Provide a summary of your organization’s comments on the Maximum Import Capability (MIC) Enhancements issue paper:
VEA is a rural electric distribution cooperative based in Pahrump, Nevada, which serves approximately 6,849 square miles of service territory in southern Nevada and a small portion of California. VEA has approximately 19,500 member-consumers, and a peak load of about 140 MWs. VEA is the only CAISO LSE located outside of California. VEA joined the CASIO balancing authority area (BA) and became a load serving entity (LSE) in the CAISO in 2013, pursuant to the terms of a Transition Agreement with the CAISO, which was accepted by the Federal Energy Regulatory Commission on December 14, 2011. Cal. Indep. Sys. Operator Corp., 137 FERC ¶ 61,194 (2011).
VEA owns no generating resources, and it traditionally has served its load through long-term power purchases delivered at WAPA’s Mead 230 kV Substation. In recognition of this fact, the Transition Agreement provided that the CAISO would allocate 150 MWs of Mead RA import capability to VEA for a period of ten years as “Pre-RA Commitments” under the resource adequacy import allocation rules provided in Section 184.108.40.206 of the CAISO Tariff. VEA’s peak System RA obligation for 2021 is approximately 153 MWs. Under the terms of the Transition Agreement, VEA’s Mead import rights expire on January 3, 2023, the tenth anniversary of the Transition Date provided in the Transition Agreement.
Since joining the CAISO, VEA generally has continued to rely on long-term contracts delivered at Mead to provide the energy and capacity to serve its load, as well as meet its RA requirements. However, VEA also has delivered power at its interconnection points with Western Area Power Administration and NV Energy at Amargosa, Mercury and Northwest substations, when the Mead delivery point was constrained or unavailable.
On June 19, 2019, VEA entered into a 20-year contract for the purchase of unbundled energy, System RA Capacity and Flexible RA Capacity. VEA understands from the supplier that it intends to supply the RA from a solar plus battery storage project under development adjacent to the Mead substation in the WAPA BA. VEA plans to use both the contract described above, as well its long-term contracts for federal hydropower from Hoover Dam, the Parker Davis System, and the Colorado River Storage Project to meet its System and Flexible RA requirements. In 2020, VEA entered into an agreement with the CAISO to allow dynamic scheduling of its Hoover allocation into the CAISO.
- State of the RA Market
In recent years, and particularly in 2021, the RA market has become extremely illiquid, and prices have exceeded reasonable levels. One of the reasons for this is that the level, availability and lack of use of maximum import capacity (MIC) has effectively stranded available RA resources, including carbon neutral RA resources, outside the CAISO. In addition, the available MIC at Mead is extremely limited. Currently, there is no Remaining Import Capability at the Mead 230 intertie after accounting for Pre-RA Import Commitments and existing ETC. After VEA’s Pre-RA Import rights expire in 2023, the CAISO projects that there will be only 25 MWs of Remaining Import Capability to allocate among all LSEs importing at Mead. This shows that the CAISO’s planning process is not expanding MIC to keep pace with the need for MIC for both loads additions and generation retirements within the CAISO. In addition, the market for purchasing MIC at Mead is illiquid, and MIC is generally unavailable for purchase.
As the CAISO noted in the MIC enhancements Issue Paper (Issue Paper), “the sum of the Total Transfer Capability (TTC) of each individual intertie is about 44,400 MW whereas MIC (simultaneous deliverability for all imports) is around 15,500 MW and the CAISO control area cannot physically receive imports beyond the simultaneous limit.” Issue Paper at 3. This shows that only 35% of the physical import capability of the interties is being used to import RA, presumably due to deliverability issues on the CAISO Grid.
The CAISO must find ways to increase the amount and utilization of MIC in the Mead area to improve RA liquidity through more RA imports. The Issue Paper states that:
MIC may be increased on a prospective basis at specific interties to meet state and federal policy goals with the completion of the related necessary policy driven transmission upgrades. The CAISO assures through deliverability studies that both the increased MIC and internal generation are deliverable to the aggregate of load. If necessary, through the CAISO annual transmission planning process (TPP), transmission upgrades are approved and subsequently built before the additional deliverability is made available to increased imports and new internal resources. Issue Paper at 1.
VEA supports the CAISO’s efforts to improve the availability and use of MIC to support RA imports. VEA encourages the CAISO to implement changes that would satisfy the following goals:
- Recognize the need to include VEA’s resource plans, and those of other LSEs whose plans are not in the CPUC-provided portfolios, in its study of needed import capacity such that MIC can be assured at interties where additional RA resources can be imported into the CAISO to meet reliability and state and federal policy goals;
- Recognize and support the policy goals of CASIO LSEs that are not CPUC jurisdictional or not located in California;
- Recognize historically scheduled import patterns in allocating MIC rather than relying strictly on a load ratio share allocation process; and,
- Provide for an auction mechanism to increase the liquidity and utilization of all available MIC.
- VEA MIC Position
As noted above, VEA has a Pre-RA import allocation that will expire in 2023. Given the relatively small size of its native load, under a strict load share calculation, VEA could see a dramatic reduction in the amount of import capability at Mead using the CAISO’s proposed process for MIC allocation. VEA is unique due to its historic reliance on imports at Mead to serve its load, as well as its geographic location and direct connection to Mead via the 230 kV transmission line it constructed (now owned by GridLiance).
VEA’s resource plan includes abundant resources that have high reliability value to the CAISO, including a dynamically transferred and dispatchable hydro position at Hoover and other RA resources delivered over firm transmission from outside the CAISO. Given its proximity to the neighboring WAPA and NV Energy control areas and its historical relationships, VEA generally sources its RA outside the CAISO footprint. Additionally, and perhaps most importantly, the CPUC’s portfolio delivered to the CAISO for study does not include VEA’s resource plan. As a result, to date, the CAISO would not have ensured that sufficient MIC is available for the resources of VEA and other CAISO non-CPUC jurisdictional LSEs. VEA understands that about 10% of the CAISO load is not included in the CPUC portfolios and thereby is excluded from the MIC analysis in the CAISO TPP.
VEA would like to explore measures to mitigate the impact of moving directly to a MIC allocation based on the load share quantity formula provided in the CAISO Tariff. Otherwise, a large portion of VEA’s RA resources will be stranded outside the CAISO. While it is theoretically possible that VEA could purchase MIC allocations at Mead from third parties, as noted above that market is illiquid, and MIC rights at Mead are held by a small number of LSEs. Another problem is that each year some MIC allocations go unused resulting in artificially low RA imports at Mead. In addition, as noted above, the total available MIC at Mead will decrease substantially when VEA’s pre-RA import allocation expires, because the CAISO calculates MIC by adding Pre-RA Import Commitments to the historically determined amount of available MIC.
Finally, VEA is dynamically scheduling Hoover and is considering obtaining the ability to dynamically transfer some of (or all of) its other external RA Resources into the CAISO BA. The CAISO should revisit whether a process could be established to apply for full capacity deliverability of dynamically transferred RA resources, especially if they are carbon free resources. This would allow California to avoid artificially limiting the import of carbon free resources due to MIC limitations.
- Necessary MIC Enhancements
As part of this stakeholder initiative, the CAISO should explore the following potential solutions to the MIC issues identified above.
- The CAISO should include in its TPP study the base portfolio provided by the CPUC, as well as the resource plans of those CAISO LSEs not included in the CPUC’s base portfolio.
The CAISO already has established mechanisms for such a prospective study. The Reliability Requirements Business Practices Manual (BPM) describes the process to which the Issue Paper refers.
The process starts in the TPP, where the ISO will first establish target Expanded MIC MW values for each intertie that will be sufficient to support RA deliverability for the MW amount of resources that will utilize each intertie for scheduling imports into the ISO BAA and that are included in the base case resource portfolio that will be used in the current TPP cycle for identifying policy-driven transmission additions and upgrades. Reliability Requirements BPM at 68.
This Reliability Requirements BPM calls for the CAISO to establish MIC for the base case portfolio. Further, as indicated above, the Issue Paper recognizes that MIC may be increased on a prospective basis at specific interties to meet state and federal policy goals with the completion of the related necessary policy driven transmission upgrades and that the CAISO assures through deliverability studies that both the increased MIC and internal generation are deliverable to the aggregate of load. In fact, the CAISO’s Transmission Plans have for several years, for example, noted an intended plan to add over 700 MWs of MIC from Imperial Irrigation District’s service area given expected development of RA sources in that region.
However, this mechanism while seeking to confirm MIC needs for CPUC-jurisdictional CAISO participants, currently does not address VEA’s needs or the needs of other non-CPUC jurisdictional entities. VEA, given its size, location and type of organization, does not submit Integrated Resource Plans to California or federal agencies to inform the TPP portfolios. VEA recommends that the CAISO confirm MIC feasibility for all its LSEs and not for only those who file IRPs with the CPUC. Otherwise, VEA and other similarly situated small LSEs seem to be disadvantaged by the MIC assessment process, because their resource needs and planned supplies are not considered as part of the CAISO’s planning studies. This warrants either inclusion of these additional resource plans in the CAISO’s study or direct CAISO consideration of resource plans of VEA and other small LSEs who are not represented within the TPP portfolios. VEA is subject to CARB’s GHG import policies. Additionally, consistent with other CAISO utilities, VEA is transitioning to renewable resources as the local regulatory/planning authority for its service area, which is consistent with state and federal policies. Therefore, the CAISO should recognize and support these goals in implementing the TPP. This will become even more important as the CAISO continues to expand its footprint outside of California.
The CAISO should demonstrate expanded MIC availability or otherwise consider whether policy driven TPP upgrades are warranted to increase the MIC capacity at Mead, given the base case portfolio as well as the resource plans of VEA and other LSEs who are not included in the CPUC’s base portfolio and the potential renewable resources that can be accessed through Mead. VEA expects that significant renewable RA resources will be developed in the area near Mead.
VEA requests that the CAISO study the availability of MIC values at Mead for the combined CPUC base case portfolio plus the resource plan of VEA. Doing so will allow the CAISO, in accordance with its Reliability Requirements BPM, to demonstrate that sufficient MIC exists to accommodate the resource plan reliability resources, and if necessary, provide the requisite policy upgrades to ensure that the system can provide the import capability (MIC) needed for the planned resources.
VEA would expect that in doing so deliverability would be available for VEA’s dynamically scheduled RA resources and other resources that are consistent VEA’s resource plan.
- VEA Supports an Auction Mechanism to Increase the Liquidity and Utilization of MIC.
The CAISO should take steps to improve the liquidity of the RA market, by improving the ability to trade MIC rights, or by implementing an auction mechanism. VEA encourages the CAISO to consider creating an Auction Revenue Right (ARR)-type mechanism in which LSEs would be allocated “Auction Revenue MIC Rights” or (ARMRs). The ARMRs could be allocated using a process similar to what is in place today. After the allocation of MIC, the CAISO would then conduct an auction. LSEs could “self-schedule” their ARMRs into the auction (essentially submitting a price-taker bid) to ensure they received back the MIC capacity they were allocated in the allocation process; or an LSE could submit its indifference price for the MIC, thereby yielding it to another LSE if another LSE valued it more. Similarly, LSEs could acquire MIC beyond their load share in this manner by placing bids into the ARMR auction. Such a mechanism would ensure that the value of the MIC was maximized for those LSEs interested in valuing their allocated MIC or seeking to acquire additional MIC. VEA envisions that this ARMR auction would be conducted annually. Potentially there would be benefit from conducting residual auctions monthly as well.
- Other VEA Recommendations
To avoid stranding valuable RA resources outside the CAISO, the CAISO also should consider the following additional measures:
- The CAISO should create a process for obtaining full capacity deliverability of dynamically transferred RA resources that are outside the CAISO, especially if they are carbon free resources. Since a dynamically transferred resource is effectively within the CAISO Balancing Area Authority, it should have the same right to request to be studied as fully deliverable as other generating resources within the CAISO and avoid the need for a MIC allocation. This would allow California to avoid artificially limiting the import of carbon free resources into the CAISO due to MIC limitations.
- The CAISO should explain the relationship between its study of the feasibility of MIC needed for the base portfolio and its allocation policy which relies upon past peak flow days to determine MIC. Given the description of how MIC is tested in the TPP, it is unclear to VEA how this relates to the CAISO only offering MIC at intertie points where past scheduled flows occurred, and at levels corresponding to these flows, during the designated maximum flow days. VEA requests that the CAISO consider the following potential solutions to this issue:
- The CAISO should consider all of the branch groups used to import RA into California from the Mead area as one aggregated MIC allocation point, similar to what it has proposed to do for the two IID interties into southern California. Any path that delivers into CA from the Mead area should be combined in order to maximize RA import capacity.
- VEA seeks a means to obtain MIC allocations at intertie points that are used on an intermittent basis to import power into the CAISO. VEA has interconnections with Western Area Power Administration (WAPA) at Amargosa Substation and Mead Substation and with NV Energy at Northwest Substation (through GridLiance) and Mercury Substation. The CAISO should study whether RA capacity can be imported at Amargosa, Northwest, and Mercury, as well as whether MIC import capacity at Mead can be increased. To effectively solve this problem, VEA requests that the CAISO define Mead MIC as being inclusive of deliveries at Mead, Amargosa and/or Northwest.  VEA understands that the limiting factors for MIC are constraints for delivery within the bulk system, suggesting that such a Mead-area MIC should not harm other CAISO LSEs or place any additional burden on the grid.
- Similarly, VEA would expect that the TPP study of the portfolio would be forward-looking to account for changes in operations and new generation and transmission facilities needed in the future to import RA capacity, rather than simply looking at historic imports over a five-year period. Otherwise, MIC will likely be insufficient to import the resources being developed.
 For example, if the adopted policy mandate for identifying policy-driven transmission in the TPP is the state’s 33 percent renewable portfolio standard, the ISO establishes the resource portfolio in collaboration with the CPUC, and this portfolio includes renewable resources that will be sufficient to meet the state mandate of 33% renewable energy on an annual basis by 2020.
 It would be reasonable for the CAISO to include the resource plans of other CAISO LSEs who do not file IRPs with the CPUC. VEA is particularly vulnerable from being excluded given that it is located at the boundary of the CAISO and is a member of AEPCO with historical predominant supplies outside of the CAISO.
 Such a mechanism of viewing the Mead-area import paths collectively is especially important during periods when the CAISO requires VEA to reschedule its imports away from Mead and into Northwest or Amargosa.