Federal energy regulators gave power sellers that sold power in the California Independent System Operator above a $1,000/MWh price cap during a heat wave last August an additional 30 days to justify their actions, and offered further guidance on how those prices could be justified.
The Federal Energy Regulatory Commission in the June 17 order provided guidance that sales above the $1,000/MWh soft price cap can be justified under a production-cost framework, an index-based framework and an opportunity cost-based framework. The guidance applies to any justification filings that are pending at the commission and any future filings regarding sales in excess of the price cap [ER21-40 et al.]. FERC adopted the Western Electricity Coordinating Council soft price cap in response to the 2000-2001 Western energy crisis.
"Given the recent events in WECC and the current filings before us, we find that it is appropriate to provide additional information on approaches a seller could take to justify sales in excess of the WECC soft price cap," FERC said in the June 17 order.
Power sellers have 30 days to make new filings based on the new guidance. The transactions in question occurred in mid-August 2020, when power reserve shortages resulted in blackouts and price spikes. At least 19 Western power sellers made justification filings to FERC for selling electricity in August at wholesale prices above the price cap (see CEM No. 1619). California's market monitor, the Public Citizen group, and some investor-owned utilities are opposing or raised concerns about the requests. Public Citizen said the high prices are an example of climate change-induced price gouging.
PacifiCorp, one of the sellers in question, told FERC that none of the commenters were counterparties in the sales, and that they had provided no justification for asking FERC to unwind the transactions [ER21-60].