On September 30, 2016, FERC accepted the change in status filing submitted by Puget Sound Energy, Inc. (“Puget”) and certain affiliated generators. The filing informed FERC of the companies’ intent to join the Energy Imbalance Market (“EIM”) administered by the California Independent System Operator Corporation (“CAISO”) beginning on October 1, 2016.  As discussed in a previous WER article, in August 2016, FERC approved a similar filing and anticipated EIM start-date from Arizona Public Service Company (“APS”).  With this order, Puget and APS become the fifth and sixth balancing authority areas to join the EIM, following PacifiCorp East and PacifiCorp West in 2014, and Nevada Power Company, Sierra Pacific Power in 2015.  Idaho Power plans to become the seventh balancing authority area in 2018.  (see April 13, 2016 edition of the WER).

As discussed in previous editions of the WER, the EIM enables non-California-based balancing authority areas (“BAAs”) to participate in CAISO’s real-time energy market.  As EIM participants, utilities like Puget can more easily share resources regionally, including renewable energy generation, which is often useful for meeting state renewable energy portfolio standards.  However, due to concerns over the potential to exert market power, especially in their own territories, FERC limited the other five EIM participants to submitting only cost-based energy bids.

In its March 9 filing, Puget argued that, unlike the other five EIM participants, there are no restrictions on its market-based rate authority that would prevent it from selling energy throughout the EIM.  In support of this argument, Puget submitted supplier and wholesale market share studies demonstrating a lack of market power in the EIM, and furthermore argued that market monitoring and mitigation measures previously approved by FERC will also help prevent EIM participants from exerting market power in areas constrained by congestion.  Puget amended its filing on July 27, 2016 with an additional analysis of a 300 MW firm transmission reservation, which the utility has specifically dedicated to potential EIM transactions.  According to that study, energy imbalance demand will be much less than the full 300 MW reservation, which connects the Puget and PacifiCorp-West BAAs by way of the Bonneville Power Administration (“BPA”) transmission system.  As Puget argued, the study’s results demonstrate that its BAA will not constitute an EIM submarket, thereby avoiding any need to submit further studies to FERC.  Any remaining congestion concerns, the utility argued, can be addressed through CAISO’s local market power mitigation measures as well as BPA’s pro rata curtailment procedures.

In its decision, FERC agreed that Puget’s initial filing, and subsequent amendment, successfully demonstrated that the utility lacked vertical and horizontal market power in the 6-BAA EIM footprint.  The Commission was particularly persuaded by Puget’s 300 MW firm power reservation with BPA, as well as the July 27 studies demonstrating that congestion levels would be minimal and manageable through BPA’s curtailment procedures.  FERC accepted Puget’s filing, authorized the utility to transact in the EIM at market-based rates, and directed the utility to revise its status filing if it begins experiencing transmission constraints on BPA’s transmission system.

A more detailed version of this post first appeared on the Troutman Sanders’ Washington Energy Report.