Docket No. EL24-92-000
Although the Commission reaches the correct result in this case, I write separately to highlight the narrow and fact-specific nature of the rule of reason determination in this order.
CAISO’s Business Practice Manual (BPM) for Reliability Requirements states that “[t]o the extent a Generating Unit becomes incapable of operating at this level for any consecutive three-year period, the Generating Unit will lose its deliverability priority . . . .”[1] As I explain below, this three-year deadline, which only appears in CAISO’s BPM and not in its Tariff, would clearly fail the Commission’s rule of reason[2] if considered in isolation.
Deliverability is “transmission capacity for a generating facility at a specific point of interconnection to deliver energy to load during peak conditions[.]”[3] It is limited and not easily transferable between generators.[4] As Saavi argues, removal of deliverability status “concretely and materially undermines the economic value of the generation facility.”[5]
It stands to reason that because of the limited nature of deliverability and its corresponding economic value, any deadline that would allow CAISO to revoke a generator’s deliverability status permanently would undoubtedly “significantly affect rates, terms, and conditions of service.”[6] Indeed, as Saavi points out, CAISO’s Tariff does include processes to reduce net qualifying capacity.[7] Under the same logic, a specific deadline triggering full termination of a generator’s deliverability status would normally warrant inclusion in the Tariff. Had CAISO’s BPM provided for a 10-year deadline rather than a three-year deadline, for example, the Commission might not be asked to resolve this complaint at all.
Nevertheless, I voted in support of this outcome because CAISO’s Tariff, to which Saavi’s Participating Generator Agreement must adhere,[8] includes several provisions that, when read together, provide sufficient notice that Saavi could lose deliverability status if it is disconnected for too long.[9] Most importantly, the Tariff provides that CAISO must conduct an annual deliverability assessment and may reduce a resource’s net qualifying capacity in response to that study,[10] which could be interpreted to mean that CAISO could revoke a generator’s deliverability status after a single year of disconnection. Under that reasoning, the three-year deadline in the BPM merely provides deadline flexibility to CAISO and generators above and beyond that one year specified in its Tariff. If that were the case, the three-year deadline would be immaterial to the decision in this case and need not be specified in the Tariff.[11]
Rule of reason determinations must be addressed on a case-by-case basis, and today’s holding is narrowly tailored to these facts. Here, a series of CAISO Tariff provisions, read together, overcome an otherwise clear violation of the rule of reason. Had the Tariff not included these express provisions that imply the existence of such a deadline,[12] I would not have voted in support of this order.
For these reasons, I respectfully concur.
[1] CAISO, BPM for Reliability Requirements, § 6.1.3.4 (Deliverability to Aggregate of Load).
[2] City of Cleveland v. FERC, 773 F.2d 1368, 1376 (D.C. Cir. 1985) (interpreting the Federal Power Act to require “only those practices that affect rates and services significantly, that are realistically susceptible of specification, and that are not so generally understood in any contractual arrangement as to render recitation superfluous” to be on file with the Commission) (emphases omitted).
[3] CAISO May 6 Answer at 3.
[4] Id. at 3, 5.
[5] Saavi April 24 Answer at 5.
[6] Midcontinent Indep. Sys. Operator, Inc., 169 FERC ¶ 61,137, at P 252 (2019); Demand Response Coalition v. PJM Interconnection, 143 FERC ¶ 61,061, at P 17 (2013).
[7] Saavi April 24 Answer at 6 (citing CAISO Tariff, § 40.4.2).
[8] Participating Generator Agreement § 4.1.1; § 4.2.
[9] Order PP 43-48 (discussing definitions of Generating Unit, Deliverability, and Qualifying Capacity in CAISO Tariff app. A (Definitions); discussing CAISO Tariff §§ 40.4.4 (Reductions for Testing), 4.5.1 (Scheduling Coordinator Certification), and 4.6 Relationship Between CAISO and Generators)).
[10] CAISO Tariff, § 40.4.4 (requiring CAISO to undertake an annual deliverability study, and explaining that in accordance with the BPM procedures, CAISO may reduce the resource’s net qualifying capacity to the extent it determines that a generator is not capable of supplying its full qualifying capacity amount); see also Order PP 44, 48.
[11] Saavi disconnected for approximately seven years and therefore this case is not a close call under the annual deliverability assessment provision of CAISO’s Tariff.
[12] Hecate Energy Green Cnty. 3 LLC v. FERC, 72 F.4th 1307, 1314 (2023) (citing City of Cleveland v. FERC, 773F.2d at 1376) (“[E]ven specifiable practices that significantly affect rates need not be included if they are clearly implied by the tariff's express terms.”). Today’s order addresses CAISO’s tariff provisions together in a way that triggers the Commission’s “broad discretion” under Hecate. Id.