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Retail Suppliers Support ISO Proposal To Avoid "Anti-Competitive" Pricing

June 25, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

The California ISO, citing a lack of benefits, has asked FERC to allow the ISO to retain the current level of aggregation for load aggregation point (LAP) zones, and retail suppliers are supporting the ISO's request due to the "anti-competitive" impacts from any further disaggregation of LAPs.

The CAISO clears and settles all CAISO load at LAPs, which are aggregations of individual pricing nodes. The CAISO clears and settles the majority of load at one of the Default LAPs (DLAPs), which correspond to the service territories of Pacific Gas and Electric Co. (PG&E), Southern California Edison Co. (SCE), San Diego Gas and Electric Co. (SDG&E), and the Valley Electric Authority (VEA).

For each Default LAP, the CAISO calculates a zonal locational marginal price based on the distribution of system load at the constituent pricing nodes within the applicable Default LAP. The CAISO determines the Default LAP prices by the effectiveness of the load within the default load aggregation point in relieving a transmission constraint. The CAISO settles a scheduling coordinator’s load at the applicable locational marginal price for the Default LAP in which that load is located

FERC had previously denied CAISO's petition for a permanent waiver of a prior FERC directive requiring further disaggregation of LAPs, as FERC directed CAISO to submit a report on the issue. CAISO submitted such report earlier this month, and said that further disaggregation of LAPs would result in minimal benefits but would entail significant implementation costs. CAISO thus asked to maintain the current level of aggregation for LAP zones

The Alliance for Retail Energy Markets filed comments in support of CAISO's request, noting that further disaggregation would result in the potential for anti-competitive effects in the retail market

Specifically, due to current utility retail pricing in California, AReM explained that, "If the CAISO were to disaggregate the three DLAPs into more load zones, there would be several impacts. Most significantly, the IOUs’ retail rates would be disconnected from the wholesale settlements at the load zones -- with the result that (1) retail customers in higher-priced load zones would be subsidized by retail customers in the lower- priced load zones and (2) price comparisons that retail customers eligible for direct access or community choice aggregation must make would be skewed."

"For example, if an ESP were competing to serve a large retail store chain in a particular IOU’s service territory, the ESP would be required to settle that customer’s load at each of the load zones in which it had store locations, while that same customer on IOU service would settle all of its store locations at the IOU’s uniform tariff rate. The ESP would be significantly disadvantaged by the fact that the wholesale rates it will pay and pass along to its customers are now disconnected from the retail rates against which it directly competes. This approach would inevitably create winners and losers among the ESPs and their retail customers," AReM said

Pacific Gas & Electric and Southern California Edison also supported the CAISO's request to maintain the current Default LAPs.

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