June 20, 2018 - 5:15 PM EDT
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CXA La Paloma Files Complaint with Federal Energy Regulatory Commission Regarding California Wholesale Power Market Design

Flaws in California's electricity market have significantly increased electricity rates; created unfair conditions for incumbent generators

BAKERSFIELD, Calif., June 20, 2018 /PRNewswire/ -- CXA La Paloma, LLC ("La Paloma"), the owner and operator of a 1,124-megawatt, clean burning, natural gas-fired, combined cycle power generation facility in Kern County, California, today filed an administrative action with the Federal Energy Regulatory Commission ("FERC") requesting that FERC use its authority to require the California Independent System Operator Corporation ("CAISO") to implement and enforce a reasonable and transparent centralized resource adequacy procurement regime ("Centralized RAP").

La Paloma's complaint details fundamental problems in the design of California's wholesale power market. Instituting a Centralized RAP similar to that in place in other regions across the country would address many of these market problems and inefficiencies.

In the aftermath of the state's energy crisis in 2001, California regulators began implementing numerous short-term, stopgap initiatives that have resulted in an inefficient system that favors more recently constructed power generation facilities, including many renewable plants that only generate energy intermittently.  As a result, existing generators are not able to operate profitably and many are shutting down or being forced into bankruptcy.

La Paloma's continued presence in the energy market will enable California to fulfill its renewable source strategy. Many of California's newer renewable generators are unable to produce power 24/7 or can't generate power quickly enough to meet spikes in demand.  Many incumbent generators, by contrast, can quickly add power to the grid during peak demand hours, playing a critical role in California's reliable power supply.

"Power plants like La Paloma are a source of much needed reliable and flexible generation," said Joseph Williams of Norton Rose Fulbright, attorney for CXA La Paloma. "However the current market design is inadequate for those plants to survive.  While existing plants with flexible capacity are leaving the market, the state is encouraging the construction of new power generation facilities that are unable to generate on demand and actually exacerbate the need for more flexible, reliable generation.  We are asking FERC to direct CAISO to implement a Centralized RAP to address the need for flexible resources and provide for a fair opportunity to compete in a centralized, nondiscriminatory procurement process."

La Paloma believes a Centralized RAP would provide an auction-based, free-market system rather than relying on stopgap procurement practices. A Centralized RAP would ensure that capacity enters the market when and where it is needed, unnecessary or uneconomic capacity retires and capacity prices are more transparent over the long term. FERC has recognized Centralized RAPs for their benefits to overall market functionality and ability to enable just and reasonable wholesale electricity rates. 

"CAISO has previously considered developing a functional, long-term system of centralized resource adequacy procurement, yet has taken no material steps to do so," said Williams. "In fact, development of centralized resource adequacy procurement in California would not be novel. FERC has approved the transition toward centralized resource adequacy procurement in several other regions, noting the efficiency and reliability benefits that a more centralized structure provides."

About CXA La Paloma
CXA La Paloma, LLC is a limited liability company that owns the La Paloma generating facility, a 1,124 MW natural gas-fired, combined cycle generation facility located in McKittrick, California. The generating facility achieved commercial operation in 2003.


Media Contact:

Josephs Williams | Norton Rose Fulbright US LLP
(202) 662-0423
[email protected]

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Source: PR Newswire (June 20, 2018 - 5:15 PM EDT)

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