By Hudson Sangree

FERC said Tuesday it won’t rehear a case on whether Pacific Gas and Electric deserves a $30 million annual incentive adder for staying in CAISO (ER14-2529-006, ER15-2294-005, ER16-2320-005).

The commission first decided the hotly contested case in August 2018 and reaffirmed its decision in July after the 9th U.S. Circuit Court of Appeals rebuked it and sent the matter back on remand. (See PG&E Deserves $30M ISO Adder, FERC Says.)

The two decisions left little doubt about FERC’s views on whether participation in CAISO is voluntary or mandatory for PG&E and other transmission owners.

FERC concluded in both instances that participation in CAISO is voluntary; that PG&E could unilaterally leave CAISO without permission from state regulators; and that the “RTO-participation incentive [adder] induces PG&E to remain a participating member of CAISO and is consistent with the directives of the Federal Power Act.” (See Can PG&E Quit CAISO? FERC Wants to Know.)

The California Public Utilities Commission and other parties sought a rehearing, contending FERC had cited irrelevant sections of state law and ignored court decisions regarding the scope of the CPUC’s authority. They also argued FERC had erroneously justified the grant of the incentive adder based on commission policy that participation in a transmission organization is voluntary, even if state law and regulations say it’s not.

“We are unpersuaded by these arguments,” FERC said in its latest ruling. The commission said it had interpreted the appropriate laws and legal precedents correctly and that it didn’t have to defer to the CPUC’s authority in the case.

The CPUC argued in its rehearing request that it must approve changes in operational control of utility assets, such as CAISO returning operational control of PG&E’s transmission lines to the utility. FERC said it didn’t need to address that argument because it was based on evidence presented for the first time on rehearing.

“Nonetheless, we disagree with California parties’ interpretation,” FERC said. California law “expressly provides for CPUC authority over ‘changes in control’ of a public utility, along with mergers and acquisition.” The specified code sections, FERC said, “are most reasonably interpreted to mean changes in ownership control of the entire utility enterprise, not the operational control of individual facilities.”

The state laws cited by the CPUC refer to “changes or transfers in proprietary interests or something similar, rather than applying to transfers of operational control where the transmission owner retained ownership over the transmission facilities,” as in the case of PG&E and CAISO, FERC said.