On April 20, 2012, FERC clarified through a WSPP, Inc. (“WSPP”) order that the Commission does not have jurisdiction over the trading of unbundled renewable energy certificates (“REC”) – i.e. those REC contracts that do not have an energy sales component.  However, the Commission did assert jurisdiction over bundled REC transactions under sections 201, 205, and 206 of the Federal Power Act.  RECs can be used to satisfy particular requirements for a state’s renewable portfolio standard.  Therefore, WSPP sought FERC approval to add a new service schedule that would encompass the buying and selling of RECs.

WSPP is an organization of 300 members that buy and sell bulk power markets in the West.  WSPP member companies operate under a FERC approved agreement that allows the members to provide “flexible pricing for coordination sales and transmission service” without having to negotiate certain bilateral transactions.  On February 22, 2012, WSPP submitted a proposal for a new Service Schedule R that would allow its members to buy and sell REC products that have a varying degree of firmness. 

WSPP’s proposed Service Schedule R allows for RECs to be transferred independently or bundled with energy.  For bundled transactions, the parties could opt to allocate a single price for the REC and the power, or if individual pricing is used, then particular rate caps would apply.  In approving the new service schedule, FERC confirmed unbundled deals for RECs that do not involve the sale of energy are outside of the Commission’s jurisdiction.  Specifically, FERC determined unbundled RECs are “state-created and state-issued instruments”  that:  1) do not involve the sale of wholesale power or transmission in interstate commerce, and 2) do not “affect” the rates a utility charges “for or in connection with”  jurisdictional service. 

The Commission warned that existing obligations under the FERC approved WSPP agreement still apply, and parties are not allowed to circumvent FERC authority by attempting to separate transactions.  FERC explained that contract interpretation allows for multiple instruments that pertain to the same transaction to be read together, even if the documents do not refer to each other.

A copy of the full Commission order is available here.