On February 20, 2009, FERC accepted the California Independent System Operator Corporation’s (“CAISO”) Exceptional Dispatch provisions in its Market Redesign and Technology Upgrade Tariff (“MRTU Tariff”). While FERC believes that CAISO will rely on the Exceptional Dispatch mechanism much less frequently in the future as it gains experience with MRTU, the mechanism will maintain grid reliability in circumstances where resources issued exceptional dispatch instructions could exercise local market power.
FERC first conditionally approved the MRTU Tariff, scheduled to launch at the end of March, in September 2006. In addition to the Exceptional Dispatch provisions, the MRTU Tariff contains processes for resource adequacy, reliability must-run, and an Interim Capacity Procurement Mechanism. These provisions will allow CAISO to manually commit and/or dispatch resources that do not clear market software in order to ensure grid reliability. The Exceptional Dispatch mechanisms will specifically provide instructions for forced start-ups and shut-downs, incremental or decremental energy, and operations at a minimum operating level.
Since September 2006, CAISO has found that exceptional dispatches have occurred more frequently than it originally expected. As a result, it filed revisions to the MRTU Tariff in June 2008 so that it could mitigate the exceptional dispatches. While CAISO already has broad mitigation measures in place, it believed the Exceptional Dispatch Mitigation Measures were necessary because the general mitigation measures would not apply to exceptional dispatches, which are settled out of market.
In October 2008, FERC recognized that the MRTU Tariff may not be just and reasonable because of certain market changes. FERC asked CAISO to consider a proposed remedy, scheduled a technical conference for input from CAISO, and asked CAISO to submit revised tariff sheets.
In its order, FERC recognized concerns that exceptional dispatches may occur more frequently, but concluded that the provisions are necessary to ensure grid reliability. Additionally, FERC concluded that future actions will almost completely eliminate the need for exceptional dispatch. FERC asked CAISO to work with stakeholders so that the market does not have to permanently rely on exceptional dispatch. Meanwhile, CAISO will follow extensive reporting requirements for the exceptional dispatch and will consider startup and minimum-load costs when exceptional dispatches are issued.
While FERC accepted the Exceptional Dispatch Mechanisms, the proposed mitigation measures for exceptional dispatch were largely rejected. Mitigation measures were accepted in two specific circumstances: when exceptional dispatch addresses reliability requirements for noncompetitive restraints; and when exceptional dispatch addresses an environmental restriction affecting specific generators in the Sacramento Delta during certain periods in the spring and summer. Beyond these two circumstances, FERC rejected the mitigation measures because they are usually limited to well-defined structural problems in the market.
A copy of the order is available on FERC’s website under Docket No. ER08-1178.