FERC Filings
COMMENTS OF THE ELECTRIC POWER SUPPLY ASSOCIATION AND THE WESTERN POWER TRADING FORUM ON THE REQUEST FOR REHEARING AND CLARIFICATION OF THE CALIFORNIA INDEPENDENT SYSTEM OPERATOR
INTRODUCTION
San Diego Gas & Electric Company, Complainant,
Docket No. EL00-95-058
EL00-95-053
EL00-95-031
v.
Sellers of Energy and Ancillary Services Into Markets Operated by the California Independent System Operator and the California Power Exchange Respondents.
Investigation of Practices of the California
Independent System Operator and the California Power Exchange
Docket No. EL00-98-050
EL00-98-047
EL00-98-042
EL00-98-038
EL00-98-033
EL00-98-009
Pursuant to Rule 213 of the Rules of Practice and Procedure of the Federal Energy Regulatory Commission (FERC or Commission), 18 C.F.R. § 385.213, the Electric Power Supply Association (EPSA) and the Western Power Trading Forum (WPTF) hereby file comments in the above-captioned proceeding responding to the California Independent System Operator’s (CAISO) “Motion for Clarification, Request for Rehearing, and Petition for Reconsideration and Motion for Expedited Consideration” (Rehearing Request) filed on June 7, 2002.
CAISO’s Rehearing Request seeks clarification and/or rehearing of several orders issued by FERC on the implementation of the seven percent Operating Reserve threshold for recalculation of the mitigated market clearing price (May 15th Orders).3 CAISO is seeking the clarifications to eliminate the need to restate the mitigated market clearing price (MMCP) as required under its current rules, a restatement that would cut the MMCP in half, which would, in turn, likely cause available generation to flee the California markets during the critical summer period. In order to preclude this outcome, CAISO seeks to solve the problem by getting broad, unfettered discretion to reset the cap when it deems appropriate. Such discretion in the hands of the CAISO will quash what little price certainty the current MMCP rules provide, which in turn will further stifle incentives for additional sources of supply, new investment, risk management and demand response. As EPSA and WPTF have argued, repeatedly, the lack of independence by the CAISO is a serious concern. California’s role as a market participant compromises the CAISO’s role as an honest broker in applying the price cap.4
The Commission should not grant the CAISO’s request. Rather, FERC should deal with the fundamental issue that any MMCP reset mechanism will be harmful to the market, and should instead set a MMCP that does not vary based on parameters under the control of any market participant. Any mechanism used to reset the MMCP must be final, not subject to retroactive refund, to allow for transactional certainty. The current uncertainty over the MMCP level – present, future and past – is in danger of dampening or stifling market activity in California, which could induce another California power crisis. The Commission recognized the importance of market certainty in its discussion of the recalculation of the mitigated prices triggered by the operating reserves level in the December 19, 2001 “Order Accepting in Part and Rejecting in Part Compliance Filing:”
“We find that establishing a specific percentage is appropriate and reasonable because it enhances market certainty during the mitigated period. Prior to the April 26 Order, when we granted the ISO the discretion to declare system emergencies based on forecast conditions and other factors, the declaration of a system emergency did not trigger new prices through the mitigation plan. We find that during the duration of the mitigation plan, this discretion is no longer warranted and, further, such discretion could provide the appearance of manipulation of the market by the ISO.”5