Monday, March 27, 2017

FERC OKs New CAISO Load-Serving Entity Definition

By Robert Mullin

FERC approved a CAISO Tariff revision expanding the definition of a “load-serving entity” to include organizations that purchase wholesale electricity to serve their own needs (ER17-218).

The ISO’s rules previously recognized as LSEs only those entities that sell electricity or serve load to end users, a description that covers utilities, federal power marketing agencies and community-choice aggregators.

ferc caiso load-serving entity

CAISO’s LSE definition refinement eliminates a subcategory that previously covered California’s State Water Project, which will now fall under the newly expanded definition. | CDWR

The original definition also made a special provision for the State Water Project (SWP), a California agency that directly engages the wholesale market to cover its own energy requirements. The revision eliminates that subcategory, with SWP now covered under the newly expanded definition.

The ISO sought to broaden the definition to accommodate the San Francisco Bay Area Rapid Transit District (BART), which, like the SWP, serves its own load but did not meet the standard definition of an LSE. (See CAISO Issues Revised Proposal to Expand LSE Definition.)

BART’s transmission contract rights on Pacific Gas and Electric’s network, which predate the existence of the ISO, expire at the end of 2016. When those rights automatically convert to CAISO service, the agency will be exposed to congestion charges.

The definition change will permit BART to receive a free congestion revenue rights allocation in the ISO’s annual process in order to hedge the transmission costs of serving its load. The revised Tariff language also makes clear that BART — and any other entity choosing to serve its own load — will be subject to resource adequacy obligations.

caiso load-serving entity ferc

| BART

“We find that the revised definition is a reasonable approach to encompass entities, such as BART, that are currently excluded but that nonetheless should be considered a load-serving entity, and avoids the need for CAISO to add carve-outs to the definition, as it initially did for State Water Project,” the commission said in its Dec. 30 ruling.

The revision also alters a provision requiring that any LSE must be authorized to serve load under California state or local law — deleting the reference to California. The change was intended to acknowledge the current membership of Nevada-based Valley Electric Association and to prepare the ISO for additional out-of-state members through regional expansion.

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