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California vs. Oregon

An expiring 40-year-old contract rocks the Pacific AC Intertie.

Fortnightly Magazine - August 2007

(BPA), which controls and operates the same path as it extends north into Oregon and beyond. But the Cal-ISO’s authority has depended in no small part of the 1967 contract, which put PACI capacity in the hands of PG&E, which then turned it over to ISO control as part of California’s industry restructuring. ( See Figure 1, “Pacific Intertie and COTP Facilities.” )

Thus, at the very least, PacifiCorp’s decision not to renew the out-of-date contract would undo a series of longstanding agreements regarding line operations and sharing of curtailment costs along the entire COI—the highway that facilitates power imports and exports between California with the Pacific Northwest.

At the worst, the PacifiCorp announcement, if not followed up by successful settlement discussions and new agreements, could even force a redrawing of geographic boundaries between the BPA and the Cal-ISO, which run the two largest balancing and control areas in the West.

And for the Cal-ISO, that’s not what you would want to see at the end of July, at the height of the summer peaking season, and just six months from Feb. 1, 2008—the planned start date for its new MRTU rate overhaul, the Market Redesign and Technology Upgrade.

In a Pickle

No obvious villain emerges in this case. PacifiCorp simply wants to update a rate that for years has fallen below market. Its opponents, meanwhile, seek to ensure continued reliable operations of a key regional grid interface.

By all accounts, PacifiCorp began early on—a good six months prior to the July 31 contract termination date—to open up negotiations with all affected parties. Rich Bayless, PacifiCorp’s transmission strategy director, began searching for a solution in an e-mail message he sent in January to Jim Detmers, vice president for operations at the Cal-ISO:

“As we discussed on the phone,” wrote Bayless, “we’re in somewhat of a pickle with the Malin-Indian Springs contract expiring this year.

“I think we’ve tumbled to the fact that no matter which way we head on the expiring contract, we will have parties on one side or the other challenging our action at FERC. …

“Timing is a problem … since the contract expires in August.

“Representatives from our Transmission Services and Operating groups would like to come down and discuss options with the Cal-ISO.” ( See, Appendices 2-8, e-mail exchanges and correspondence, Jan. 8 to May 24, 2007, PacifiCorp’s Answer to Comments, FERC Docket No. ER07-882, filed June 18, 2007 .)

The record shows that informal discussions and negotiations continued for some time, with the ISO outlining various options. For instance, one option would have PacifiCorp joining the ISO’s controlled grid as a participating transmission owner (PTO), so that it might step into the shoes of PG&E. (Without joining the ISO, any service that PacifiCorp might offer after contract expiration would come under its own tariff. The Cal-ISO tariff regime for grid access and congestion would not apply, nor would the ISO provide scheduling or balancing services in its role as control area operator.)

The give and take concluded in a letter exchange between Detmers and Kenneth Houston,