FERC last week issued an order allowing the California Independent System Operator (CAISO) to eliminate on an expedited basis the requirement that bids be limited to $0/MWh if submitted into the CAISO real-time energy market by generation facilities that are located beyond the grid operator’s control area.

“By authorizing the early elimination of the zero-bid requirement, this order benefits customers by encouraging imports into California, thereby enhancing reliability, during the peak summer demand period,” FERC said.

This change was previously approved by FERC in January to become effective on the date of implementation of a phase of CAISO’s comprehensive market redesign. The phase in question was originally slated to be implemented prior to this summer, but has now been delayed until Fall 2003.

In its January order, FERC agreed to allow system resources to submit bids greater than $0/MWh, but required that the prohibition on those resources setting the market clearing price be maintained.

FERC on Tuesday said that the continued stabilization of the market and the recognition of the importance of imports to CAISO in the coming summer months, leads the agency to believe that the continued prohibition on imports setting the market clearing price is sufficient protection against any remaining opportunities for “megawatt laundering.”

FERC believes that eliminating a “strong disincentive” to suppliers outside the CAISO control area to bid into CAISO markets through removal of the zero bid requirement outweighs any remaining concerns related to the possibility of megawatt laundering.

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