Adding day-ahead market services to Western EIM an incremental step toward ISO, panel says

Published on February 12, 2019 by Kevin Randolph

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WASHINGTON – Regional grid integration in the Western Interconnection will be an “evolutionary change, not a revolutionary change,” Commissioner Kristine Raper of the Idaho Public Utilities Commission told attendees of a panel at the National Association of Regulatory Utility Commissioners’ (NARUC) 2019 Winter Policy Summit held this week.

The panel explored the future of power markets in the west and the possibility of adding day-ahead market services to the Western Energy Imbalance Market (EIM), a real-time energy market operated by the California Independent System Operator (CAISO) with participants in eight western states.

This service, referred to as EIM plus day-ahead market (EDAM), could be an incremental step toward the creation of an independent system operator.

Jennifer Gardner, senior staff attorney for Western Resource Advocates, used the analogy of marriage to describe how the West is potentially progressing toward an ISO or regional transmission organization (RTO). The EIM, she said, is analogous to a promise ring, the EDAM to an engagement ring and the creation of an ISO to marriage.

“… When we look at EDAM, we’re really looking at an incremental approach to markets,” she said.

Moving to EDAM without committing to an ISO could provide additional benefits without the complexity of transitioning to a full ISO. Moving to the EDAM would also be optional for EIM entities, and CAISO could operate both EDAM and EIM simultaneously. In addition, moving to EDAM would require a critical mass of EIM entities, although the number of the critical mass, Raper noted, is still uncertain.

“After the development and expansion of the EIM in the West, the natural next question is, ‘are there continued opportunities to increase economic efficiency and renewable integration beyond the scope of the EIM but short of the fully regional independent system operator?’” Pam Sporborg, transmission and reliability services analyst at Portland General Electric, said. “In other words, ‘how can we build additional incremental value by adding market services without some of the more challenging political economic and regulatory elements that come with a full regional ISO?’”

Sporborg noted that CAISO’s 2019 Draft Policy and Issues Roadmap cited potential benefits such as additional net power cost savings for EIM participants and renewables integration through day-ahead unit commitment and scheduling. Gardner noted EDAM should also enable more efficient unit commitment across all resources.

Gardner highlighted four issues that EIM entities and stakeholders will need to work through: cost-benefit studies; transmission access and cost recovery; governance; and transparency.

EIM entities, Gardner noted, have hired E3 and the Brattle Group to conduct cost-benefit analyses of EDAM. The reports are expected in the second quarter of 2019.

In regards to transmission access, EDAM would bring about significant changes. With EIM, Gardner explained, transmission is “essentially free.” EDAM, however, would lead to much more energy flowing in and out of the market and would require payment for transmission access. EIM entities, she said, must determine how to address the use and availability of transmission, develop a methodology to fairly compensate for transmission use and develop a method for calculating congestion revenue.

“The complexity of both the market and individual EIM entity transmission service provider requirements for EIM and EDAM participation should not be underestimated,” Sporborg said. “It is important that adequate time be provided to consider the feasibility and benefits of expanding the EIM market to the day ahead process.”

Technically, Gardner said, EDAM can exist within the EIM model but it may be necessary to add additional authority to the EIM governing body.

“There may be additional features or processes that can be added to the EIM governing model that would layer additional, meaningful independence short of needing to change the legal structure for the ISO’s board of governors,” Sporborg said.

Currently EDAM discussions are occurring exclusively between EIM entities, Gardner also noted, but we will, at some point, need more transparency into EDAM discussions

“… We’re at basically the proto-stakeholder where the EIM entities themselves are getting together to talk about this conceptual design and once it merges into the light of day, I would expect a very robust stakeholder process around it,” Travis Kavulla, director of energy and environmental policy at R Street and a member of the Western EIM Governing Body, said.

CAISO has targeted beginning the process of extending EDAM to EIM entities in mid-2019, according to its 2019 Final Policy Initiatives Roadmap. Sporborg noted that CAISO has targeted implementation for 2021 and on-boarding of interested EMI entities for 2022.