Dive Brief:

• Federal regulators have opened an investigation into the California ISO's energy imbalance market which launched late last year and which so far has seen greater price volatility than anticipated.
• FERC rejected the ISO's bid for a waiver of energy price imbalance rules, saying the grid operator appeared to have underestimated the severity of underlying market issues causing the volatility.
• The new market enables power to be bought in five-minute increments, helping to match fluctuations in solar and wind power generation.

Dive Insight:

Utility Dive reported recently on the successes of the California Energy Imbalance Market's first few months in operation, but now FERC is looking at the market for what it says is enhanced price volitility.

California's grid operator requested FERC extend for a year a waiver that allows more flexibility to setting the marginal economic bid, but regulators have rejected that idea.

CAISO "failed to establish that the imbalance energy price spikes are continuing to occur primarily as a result of the transitional issues it identifies," FERC said in its March 16 order, "and therefore has not shown that waiving the scarcity pricing provisions for a full year is responsive to the issues causing the price spikes."

The commission ordered a technical conference to investigate the price spikes. Staff from FERC also attended the ISO's Market Performance and Planning Forum this week.

FERC said it shared the concerns of some protestors’ who worried that waiving parameters intended to send price signals to the market to increase supply during shortage conditions "could have the ultimate effect of masking the effects of the issues underlying the price anomalies."

Regulators also said the ISO's proposal failed to include measures to ensure that new entrants joining the energy imbalance market are able to confirm market readiness and identify operational issues prior to full activation.

Portland-based PacifiCorp began operating its Energy Imbalance Market system in parallel with the California ISO system last year.