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Commission Watch

FERC mulls rival plans at the last minute, while on the West Coast, California gets into the game.

Fortnightly Magazine - November 2005

energy contracts tied to specific generating units. But the draft order remains cagey on the question of LICAP:

"While we have not determined that a centralized capacity market should be developed, … the question … should be studied in additional proceedings." ()

Moreover, the draft opinion seems to herald possible trouble down the road for a state-mandated LICAP scheme.

First, while the draft plan would impose obligations on LSEs, it makes no demands on generators: "While we generally approve the concept of a split RAR obligation that includes Cal-ISO enforcement of specific generator availability and performance duties, we cannot and will not adopt the Staff/Cal-ISO proposal here." ()

This issue-how to measure plant availability-has proven particularly troublesome in New England, and could well prove problematic in California.

In New England, the ISO chose to measure plant capacity in terms of its availability only during certain critical hours, on the theory that these periodic periods of peak demand and power shortage are the reason that LICAP is needed. Also, New England had proposed a method of calculating plant outages (which diminish availability) that was said to be incompatible with the traditional definition used in PJM and the New York ISO (and in New England under its current ICAP regime, which pre-dates LICAP). That more traditional measure is known as EFFORd, or the "equivalent forced outage rate." Of all the questions presented by New England's LICAP plan, these issues received the greatest degree of review and criticism by judge McCartney in her initial decision at FERC.

Second, it appears the CPUC might also delay beyond 2006 its promise to establish a local capacity (locational) component to its RAR regime to ensure deliverability in load pockets and congested areas. Indeed, will California see its LICAP dreams run aground on the same cost concerns that have dogged regulators in New England? Consider this excerpt from the draft decision, discussing Cal-ISO's straw proposal Jan. 25 for establishing local capacity requirements, designed to overcome problems imposed by transmission constraints:

"The record before us does not allow [us] to find that the reliability benefits of the Cal-ISO's straw proposal justify the costs and operational burdens that will be imposed on LSEs and their customers. … LSEs may need to procure 25,000 MW of local RAR in 2006. …

"The Cal-ISO proposal may result in higher capacity requirements than are currently available under contract through RMR contracts. Also, the analysis appears to have resulted in unexpectedly high levels of local capacity requirements because of some combination of transmission and generation contingencies and … peak loads that are collectively more extreme than the analyses justifying RMR contracts." ()

To anyone following the LICAP case in New England, California's "unexpected" discovery should come as no surprise.

Consider this last comment from John Estes, at FERC's oral argument on LICAP on Sept. 20:

"I can't help but point out that for something like five years now virtually every load-serving entity in virtually every state government has fought against any capacity market whatsoever."

As might be expected, however, ISO New England was ready for