On April 29, 2025, FERC partially granted rehearing in the case of Cometa Energia, S.A. de C.V. (“Saavi”) against the California Independent System Operator Corporation (“CAISO”), finding a provision of CAISO’s Business Practice Manual for Reliability Requirements (“Business Practice Manual”) must be included in CAISO’s tariff under the “rule of reason,” as the provision significantly impacts rates and services. In its underlying complaint, Saavi argued that CAISO unlawfully terminated the deliverability status of its 181.5 megawatt generating unit (“Project”). In its rehearing order, FERC agreed that under the “rule of reason” CAISO should have reflected the deliverability status provision of its Business Practice Manual in its tariff, but FERC declined to reinstate the Project’s deliverability status citing concerns over reduced resource adequacy for other generating units.

The Project, located in Mexico, is connected to the CAISO-controlled grid and has been granted “Full Capacity Deliverability Status” by CAISO, which allows Saavi to deliver the Project’s full capacity during peak conditions. Pursuant to a participating generator agreement with CAISO, Saavi may dispatch energy in either CAISO or Mexico’s Comisión Federal de Electricidad (“CFE”) systems. In 2017, the Project disconnected from CAISO and connected to CFE for over three consecutive years. On October 20, 2022, CAISO informed Saavi that the Project had lost its Full Capacity Deliverability Status pursuant to a provision in CAISO’s Business Practice Manual, which states that if a generating unit becomes incapable of operating for any consecutive three-year period, then it will lose its deliverability status.

On March 20, 2024, Saavi filed a complaint against CAISO alleging that CAISO unlawfully terminated the deliverability status of the Project. Among other things, Saavi argued that CAISO’s decision violated the “rule of reason.” The rule of reason provides that tariffs must include practices that (1) affect rates and services significantly, (2) are realistically susceptible of specification, and (3) are not so generally understood in any contractual arrangement as to render recitation superfluous. Saavi argued that the Business Practice Manual’s provision for terminating deliverability status satisfies the rule of reason criteria and thus the requirement must be included in CAISO’s tariff. Saavi requested FERC to direct CAISO to reinstate the Project’s deliverability status. Saavi planned to transfer the reinstated status to a new Battery Energy Storage System (BESS) that it planned to construct by 2027.

On June 27, 2024, FERC denied Saavi’s complaint (“Complaint Order”) because according to the D.C. Circuit case, Hecate Energy Greene Cnty. 3 LLC v. FERC, 72 F.4^th 1307, 1314 (D.C. Cir. 2023), “even significant and specifiable practices need not be in a tariff when they are clearly implied by the tariff’s express terms.” FERC found that the tariff “clearly implied” the Business Practice Manual provision because the tariff stated CAISO can reduce a unit’s annual capacity for the next year if a testing program finds it incapable of supplying its maximum capacity. FERC also found that Saavi could not transfer the Project’s deliverability status to a new BESS because the status of the Project was validly terminated. Saavi sought rehearing on July 29, 2024, arguing that the Business Practice Manual provision is not “clearly” implied by CAISO’s tariff.

In its order on rehearing, FERC set aside, in part, the Complaint Order, finding that for CAISO to apply the Business Practice Manual provision to terminate deliverability status, the rule of reason requires that the practice be included in the tariff. FERC found that the Business Practice Manual provision satisfied the three prongs of the rule of reason test. FERC also found that CAISO’s tariff does not clearly imply the Business Practice Manual provision under Hecate, finding that the Business Practice Manual provision requires CAISO to permanently revoke Full Capacity Deliverability Status if a generating unit is incapable of operating for a consecutive three-year period, where as the tariff only permits CAISO to reduce a unit’s annual capacity for the next year if a testing program finds it incapable of supplying its maximum capacity. However, FERC declined to grant Saavi’s requested remedy because it would lead to a reduction in the resource adequacy capacity for approximately 40 generating units, which collectively would be equivalent to the Project’s 181 MW capacity. FERC found that the reliability concerns outweighed any potential harm to Saavi.

A copy of the order, issued in Docket No. EL24-92-001, can be found here.