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FERC Approves Energy Imbalance Market Tariffs, Paving Way for October Start-Up

June 20, 2014 posted by Eric Christensen

At its monthly meeting yesterday, the Federal Energy Regulatory Commission ("FERC") approved tariffs that will allow the western Energy Imbalance Market ("EIM") to open as planned on October 1, 2014. The EIM is designed to allow economic dispatch at five-minute intervals of energy balancing resources in the footprint of participating utilities. The EIM is one of a number of initiatives undertaken by utilities in the West to address the problems created by the rapid expansion of non-dispatchable wind and solar resources. Because these resources produce output that can be both highly variable and unpredictable, they have created increasing demand for balancing resources that can respond rapidly to changes in generation output to maintain the balance between generation supply and electric demand necessary for reliable operation of the electric system. Yesterday's FERC orders approve the EIM proposed jointly by PacifiCorp and the California Independent System Operator ("Cal-ISO"). The PacifiCorp-ISO EIM will employ the Cal-ISO's existing five-minute market mechanism to dispatch balancing resources in the EIM's footprint. Initially, the EIM will dispatch resources within California, as well as within the two balancing authorities operated by PacifiCorp, which are centered on its service territories in the Pacific Northwest and Utah. Participation in the EIM is voluntary and the system is designed to allow expansion through addition of new utility participants. FERC's actions are contained in two orders, one generally approving the EIM tariff filed by the Cal-ISO and the other generally approving the EIM tariff filed by PacifiCorp. While the orders allow the EIM to move forward, FERC required a number of modifications to the proposal. Most of these modifications are relatively minor, but one is noteworthy. FERC rejected PacifiCorp's proposal that EIM participants who already hold transmission capacity on the PacifiCorp system should be required to purchase additional transmission capacity to participate in the EIM. FERC found that this proposal would permit a double-recovery of PacifiCorp transmission charges, and therefore directed PacifiCorp to remove this requirement from its EIM tariff. Also of note, FERC generally approved the Cal-ISO's proposal to address the always-thorny problem of compliance with California's Greenhouse Gas ("GHG") regulations for out-of-state generators that are delivered into California as a result of dispatch by the EIM. The ISO proposed a complex bid adder mechanism, which would reflect the added costs of GHG compliance for resources dispatched into California. However, FERC ordered the ISO to develop a "bid flag" mechanism that would allow resources that do not wish to be delivered into California to be excluded from that market. If you have any questions about the EIM, electric transmission, or other matters involving the energy or environmental law, please contact a member of GTH's Energy, Telecommunications, and Utilities or Environment & Natural Resources practice groups. We're proud that practice members Margaret Archer, Eric Christensen, Don Cohen, Brad Jones, and Bill Lynn have all been named Washington "Super Lawyers" for 2014, and practice member Bill West has been named a "Rising Star."