On May 20, 2010, FERC instituted a section 206 investigation of Western Electric Coordinating Council's ("WECC") spot market energy price cap. The investigation is based on the increase in the California Independent System Operator Corporation's ("CAISO") energy bid hard cap from $500/MWh to $750/MWh on April 1, 2010 which is set to increase to $1000/MWh on April 1, 2011. Outside of CAISO, the rest of the WECC is subject to a $400/MWh soft price cap. FERC found that the WECC soft price cap may no longer be "just and reasonable" since the discrepancy between the WECC price cap and CAISO price cap may "cause the WECC to have difficulty competing for energy if CAISO energy prices rose substantially above the WECC price cap, which in turn could cause market distortions."

FERC proposes to increase the WECC price cap to $750/MWh for all spot market sales outside of CAISO, and to increase the WECC price cap to $1000/MWh on April 1, 2011, consistent with the current CAISO bid cap and upcoming CAISO cap increase. FERC also proposes that the WECC price cap continue as a soft price cap. Unlike the CAISO, which operates under locational marginal prices that enable CAISO participants to receive a market clearing price above the bid hard cap, the WECC is a bilateral market currently subject to a soft price cap enabling bidders to bid above the price cap with adequate justification. FERC stated that maintaining the soft cap will allow WECC participants to receive bids above the soft price cap as long as the participant can justify the higher price. FERC established the refund effective date as the date when the notice of investigation in this proceeding is published in the Federal Register.

Comments are due by June 20, 2010 (30 days from the issuance of the order). Please contact us if you would like help formulating comments on the proposed price cap increase for the WECC.

Click here to access the order.