The debate over changes to energy wheel-throughs in California intensified this week, with Arizona's top regulator charging that federal energy regulators allowed the California ISO "to unfairly block" electricity flowing to Arizona.

The battle is over CAISO's new wheel-through policies approved by FERC on June 25 [ER21-1790]. The grid operator implemented the changes to protect native load during tight supply conditions this summer, creating a new category of "priority" wheel-throughs and putting internal transfers on equal parity with wheel-throughs. Arizona relies on the CAISO system to access Northwest hydropower.

"This decision is problematic for many Western states, including Arizona," Arizona Corporation Commission Chair Lea Márquez Peterson said in a June 30 news release. "Our electric utilities did the right thing and planned ahead, securing pre-negotiated contracts with utilities in the Pacific Northwest to ensure that critical hydropower would be available to Arizonans when it would be needed the most which would be delivered across transmission line[s] through the state of California."

Parties filing protests at FERC over the new policies include BPA, Powerex, the Large Public Power Council, Southwest Public Power Agency, Vistra, Public Service Company of New Mexico, Idaho Power and Portland General Electric.

Márquez Peterson said she is "alarmed" by the changes in California, saying that they are a result of "short-sighted energy policies, poor long-term planning, and extensive rolling blackouts in 2020." She said the changes will harm Arizonans.

"Our energy is threatened and could be held hostage this summer," Márquez Peterson said. "As Arizonans we need to be prepared for the possibility that we may suffer from power shortages as a result. Arizonans may die or suffer heat-related illnesses as a result. FERC's decision helps California at the expense of our own public health and safety."

She said ACC is determining its next steps, and went so far as to question participation in regional markets—a topic that has gotten more attention recently.

"As a commissioner, I must question how potentially expanding our participation in the regional market will benefit Arizonans, if the energy market will not be governed fairly and independently," she said.

Under FERC's Order No. 888, which spells out open access rules, electric utilities are required to provide transmission service to others equitable to themselves. The rules are meant to enhance competition and enable more access to low-cost power for consumers. But FERC did not go so far as to prohibit policies that protect native load.

CAISO has historically not given any priority to native load, unlike some other ISOs and regional transmission organizations that reserve capacity for native load. But the blackouts of last August caused CAISO to revisit the policy and file the proposed tariff changes with FERC on April 28.

CAISO says the proposed rules will help ensure that when there is insufficient supply to meet both CAISO load and exports, resources intended to serve CAISO load will not be used to support exports unsupported by designated capacity. More specifically, under the new rules, a scheduling coordinator confirms that its resource backing a high-priority non-recallable export has sold capacity only to an external load serving entity (LSE) and no CAISO LSE has a right to such capacity. This is to ensure that capacity sold and dedicated to CAISO LSEs is not used to support a high-priority non-recallable export, FERC said.

Another rule change is that a scheduling coordinator for a resource supporting a high-priority non-recallable export and the scheduling coordinator for the export must ensure that there is sufficient available capacity to support the export quantity throughout the hour. There is a series of other wheel-through changes contained within the CAISO proposal.

FERC's order contains lengthy descriptions of protests filed, arguments put forth and answers provided by CAISO. Ultimately, FERC approved the changes.

"We find that CAISO's wheeling through proposal represents a just and reasonable and not unduly discriminatory or preferential prioritization of the use of CAISO's transmission system," FERC said.

The commission noted that CAISO's tariff changes are transitional and agreed with CAISO's Department of Market Monitoring, which recommended that CAISO develop a long-term solution that will clearly delineate rights across CAISO's transmission system.

"In light of potentially challenging summer conditions across the Western interconnection, it is particularly important that CAISO's transmission capacity is allocated in a balanced and fair manner that is not inconsistent with the principles embodied in Order Nos. 888 and 890. CAISO's proposal accomplishes this for the interim period as CAISO develops a more comprehensive solution," FERC said.

CAISO President and CEO Elliot Mainzer has said the grid operator is working on a more long-term solution to the wheel-through issue.

It is possible utilities in the West have gotten used to a system that was unique to California, and allowed liberal wheel-throughs to help maintain reliability in the West. Now they don't like the changes, but they have passed muster at the federal level, potentially leaving states such as Arizona to fend for themselves when things heat up.

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