On October 8, 2010, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) issued an order (the “Order”) modifying the energy price cap on spot market sales in the Western Electricity Coordinating Council (“WECC”) to $750/MWh.  This Order comes after FERC began an investigation on May 20, 2010 under Section 206 of the Federal Power Act into the energy price cap in WECC outside of the California Independent System Operator Corporation (“CAISO”).

The Commission has previously adjusted the energy bid cap to eliminate the opportunity for market distortions.  On January 13, 2006, the Commission adjusted the CAISO energy bid cap from $250/MWh to $400/MWh.  This coincided with a Section 206 investigation into the price cap in the WECC outside of CAISO.  On February 13, 2006, the Commission set the price cap on spot market sales in the WECC outside of the CAISO to a $400/MWh soft cap.

In its Order, the Commission found that given the “interdependency of market and infrastructure,” and conditions and changes inside California that affect the Western region, it is important to avoid market distortions.  FERC found that the energy price cap for spot market sales in the WECC outside of the CAISO established by the Commission’s February 13, 2006 Order is not just and reasonable.  The Commission found that the just and reasonable price cap is a $750/MWh soft cap.  Additionally, the Commission increased the energy bid cap in the CAISO to $1000/MWh on April 1, 2011, to maintain consistency with the CAISO bid cap and WECC price cap.  The Commission also stated that it will “consider the need to adjust the WECC price cap” if it is presented with a proposal to adjust the CAISO energy bid cap in the future.

A copy of the Commission’s Order is available here and at www.ferc.gov under docket no. EL10-56.