FERC Fines CAISO Battery Operator $1 million for Rule Breaches

FERC, the US Federal energy regulator, announced (click here) an enforcement action again Vista Energy Storage (Vista) who was penalised for violating the California Independent System Operator Corporation’s (CAISO) Open Access Transmission Tariff and FERC regulations by submitting bids to CAISO when a battery owned and operated by Vista was not reasonably expected to be available and capable of performing at the levels specified in the bids. The activity occurred over 33 days during the summer of 2022. The facts of the case from the 15-page Order are briefly summarised as follows:

• Vista is a subsidiary of REV, a renewable power company with approximately 2.8 GW in generation assets, which owns and operates the Vista Battery in the CAISO market – the latter has a maximum storage capacity of 40 MWh;
• The Battery can charge or discharge at a rate of 40 MW for a duration of 1 hour, and thus can fully charge or discharge within one hour;
• CAISO runs both a Day Ahead and a Real Time power market in California - CAISO procures all forecasted Ancillary Services needs in the Day-Ahead market;
• Bids in the Day-Ahead market by market participants must be made by 10am on the day before delivery and the results are published typically at around 1pm on the same day;
• The Vista Battery offered both Energy Services (i.e. when a resource provides or absorbs electricity based on CAISO’s dispatch signal) and Ancillary Services (i.e. providing reserves to support the reliable operation of the transmission system) into CAISO;
• “Regulation” is a type of Ancillary Service in which CAISO controls a resource to ensure that the frequency on the grid stays within required limits - in the case of a battery, with Regulation Down, the grid operator changes its directives to the battery to reduce the total amount of energy on the grid (the opposite with Regulation Up);
• When CAISO gives a Regulation Up or Down award to a battery, it is paying it to be available to provide these services (Energy awards are paid separately);
• To be able to offer regulation services to CAISO, control over a resource’s output must be handed to CAISO’s Automated Generation Control algorithm – the algorithm takes over the resource’s operation to increase or decrease a resource’s output to keep the grid balanced;
• At all times, a battery has a “State of Charge” – this is a number that represents the available stored energy of the battery at any given time;
• Under the CAISO Tariff, when it submits a Day Ahead bid at 10am, a battery has the option of forecasting its “Initial State of Charge,” that is, the battery’s expected charge 14 hours later at midnight, which is the beginning of the next day;
• If a battery submits an Initial State of Charge forecast as part of its Day-Ahead bid, CAISO’s market engines use that value to determine whether the battery will get an award and what awards it will get;
• In both the Day Ahead and Real Time markets, CAISO enforces the Ancillary Service State of Charge constraint for battery resources - this is designed to ensure that a battery will be able to perform Ancillary Services when called on to do so;
• Under the tariff in effect until 20 September 2022, CAISO paid the higher of LMP or the unit’s Energy bid price for these purchases of Energy - if the latter was higher, CAISO would pay the resource through Bid Cost Recovery to make up the difference;
• The Ancillary Service State of Charge constraint also seeks to ensure that a battery can perform a Regulation Up award;
• During the 22 summer period, Section § 37.3.1.1 of the CAISO tariff read:

"Expected Conduct. Market Participants must submit Bids for Energy, RUC Capacity and Ancillary Services and Submissions to Self-Provide an Ancillary Service from resources that are reasonably expected to be available and capable of performing at the levels specified in the Bid, and to remain available and capable of so performing based on all information that is known to the Market Participant or should have been known to the Market Participant at the time of submission."

• During 33 days within the summer 2022 period Vista told CAISO (in a bid submitted by 10 a.m.) that it forecasted its Initial State of Charge the next day (i.e., 14 hours after submitting the bid) to be at or below 4MWh, even though the battery had a 36 MW or larger Regulation Up award for the final hour of that day;
• Vista knew (or should have known) that because of that Regulation Up award, the Ancillary Services State of Charge constraint would ensure that Vista’s actual State of Charge would be around 20 MWh during the final hour that day;
• On the 33 days in question, Vista received 40 MW Regulation Down awards for the first hour of the next day due to its 4 MWh (or lower) Initial States of Charge - since Vista knew (or should have known) that it would not have received these awards in the first hour of the day if it had submitted an Initial State of Charge value of 20 MWh;
• On these days Vista’s low Initial State of Charge values also enabled it to obtain 40 MW Regulation Down awards for several hours after the first hour;
• Because the Battery was actually at a State of Charge around 20 MWh at the beginning of each of the 33 days in question, there was a conflict between the operation of the Regulation Down product (which seeks to charge the Battery to adjust frequency on the grid) and the Ancillary Service State of Charge constraint (which seeks to discharge the Battery when necessary to keep its State of Charge below a certain level);
• To resolve the conflict, the Ancillary Service State of Charge Constraint frequently discharged the Battery to make Vista’s Regulation Down Awards feasible;
• Under its Tariff at the time, CAISO was required to pay Vista for these discharges at Vista’s bid prices, which were often above the CAISO Locational Marginal Pricing (LMP) - LMP is the pricing mechanism used to determine the cost of electricity at different locations on the grid, reflecting the cost of producing and delivering power, and includes congestion and loss factors;
• The Order claims that Vista received roughly USD $1,485,000 in Bid Cost Recovery payments that CAISO made because of Regulation Down Awards that Vista would not otherwise have obtained if it had submitted Initial State of Charge values consistent with the CAISO Tariff, rather than values that resulted in Vista’s obtaining the largest possible Regulation Down awards;
• Vista also received approximately USD $185,000 for Regulation Down awards during the Relevant Period;
• FERC concluded that on the 33 days in question, Vista submitted inaccurate Initial State of Charge values as part of its Regulation Down bids from a resource that was not “reasonably expected to be available and capable of performing at the levels specified in the Bid,” based on its actual expected Initial State of Charge and therefore had violated § 37.3.1.1 of the CAISO Tariff;
• The following penalties were agreed:

1. Vista pays a civil penalty of USD $1,000,000;
2. Vista disgorges ill-gotten gains of USD $1,670,000;
3. Vista to conduct compliance training and must submit one annual compliance monitoring report to FERC with the possibility of a second at FERC’s discretion.

• The Order notes that the investigation was triggered from a referral from the CAISO Market Monitoring department.