FERC Approves CAISO Capacity Procurement Mechanism Settlement Which Features New Pricing

FERC approved a settlement adjusting the capacity price under the California ISO's Capacity Procurement Mechanism (CPM), and other terms of the mechanism (ER11-2256).

Under the approved settlement, CAISO will revise its tariff to provide for a fixed CPM capacity price of $67.50/kW-year, effective on the date the Commission order approving the settlement, and remaining in effect for two years.

On the second anniversary of the Settlement Order date, the fixed CPM capacity price will increase by five percent to $70.88/kW-year, which will remain in effect for two years.

The CPM and all revisions to other tariff sections to implement the CPM will expire after 48 months.

The settlement also provides for the continuation of the exceptional dispatch mitigation provisions, as currently in effect

With regard to the quantity of exceptional dispatch CPM designations, the settlement provides for tariff revisions that will require CAISO to base the quantity of the designation on the greater of the resource's minimum load or the amount of capacity needed to address the reliability issue as determined by the CAISO in an engineering assessment conducted as set forth in the Business Practice Manuals.

CAISO states that it will make an explicit determination for each initial exceptional dispatch CPM designation as to whether it was necessary to address an exceptional dispatch CPM system reliability need (i.e., a need that does not depend on a resource in a specific geographic area), resulting in an initial 30-day term, or an exceptional dispatch CPM non-system reliability need (i.e., resolution depends on a resource in a specific geographic area), resulting in an initial 60-day term.