FERC recently shot down the WSPP Inc.’s proposal to win for its members the authority to sell certain ancillary electric services (reserves and imbalance service) at market prices on par with sellers operating within a FERC-approved regional transmission organization or independent system operator (RTO/ISO). WSPP Inc. is the successor in name to the Western States Power Pool that was formed in 1991 to allow member companies to trade flexibly in energy at market prices. Following demonstrations that market power in ancillary services sales either didn’t exist or had been mitigated within an RTO or ISO market, FERC for some time has allowed ancillary services to be market priced, free of FERC’s long-standing open-access requirement that the price of these sales be capped at cost. But, pursuant to FERC’s transmission open-access rules, WSPP members have not enjoyed authority to sell ancillary services within the western footprint of the WSPP at market prices because that footprint is not within a FERC-approved RTO or ISO.
To win for its members market-pricing authority for ancillary-service sales to WSPP utilities comparable to that enjoyed by sellers into RTOs and ISOs, last August WSPP asked FERC to approve two new tariffed services offered under the WSPP Agreement. One service proposed to allow WSPP members to sell at market rate reserves, even to transmission providers that purchase the reserves to fulfill their open-access obligation to offer ancillary services at cost-based rates. The second service proposed to allow WSPP members to sell at market rates something called “intra-hour supplemental power service” that is either manually or dynamically dispatched. FERC balked at both proposals. The regulator was unwilling to assume without proof, as WSPP requested, that a WSPP member lacked market power in the sale of reserves. And it also resisted WSPP’s invitation to view the proposed “intra-hour supplemental power service” as merely an energy product and not an imbalance ancillary service subject to cost-based pricing.
The none-too-veiled message of FERC’s March 4 order shooting down the WSPP’s proposals is that sales of services ancillary to transmission cannot be made at market prices to a transmission provider that has not joined an ISO or RTO, absent a showing by that market power cannot be exercised in connection with the sale. If you want to make such sales, then either undertake the requisite market power showing or join an RTO or ISO that has already made that showing for you.
WSPP’s complete loss on these market pricing proposals is surprising since the power pool has long been an inside player that negotiates in advance approval of its regulatory requests.