(November 2008)Economic uncertainties are raising doubts over utility returns. Will regulators feel the need to consider broader economic effects when engaging in ratemaking? While...
California vs. Oregon
An expiring 40-year-old contract rocks the Pacific AC Intertie.
fall under the umbrella of the Cal-ISO’s path operator function. It won this assurance under the same 2004 OCOA settlement ruling at FERC. Moreover, that 2004 FERC decision also granted WAPA a “carve-out” from the Cal-ISO grid, allowing it to provide transmission service to itself over the PACI under its own tariff, without risk or liability of having to pay the Cal-ISO grid-access charge or congestion charges. In this way, the WAPA substation at Tracy operates as a “subcontrol area” of the SMUD balancing area. WAPA is given an “encumbrance” that allows it to gain access across the ISO grid in Northern California to the Central Valley Project, but without having to accept the risks and liabilities of status as an ISO market participant. It’s a lot like the explanation you will hear from the Pennsylvania Amish: WAPA is “in” the ISO grid, but not “of it.”
These unusual rights were quite controversial at the time. Southern California Edison had argued vehemently in 2004 that such encumbrances violated Cal-ISO tariffs. Edison had asserted that the Cal-ISO lacked authority to provide transmission services to certain privileged customers on terms different from those stated in its tariff applicable to ordinary market participants.
Nevertheless, FERC had allowed these special carve-outs because they were crafted as part of an overall indivisible settlement agreement. ( See Docket No. ER04-688, Order issued Dec. 3, 2004, 109 FERC ¶61,255. )
Thus, PacifiCorp here is asking for nothing more than what various other public-power entities already have received. It wants the stability of overarching ISO control over the region’s largest N-S grid interface, but with the opportunity and economy to self-serve its own transmission needs and those of its customers, under its own tariff.
Of course, from the ISO side of things, the simplest solution to breaking the deadlock would have PacifiCorp joining the Cal-ISO as a full-fledged participating transmission owner. But you can imagine how that would play in Oregon.
“PacifiCorp understands,” as PacifiCorp grid manager Ken Houston wrote to Detmers in April, that “Cal-ISO would prefer that PacifiCorp become a participating transmission owner.”
But Houston also was tied to reality.
“The PTO approach is the most beneficial solution for the Cal-ISO and the customers of the Cal-ISO,” he acknowledged.
“However, it is not the most beneficial solution for PacifiCorp’s wholesale and retail customers.”