ferc ' s 4 / 26 / 01 order on california price mitigation if you read ray alvarez ' s summary from yesterday evening , open the attached word document and read only the changes that we made to the summary since receiving the final order , which was issued this afternoon . alan comnes
the full order is available at : http : / / www . ferc . fed . us / electric / bulkpower . htm
summary of ferc ' s
order establishing prospective mitigation and monitoring plan for the california wholesale electric markets and establishing an investigation of public utility rates in wholesale western energy markets
( issued april 26 , 2001 )
effective date - - price mitigation is effective may 29 , 2001 . ( iso needs to have its day - ahead proxy price ready on 5 / 28 )
physical withholding - - to prevent physical withholding , the plan will require sellers with pga ' s to offer all their available power in real time to the extent not scheduled in bilateral trade . all california generators , even those not subject to ferc price regulation , will be required to sell into the iso ' s real time market as a condition of their use of the iso ' s interstate transmission lines . hydroelectric facilities will be exempted . ( this requirement to provide power is for all hours ( 24 / 7 ) for lyr )
price mitigation - the plan will establish a single market clearing price auction for the real time market . during stage 1 , 2 and 3 emergencies in the iso ' s real time market , each generator ( other than hydro ) with a participating generator agreement is required to offer all available power and bid its marginal cost based on the generator ' s heat curve , emission rates , gas costs and emission costs , plus $ 2 / mwh for o emissions are to be based on cantor fitzgerald environmental brokerage services . the iso will publish by 8 : 00 am , the gas and emission figures to be used for the next day in any hour where an emergency is declared . these figures ( for the next day ) will be based on the prior day ' s gas daily and cantor fitzgerald data . a single market clearing price is determined in real time for all generators . highest bid sets the clearing price . each gas - fired generator must file with ferc and the iso within 5 days , on a confidential basis , heat and emission rates for each generating unit . the iso will use these rates to calculate a marginal cost for each generator , including maintenance and operating costs . generators that submit bids at or below the market clearing price will not be subject to refund liability . ( although the following qualification is made : " however , all public utility rates will be subject to refund for violations of the conditions imposed on market - based rates , discussed infra . " presumably this has to do with anomalous bidding behavior . ) in the event a generator submits a bid higher than the proxy price , the generator must , within 7 days of the end of each month , file a report with ferc and the iso justifying its price . ferc explicitly acknowledges that some units may have gas costs that exceed the " all delivery point " index it has adopted . ferc has 60 days to review / act . no opportunity costs in real time . marketers are not held to any generator cost standard but must be prepared to justify bid at purchased cost based on specific purchases or portfolio with no opportunity cost .
underscheduling penalites - - ferc acknowledges that the there is a pending request to revoke the current underscheduling penalty but indicates that it is still in place . thus , although it may be advantageous to wait to buy power in r / t at capped prices , doing so may make the scheduling coordinator subject to the currently effective $ 100 / mwh penalty . see p . 20 of the ferc order .
new generation - - new generation is not exempted from the commission ' s price mitigation measures .
demand response - - beginning june 1 , only public utility load serving entities must submit demand side bids to curtail load and identify the load to be curtailed under those bids . ferc is attempting to make the demand curve more price responsive . ( this requirement is in effect for all hours ( 24 / 7 ) )
outages - - pga generators will coordinate planned outages and report forced outages the iso is required to make a tariff filing within 15 days of the order proposing a mechanism for coordination and control of outages , including periodic reports to the commission .
term - order expires one year from date of issuance .
rto filing - california iso and two utilities must make rto filing by june 1 or order lapses with no further effect . the rto filing is to be consistent with the characteristics and functions in order no . 2000 .
iso reporting - on september 14 , 2001 , iso must file a status report on how things are working and how much generation has been built . comments are due in 15 days . quarterly reports thereafter .
revocation of market based rate authority and refunds - the market based rate authority of all public utilities is conditioned on ( 1 ) no physical withhold of capacity , and ( 2 ) no inappropriate bidding behavior . inappropriate bidding behavior includes bidding unrelated to known characteristics of the generation unit or without an input cost basis or bidding not based on unit behavior . an increased bid based on increased demand could apparently be inappropriate . in addition , " hockey stick " bids are expressly prohibited ( i . e . bidding 95 % at marginal cost and 5 % at a much higher level ) . other prohibited bidding practices identified include : pricing a single unit much higher than other units in a supplier portfolio and changes in bids due to increased scarcity rather than changes in generator costs .
west - wide section 206 investigation - opens a section 206 investigation concerning the j & r of wholesale power in the wscc other than sales to the caiso market . ferc requests comments on the scope and nature of price mitigation . however its proposal is that refund conditions apply only in real time ( markets for power less than 24 hours in advance of r / t ) spot markets when contingency within a control area falls below 7 % within a control area . ferc is attempting to mirror the rules applied in california . comments are due in 10 days on the 206 investigations . although it is still formulating its price mitigation plan for the non - california pnw , the ferc sets the refund effective date is 60 days from publication of the order .
nox limits in california - - must sell requirements do not apply if a unit is prohibited from running by law . however , it appears that incurring fines does not overcome the must sell requirement - just include the fines as part of the price bid . also if nox is limited , may seek to show that generation would have been sold elsewhere or at different times for determining price .
surcharge to pay past amount due - - comments are due in 30 days on ( 1 ) whether ferc should require the iso to surcharge parties for payment into an escrow account to pay past costs and ( 2 ) the effect this surcharge would have on the pg & e bankruptcy filing .
treatment of the caiso ' s market stabilization plan ( msp ) . the ferc rejects the caiso ' s msp saying that ferc ' s plan for market mitigation is sufficient . it expressly rejects caiso ' s plan to create a day - ahead and hour - ahead energy markets are expressly reject and tells caiso to stop actions to implement software changes to effectuate such markets . unfortunately , it does not expressly reject caiso ' s plan to cut exports . in general , no mention was made as to issue of exports of power from california although the statement that caiso must become a real rto would support the notion that caiso must honor firm schedules on its system . .
recap of dates identified in the order
? issue date : 4 / 26 / 01
? heat rate emission filing from generators due : 5 days ( 5 / 1 / 01 )
? comments due on wscc - wide price mitigation : 10 days ( 5 / 6 / 01 )
? iso tariff filing due : 15 days ( 5 / 11 / 01 )
? comments on iso tariff due : 5 days thereafter ( 5 / 16 / 01 )
? comments on whether commission should allow a premium to recover unpaid generator bills : 5 / 30 / 01
? effective date of proxy prices : 5 / 29 / 01
? demand responsive bids from load serving entities : 6 / 1 / 01
? refund effective date begins : 60 days after publishing in federal register ( late june ? )
? first iso quarterly report : 9 / 14 / 01
? comments on first iso quarterly report : 15 days thereafter ( 9 / 29 / 01 )
? plan terminates : 4 / 26 / 02
ra & gac
ferc ' s 4 / 26 / 01 order on california price mitigation
if you read ray alvarez ' s summary from yesterday evening , open the attached word document and read only the changes that we made to the summary since receiving the final order , which was issued this afternoon . alan comnes
the full order is available at : http : / / www . ferc . fed . us / electric / bulkpower . htm
summary of ferc ' s
order establishing prospective mitigation and monitoring plan for the california wholesale electric markets and establishing an investigation of public utility rates in wholesale western energy markets
( issued april 26 , 2001 )
effective date - - price mitigation is effective may 29 , 2001 . ( iso needs to have its day - ahead proxy price ready on 5 / 28 )
physical withholding - - to prevent physical withholding , the plan will require sellers with pga ' s to offer all their available power in real time to the extent not scheduled in bilateral trade . all california generators , even those not subject to ferc price regulation , will be required to sell into the iso ' s real time market as a condition of their use of the iso ' s interstate transmission lines . hydroelectric facilities will be exempted . ( this requirement to provide power is for all hours ( 24 / 7 ) for lyr )
price mitigation - the plan will establish a single market clearing price auction for the real time market . during stage 1 , 2 and 3 emergencies in the iso ' s real time market , each generator ( other than hydro ) with a participating generator agreement is required to offer all available power and bid its marginal cost based on the generator ' s heat curve , emission rates , gas costs and emission costs , plus $ 2 / mwh for o emissions are to be based on cantor fitzgerald environmental brokerage services . the iso will publish by 8 : 00 am , the gas and emission figures to be used for the next day in any hour where an emergency is declared . these figures ( for the next day ) will be based on the prior day ' s gas daily and cantor fitzgerald data . a single market clearing price is determined in real time for all generators . highest bid sets the clearing price . each gas - fired generator must file with ferc and the iso within 5 days , on a confidential basis , heat and emission rates for each generating unit . the iso will use these rates to calculate a marginal cost for each generator , including maintenance and operating costs . generators that submit bids at or below the market clearing price will not be subject to refund liability . ( although the following qualification is made : " however , all public utility rates will be subject to refund for violations of the conditions imposed on market - based rates , discussed infra . " presumably this has to do with anomalous bidding behavior . ) in the event a generator submits a bid higher than the proxy price , the generator must , within 7 days of the end of each month , file a report with ferc and the iso justifying its price . ferc explicitly acknowledges that some units may have gas costs that exceed the " all delivery point " index it has adopted . ferc has 60 days to review / act . no opportunity costs in real time . marketers are not held to any generator cost standard but must be prepared to justify bid at purchased cost based on specific purchases or portfolio with no opportunity cost .
underscheduling penalites - - ferc acknowledges that the there is a pending request to revoke the current underscheduling penalty but indicates that it is still in place . thus , although it may be advantageous to wait to buy power in r / t at capped prices , doing so may make the scheduling coordinator subject to the currently effective $ 100 / mwh penalty . see p . 20 of the ferc order .
new generation - - new generation is not exempted from the commission ' s price mitigation measures .
demand response - - beginning june 1 , only public utility load serving entities must submit demand side bids to curtail load and identify the load to be curtailed under those bids . ferc is attempting to make the demand curve more price responsive . ( this requirement is in effect for all hours ( 24 / 7 ) )
outages - - pga generators will coordinate planned outages and report forced outages the iso is required to make a tariff filing within 15 days of the order proposing a mechanism for coordination and control of outages , including periodic reports to the commission .
term - order expires one year from date of issuance .
rto filing - california iso and two utilities must make rto filing by june 1 or order lapses with no further effect . the rto filing is to be consistent with the characteristics and functions in order no . 2000 .
iso reporting - on september 14 , 2001 , iso must file a status report on how things are working and how much generation has been built . comments are due in 15 days . quarterly reports thereafter .
revocation of market based rate authority and refunds - the market based rate authority of all public utilities is conditioned on ( 1 ) no physical withhold of capacity , and ( 2 ) no inappropriate bidding behavior . inappropriate bidding behavior includes bidding unrelated to known characteristics of the generation unit or without an input cost basis or bidding not based on unit behavior . an increased bid based on increased demand could apparently be inappropriate . in addition , " hockey stick " bids are expressly prohibited ( i . e . bidding 95 % at marginal cost and 5 % at a much higher level ) . other prohibited bidding practices identified include : pricing a single unit much higher than other units in a supplier portfolio and changes in bids due to increased scarcity rather than changes in generator costs .
west - wide section 206 investigation - opens a section 206 investigation concerning the j & r of wholesale power in the wscc other than sales to the caiso market . ferc requests comments on the scope and nature of price mitigation . however its proposal is that refund conditions apply only in real time ( markets for power less than 24 hours in advance of r / t ) spot markets when contingency within a control area falls below 7 % within a control area . ferc is attempting to mirror the rules applied in california . comments are due in 10 days on the 206 investigations . although it is still formulating its price mitigation plan for the non - california pnw , the ferc sets the refund effective date is 60 days from publication of the order .
nox limits in california - - must sell requirements do not apply if a unit is prohibited from running by law . however , it appears that incurring fines does not overcome the must sell requirement - just include the fines as part of the price bid . also if nox is limited , may seek to show that generation would have been sold elsewhere or at different times for determining price .
surcharge to pay past amount due - - comments are due in 30 days on ( 1 ) whether ferc should require the iso to surcharge parties for payment into an escrow account to pay past costs and ( 2 ) the effect this surcharge would have on the pg & e bankruptcy filing .
treatment of the caiso ' s market stabilization plan ( msp ) . the ferc rejects the caiso ' s msp saying that ferc ' s plan for market mitigation is sufficient . it expressly rejects caiso ' s plan to create a day - ahead and hour - ahead energy markets are expressly reject and tells caiso to stop actions to implement software changes to effectuate such markets . unfortunately , it does not expressly reject caiso ' s plan to cut exports . in general , no mention was made as to issue of exports of power from california although the statement that caiso must become a real rto would support the notion that caiso must honor firm schedules on its system . .
recap of dates identified in the order
? issue date : 4 / 26 / 01
? heat rate emission filing from generators due : 5 days ( 5 / 1 / 01 )
? comments due on wscc - wide price mitigation : 10 days ( 5 / 6 / 01 )
? iso tariff filing due : 15 days ( 5 / 11 / 01 )
? comments on iso tariff due : 5 days thereafter ( 5 / 16 / 01 )
? comments on whether commission should allow a premium to recover unpaid generator bills : 5 / 30 / 01
? effective date of proxy prices : 5 / 29 / 01
? demand responsive bids from load serving entities : 6 / 1 / 01
? refund effective date begins : 60 days after publishing in federal register ( late june ? )
? first iso quarterly report : 9 / 14 / 01
? comments on first iso quarterly report : 15 days thereafter ( 9 / 29 / 01 )
? plan terminates : 4 / 26 / 02
ra & gac