FERC rescinded the West-wide wholesale electricity price cap mechanism it implemented in response to widespread price manipulation during the Western energy crisis of 2000-2001, saying development of new markets and expanded authority has led to improved monitoring capabilities.

The commission found in a Feb. 19 order that the WECC soft price cap framework “is no longer just and reasonable.” It cited three reasons for eliminating the price cap: the evolution of Western wholesale markets, FERC’s expanded legal authority to monitor market misconduct and filing burdens associated with the price cap (EL10-56).

“Upon consideration of the record developed in response to the 206 Order, we have determined, as discussed below, that the WECC soft price cap is no longer just and reasonable, and we rescind the WECC soft price cap effective as of July 18, 2025,” the commission wrote in the order.

A product of the Western energy crisis of 2000/01, the policy requires sellers to justify the costs behind power prices exceeding the soft cap of $1,000/MWh, or refund any amount earned above the cap.

(While the policy is referred to as the “WECC soft price cap,” WECC is not involved with it or any regional market operations.)

The policy came into question after the D.C. Circuit Court of Appeals ruled in 2024 that FERC must conduct a public interest analysis of the price cap under the Mobile-Sierra doctrine. The case concerned a series of 2022 FERC orders requiring electricity sellers to refund a portion of the high prices they earned during an August 2020 heat wave. (See FERC Proposes to Eliminate Western ‘Soft’ Price Cap and FERC Must Apply ‘Mobile-Sierra’ to Western Soft Cap Refunds.)

Following the court’s decision, FERC proposed eliminating the policy all together and launched a Section 206 proceeding in July 2025.

When initiating the 206 proceeding, FERC recounted the D.C. Circuit’s findings and noted that, while FERC has over time revised the soft offer cap to reflect increases in CAISO’s caps, it has never reassessed whether the framework is necessary to ensure just and reasonable rates in the West as required under the Mobile-Sierra doctrine.

In the Feb. 19 order, FERC reiterated many of its initial findings, saying the policy is no longer justified.

One major reason is the development of new wholesale markets in the West, which provide alternatives to traditional bilateral markets. These newer markets, like CAISO’s Western Energy Imbalance Market and the Extended Day-Ahead Market (EDAM), already include market monitoring tools to address potential abuse, FERC wrote.

“In particular, we note that RTO West and EDAM are scheduled to go live this spring (of 2026) and will meaningfully expand Western market participants’ access to centralized, day-ahead markets as an alternative to existing bilateral trading activities,” the order stated. “While we recognize that Markets+ is not scheduled to go live until next year, and that participation in these new market constructs will expand gradually over time, we nonetheless find that the coming expansion of these market alternatives provides additional support for eliminating the WECC soft price cap at this time.”

‘Important Check’

Another reason to eliminate the cap is FERC’s own ability to tackle misconduct, according to the order.

The Energy Policy Act of 2005 granted the commission “authority to pursue allegations of market manipulation in FERC-jurisdictional wholesale electric markets, which serves as an important check against the types of misconduct that fueled the Western energy crisis and led to the adoption of the currently effective soft price cap,” the order states.

The 2005 act has led to development of new tools, capabilities and enforcement mechanisms, the order notes.

“In total, these various data sources and improved analytical capabilities provide the commission far more comprehensive, timely, and actionable information to identify and address market misconduct than was available to the commission in 2002 when it established the WECC soft price cap,” FERC wrote. “We conclude that these capabilities are also more effective at deterring, identifying and addressing market misconduct than any delayed and indirect oversight via review of individual sellers’ spot market transactions under a Mobile-Sierra framework.”

The Feb. 19 order affirmed the commission’s preliminary finding “that the administrative burdens associated with the soft price cap framework outweigh the negligible benefits associated with retaining the cap merely as a flagging mechanism.”

“We also find that this negligible benefit does not offset the burden imposed on sellers and the commission,” the order states. “We affirm the commission’s preliminary finding in the 206 Order that ‘the filing requirement imposes costs on market participants and the commission and creates uncertainty for individual transactions while those filings are pending review at the commission.”’