Frequently asked questions: PSE's participation in an Energy Imbalance Market

What is an Energy Imbalance Market (EIM)?

An EIM is a real-time energy supply market that offers electricity generation and transmission services. It automatically balances demand every 15 minutes and dispatches power plants to meet demand every five minutes with the lowest cost energy. EIM participants include multiple balancing authority areas and utility territories. This can increase the economic efficiency of the power system and provides centralized, automated and region-wide generation economic dispatch. The new market is attracting additional participants and has the benefit of increasing benefits for all customers as diversity increases.

What does joining the EIM entail for Puget Sound Energy (PSE)?

Becoming an EIM member means that PSE's transmission system and generators can be used on a real-time 15-minute basis, either within PSE's Balancing Authority Area (BAA) or with other EIM BAAs. This promotes efficient power plant dispatch and allows low-cost resources to be used where and when they are most needed while reducing reserve obligations and associated costs. Between now and Oct. 1, 2016, PSE will be working to upgrade the telemetry, dispatch and communication capabilities of its transmission and generation assets. We'll also coordinate with the California Independent System Operation (CAISO), Federal Energy Regulatory Commission (FERC) and stakeholders to ensure a smooth launch.

Who are the other EIM participants?

Currently, both the ISO and PacifiCorp are participating in the EIM. NV Energy is expected to enter the EIM in October 2015. In October 2016, PSE would become the third member, along with Arizona Public Service (APS).

Why is PSE doing this?

Participating in an EIM presents an opportunity to improve how we operate the electric grid and will enable us to more efficiently dispatch energy to our customers. According to a third-party study, a projected $18 million to $30 million in annual savings will be realized to the benefit of PSE customers.

Are all cost savings passed on to customers?

In general, EIM transactions are limited to imbalance energy; therefore, all of the benefits realized through lower energy production costs are expected to flow back to customers in Washington Utilities and Transportation Commission (WUTC)-approved rates.

How much does it cost for PSE to participate in the CAISO EIM?

PSE has estimated that it would incur EIM startup costs of approximately $14.2 million, including contingency costs and ongoing costs of approximately $3.5 million per year.

How has the CAISO EIM market been working so far?

The EIM began financially binding operation on Nov. 1, 2014. According to an ISO report, the estimated gross benefits from the first five months of EIM operation were nearly $11 million, which is in line with pre-launch projections. To ensure a smooth onboarding for new entities participating in the market, ISO is working with FERC to strengthen readiness criteria.

What safeguards are in place to protect customers from market manipulation?

FERC found that the ISO's Department of Market Monitoring (DMM) and the ISO Board of Governors satisfy FERC's independence requirements. FERC found that the DMM, which is an independent department reporting directly to FERC, is the logical choice to act as market monitor for the EIM and that it has extensive experience in monitoring an imbalance market in the West and with ISO's software.

How can stakeholders become engaged or provide comments on the process?

PSE will implement a stakeholder process prior to filing tariff amendments with FERC. PSE will provide reasonable time for stakeholders to provide comments and respond to those comments in a timely manner to allow for a full dialogue with our transmission customers and other stakeholders. Information on announcements for stakeholder sessions, EIM information and other key dates for PSE's stakeholder process will be available at oasis.oati.com/PSEI.