Public Utilities Reports

PUR Guide 2012 Fully Updated Version

Available NOW!
PUR Guide

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

Reliability Wars

Power System Planning: Who gets paid (and how much) for backing up the system?

Fortnightly Magazine - June 2005

resources to satisfy the number of hours for each month in which its load reaches 90% of its coincident peak load – the time of its maximum contribution to the monthly CAISO system peak. See Cal. PUC Decision 04-10-035, Oct. 28, 2004 .

However, this static requirement does necessarily guarantee sufficient delivery capability at particular hours and locations, to overcome local grid congestion and physical and regulatory factors that can limit operations at certain plants (startup ability, emissions restrictions, fuel limitations, etc.).

Thus, lack of a security-constrained, bid-based, locational and temporal market mechanism marks a potential Achilles’ Heel for the California RAR plan in estimating required resources and attendant costs, and differentiates it from New England’s proposed LICAP Plan and PJM’s proposed Reliability Pricing Model.

Nevertheless, the ISO has provided the following rough outline on how RAR units might be allocated to meet real-time obligations.

The Pink Strip. The top (pink) strip (see Figure 2) represents when the system-wide load exceeds 90% of the system-wide peak. The width of this strip represents the number of hours the RAR resources must meet both a capacity and a duration criteria … Given that a supplier with an energy or use-limited resource would normally attempt to maximize its profits by operating the unit only during peak periods when prices are highest, it can be properly assumed that the pink strip will be met through energy and use-limited resources …

The Yellow Strip. The bottom (yellow strip) represents a subset of the system-wide RAR capacity that is needed for local reliability. This subset must be able to produce energy when called upon practically all the time (unless it is on maintenance or forced outage). Depending on the local Resource Adequacy Requirements, this could represent 25% to 35% of the system-wide RAR capacity …

The Blue Strip. The middle (blue) strip represents a subset of the system-wide RAR that is not necessarily needed for local reliability, but is needed to ensure system-wide resource adequacy. The CAISO contemplates that this subset would also be subject to a must-offer obligation to the extent it is not on maintenance or forced outage … [but] … CAISO cannot, and does not intend, to identify the minimum amount of local capacity that would be necessary to respond to all contingencies or possible system conditions …

The arched line (red) shows how the available RA capacity, beyond that procured in the local areas, is effectively reduced because the … resources have legitimate limitations on their availability. … Thus, the available capacity within the middle section of this figure will not be capable of fully covering the defined box. Rather it will diminish with the number of hours beyond those required to meet the top 10% of hours. This principle is reflected by the downward slope of the red line …


In the aggregate, the blue strip should consist of sufficient non-use-limited resources to be capable of meeting system-wide energy needs plus PRM outside the system peak hours. ( See, Calif. PUC Rulemaking 04-04-003, Reply comments of California Independent System Operator, Feb. 28,