Certain generation in California is needed for future reliability. If those units retire — when they don’t receive a current bilateral resource adequacy contract — future reliability can be threatened. Seeking a more “holistic” solution to this problem, FERC recently rejected incremental changes to the California Independent System Operator’s (CAISO) risk of retirement Capacity Procurement Mechanism (CPM). FERC Docket No. ER18-641.

The CPM pays units — needed for future reliability — to keep those units from retiring. CAISO proposed to incrementally improve the payment process. But FERC rejected incremental changes, “strongly encourage[ing]” CAISO and stakeholders “to adopt a holistic” solution, FERC wants a stakeholder process to continue:

(1) revisiting the issue of the adequacy of CPM and Reliability Must Run (RMR) compensation;
(2) evaluating whether both risk of retirement CPM and RMR need to be retained;
(3) examining the timeline and eligibility requirements for issuing risk of retirement CPM designations; and
(4) evaluating measures for reviewing the payments.

FERC required quarterly reports on stakeholder progress. Check back for future updates.

Bob Fallon, 202 464-1331, rfallon@www.efenergylaw.com