FERC probes need for must-offer obligations in WECC
FERC launched a proceeding yesterday under the Federal Power Act’s Section 206 to investigate whether must-offer obligations in the Western Electricity Coordinating Council (WECC) are still needed. The commission imposed the obligation during the California Energy Crisis and the markets have changed a lot since then.
When the WECC-wide must-offer requirement was set up, FERC found the prices there and the in Cal-ISO had a critical interdependence. The solution to that was to eliminate the state’s excessive reliance on the spot markets to meet load.
In April 2001, FERC set up a must-offer obligation for the ISO that required most resources serving the market to offer all of their capacity in real-time if they were available and not already scheduled to run under a bilateral deal. FERC extended that obligation and other mitigation measures to WECC.
The WECC obligation was set to expire Sept 30, 2002, but FERC extended both obligations indefinitely until “long-term, market-based solutions can be fully implemented.”
The ISO’s obligation has since been replaced by the resource-adequacy framework in California, implemented as part of the ISO’s Market Redesign & Technology Upgrade (MRTU). But the WECC obligation, which entails the posting of available energy on public utilities’ and the Western Systems Power Pool’s website remained unchanged, despite the changes in California’s market conditions and the elimination of the broad must-offer obligations in the ISO.
Beyond the MRTU, California eliminated its use of spot markets to meet load, replacing them with a resource-adequacy program overseen by the PUC and an aggressive renewable portfolio standard. The ISO has numerous rules to make its market mesh with the state resource adequacy program.
The market-design changes contributed to a well-functioning market in the ISO that has produced overall competitive energy and ancillary services prices.
The ISO has also seen significant growth in the generation resources in its footprint, which have resulted in robust reserve margins, FERC noted.