Coming down firmly on the side of generators in California’s ongoing energy wars, FERC last Wednesday ordered the California Independent System Operator (Cal-ISO) to enforce the creditworthiness requirement of its open access tariff and previous orders issued by the Commission within 15 days. The Commission said that it was taking this step in order to ensure timely payment of Cal-ISO’s energy suppliers.

Cal-ISO’s tariff imposes a creditworthiness requirement on utility distribution companies, scheduling coordinators and metered subsystems. Under that requirement, Southern California Edison Co., the California Department of Water Resources (DWR) and Pacific Gas and Electric Co. (PG&E), among others, must either maintain an approved credit rating or post security in an amount sufficient to cover their outstanding liability for transactions controlled through the ISO grid.

FERC in February issued an order on creditworthiness that provided third-party suppliers assurances of a creditworthy buyer for all energy delivered to the loads throughout the ISO. More recently, in an April ruling FERC granted a motion filed by a group of California generators to require the ISO to comply with the February order.

In its April decision, the Commission directed the ISO to ensure the presence of a creditworthy buyer for all power that third-part suppliers provided to utility distribution companies that did not meet the crediworthiness provisions of the ISO tariff. Cal-ISO subsequently said that DWR would be the creditworthy third party for SoCal Edison’s and PG&E’s net short position.

FERC on June 13 issued an order denying a request for rehearing of the April order. The Commission also clarified that power suppliers were not allowed to ignore emergency dispatch orders, even if a utility distribution company or scheduling coordinator fails to meet creditworthiness standards.

Energy suppliers, however, were given the opportunity to file a complaint before the Commission to enforce their right to credit assurance. In September, several generators filed a motion for expedited enforcement of FERC’s creditworthiness orders.

At issue in last week’s decision is a proposal by Cal-ISO to amend its tariff. Specifically, the grid operator wants to temporarily suspend its “two invoice” settlement practice by suspending cash distributions on preliminary invoices and deferring issuance of the preliminary invoice.

FERC rejected Cal-ISO’s proposed amendment, saying that the two-invoice settlement process is not the problem. Rather, the more important matter in the eyes of the federal agency is that parties are not being paid for services rendered. “We believe that it is the ISO’s obligation to enforce the provisions of the tariff uniformly and to ensure that all parties are treated equitably and fairly.”

The Commission directed Cal-ISO to comply with its tariff and FERC’s previous creditworthiness orders by taking several steps. First, FERC ordered Cal-ISO to enforce its billing and settlement procedures under its tariff. Also, the Commission wants the grid operator to invoice the DWR for all ISO transactions it entered into on behalf of SoCal Edison and PG&E within 15 days from the date of the order.

In addition, Cal-ISO is expected to file a report with FERC, within 15 days of the date of the order, indicating overdue amounts from DWR and a schedule for payment of those overdue amounts within three months of the date of the order. FERC also said that Cal-ISO must reinstate the billing and settlement procedures under the Commission-approved ISO tariff since the agency is rejecting the proposed amendment.

FERC warned the Cal-ISO that if it fails to take these steps, that will be considered a violation of the Commission’s previous creditworthiness orders and the grid operator’s tariff warranting the Commission to seek injunctive relief under a section of the Federal Power Act.

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