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
COMMENTS
This recent debate over the CAISO MMCP emphasizes the urgent need for Commission intervention, but not the intervention requested by CAISO. Ironically, it is the CAISO’s own request for rehearing that underscores the inadequacy of the MMCP price cap – the filing implicitly recognizes that the MMCP mechanism results in a counter-intuitively low mitigation price cap, less then half the current level. Because of the inadequacy of the current plan, the CAISO is seeking discretion over the cap resetting mechanism, which compounds, rather than solves, the problem. Such unfettered control maintains the current lack of confidence in the Western electricity markets, especially over the lack of transactional finality. This uncertainty poses a serious threat to the stability in California’s markets that the Commission is trying to promote through its various mitigation orders, as well as its efforts to promote better market design and structures. As EPSA has argued in numerous filings before the Commission, the imposition of cap prices below the true market price will not promote the development of robust, competitive and reliable wholesale energy markets. With the clarifications and changes requested by CAISO, the California MMCP mechanism would have profound negative consequences, both short and long-term.8
Should there be an event that triggers the resetting of the cap during this peak summer season, the resulting cap will fall to levels so low that there will no longer be incentive for any of the following: long-term or forward contracting for both supply certainty and risk management; interregional trade bringing needed power imports into California; capital investment for either generation or transmission; creation or utilization of demand response measures; or hydropower generation from out-of-state sources that have historically supplied California during energy shortages. All of these components are necessary to promote stable markets in California and avoid reliability crises in the state this summer.
EPSA and WPTF urge the Commission to maintain its focus on the long-term needs of the California and West-wide markets. While EPSA and WPTF strongly oppose any form of price cap, if some form of temporary intervention is required, ensure that it is set at a fixed level that is not a function of variable parameters, such as operating reserves, or other factors under the control of any individual market participant. Also, any sales made under the cap must be final; the specter of possible refunds at a later date will quash the market and reliability along with it.
Finally, any cap must provide sufficient incentives for all possible resources, including hydro, to provide power to California consumers this summer. While price caps are antithetical to well functioning, competitive markets, the Commission has developed and imposed a temporary mitigation regime to ensure reliable and stable electricity supplies while more robust competitive markets are developed and mitigated. While EPSA and WPTF have consistently raised concerns with various aspects of the mitigation, it cannot continue to be a moving and opaque target; market participants must have some minimum confidence in the California price caps to sustain adequate supply and investment.