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
BACKGROUND
Underscoring the importance and urgency of the MMCP price cap issue, there have been three major filings on the MMCP in the past month. First, on May 17, 2002, Dynegy, Mirant and Williams (Joint Movants) jointly filed an “Emergency Motion to Retain Winter West-Wide Price Mitigation Methodology” (Emergency Motion) in which the Joint Movants asked FERC to expeditiously adopt the winter West-wide price mitigation methodology through September 30, 2002. The Joint Movants reason that the summer mitigation methodology, which establishes a price cap rather than the winter methodology adoption of a price floor, will likely result in an unjust and unreasonable mitigation price level that “would seriously threaten reliability.”6
Next, on June 7, 2002, Stephen W. Bergstrom, President and Chief Operation Office of Dynegy, Inc., sent a letter to the FERC Commissioners to emphasize the serious consequences of the declaration of emergency conditions on June 6, 2002, because the CAISO did not maintain a 7% operating reserve margin throughout an entire hour. Mr. Bergstrom points out that the declared emergency triggers the recalculation of the West-wide price cap, which, based on the current formula, would result in a new level of approximately $45/MWh. As emphasized in Mr. Bergstrom’s letter, this price cap fails to cover even marginal operating costs of intermediate and peaking generating units. The dire results of such a low price cap are enumerated in Mr. Bergstrom’s letter, and point out the overriding flaws of the market mitigation plan.
Finally, and concurrently with Mr. Bergstrom’s letter, the CAISO filed its Rehearing Request on June 7, 2002. In that filing, CAISO raises concerns over two issues:
(1) Clarification of the effective date of the ISO’s seven percent reserve threshold for resetting the MMCP and whether the price should be reset for short-term operating events (including an event that occurred on May 13, 2002, before issuance of the FERC order approving the 7% operating level).
(2) Rehearing on the level of Operating Reserves that must be maintained by CAISO before the market clearing price is recalculated. CAISO “believes a better threshold would be six (6) percent,” to allow the ISO to purchase Operating Reserves based on variable system conditions and follow more closely WECC criteria (which have ranged from a low of 6.08 percent to a high of 9.67 percent since January 2000, according to the CAISO filing).7