The Federal Energy Regulatory Commission on June 11 accepted proposed revisions to the California ISO’s open access transmission tariff to implement an Extended Day-Ahead Market access charge as outlined by the California grid operator in April 2024.
Background
On August 22, 2023, CAISO filed proposed revisions to its Tariff to implement its Day-Ahead Market Enhancements and EDAM proposals. As part of its EDAM proposal, CAISO proposed an EDAM access charge that would have allowed an EDAM transmission owner 4 to recover three discrete components of forgone revenues, components which it proposes again in the April filing. CAISO stated that the EDAM access charge Tariff provisions were severable from the rest of its EDAM proposal.
In an order issued December 20, 2023, the Commission rejected the EDAM access charge without prejudice while accepting the rest of CAISO’s EDAM proposal.
The Commission found that CAISO had not demonstrated that the three components of the proposed EDAM access charge were just and reasonable and not unduly discriminatory or preferential.
CAISO April Filing
In the April filing (Docket ER24-1746-00), CAISO again proposes an EDAM access charge, comprised of three components, to allow for the recovery of an EDAM transmission owner’s eligible transmission service revenue shortfalls from other EDAM BAAs.
CAISO explains that although participating in the day-ahead market will not affect a transmission owner’s transmission revenue requirements, it may affect the allocation of revenues the transmission owner receives for use of its transmission system.
To avoid such unintended cost shifts at the margins, CAISO proposes to protect EDAM transmission owners against risk of forgone transmission revenues via an EDAM access charge.
CAISO states that if transmission owners release transmission at no cost for use in CAISO’s day-ahead market, they will forgo some transmission sales that they would have likely made in the absence of their participation in EDAM (which, for transmission owners with stated rates, would have been accounted for in their rate cases establishing their rates).
CAISO explains that stakeholders have raised concerns that these changes in transmission owners’ revenues due to transmission owner participation in EDAM may result in unexpected downstream cost shifts for ratepayers.
CAISO states that it expects EDAM access charges will be relatively small upon joining EDAM and may potentially decrease as EDAM transmission owners adjust their rates to reflect recovery of their revenue requirements under a model where they use their transmission assets to support participation in EDAM. CAISO states that without the EDAM access charge, EDAM transmission owners would lack a reasonable opportunity for cost recovery from all classes of beneficiaries.
In addition, CAISO states that participation in EDAM will, on a going forward basis, affect energy transfers between EDAM BAAs, resulting in new wheeling through volumes. Because these new transfers will make use of existing transmission systems, CAISO proposes to compensate an EDAM BAA when wheeling through volumes in that BAA are greater than its total import and export volumes.
CAISO said it recognizes the EDAM access charge may require enhancements as parties gain experience and more transmission owners join EDAM.
CAISO states that it will review the impact of the EDAM access charge annually and will make adjustments whenever necessary to maintain just and reasonable cost allocations, consistent with the commitments CAISO made in its EDAM proposal to monitor and review the ongoing performance of components of the EDAM design and to consult with stakeholders as needed.
FERC Order
“We find, based on the record before us, that CAISO’s proposed EDAM access charge is just and reasonable and not unduly discriminatory or preferential. We accept CAISO’s proposed Tariff provisions related to EDAM access charge implementation activities, effective June 12, 2024, as requested,” FERC said.
“We agree with CAISO and commenters that the EDAM access charge is a just and reasonable mechanism to avoid unintended cost shifts among ratepayers. On joining EDAM, transmission owners will voluntarily make unscheduled transmission capacity -- which could otherwise be sold as short-term firm or non-firm point-to-point transmission service -- available to EDAM at no cost, thus forgoing the opportunity to sell that transmission capacity.”
FERC said that because the revenues from such sales are typically credited back to the transmission owner’s native and network load and long-term firm point-to-point transmission service customers, without a mechanism like the EDAM access charge, EDAM participation may shift costs and allow EDAM participants to benefit from the use of EDAM transmission owners’ transmission systems through access to a larger market without contributing to the costs of that transmission.
Consistent with court precedent, evaluating compliance with the cost causation principle involves comparing the costs assessed against a party to the burdens imposed or benefits drawn by that party.
“We thus find that it is reasonable for voluntary EDAM participants to pay an EDAM access charge because they benefit from the use of the unscheduled transmission capacity that EDAM transmission owners make available to EDAM, which facilitates EDAM transfers and, in turn, the market efficiency benefits that those transfers provide.”
Similar to the implementation filings for EDAM participation, EDAM transmission owners will have to revise their OATTs to incorporate the EDAM access charge or demonstrate that their formula rate already does so, prior to EDAM participation.
PacifCorp Becomes First Western Entity to Formally Commit to Regional Coordinated Market
In April, PacifiCorp became the first entity in the Western United States to formally commit to a regional coordinated energy market by recently signing an implementation agreement with the California ISO for its Extended Day-Ahead Market.
Currently, four entities have informed the ISO of their interest in joining the EDAM: PacifiCorp, Balancing Authority of Northern California, Portland General Electric, Los Angeles Department of Water & Power.
A fifth entity, Idaho Power has indicated it is leaning toward the EDAM as its preferred day-ahead market.
