FERC Filings

MOTION OF EPSA FOR LEAVE TO INTERVENE IN SUPPORT OF THE COMPLAINT, CALISO

II. Introduction

A.
Background

The Cal ISO’s experience with caps, or its “maximum purchase price authority,”2 began in 1998 when, pursuant to Commission approval,3 the Cal ISO implemented a $250/MWh cap on what it would pay for Ancillary Services and Imbalance Energy (real-time). A subsequent Commission Order afforded the Cal ISO the discretion to establish purchase price caps for imbalance energy at any level it deemed appropriate until November 15, 1999. 4

In August 1999, the Cal ISO Board raised the caps in the Ancillary Services and Imbalance Energy (real-time) markets to $750/MWh, effective September 30, 1999. The Board action also provided that it would lower the caps to $500, effective June 1, 2000, if it determined that (1) the markets are not workably competitive; (2) there are not effective demand side management options in place; or, (3) the local utilities have not sought and obtained practicable options to self-provide ancillary services and applicable hedging products in the CalPX. The tariff amendment also gave the Cal ISO the
discretion to lower its purchase price caps if it determined that the markets were not workably competitive. On November 12, 1999, the Commission issued an Order5 approving a tariff amendment that extended the Cal ISO’s maximum purchase price authority to November 15, 2000.

On March 22, 2000, the Cal ISO’s Board unanimously voted to extend the $750 purchase price limit through November 15, 2000. However, on June 28, 2000, the limit was subsequently reduced to $500. After two unsuccessful votes in July, on August 1, 2000 the purchase price authority was reduced even further to $250/MW.

The Complaint

The Complainants are alarmed at their potential exposure should the Cal ISO presume to impose a “price cap” of $250 when exercising its authority to recall export schedules in emergency conditions. Importantly, Section 5.6.1 of the Cal ISO tariff governing emergency actions the Cal ISO may take is silent on how market participants should be compensated under these circumstances6. Therefore, over the past three months, the Complainants have attempted to resolve this question with the Cal ISO in a manner that was consistent with FERC policy, prior relevant orders, traditional principles of contract law and fundamental fairness. Unfortunately, those efforts -- more fully set forth in the Compliant -- were unavailing. On August 1, 2000, the Cal ISO Board rejected a motion that would have provided Complainants with adequate compensation for curtailed exports. Therefore, the Complainants were compelled to file their Complaint.
2. In its most recent order relating to pricing in the California markets, the Commission distinguished between the caps it has approved in other regions and those in California by referring to the Cal ISO’s “maximum purchase price authority.” It further emphasized that prior orders concerning the California markets “explicitly stated that it was inappropriate to characterize the ISO’s proposal as a price cap on sellers’ rates.” Morgan Stanley Capitol Group, Inc. v. California Independent System Operator Corportation, Docket No. EL00-91-000 (July 28, 2000) at 6. EPSA appreciates that the Commission did not treat this as merely a semantic point; the correlative point it made in Morgan that “[s]ellers have the option of selling to the ISO at the price it is willing to pay, or sell elsewhere if a higher price is available” goes to the heart of the Complainant’s action. Id at 7.

3. California Independent System Operator Corp., 83 FERC 61,209 (1998).

4. California Independent System Operator Corp., 89 FERC 61, 059 (1999).

5. California Independent System Operator, 89 FERC 61,169 (1999), reh’g pending (the “November 12 Order”).

6. The Cal ISO attempts to justify capping the price for recalled export energy under Section 11.2.4.2 of its tariff. That section, however, is inapplicable; the Cal ISO’s threatened actions would cause damages far in excess of the compensation that Section 11.2.4.2 provides. As explained in the Complaint, the Cal ISO’s use of that section’s compensation provision would conflict with the Commission’s rationale for giving the Cal ISO maximum purchase price authority in Morgan, as well as prior Commission orders approving compensatory relief for emergency curtailments by the New York ISO and the New England ISO.