First FERC Workshop on Price Formation in RTO/ISO Markets Will Address Uplift Payments

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Several weeks ago, the Federal Energy Regulatory Commission (“FERC”) announced that in order to facilitate its evaluation of price formation in energy and ancillary services markets operated by Regional Transmission Organizations (“RTOs) and Independent System Operators (“ISOs”), it would schedule workshops to foster dialogue with the industry regarding the market rules and operational practices that affect price formation.  The first of these workshops has been scheduled for Monday, September 8, 2014 and will address uplift payments.  FERC noted that it would be optimal if locational market prices reflected the true marginal cost of production and fully compensated all resources for the variable cost of providing service. However, market prices often fail to reflect the marginal costs of production, as well as some components of actual operating costs or operating limits.  Uplift payments (or “make-whole payments”) are provided by RTOs and ISOs to compensate resources when there is a “shortfall between the resource’s offer and the revenue earned through market clearing prices.”  FERC identified uplift payments as one of four areas of interest, given the propensity for such payments to “undermine the market’s ability to send actionable price signals.”

The workshop will be open for public attendance.  Those interested in presenting at the workshop must register here by July 30, 2014. You can view the Notice of Workshop and additional details.

 


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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