The California Independent System Operator Corp. (“CAISO”) is moving forward on a slate of proposals which are intended to enhance grid reliability. These proposals include addressing issues related to generation retirement, entering into a specific reliability must-run contract, modifications to incentives related to the resource adequacy program, as well as adjusting the compensation given to its Board of Governors (the “Board”). On November 2, 2017, the Board approved the four proposals, and CAISO will file any resulting tariff related changes with FERC at a later date.
Specifically, the Board approved a proposal that permits a generating resource that is nearing the end of its life to request an assessment from CAISO on whether it is necessary for future grid reliability operations. If not, the generating resource can begin retirement earlier in the year. If there is a need, CAISO would decide to issue a special procurement designation and carry out a new administrative contract that permits the generating resource to continue operating. In addition, CAISO would add two windows each year, so resource owners can request risk of retirement assessments from CAISO to efficiently make decisions regarding the retirement of facilities.
The Board also approved a proposal to establish a must-run contract with Metcalf Energy Center (“Metcalf”). On June 2, 2017, the Calpine Corporation announced its intention to remove Metcalf from its participating generator agreements, making it unavailable to CAISO. However, CAISO conducted the necessary studies and concluded that Metcalf was needed for reliability purposes that could not be addressed with other alternatives. Therefore, the Board determined that Metcalf must be designated as a reliability must-run resource under CAISO’s tariff.
Further, the Board approved a proposal to adjust the incentive mechanism for ensuring appropriate participation in the CAISO’s resource adequacy program. Under the current construct of the program, CAISO has found that participants are not properly incentivized to meet their must-offer and outage replacement obligations. Lastly, the Board voted to increase its compensation to $40,000 per year. CAISO represents that this amount is significantly below the compensation amounts paid to other governing boards of the United States’ independent grid operators like CAISO.
CAISO’s news release on these proposals can be found here.