On Friday, April 25, approximately two dozen intervenors filed comments regarding PacifiCorp’s proposed amendments to its Open Access Transmission Tariff (“OATT”) to permit its participation in the California Independent System Operator Corp.’s proposed Energy Imbalance Market (“EIM”).

The CAISO EIM is the first proposed organized market structure across a multi-state footprint in the West, which is otherwise largely OATT-defined. PacifiCorp has contracted with the CAISO to be the first EIM participating balancing authority. The design and implementation of the new market requires substantial amendments to both the CAISO and PacifiCorp tariffs, and all proposals must be approved by the Federal Energy Regulatory Commission (“FERC” or “Commission”) as just, reasonable, non-discriminatory and non-preferential under the Federal Power Act. CAISO filed its proposed tariff amendments on February 28, and PacifiCorp filed its proposed OATT amendments on March 25.

Both CAISO and PacifiCorp requested that the Commission issue orders approving the amendments by June 20, 2014, to enable the Energy Imbalance Market to go live on October 1 of this year. It is an aggressive timetable, and one that appears to assume that FERC will approve the proposals without requiring significant revision.

About a dozen intervenors objected to various aspects of PacifiCorp’s EIM filing.

Objecting intervenors include Bonneville Power Association (“BPA”), several non-FERC-jurisdictional public utility districts in the Pacific Northwest (Grant County, Chelan County, Snohomish County, Cowlitz County, and the City of Tacoma, all of Washington), non-jurisdictional California municipalities (Cities of Redding, Santa Clara, and the Modesto Irrigation District), and PacifiCorp transmission customers (Utah Associated Municipal Power Systems (“UAMPS”), Deseret Generation & Transmission Co-operative, Inc., Tri-State Generation and Transmission Association, Inc., and Powerex Corp.). Two California investor-owned utilities—Southern California Edison Co. and Pacific Gas & Electric Co.—also filed comments expressing concerns regarding various proposed amendments.

Several intervenors expressed support for PacifiCorp’s proposed amendments. But even a number of the supporters, including CAISO, the Western Power Trading Forum (“WPTF”), and the Electric Power Supply Association (“EPSA”), qualified their support with concerns regarding certain aspects of the filing, and requested further Commission guidance on the Energy Imbalance Market’s implementation.

The strongest objections to the PacifiCorp filing fall into two categories: concerns about PacifiCorp’s proposed transmission rate structure and access to transmission for EIM transfers; and concerns regarding the structural issues of overlapping California state and CAISO-PacifiCorp tariff governance, particularly of western entities that do not otherwise participate in CAISO’s markets. Each of these concerns is discussed briefly below.

Transmission Access and Rate Structure for the CAISO-PacifiCorp EIM

CAISO and PacifiCorp propose to exempt EIM transfers—from the CAISO balancing authority area (“BAA”) to the PacifiCorp BAAs and vice versa—from transmission charges that would otherwise be imposed on real-time imports and exports in and out of these BAAs. Both the CAISO and PacifiCorp have committed to “re-evaluate” this policy after one year of EIM operation.

Several intervenors—including some of those who otherwise expressed support for the EIM—raised concerns that the exemption will lead to differential pricing between transmission customers using PacifiCorp and CAISO transmission during the same time intervals, and that it will not, in fact, reduce rate pancaking across the west (as CAISO and PacifiCorp claim). These results, the intervenors argue, would be unjust, unreasonable, and unduly discriminatory under the Federal Power Act. The Transmission Agency of Northern California (“TANC”), representing California municipalities, commented that, “preferential rate treatment underlying the ‘no charge’ EIM transmission pricing structure may create incentives to change scheduling behavior in a way that results in negative impacts on non-EIM transmission facilities.”

In addition, PacifiCorp’s filing presents two proposals regarding EIM access to transmission facilities that some intervenors describe as unjust and unreasonable.

First, PacifiCorp proposes to permit EIM dispatches from network resources on network transmission. Because under PacifiCorp’s existing OATT, network transmission customers’ rate structures vary significantly from the rate structures for point-to-point transmission, BPA articulated the concern that “PacifiCorp’s proposal will create significant transmission cost disparities between EIM participants that use [network] transmission and EIM participants” that use point-to-point transmission, “which will cause unintended market impacts, encourage gaming, and result in discriminatory distribution of EIM transmission costs.” UAMPS also raised concerns about the use of and charges for network transmission for EIM dispatches. PacifiCorp’s proposal to permit non-network uses of network appears to be both unconventional and controversial; the Commission will decide whether it is consistent with or superior to the pro forma OATT and just and reasonable under the Federal Power Act.

Second, PacifiCorp proposes to permit transmission customers to voluntarily offer their unused Point-to-Point transmission capacity, including capacity on systems operated by third parties who are not EIM participants, to facilitate CAISO EIM dispatches. This appears to be among PacifiCorp’s most unconventional proposals, and one that raised concerns regarding its consistency with PacifiCorp’s existing OATT and the Commission’s policy regarding offering available transfer capability on a non-discriminatory basis. Comments filed by Powerex, Washington state non-jurisdictionals, and Deseret all expressed concerns that such a proposal could result in discriminatory usage of transmission rights. Deseret, for example, commented that there is potential for transmission customers offering their transmission rights to “manipulate the amount and the timing of the release” of the capacity “so as to gain a trading advantage.”

Concerns Regarding Structural Defects with the PacifiCorp EIM Filing

Many intervenors expressed concern about the lack of detail presented in PacifiCorp’s filing regarding various design and implementation elements of the EIM and the unknown effect on the transmission rights and investment of existing transmission customers. The City of Santa Clara, BPA, UAMPs, and Powerex all noted that they were unable to evaluate properly some of PacifiCorp’s proposed amendments because the details were left to the future drafting of an EIM Business Practice manual. As stated by UAMPS, “The matters raised in the Business Practices are not merely technical implementation issues. PacifiCorp has not provided a complete Business Practice which allows all EIM Stakeholders to evaluate the plain language in the PacifiCorp OATT in light of the details needed in the Business Practices.”

Further, the interdependence of PacifiCorp’s proposed amendments with the CAISO’s current and pending revised tariff raised concerns among stakeholders, particularly those who are not current participants in the CAISO markets. BPA stated that the volume of cross-references between the tariffs “subjects [PacifiCorp] Transmission Customers to vast portions of the CAISO’s Tariff through specific and vague references.” As stated by UAMPS, “The administrative issues created by an entity effectively being part of two OATTs for the same transaction within a single BAA include concerns of document priority, stakeholder discrimination and uncertainty regarding how the various OATTs will truly be implemented according to the as-yet-to-be-defined Business Practices of CAISO and PacifiCorp.”

PacifiCorp Has Until Monday, May 12 to Respond to the Serious Concerns of Intervenors

Ultimately, several intervenors voiced serious concerns that the PacifiCorp amendments will erode their investment in existing transmission rights, reduce reliability across the West, and subject them to as-yet-unknown California state regulations and tariff rules, whether they decide to participate in the voluntary EIM or not.

PacifiCorp has until Monday, May 12 to respond to the comments and protests. The Commission is expected to issue an order on the CAISO and PacifiCorp filings later this year, though it remains to be seen whether the Commission will rule by the requested June 20 order date and whether the order will approve the proposals without substantial amendment. Check back with Bracewell & Giuliani’s Energy Legal Blog for updates regarding future developments.

—Jessica Miller and Deanna King, Bracewell & Giuliani LLP. This post was also published on the law firm’s website