On September 26, 2016, the Commission approved revisions to the California Independent System Operator Corporation (“CAISO”) Open Access Transmission Tariff (“Tariff”) that create a new product in the CAISO real-time market for “flexible ramping”—meaning a generation resource’s ability to rapidly change its output, upward or downward, to respond to a change in forecasted net load. While the Commission approved the new product, which will replace CAISO’s existing “flexible ramping constraint,” effective October 1, 2016, the CAISO subsequently requested on September 28, 2016 that the Commission suspend the effectiveness of the Tariff revisions for one month, until November 1, 2016. That request remains pending before the Commission.

CAISO first implemented the “flexible ramping constraint” in 2011 as part of a broader effort to enhance its real-time market to more effectively manage the integration of variable energy resources. At that time, CAISO committed to address limitations of the constraint through the design of a market product that would more effectively dispatch resources to meet ramping needs. After a five-year stakeholder process, CAISO developed the flexible ramping product as a replacement to the constraint.

In its June 24, 2016 tariff filing, CAISO described the flexible ramping product as a “significant enhancement” from the flexible ramping constraint currently in place, because it procures and compensates resources for providing ramping capability for both: (i) the forecasted movement of net load; and (ii) uncertainty in the forecasted net load, which is the amount of flexible ramping capability needed to cover the potential error in the real-time dispatch forecasted net load. According to CAISO, while the current constraint covers only the fifteen-minute real-time unit commitment process and only addresses upward ramping needs, the flexible ramping product ensures that sufficient upward and downward ramping capability is available and efficiently dispatched in all CAISO real-time market processes (not just the fifteen-minute real-time unit commitment process).

In its approval order, the Commission accepted CAISO’s proposed Tariff revisions, finding that the flexible ramping product will enhance CAISO’s ability to: (i) manage ramping capability to address changes in system conditions by extending CAISO’s ability to procure ramping capability in both the upward and downward directions; and (ii) account for forecasted net load movement and forecast uncertainty in all processes of the real-time market, thereby ensuring that CAISO has sufficient dispatchable ramping capability to meet net load changes in all market intervals. The Commission determined that CAISO’s proposal “will ensure that flexible ramping capability is valued and compensated properly in CAISO’s markets.” Finally, the Commission noted that the flexible ramping product was based on “opportunity cost” which, according to the Commission, provides “a just and reasonable basis for compensation for flexible ramping product providers” because it “appropriately captures the costs associated with providing flexible ramping capability while avoiding the market inefficiencies that may be associated with a bid-based product given the other elements of CAISO’s flexible ramping product design.”

While the Commission authorized October 1, 2016 as the effective date for the Tariff revisions, the CAISO subsequently requested on September 28, 2016 that the Commission suspend the effectiveness of the Tariff revisions for one month, until November 1, 2016. That request remains pending before the Commission.

A copy of the Commission’s order may be found here.

A copy of CAISO’s September 28, 2016 request to modify the effective date is available here.