FERC Concedes Error in Allowing Provider of Last Resort to Recover Administrative Costs Via Wholesale Rate

FERC has granted rehearing concerning the cost recovery of Providers of Last Resort in the Midwest ISO capacity market, agreeing that it erred in a prior order which allowed such POLRs to recover undefined "administrative" costs.

Providers of Last Resort, which in the MISO market typically means utilities offering default service, are allocated any capacity obligations not accounted for in individual LSE load forecasts. In a 2012 order, FERC granted POLRs the ability to recover the "administrative" costs of such additional capacity obligations.

At that time, FERC did not specify a method of such cost recovery, but the mere granting of such recovery implicated a wholesale rate imposed on wholesale customers, such as the assignment of the POLR's costs to other LSEs in the service territory; namely, retail suppliers competing with a host distribution company which has the POLR obligation.

See prior story for more background on FERC's 2012 order

Retail suppliers as well as MISO sought rehearing on this issue.

On rehearing, FERC agreed with MISO that, "the provider of last resort incurs no additional administrative costs as a result of its responsibilities under MISO's proposal."

"No party in this proceeding has suggested that the provider of last resort would incur additional administrative costs in acquiring the requisite capacity," FERC said, in reversing its prior direction that MISO develop a tariff to allow for the recovery of such administrative costs.

FERC also denied rehearing requests from retail suppliers regarding load forecasting responsibility and processes in the MISO capacity market.

Docket No. ER12-2706