On December 30, 2019, FERC accepted tariff revisions by the California Independent System Operator Corporation’s (“CAISO”) to apply three previously accepted-interim provisions designed to address the Aliso Canyon natural gas storage facility’s (“Aliso Canyon”) continued operational limitations and impacts on CAISO’s system.

In October 2015, Aliso Canyon—a key part of the natural gas system serving the Los Angeles basin and San Diego, California region—experienced a large natural gas leak, making it unavailable for gas storage and balancing. According to CAISO’s filing, Aliso Canyon has only been restored to 40 percent operating capacity. As a result, the Southern California Gas Company (“SoCal Gas”) system remains insufficient to maintain natural gas reliability to electric generation customers during peak periods, and CAISO must continue to coordinate closely with SoCal Gas to ensure the electric generation resources are dispatched appropriately to maintain both gas and electric system reliability.

To address these concerns, CAISO proposed to permanently incorporate into its tariff three measures formerly accepted by the Commission on a temporary basis regarding CAISO’s authority to enforce maximum gas constraints:

(1) Tariff sections 27.11 and 6.2.1.3., to implement a natural gas constraint that limits the maximum amount of natural gas resources that can be burned by natural gas-fired resources in the SoCal Gas and San Diego Gas and Electric Company (“SDG&E”);

(2) Tariff section 39.7.2.2., to allow CAISO to deem certain internal transmission constraints as part of its local power mitigation process uncompetitive when it enforces a natural gas constraint in the SoCal Gas and SDG&E regions; and,

(3) Tariff section 7.9.2(d), to allow CAISO to suspend virtual bidding when they may detrimentally impact market efficiency because CAISO enforced natural gas constraints.

In response to comments from Pacific Gas and Electric Company (“PG&E”) and the CAISO Department of Market Monitoring (“DMM”), CAISO reiterated that its proposed tariff revisions are necessary because the gas system in Southern California will continue to be constrained for the foreseeable future. CAISO also committed to work with DMM and stakeholders to refine use of the constraints and consider appropriate enhancements; however, CAISO disagreed that such changes were necessary before the Commission grants CAISO permanent authority to use the constraint.

On review, the Commission accepted CAISO’s proposal to incorporate the three tariff provisions related to the enforcement of a maximum gas constraint, effective December 31, 2019, as requested. The Commission found that implementation of the tariff provisions will allow CAISO to ensure it continues to have the tools necessary to address the risks associated with the potential impacts of Aliso Canyon’s continued limited operability on the reliability of CAISO’s system. The Commission further encouraged CAISO to work with DMM and stakeholders to focus on additional refinements to the software and operational processes necessary for the design of the gas burn constraint, and to make the implementation more transparent and efficient.

Finally, the Commission directed CAISO to file annual informational filings with the Commission, beginning June 30, 2020. In the interim, the Commission directed CAISO to publish an equivalent analysis on its website, regarding the impacts of the maximum gas burn constraint on the CAISO markets when the constraint is enforced.

Click here to read the Order.