Electricity Markets

FERC OKs CAISO changes to RMR, capacity procurement rules

The Federal Energy Regulatory Commission recently approved changes to the California Independent System Operator’s reliability must run (RMR) and capacity procurement mechanism (CPM) rules, with most of the changes addressing the RMR provisions.

Both mechanisms are components of the CAISO’s backstop procurement authority, which allows the CAISO to remedy resource adequacy deficiencies not covered by the load-serving entity (LSE) resource adequacy procurement.

Prior to these revisions, the RMR and CPM tariff provisions both allowed the CAISO to retain and procure capacity from designated resources at risk of retirement. The primary differences between the CPM and RMR mechanisms were:

  • Risk of retirement CPM resources were subject to the must offer obligation, which does not apply to RMR resources;
  • The risk of retirement CPM process occurred only during a specific time period, whereas RMR designations can be made at any point during the year; and
  • A resource’s acceptance of a risk of retirement CPM designation was voluntary, but acceptance of RMR designations is mandatory. 

The rule changes accepted by FERC in its Sept. 27 order eliminate the risk of retirement CPM designation and address all backstop procurement of resources at risk of retirement or mothball status through RMR arrangements and allow CAISO to designate and dispatch RMR resources to address any determined reliability need rather than just local reliability needs.

In addition, the changes create a second path for processing RMR designations that formalizes a longer “runway” for resource planning and establish provisions to reduce the opportunity to use an RMR request as a price discovery tool, including the submission of a notarized attestation stating the reason for the retirement or mothball decision.

Also, the changes subject RMR resources to a must offer obligation and the Resource Adequacy Availability Incentive Mechanism, which provides for incentive payments and charges for resources that exceed or do not meet specified goals for system, local, and flexible resource adequacy capacity.

In addition, the changes allow for the allocation of RMR costs to LSEs instead of transmission customers and establish a method for allocating resource adequacy credits for the RMR capacity. 

Public power utilities voiced concerns about specific elements of proposal

The “Six Cities” public power utilities within the CAISO supported CAISO’s proposal while expressing concerns about a number of specific aspects of the proposal. 

Although FERC declined to direct changes in response to Six Cities’ comments, the California grid operator stated that it would explore certain of the recommendations through its business practice manual process. 

Commissioner Glick partially dissents

FERC Commissioner Richard Glick partially dissented from the order.

He objected to the tariff change that allows the CAISO to designate an RMR for any reliability need, stating that the order gives the CAISO “near-carte blanche discretion to enter into out-of-market contracts without review by the Commission.”

He also pointed out that the “CAISO is not required to justify its decision to enter an RMR agreement in a filing before the Commission, as is required in other RTOs and ISOs. Instead, the only matter that will come before the Commission is whether the rate established for the RMR agreement is just and reasonable, not whether that agreement is needed or appropriate in the first place.”

In addition, Glick noted that the CAISO “does not appear to tie the availability of an RMR agreement to the development of a replacement solution, which could, in effect, allow the RMR agreement to remain in effect in perpetuity.”