California ISO, Western agree upon locational pricing for CVP federal hydropower
by Jennifer Neville
Western and the California Independent System Operator Corporation implemented the first phase of a Market Efficiency Enhancement Agreement that updated the location pricing for energy Western markets to two of its customers—Northern California Power Agency and Silicon Valley Power—on Dec. 3. Similar to an uptick in the value of a financial stock, the agreement increases the value of federal hydropower produced as part of the Central Valley Project in northern California.
“This partnership between Western and the ISO will further protect the value of northern California’s federal hydropower in a cost-effective manner; and Western’s customers will benefit from the agreement,” said Western Senior VP and Sierra Nevada Regional Manager Subhash Paluru.
Like the stock market, supply and demand of energy drives price changes based on specific locations. For example, the cost to move and deliver power is higher in a metropolitan area where electricity is in high demand compared to a rural area, where there are fewer customers and less-trafficked energy pathways.
Yet, regardless of location, the need for reliable and affordable energy is vital to support California’s big cities, small towns and rural areas.
“Several of our customers are in the California ISO-controlled grid; and this agreement ensures we can deliver Western’s federal hydropower at its proper value to NCPA and SVP,” said VP of Power Marketing for Sierra Nevada Region Sonja Anderson. “Before we were importing CVP hydropower at an aggregate price, now the price will be set by specific locations that are close to the federal dams from which we market power.”
Different price points within the ISO’s balancing authority take into account the resource generating location, the demand for power where the energy is delivered, and the supply of energy.
“The ISO is pleased to provide this opportunity to customers for expanded value in the energy marketplace,” said ISO Spokesperson Anne Gonzales. “This agreement allows power prices to align closely with particular geographic locations, which is a significant benefit to participants.”
To support the agreement, Western modified its scheduling and energy tagging systems to provide more details on the data sent to the ISO about generation marketed to NCPA and SVP.
Western and the California ISO will track the results of the agreement. Based on the success demonstrated in Phase 1, other Western customers may recognize the benefits and opt to participate in the Market Efficiency Enhancement Agreement at a later date.
A Balancing Authority is responsible for maintaining the electricity balance between the demand for energy and power generated to make sure they are equal across the transmission line and infrastructure within its area, and between neighboring balancing authorities. The California ISO and Western’s sub-balancing authority, underneath Sacramento Municipal Utility District, ensure the generation, transmission and distribution systems are all working reliably every hour to support California's energy needs.
Pricing Location (i.e. Pricing Nodes) are specific locations on the transmission system for which California ISO calculates and publishes wholesale electricity prices. Location-specific pricing provides clear, accurate costs for moving electricity at every location within the balancing authority’s area.