Commissioner James Danly Statement
June 17, 2021

Item E-20

I dissent from the Commission’s order because it grants an unlawful retroactive waiver of a California Independent System Operator Corporation (CAISO) tariff provision.  This action contravenes the filed rate doctrine and rule against retroactive ratemaking.  There is no exception to these legal obligations even for a case in which a Regional Transmission Organization (RTO) misinterprets its own tariff and market participants act in reliance upon those misinterpretations.

The circumstances in favor of a waiver are compelling in this case, as they are in so many others.  The CAISO Business Practices Manual for Market Operations (BPM) defines a “Medium Start Unit” to consider a unit’s cycle time.  “Cycle time” includes both start-up time and minimum run time.  CAISO staff also confirmed to Harbor Cogeneration that its unit would be considered a “Long Start Unit.”  Only a Medium Start Unit is obligated to submit bids in the real-time market, so as an apparent “Long Start Unit,” Harbor Cogeneration’s would be excused.  Unfortunately, both the BPM and CAISO staff’s guidance contradict the tariff, which defines a “Medium Start Unit” to consider only a unit’s start-up time and not take into account its cycle time.  CAISO ultimately assessed penalties to Harbor Cogeneration for failing to bid into the real-time market because under the tariff, it is in fact a “Medium Start Unit.”

Admittedly Harbor Cogeneration finds itself in a difficult position.  It relied upon CAISO’s BPM and CAISO’s guidance that it was a “Long Start Unit.”  But the filed rate says otherwise and the filed rate controls.  Harbor Cogeneration did not offer in real-time, and CAISO assessed penalties.  There is no provision in the tariff that allows the Commission to waive the filed rate or that otherwise provides notice that the rate may be changed and neither of the judicially recognized exceptions to the filed rate doctrine, the notice exception[1] and the contract exception,[2] apply here.

Harbor Cogeneration argues that the tariff contemplates retroactive changes and thus permits retroactive waiver.  Harbor Cogeneration cites the CAISO tariff provision that states “[t]he CAISO may waive these availability obligations for a resource that is not a Long Start Unit or an Extremely Long-Start Resource that does not have an Day-Ahead Schedule or a RUC Schedule based on a procedure to be published on the CAISO Website.”[3]  This provision, however, does not contemplate retroactive changes to the filed rate.  Instead, it contemplates that CAISO can decide to waive the real-time bid requirement for a “Medium Start Unit.”  CAISO did not do so.

This result seems harsh in this case, but it is what the law requires.  To prevent harsh results, the solution is to amend the tariff to provide actual notice of potential retroactive changes to the filed rate.  The solution is not to grant unlawful—but seemingly equitable—retroactive waivers on a case-by-case basis, which ultimately depend upon how sympathetic the Commission believes the applicant’s situation to be.

Federal Power Act section 309 relief also is unavailable in this case.  Section 309 grants the Commission authority to “perform any and all acts, and to prescribe, issue, make, amend, and rescind such orders, rules, and regulations as it may find necessary or appropriate to carry out the provisions of this chapter.”[4]  However,

It bears repeating . . . that the Commission does not have the authority to ignore the law to achieve an equitable result.  Had we found that . . . actions violated the filed rate doctrine or the rule against retroactive ratemaking, we would not then invoke the Commission’s assessment of the equities to overcome those violations.[5]

Finally, the fact that an RTO is involved changes none of our legal obligations.  An RTO is a just a utility and the same rules and laws apply to it as to every other utility.  The utility in this case, CAISO, promulgated an interpretation in a business manual that flatly contradicted its filed rate.  CAISO then provided guidance “confirming” its erroneous interpretation to Harbor Cogeneration, which Harbor Cogeneration then relied upon.  CAISO, in turn, then assessed penalties for Harbor Cogeneration’s failure to offer in the real-time market even though the CAISO tariff at least arguably would have granted CAISO authority not to assess the penalties. 

I, for one, would like to know how we got to this point.  How exactly it is that Harbor Cogeneration was assessed nearly half a million dollars in penalties even though the party primarily to blame at every stage of this story appears to have been CAISO?


For these reasons, I respectfully dissent.


[1] See Old Dominion Elec. Coop., Inc. v. FERC, 892 F.3d 1223, 1231 (D.C. Cir. 2018) (quoting Nat. Gas Clearinghouse v. FERC, 965 F.2d 1066, 1075 (D.C. Cir. 1992)).

[2] See City of Piqua v. FERC, 610 F.2d 950, 954-55 (D.C. Cir. 1979).

[3] Waiver Request at 13 n.40 (citing CAISO Tariff, § 40.6.2(b)).

[4] 16 U.S.C. § 825h; accord 15 U.S.C. § 717o.

[5] Public Utils. Comm’n of Cal. v. FERC, 988 F.2d 154, 168 n.12 (D.C. Cir. 1993) (citation omitted) (emphasis added); see also Maislin Indus., U.S., Inc. v. Primary Steel, Inc., 497 U.S. 116, 132 (1990) (“strict adherence to the filed rate has never been justified on the ground that a carrier is equitably entitled to that rate, but rather that such adherence, despite its harsh consequences in some cases, is necessary to enforcement of the Act.”); accord AT&T v. Cent. Office Tel., Inc., 524 U.S. 214, 223 (1998) (explaining that the filed rate doctrine applies regardless of any motive “to benefit or harm a particular customer”).

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