Food groups urge FERC to reform Western supply cap to avoid market uncertainty

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Diving brief:

  • According to the Western Power Trading Forum, or WPTF, and the Electric Power Association, known as EPSA.
  • Trade groups urged FERC in a Wednesday deposit to align the Western Electricity Coordinating Council’s, or WECC’s, soft bid cap with the California Independent System Operator’s $2,000/MWh bid cap to reduce uncertainty for market sellers.
  • Trade groups say recent FERC rulings ordering refunds to sellers who have exceeded the WECC soft supply cap are creating uncertainty. “The commission’s actions to date on cost justification requests may threaten sellers’ ability or willingness to offer electricity under high demand conditions or when supply is tight, for fear of violating an unfounded regulatory ban that would require refunds,” the trade groups wrote. .

Overview of the dive:

Trade groups’ warning comes as West faces increased risk of power outages this summer, partly because of the drought.

During the summer of 2020, the West was hit by significant heat waves, causing wholesale electricity prices to spike, with some transactions exceeding the WECC soft supply cap in place in the states. Westerners outside of CAISO. Subsequently, FERC ordered 21 utilities and other electricity providers to justify these sales. The companies included Exelon Generation, Tucson Electric Power Co., Public Service Co. of New Mexico, PacifiCorp and Nevada Power Co.

In some cases, FERC has ordered companies to refund deals calculated to be higher than the weighted average of the Intercontinental Exchange, or ICE, index at area malls, according to the groups, which represent service providers. electricity.

The WPTF and EPSA argue that FERC based these decisions in part on “a very concerning misapplication of the Mobile-Sierra Doctrine that underpins trust in mutually agreed contracts between buyers and sellers.

Under the Mobile-Sierra Doctrine, FERC cannot alter freely negotiated contracts between independent parties unless it is deemed to be in the public interest.

“In these [bid justification] orders, the commission acknowledges that the Mobile-Sierra doctrine applies to the contracts at issue, but then relies on a convoluted interpretation of entity market-based rate authority to in effect change the price of the contract,” said declared the WPTF and the EPSA.

“In no event has the commission made a decision in the public interest to support such a conclusion,” they said.

To reduce uncertainty, the groups urged FERC to reaffirm its adherence to the Mobile-Sierra Doctrine unless the agency shows that the public interest would be harmed.

In addition, the refusal and requirement to refund sales that exceeded the ICE index price raises “painful issues” for future sales under tight supply conditions, the groups said.

FERC should reconsider its use of the ICE index in its cost justification reviews, the WPTF and EPSA said.

Alan A. Seibert