On March 4, 2011, FERC rejected two new Service Schedules proposed by the Western System Power Pool (“WSPP”) for incorporation into the WSPP Agreement. These proposed schedules would allow sales of reserve services at market based rates (“MBRs”) and sales of intra-hour supplemental power service at MBRs.  The Commission denied WSPP’s proposed schedules and encouraged the WSPP to submit a new proposal.

On August 23, 2010, WSPP’s submitted proposed new Services Schedules D and E to the WSPP Agreement.  Service Schedule D would allow WSPP members to sell reserve services at market-based rates if the seller already had MBR authority.  Schedule D included: (1) spinning reserve; (2) non-spinning reserve; (3) operating reserve-spinning; (4) operating reserve-supplemental; and (5) regulating reserve.  Service Schedule E allowed parties to sell intra-hour supplemental power service at market-based rates with manual or dynamic dispatch options.  In order to implement the Service Schedules, WSPP sought various waivers of the Commission’s restrictions set forth in a previous Order, known as the “Avista restrictions.”  Specifically, WSPP requested that the Commission: (1) waive the prohibition on selling ancillary services at MBR by a third-party supplier to a Regional Transmission Organization/Independent System Operator (“RTO/ISO”) that has no ability to self-supply ancillary services but instead depends on procurement from third parties; and (2) waive the prohibition on selling ancillary services at MBR by a third party supplier to satisfy the purchasing utility’s own Open Access Transmission Tariff (“OATT”).  WSPP also requested that the Commission not require a market power study or showing that a study is infeasible to “foster transactions” under Service Schedule D.

In its March 4, 2011 Order, the Commission rejected WSPP’s proposed Service Schedules D and E.  Further, in response to WSPP’s requested waivers, the Commission stated that sellers under the WSPP Agreement with MBR authority already have the opportunity to make sales of ancillary services in RTOs/ISOs where the Commission has approved those sales.  Additionally, the Commission stated that granting WSPP’s request to waive the prohibition on sales by a third-party supplier to satisfy a utility’s own OATT requirements to offer ancillary services would allow sellers to sell reserve services at MBRs without any market power study.  The Commission also expressed concern that transmission providers might be able to replace purchases under non-cost based rates for their mandatory service obligation, and transmission customers could be exposed to potentially unjust and unreasonable rates if market prices for reserve services resulted from the exercise of market power.  With respect to Service Schedule E, the Commission found that intra-hour supplemental power “may be analogous” to energy or generator imbalance services as found in Schedule 4 or 9 of the OATT.  The Commission rejected Service Schedule E, as it would also then be subject to the Avista restrictions. 

The Commission noted in its Order that it “appreciate[s] the difficulties” of creating a proposal for selling reserve services at MBRs.  FERC encouraged WSPP to submit a new proposal.

A copy of the Commission’s Order is available here.