Staff Guidance on WECC Soft Price Cap

During the 2000-2001 Western energy crisis, the Commission identified a number of structural reforms and market rule changes that were necessary in order for a robust, stable, competitive bulk power market to operate over the long-term in California and West-wide.  One of these reforms was the WECC soft price cap. 

In July 2002, in response to the CAISO’s Comprehensive Market Redesign Proposal, the Commission established a $250/MWh offer cap for the CAISO markets and a $250/MWh price cap for all spot market sales in WECC.[1]  The Commission stated that the $250/MWh offer cap, together with the other mitigation measures, was a careful balance of the need to provide an incentive for market entry by new generation with the need to protect markets from potential market power abuse.[2]  The Commission subsequently clarified that the $250/MWh cap is a “soft” cap and that offers and prices above the cap will be subject to justification and refund.[3]

All Commission-jurisdictional sellers who make spot market sales in WECC outside of CAISO are subject to the filing requirement.  The reference to WECC in the context of energy price caps in Commission orders and this staff document is to the wholesale electricity market in the United States portion of the Western Interconnection. 

The Commission requires that justification filings be made within 30 days after the end of the month in which the sale in excess of the WECC soft price cap occurred.[1]  For the purposes of this reporting, the date the sale occurred is the date on which the power flowed.

Buyers are not required to submit justification filings.

Justification filings should be filed in new dockets under section 205 of the Federal Power Act, using Filing Code 80 (Compliance) for sellers in the “E” program, and Filing Code 70 (Compliance) for sellers in the “M” program.

Justification filings should not be filed in the docket in which a seller’s MBR tariff was accepted.

The Commission requires justification filings for spot electric market sales that exceed the WECC soft price cap of $1,000/MWh.  Spot market sales in WECC are sales that are 24 hours or less in duration and are entered into the day of or day prior to delivery.  Purely financial transactions that do not result in the delivery of a physical electricity product are not subject to the WECC soft price cap. 

Sellers are required to include detailed information to support each transaction above the WECC soft price cap; this support could include documentation such as affidavits, purchase confirmations, and invoices.

In the June 2021 Guidance Order, the Commission provided examples of the kind of support that may be used to justify sales above the WECC soft price cap as just and reasonable.  For example, under the production cost-based framework, sellers may demonstrate actual short-run marginal costs such as fuel and operation and maintenance costs for generating resources using documentation such as purchase confirmations, invoices, and affidavits.      

All jurisdictional sellers are required to submit justification filings for sales above the WECC soft price cap, even those responding to a bid.  Accordingly, even if a seller responded to a buyer’s bid, a justification filing is required to support a claim that a sale above the WECC soft price cap is just and reasonable. 

All jurisdictional sellers are required to submit justification for sales priced above the soft price cap, regardless of how that sales price came to be.

The June 2021 Guidance Order includes guidance regarding justification for sleeve transactions and justification under an index-based framework.