FERC Filings
REQUEST FOR CLARIFICATION OR IN THE ALTERNATIVE REHEARING OF THE ELECTRIC POWER SUPPLY ASSOCIATION-Docket No. EL00-95-012, Docket No. EL00-98-000, Docket No. RT01-85-000, Docket No. EL01-68-000
6. The Commission Should Not Drive Buyers Into The Real-Time Markets
In its December 15th Order, the Commission is clear that its:
<center>primary price mitigation is to eliminate undue reliance on the spot market so that price volatility in the spot market will no longer have the ability to cause the adverse economic consequences that it has to date. In this context, the $150 breakpoint serves as a supplemental price mitigation measure.</center>
EPSA is concerned that the provisions of the April 26th Order may, perhaps inadvertently, drive parties back to that volatile real-time spot market.
The mitigation measures adopted in the April 26th Order only apply to the real-time spot market. The December 15th Order imposed a requirement that 95 percent of anticipated load be scheduled prior to the real-time market, imposing a penalty charge of two times the energy cost not to exceed $100/MWh for purchases outside that bandwidth. Assuming, hypothetically, that the proxy market-clearing price does not exceed the highest proxy price derived using the Commission’s refund rate screen methodology, the real-time proxy price derived under the April 26th Order is not likely to exceed $430. Adding the $100 penalty charges takes the maximum price to $530/MWh. What this means is that any time the Day-Ahead price exceeds this limit, the Load Serving Entities (LSEs) and the CAISO will forgo day-ahead purchases and again revert to over-reliance on the spot market – exactly the result the Commission’s December 15th Order was intended to preclude.
If the Commission adopts this approach to mitigation, EPSA would urge the Commission to rethink the penalties imposed on imbalances in real-time markets. A $100 penalty on top of a capped price will not be adequate to encourage LSEs and the CAISO to buy power in forward markets and limit their exposure to the volatility inherent in real-time markets. That penalty must be significantly increased if it is to have the effect intended by the Commission.