[BETA] Fortnightly

While NAESB and NERC struggle over the issue, North America steadily drifts toward unreliability.

Time is running out. It's been more than two years since the North American Electric Reliability Council (NERC) Joint Inadvertent Interchange Taskforce (JIITF), on which I served, issued its white paper[1] proposing how to price the unscheduled power (inadvertent interchange) ¹ flowing between NERC-certified balancing authorities (BAs). This was the first serious attempt ever to price the degree to which non-adherence to generation or load "schedules" helps or hurts keeping frequency within a reliable range of 60 Hz, which is the point where all the scheduled load exactly and instantly equals all the scheduled generation on an interconnected electric system. ²

A year-and-a-half ago, NERC decided implementation and further development of the paper was a commercial matter and handed it to the North American Energy Standards Board (NAESB), which thus created the Inadvertent Interchange Payback Taskforce (IIPTF) on which I currently serve. But the IIPTF has made little progress in proposing a credible standard for paying for unscheduled power flows ³ between BAs because BAs will not or cannot override existing incentives for unscheduled behavior that is moving frequency away from, rather than toward, schedule ().

The fundamental incompatibility between reliability and non-payment for unscheduled power is causing not only a reliability crisis in the form of upward frequency drift [2] and declining frequency support[3], but also a Sarbanes-Oxley financial reporting concern about unearned profit or unjustified costs due to taking or giving unscheduled power for free, which one big BA is already estimating the value of and deducting from its income statements. The total amount of scheduling error on the North American systems is worth many billions of dollars annually, ⁴ much of it never paid for but "accumulated" in BA accounts whose megawatt-hours are tracked by NERC. Less than a year from now, the Eastern interconnected system is set to violate NERC's upper average frequency limit and to experience widespread violation of the upper limit on BAs' control performance.

Not a Standard Commodity

Inadvertent interchange isn't a standard commodity transaction: It occurs without specific mutual consent. The total inadvertent interchange on an interconnected system always sums to zero because a single reading of a common meter on any tie-line is counted twice, once as one BA's outflow and again as the other BA's inflow. Since inadvertent interchange always clears, its price must be driven by something else. Furthermore, the NERC JIITF broke down unscheduled power into two parts: power at the hourly price of scheduled energy and an "unscheduled" part that is the average hourly contribution to frequency error, or the frequency contribution component (FCC). In the absence of an existing spot market, the cost basis of the BA's internal FERC Order No. 888/889 Schedule-4 "Energy Imbalance" tariff can serve as the energy price. ⁵

If each BA pays or is paid its local energy price for the energy component of inadvertent interchange, under- or over-collection occurs. The price differences may tend to result in over-collection, because high price areas may tend to over-schedule generation or