On March 28, 2011, FERC accepted the Southwest Power Pool Inc.’s (“SPP”) plan to establish an Offer Curve price minimum or “floor” of negative $1,000 per Megawatt hour (“MWh”) for the energy imbalance service (“EIS”) market.

On February 2, 2011, SPP filed an amendment to attachment AE of their Open Access Transmission Tariff (“OATT”) to incorporate an Offer Curve price floor.  Attachment AE of the SPP OATT contains the market rules for the SPP EIS market.  Market participants submit Offer Curves, which prior to SPP’s February 2 filing were capped at $1000/MWh, with no floor.  SPP’s amendment to attachment AE would require that “Market Participants must submit Offer Curve prices that are greater than or equal to negative $1000/megawatt-hour and less than or equal to $1000/megawatt-hour.”  According to their filing, SPP and their stakeholders found that an Offer Curve price floor will protect market participants when the lowest Offer Curve price sets the Locational Imbalance Price (“LIP”) in the EIS market.  This can occur when SPP requests that generators ramp down faster than their established ramp rate.  When the lowest Offer Curve sets the LIP, and there is no offer floor, market participants like qualifying facilities could be exposed to “excessively low prices.”  In its February 2 filing, SPP indicated that during a two-month period, Offer Curve prices close to negative $1998/MWh set the LIP, and exposed all dispatched market participants to “excessively low prices.”  SPP’s proposed Offer Curve price floor is intended to protect market participants from this risk of exposure to low prices.

The Commission accepted SPP’s amendment to attachment AE on March 28, 2011.

A copy of the SPP’s filing is available here.

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