A group of power suppliers this week urged FERC to turn aside a proposal recently filed by the California Independent System Operator (CAISO) that would allocate fuel costs on an hourly basis, saying the fuel was mostly natural gas which is not sold on an hourly basis.

The suppliers, Avista Energy, Constellation Power Source, Coral Power, IDACORP Energy, Portland General Electric, Powerex, and Puget Sound Energy, said that the request for fuel cost data on an hourly basis is inconsistent with how gas markets operate. “Specifically, natural gas is not sold on an hourly basis, nor is it nominated and scheduled for transportation on an hourly basis.”

FERC should not modify the requirement to submit fuel cost allowances on a daily basis and should provide for calculation and allocation of fuel cost allowances on a daily or monthly basis, the generators said.

CAISO in mid-August submitted a compliance filing at FERC summarizing its proposed methodology for allocating fuel cost allowance amounts during the Oct. 2, 2000 through June 20, 2001 period. According to the CAISO, it proposes to allocate the fuel cost allowances through a five-step process that will occur outside of the CAISO settlement rerun process and will be applied before the calculations of interest and final net amounts owed by and owing to each entity are determined.

CAISO described the steps as first netting each entity’s sales and purchases in the California Power Exchange Corporation (CalPX) and then netting each entity’s sales and purchases in the CAISO spot markets. CAISO indicated that it then would combine the net spot purchases in each market to get total spot market purchases for each entity.

The grid operator then would divide the total net spot market purchases for each entity during each time interval by the total spot market purchases made by all entities during each time interval. This would give the CAISO each participant’s proportional share of the spot purchases for each time interval and allocate fuel cost allowances on this basis. CAISO also would exclude from the calculation of net purchases, any CalPX and CAISO sales and purchases that are excluded from the refund calculation.

CAISO also said it preferred to assign the fuel cost allowance amounts on an hourly basis, although a daily or monthly basis could be used. Whichever it is, generators would have to provide data based on the same time period for which the allocation would be done.

The power suppliers responded this week that fuel costs should be allocated on a daily or monthly basis.

The CAISO allocation proposal “is problematic because it proposes that generators submit fuel cost allowances on an hourly basis, and that fuel costs be allocated on an hourly basis,” the suppliers said, adding that the proposal is inconsistent with a previous FERC order that required generators to provide average daily fuel costs, and to aggregate those costs on a monthly basis for an overall fuel cost allowance amount to be offset from the refund owed by each generator.

CAISO said that it cannot allocate fuel cost allowances based on a time interval shorter than the interval in which the data is provided, the suppliers noted. CAISO’s proposal to allocate on an hourly basis “would require generators to submit data in a format that the Commission has not previously requested and that may not be available.”

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