FERC Rejects SPP's Imbalance Market Proposal; Start Delayed Again

In a September 19 order FERC rejected as "inadequate" Southwest Power Pool's ("SPP") proposal to implement a real-time energy imbalance market, along with its market monitoring and market power mitigation plans.  FERC was primarily concerned that the imbalance market was not designed or would not be monitored properly to ensure stable market operation and laid out guidance for SPP in several critical areas.  FERC also rejected SPP's attempts to justify various tariff revisions as the result of its stakeholder process, saying that "SPP is ultimately responsible for the stable operation of its market and must provide justification for its proposal to show that the market will operate reasonably and provide just and reasonable rates." 

In particular, FERC found SPP's proposal lacking because it proposed a voluntary sellers' market and a mandatory buyers' market, "but no way to bridge the gap if the offers are insufficient, short of implementing emergency procedures."  SPP's proposal was also lacking because it failed to detail its market monitoring plan, market mitigation measures, and sanctions for violating market rules.  SPP also failed to clarify the different responsibilities of SPP's market monitoring unit and its independent market monitor ("IMM").  FERC directed SPP to specify in its market monitoring plan what corrective steps the IMM would take if it were to determine that the SPP markets are not producing just and reasonable prices or are failing to induce sufficient investment in infrastructure.  FERC also instructed SPP to amend its tariff language to clarify that FERC, and not the market monitor, has enforcement power.

Authorized as a regional transmission organization ("RTO") since October 1, 2004, SPP filed tariff amendments to implement the imbalance market and market monitoring and mitigation plans in response to FERC's order addressing its RTO application.  SPP had hoped to begin trials of the imbalance market in June 2005, with the market going live by October 2005.  Reliability concerns caused SPP to postpone implementation until March 2006.  In light of the current order, the imbalance market has no start date.  [Southwest Power Pool, Inc. 112 FERC ¶ 61,303 (2005)]  [NEW MATTER]