Dive Brief:

• The Federal Energy Regulatory Commission (FERC) has approved the California ISO's request to develop a backstop capacity auction for times when the grid operator is hit with unexpected power shortages or other reliability issues, Platts reports. 
• The decision means CAISO will replace its existing, administratively-priced capacity procurement mechanism (CPM) with a competitive process.
• Regulators also approved California's second phase of a grid reliability effort, which will place additional flexibility requirements on load serving entities.

Dive Insight:

Regulators last week approved two tariff changes for California's grid operator, looking to bolster resources during times of shortages and smooth the integration of more renewable energy into the grid.

CAISO's competitive bid backstop auction is a fair approach to "meeting CAISO’s operational needs and providing appropriate compensation to needed resources," FERC said. Compensating CPM capacity based on the results of a competitive solicitation process will result in compensation driven by competitive factors and, therefore, will appropriately reflect both changing market conditions and corresponding fluctuations in capacity prices."

Separately, FERC conditionally approved tariff revisions allowing the grid operator to allocate certain amounts of flexible capacity which must be procured by load serving entities, in order to balance intermittent renewables. 

Platts notes that regulators approve the revisions over the objections of NRG Energy, which expressed concerns the rule would essentially prohibit self-scheduling for flexible resources. 

Regulators disagreed, responding "when flexible capacity self-schedules, much of the benefit that capacity provides to the grid is negated because a lack of economic bids impairs CAISO's ability to efficiently dispatch the resources it needs to reliably operate the grid."