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FERC Grants Limited Rehearing/Clarification Of Order Raising Offer Caps

November 10,2017



FERC issued an order which granted rehearing or clarification on certain discrete issues regarding its order (Order No. 831) setting a hard cap of $2,000/MWh in the jurisdictional RTOs

As previously reported, offers above $1,000/MWh will only be permitted when cost-based.

See background on the prior offer cap order here

Among other things, FERC granted Exelon’s request to amend the rule's text regarding the costs to be verified when a bidder submits an offer in excess of $1,000/MWh

FERC on rehearing modified the rule's text such that "actual or expected" costs will be considered. Exelon had noted that the rule's text lacked such language, although FERC's preamble had set forth that both actual or expected were appropriate for consideration

"[T]hese revisions will provide more certainty to market participants and more clearly state the Commission’s intention that both actual and expected costs over $1,000/MWh may be submitted for verification," FERC said

FERC also granted NYISO’s request for clarification regarding the calculation of uplift payments.

"Resources are only eligible to receive uplift payments to make them whole to, at most, their submitted cost-based incremental energy offers if the associated offer and cost information is submitted in a sufficiently timely manner and verified by the RTO/ISO, meaning offers and supporting information must be provided consistent with RTO/ISO offer submission guidelines and approved by the RTO/ISO or Market Monitoring Unit. Consistent with Order No. 831, the after-the-fact uplift payment that a resource would be eligible to receive if its cost-based incremental energy offer above $1,000/MWh is not verified prior to market clearing shall include only actual verifiable costs. We agree with NYISO that opportunity costs, like other costs, must be submitted in a timely manner. However, we clarify that if a resource avails itself of an RTO’s/ISO’s current rules to allow a resource to include opportunity costs in its cost-based incremental energy offer, then that RTO/ISO must give that resource an opportunity to recover those opportunity costs through an uplift payment, subject to verification. We further clarify that a resource may not receive uplift payments for incremental energy costs in excess of the costs included in its verified incremental energy offer. That is, a resource may not submit a cost-based incremental energy offer based on expected costs prior to the market clearing process and subsequently receive uplift payments to make it whole to an offer above the $/MWh level(s) of its offer(s). In this instance, allowing a resource to receive uplift in excess of its verified cost-based incremental energy offer could give that resource the incentive to submit offers that do not reflect its actual short-run marginal costs and could thus result in inefficient resource selection," FERC said on rehearing

"Further, such after-the-fact uplift payments may not include any adders above cost, including risk related adders, because actual costs are known after-the-fact," FERC said on rehearing

Regarding a NYISO concern about economic merit-order dispatch, FERC clarified that, "Order No. 831 did not require cost-based incremental energy offers above $2,000/MWh to be used to determine economic merit-order dispatch. We recognize that some RTO’s/ISO’s existing commitment, dispatch, and pricing algorithms are structured differently, and the Commission in Order No. 831 did not require RTOs/ISOs to change their current practices or software to use cost-based incremental energy offers above $2,000/MWh for determining economic merit-order dispatch. However, in the event that RTOs/ISOs must select from several offers above $2,000/MWh, we encourage RTOs/ISOs to make those selections on a least-cost basis when possible, in order to minimize the cost to serve load."

"We also clarify that application of the offer cap and verification requirement adopted in Order No. 831 to minimum generation offers, as NYISO requests, is appropriate. Applying different offer caps to minimum generation and incremental energy offers could give resources the incentive to shape their offers in a manner that does not reflect their costs," FERC said on rehearing

See FERC's order on rehearing here (Docket No. RM16-5-001)

FERC also issued orders accepting in part and rejecting in part various RTOs' compliance filings to implement the new offer cap levels

See the orders on the compliance filings here



Tags:
FERC   Wholesale   Offer Caps   Price Caps  

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