On October 6, 2020, the California Independent System Operator (“CAISO”), California Public Utilities Commission (“CPUC”), and the California Energy Commission (“CEC”) (collectively, “Joint Entities”) announced that their preliminary analysis pointed to a number of factors that caused two mid-August electricity outages in CAISO. Specifically, the group’s Preliminary Root Cause Analysis report (“Preliminary Analysis”) concluded that the outages resulted from a convergence of factors, including (i) the extreme west-wide heat storm, (ii) shortfall in system planning, and (iii) certain day-ahead energy market practices.  As directed by Governor Newsom, the Preliminary Analysis includes immediate, near, and longer-term actions that can be taken to minimize future power outages.

From August 14, 2020 through August 19, 2020, the western United States experienced an “extreme” heat storm, with temperatures 10-20 degrees above normal. Based on an analysis conducted by the CEC, the heat storm was deemed a 1-in-35-year weather event. The heat storm also came during an ongoing drought and numerous wildfires in the west. The extreme heat ultimately impacted both the electric demand and supply, prompting CAISO to take a series of emergency actions from August 14 to August 19.  Among the most severe, on August 14 and August 15, CAISO declared Stage 3 Emergencies and initiated rotating outages as required to maintain system reliability. These August 14 and 15 outages impacted approximately 492,000 and 321,000 customers, respectively.

The Preliminary Analysis focuses on understanding the various factors that contributed to the rotating outages on August 14 and 15, 2020. The Preliminary Analysis concludes that there was no single cause of the outages, but rather a convergence of multiple factors, including:

  • The heat storm and evolving demand patterns induced by COVID-19 were not anticipated in the multi-year planning and resource procurement timeframe, and the West-wide nature of the heat storm limited the energy markets’ ability to help “fill the gap” between planning and real-time conditions;
  • Current resource planning targets, including the transition to a reliable, clean, and affordable resource mix, have not kept pace with demand, leading to insufficient resources in the early evening hours;
  • Weather conditions caused 1,400 MW to 2,000 MW of forced and day-of outages for various natural gas resources;
  • Scheduling coordinators under-scheduled demand in the day-ahead market;
  • Convergence bidding masked the tight supply conditions before it was temporarily suspended on August 18 through August 21; and
  • A prior market enhancement to the CAISO residual unit commitment process had inadvertently prevented it from identifying the under-scheduling and convergence bidding supply effects, leading to inappropriate market signals.

The Preliminary Analysis recommends several immediate, near-term, and longer-term actions to help ensure the reliability of California’s power system going forward, including:

  • Updating resource and reliability planning targets to more appropriately plan for (a) extreme weather events caused by climate change, and (b) balancing the demand during critical hours with meeting cleaning energy goals;
  •  Completing generation and storage projects currently underway in California;
  • Fast-tracking regulatory and procurement processes to bring more resources online by 2021;
  •  Increasing non-CPUC jurisdictional entities’ procurement; and
  • Ensuring CAISO markets accurately reflect supply and demand during stressed operating conditions.

The Preliminary Analysis notes that a “final analysis” is anticipated to be completed and published by end-of-year 2020.  A copy of the Preliminary Analysis is available here.