By Robert Mullin
FERC last week proposed eliminating a market transparency rule imposed on the Western Electricity Coordinating Council (WECC) region during the height of the California energy crisis of 2000-2001, citing a decade of advances designed to protect state’s organized electricity markets from price manipulation.
The commission on Thursday ordered a Section 206 investigation into whether its West-wide must-offer obligation is still necessary in light of a progression of technical and structural developments that have improved the resiliency of California markets. But the wording of its order made clear the commission intends to end the 15-year-old policy (EL16-27).
“Due to the passage of time and significant changes to California’s wholesale markets, the must-offer obligation established for the WECC in 2001 appears to have outlived its usefulness,” FERC said.
FERC implemented the must-offer rule in June 2001 in response to what it called “serious market dysfunction” in California — the concerted effort by some of the region’s generators to withhold power supplies to drive up prices in the now-defunct California Power Exchange.
The rule required most generators serving California to offer all capacity not already committed under bilateral agreements into the state’s real-time market. The rule also required public and non-public utilities to post a daily log of available capacity on their websites, as well as to a site hosted by the Western Systems Power Pool (WSPP).
The must-offer and posting obligations were originally set to expire in September 2002, but a second commission order extended both requirements until “long-term market-based solutions” could be fully implemented in California.
In March 2015, WSPP sent a letter to then-Chairman Cheryl LaFleur, asking the commission to clarify whether the obligation was actually still in effect, given that the event precipitating the rule — the Western energy crisis — no longer existed.
In last week’s order, FERC said the rule no longer was necessary and that the posting requirement “may have become burdensome.”
The commission said California has met the standard for long-term solutions, spelling out “significant changes” implemented in the CAISO balancing area since the must-offer requirement was instituted. Those changes include LMP-based day-ahead and real-time energy markets, ancillary services markets, a day-ahead residual unit commitment process and local market power mitigation measures.
The order also notes that California’s ambitious renewable portfolio standard (RPS) and resource adequacy program have reduced the state’s reliance on spot markets, ameliorating a flaw in the previous market that left the state’s load-serving entities exposed to short-term price spikes. FERC credited the RPS and CAISO’s improved generation interconnection process for producing “robust” reserve margins, and said that a recent build-out in WECC has been adequate for all western subregions to meet reserve margin targets for the 2014-2024 period.
“[G]iven the significant improvements in CAISO’s market design and infrastructure outlook in the West, we believe that it may be appropriate at this time to eliminate the West-wide must-offer requirement and the related requirement to post available capacity on the WSPP website or on the utilities’ own websites,” FERC wrote.
A CAISO spokesperson said Friday the grid operator was still reviewing the FERC order. The California Public Utilities Commission did not respond to a request for comment. Broad must-offer requirements have already been eliminated from the CAISO tariff with the adoption of longer-term resource adequacy provisions.
One Pacific Northwest utility analyst familiar with regional compliance issues said the rule’s termination should have little effect on operations at her company.
“It won’t change anything except a requirement to post a number on OASIS every day that nobody looks at,” said the analyst. “So it’s good news.”
FERC asked interested parties to submit comments on the termination of the must-offer requirement within 30 days. The commission expects to render a decision on the issue by June 18.
