FERC Rejects SPP's Proposal To Set Scarcity Prices

On September 20, 2017, FERC rejected Southwest Power Pool, Inc's ("SPP") Order No. 825 compliance filing that would have created a demand curve to set scarcity prices for energy shortages.  Specifically, FERC held that SPP's establishment of a demand curve to set scarcity prices was outside the scope of Order No. 825, which required SPP to establish triggers for shortage pricing, rather than change the actual shortage pricing levels.

In Order No. 825, FERC, among other things, required regional transmission organizations ("RTOs") and independent system operators ("ISOs") to establish a mechanism to trigger scarcity pricing for intervals in which there is a shortage of energy or operating reserves.  As noted by FERC, Order No. 825 did not require RTOs/ISOs to change the amount paid to resources when shortage pricing is triggered, but rather required RTOs/ISOs to establish triggers for scarcity pricing.