With ISO Vote, Energy Imbalance Market Begins to Take Shape

November 24, 2013

The California Independent System Operator's ("Cal-ISO") Board of Governors recently voted to move forward with a proposed Energy Imbalance Market ("EIM"), with the aim of encouraging Balancing Authority Areas ("BAAs") from across the West to participate in real-time energy imbalance market operated by the ISO. The market design approved by the Cal-ISO Board of Governors is scheduled to begin operation in October 2014. Consistent with an earlier agreement, PacifiCorp and the Cal-ISO would be the initial participants, but the market design approved last week is meant encourage the West's other BAAs to join the EIM. Ultimately, the aim is to create optimal real-time dispatch of generation resources across the EIM footprint, and thereby to reduce dispatch costs and improve the region's ability to integrate variable renewable resources like wind and solar into the electric system.

Under the Cal-ISO's plan, the EIM will be integrated into the Cal-ISO's real-time market. The ISO is now in the process of implementing a real-time market featuring 15-minute scheduling and five-minute dispatch. This market is being developed in response to the Federal Energy Regulatory Commission's ("FERC") Order No. 764, which, among other measures, required adoption of 15-minute scheduling as a means to improve integration variable renewable resources such as wind and solar. The ISO plans to implement this new market structure in the spring of 2014, and will use this structure as the basis of the EIM. Balancing Authorities participating in the EIM will then be able to voluntarily offer resources into the EIM and the ISO will use its 15-minute scheduling and five-minute dispatch programs to efficiently dispatch balancing resources and transfers between balancing authorities across the EIM/ISO footprint. Participants will also submit schedules 75 minutes before the operating hour. These will serve as the load forecast and the base schedule against which balancing resources will be dispatched.

Several obstacles to the EIM's rollout remain. First, the difficult problem of integrating the EIM into California's regime for regulation of greenhouse gases will need to be worked out. Second, as previously discussed here, the considerable skepticism of public power will need to be overcome. Many Public power agencies are concerned that the EIM will become a wedge which FERC uses to force greater jurisdiction over public power agencies. In addition, public power has generally viewed a Regional Transmission Organization ("RTO") in the West as creating more problems than it solves, and is concerned that the EIM "mission creep" will result in the expansion of the EIM from the limited functions currently planned to a full-scale RTO.

In addition, certain generators have complained that the EIM market design is discriminatory because it requires participating generators to hold long-term firm transmission capacity. For similar reasons, designated network resources may be unable to participate in the EIM.

PacifiCorp and the California ISO anticipate filing tariffs with FERC to implement the EIM no later than the end of March 2014.

If you have any questions about the EIM, the electric utility industry, or other matters related to the energy or the environment, please contact a member of GTH's Energy, Telecommunications, and Utilities practice group or Environment & Natural Resources practice group. We're proud that our partner Jim Waldo was recently named 2013 Lawyer of the Year for Energy and Natural Resources Law, and practice group members Don Cohen, Bill Lynn, and Brad Jones were all named among Seattle's Best Lawyers.