FERC has rejected SPP‘s tariff revisions that would modify the adder for uncertainty of expected costs for offers above $1,000/MWh, a modification spurred by Winter Storm Uri.

In its July 11 order, the commission denied the proposed revisions because they directly contradict Order 831, which includes a requirement that any adders included in cost-based incremental energy offers above $1,000/MWh not exceed $100/MWh (ER24-2002).

FERC said that in Order 831, it found it is necessary “to place an upper bound on the level of adders above cost” when incremental energy offers exceed $1,000/MWh and stating explicitly that “such adders may not exceed $100/MWh.”

SPP proposed in May to allow cost-based incremental energy offers above the threshold to include an uncertainty adder of up to 10% of verifiable short-run marginal costs. The commission said the change would lead to adders that exceed $100/MWh.

The grid operator said it suffered “severe operational challenges” in its footprint during the 2021 winter storm. It received about 50,000 offers that were subject to the Market Monitoring Unit’s verification because they exceeded $1,000/MWh.

SPP proposed to modify the uncertainty adder for offers of more than $1,000/MWh from a maximum of $100/MWh to a maximum of 10% of verifiable short-run marginal costs. It said the 10% adder would provide better protection against price volatility in the spot market and help mitigate risk related to fuel procurement cost uncertainties and cost reimbursement during extreme weather events.

The MMU filed comments supporting the tariff revisions. It said the RTO’s proposal more effectively reflected uncertainty in the expected cost of energy production and should improve price formation when energy offers are above $1,000/MWh.

FERC said it was “sympathetic to SPP’s concerns” and suggested the RTO streamline or automate its manual verification process.

“This, in turn, could improve price formation when offers are between $1,000/MWh and $2,000/MWh,” the commission said.