On October 20, 2017, FERC approved the California Independent System Operator Corporation’s (“CAISO”) proposal to revise tariff language as it relates to the procurement and cost allocation of black start capability. Under the proposed changes, black start capability will be redefined as a reliability service instead of an ancillary service, with costs for black start services to be allocated to the participating transmission owner in whose service area the resource is located. The revisions will go into effect on November 1, 2017.

In 2011, FERC issued Order No. 749, which approved Reliability Standard EOP-005-2 (“Reliability Standard”) requiring transmission operators to have a system restoration plan in place in the event of a power or system outage. The Reliability Standard also provides for periodic testing of the resources and states that each operator should have testing requirements in place to make sure those resources are adequately functioning.

In response to this order, CAISO began to work to develop such a system restoration plan. Subsequently, CAISO determined that it required additional black start capability in the San Francisco Bay area. FERC describes “black start capability” as the ability of a generating unit or station to begin operating without external assistance from the electric grid. As FERC explains, black start resources are particularly important to grid stability because in the instance of a power outage black start resources are “essential to restart other generation and to restore power to the grid.” To address black start capability shortage, CAISO then began to work with stakeholders to develop the processes for black start procurement and for the allocation of the costs for the black start capability that would be procured.

As a result of this stakeholder process, CAISO submitted the proposed tariff changes. Specifically, CAISO proposed to (1) reorganize, update and consolidate provisions related to black start capability; (2) establish provisions related to performance tests; and (3) designate the costs as reliability service costs and allocate these costs to transmission owners in areas where black start generators are located. CAISO proposed to move tariff provisions related to black start from ancillary services sections to separate new sections that are specific to black start. Under the new sections, CAISO would determine the amount and location of black start capability in accordance with the Reliability Standard and consult with transmission owners in developing their own system restoration plan. CAISO would also mandate under these sections that it would undertake performance tests from time to time with or without notification and if those resources failed those tests, the transmission owner would be subject to remedies or penalties. Further, CAISO proposed to add a new section to its tariff to allocate payments for black start capability as reliability service costs to the participating transmission owner in whose service area the black start generating unit is located. CAISO advanced that this new method is consistent with other allocation methods in other markets already approved by the Commission. The Commission found this method to be just and reasonable because recovering costs from a transmission owner where the resource is located is logical in that those resources do not benefit the electrical system equally.

A copy of FERC’s order can be found here.