivered to the Federal Energy Regulatory Commission (FERC) at least 30 days prior to the scheduled “Go Live Date.”

PSE spent the majority of the presentation outlining the breadth of system integration activities that it has been working on for the last 12 months, particularly with its principal vendor, Power Costs, Inc. (PCI). PCI is providing the cloud-based software platform that PSE will use to bridge the numerous differences in network protocols and data management between its own systems and those used by the EIM. By PSE’s estimate, a total of 28 different management systems and operating protocols have been impacted by the integration efforts, ranging from new systems for outage management and the scheduling of energy demand to increasing the modeling accuracy of resource capabilities and reprogramming the real-time meters installed at each generator on its system.

PSE is now in the “Market Simulation” phase of the integration process, where PSE is running its new system through 16 simulations designed by CAISO to test for bugs and ensure transmission reliability in various market scenarios. This phase is expected to wrap up by early August, after which PSE will begin to dispatch resources into the EIM on a small scale basis without relinquishing full control over the system (“Parallel Operations”) for the two months prior to launch. In the interim, PSE says it will continue focusing heavily on employee training to ensure a smooth transition on October 1st. It has also launched a suite of customer education programs to answer any questions that they may have about the new system.

At the end of the presentation, the WUTC expressed its appreciation for the opportunity to learn more about this process and indicated that it would keep the docket number open for PSE to post future notices regarding any change in its plans or expectations while completing the prescribed readiness criteria. The WUTC also requested a follow-up presentation to be scheduled for sometime after the Go Live Date for a post-integration debriefing. As more utilities in Washington State weigh the costs and benefits of joining the ever expanding EIM, this will likely not be the last time this issue comes before them.

What happens next? A region-wide energy market?
While utilities around the West consider joining the EIM, CAISO is beginning to promote its vision for the next step in the evolution of the western energy markets. On July 12, CAISO released a study quantifying the potential effects of creating a multi-state, regional electric market in addition to an existing region-wide EIM. The new energy market would go beyond the real time balancing activities of the EIM to integrate the remaining market functions managed by ISO’s across the region – such as day-ahead unit commitment, day-ahead market dispatch, intra-day adjustments, and coordinated transmission planning and generator interconnections.

The CAISO study assumed the existence of a region-wide EIM market and focused exclusively on the additional benefits of implementing the integrated region-wide energy market. Based on a model that assumed a large regional footprint that includes all of the Western Electricity Coordinating Council without the federal power marketing authorities (BPA and WAPA), the study revealed the following west-wide benefits:

Reduction of California’s carbon dioxide emissions in 2030 by 4 to 5 million metric tons, or 8 to 10 percent of the state’s total electricity sector emissions. The western region would see a decrease of 10 to 11 million metric tons, or about 3.5 percent, in 2030.
The creation of 9,900 to 19,400 new jobs in California by 2030, primarily as a result of lower energy rates.
Lower impacts on land, water and biological resources, as more strategic planning reduces the number of transmission projects needed for reliability.
Lower energy costs due to smaller operating reserves.
Better real-time visibility of system conditions in the larger geographic footprint and enhanced management of regional power flows.
Increased integration of renewables and reduced need for curtailment of renewable resources by offering excess energy across the West.

Moreover, by expanding the energy grid, CAISO estimates that California would reach its 50 percent renewable energy goal while saving consumers up to $1.5 billion by 2030, lowering greenhouse gas emissions and adding jobs in California.

This comprehensive benefits study comes three months after PacifiCorp’s announcement in April that it had entered into an agreement with CAISO to explore the feasibility of PacifiCorp becoming a full participant in the CAISO market, a step that would require a full stakeholder and regulatory review in each of PacifiCorp’s jurisdictions of operation (CA, ID, OR, UT, WA, and WY). If PacifiCorp now chooses to go forward with its integration plans, state regulatory proceedings can be expected to begin as early as the fourth quarter of 2016.