PacifiCorp, CAISO Release MOU to Create Balancing Energy Market

PacifiCorp and the California Independent System Operator Corporation have released a memorandum of understanding that commits the two largest western U.S. grid operators to work toward creating a real-time energy imbalance market (EIM) by October of 2014.

Authorization to proceed with negotiating a formal agreement between the companies will be considered by the ISO Board of Governors during its general meeting in March.

If implemented, PacifiCorp, which controls two balancing authorities primarily covering portions of six states, including Oregon where its service area is open to limited retail access, would participate in a co-optimized real-time energy market facilitated by the ISO.

The joint agreement applies only to the EIM service. PacifiCorp is not joining the ISO and will maintain control of its assets and responsibilities for serving its customers.

According to a fact sheet released by the two organizations, the EIM features a pay-as-you-go structure which includes an initial start-up fee based on the size of the potential partner. In the case of PacifiCorp, the start-up fee is estimated to be about $2 million. The ISO and PacifiCorp are working to define additional costs unique to their systems to ensure that the benefits of an EIM outweigh the costs.

Once the technical requirements are in place and the market goes live, PacifiCorp will only pay as, "it uses the market for the benefit of its customers." Presumably, any load serving entity within the existing PacifiCorp transmission system could access the market, although this is not clear.

Presuming retail suppliers may access the EIM, a balancing market could improve operational conditions for retail suppliers in the limited Oregon direct access market. While the PacifiCorp market has traditionally been less viable than the market at PGE, the Oregon PUC recently directed PacifiCorp to implement a PGE-style long-term cost-of-service opt-out for direct access, which should improve retail market prospects. See prior story for more on changes to direct access at PacifiCorp

Participants in the EIM voluntarily take advantage of generation resources across the entire EIM region, with the added benefit of more frequent dispatching in real time to optimize available energy supplies with actual power demand, the organizations said. Without an EIM, only generation assets within each balancing authority can be used to cover these short-term gaps, the organizations said.

The agreement between the parties initiates a public input process as well as further analysis and negotiations between PacifiCorp and the ISO before full implementation of the expanded EIM.