Tacoma Power has signed an implementation agreement with the California ISO for joining the Western EIM, targeting 2022 for going live in the market.
The agreement obligates the utility to spend funds specific to EIM participation and requires Tacoma to develop a detailed project plan ensuring the necessary systems, processes and training are in place prior to market participation.
PacifiCorp, Puget Sound Energy, Idaho Power and Powerex currently participate in the market, while Avista, Seattle City Light, and NorthWestern Energy are preparing to join the EIM.
With more and more utilities moving to the EIM, staying out of the imbalance market carries risks for Tacoma Power, said Clay Norris, the utility’s power management manager, because it means there would be fewer available resources for nonparticipating utilities.
Participants in the market must commit resources 75 minutes ahead of availability, he said. “What we’ve seen is that a lot of the people we used to trade with have joined the EIM and aren’t so interested in trading after that T minus 75 minute mark,” Norris said.
Outside the EIM, balancing Tacoma Power’s system in real time will become more difficult. The utility has already seen it get harder to make trades 30 minutes ahead of time, he said. “We’re finding fewer and fewer trading partners interested in those last minutes.”
Beyond the increased difficulty in balancing, relying on fewer trading partners puts Tacoma Power at greater risk of overpaying for subhourly trades, he said.
Joining the EIM also likely will be good for the utility’s bottom line. The net benefit after 10 years will likely be equivalent to $1.9 million plus a decade of accrued interest, according to Tacoma Power’s cost-benefit simulation.
That’s net of the $14 million to $18 million Tacoma expects to spend getting ready to go live on April 1, 2022, as well as annual ongoing participation costs estimated at $2.1 million to $4 million.
Even so, Tacoma Power may reconsider participation in the EIM if proposed changes to how CAISO calculates default energy bids are not satisfactorily approved by FERC, Norris said.
In early July, CAISO asked FERC to approve the local market-power mitigation changes meant to address concerns raised by Northwest hydro operators [ER19-2347].
Default energy bids are calculated using current and future index prices at an external hydro resource’s “default” geographic location, or closest local hub. However, that potentially undervalues how much a hydro operator could get by holding back water and selling at another location in the future.
That method is “not really fair to hydro owners, in our opinion,” Norris said.
CAISO’s proposal effectively resolves Tacoma Power’s concerns, he said.
However, the California PUC on July 23 filed objections to the proposed changes with FERC. CAISO’s proposal could allow hydro operators to use distant higher-priced hubs to skew local hub prices, CPUC said in its filing (see previous story).
Several Northwest hydro owners pushed back against CPUC in a joint filing with FERC on Aug. 8. The group includes Chelan County PUD, Eugene Water and Electric Board, Powerex, Public Generating Pool, Public Power Council, and Snohomish County PUD.
Tacoma Power did not weigh in, but it is closely following the matter.
“If FERC were to agree with the CPUC, we might have to reconsider our decision to join the EIM,” Norris said.