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FERC Approves Another CAISO Gas Rate Waiver

FERC has approved a second, broader waiver for the California Independent System Operator (CAISO) to deal with natural gas price spikes for must-run gas-fired generation plants in the state. The waiver is good until April 14, a CAISO spokesperson told NGI.

Earlier, the Federal Energy Regulatory Commission (FERC) had set aside a request from several major independent generators, including NRG Energy Inc. and Dynegy Inc., approving instead a waiver submitted by the grid operator that was aimed at overcoming a two-day lag between posted and actual gas prices used in the CAISO tariff methodology (see Daily GPI, March 17).

Noting that the latest FERC action is limited in scope, the CAISO spokesperson said the grid operator is further exploring options to address gas price indices timing issues. CAISO will start a stakeholder initiative in April to focus on the issue.

"[We] intend to identify and propose a more holistic way to timely use gas prices in determining start-up and minimum load costs," the spokesperson said.

Generators argued that CAISO's approach did not provide enough to make them whole from gas price spikes they encountered during recent harsh winter weather (see Daily GPI, March 7), but FERC did not agree.

FERC decided that the generators' request failed to meet the commission's waiver standards, and in addition they concluded that the request could have adverse market consequences. CAISO maintained that the approach could hurt the California power market's efficiency and create gaming opportunities for market participants.

"The waiver [approved] reduces the number of pricing indices used to set the gas price for the purpose of settling transactions, but continues to use the ICE index, a gas price index that is already approved in CAISO's tariff," FERC said.

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