As part of its examination of price formation in the organized markets, FERC is examining issues related to uplift costs and transparency. On January 19, 2017, FERC issued a Notice of Proposed Rulemaking (NOPR) proposing rules to address these issues, and Order No. 844 is the result of the NOPR process. In Order No. 844, FERC concludes that current RTO and ISO reporting obligations related to uplift costs are insufficiently transparent to permit market participants to fully understand how prices reflect the actual marginal cost of serving load and the full costs of reliable system operations. FERC states that Order No. 844 will allow market participants to align investments in facilities and equipment with the operational needs of the system and may result in shifting a portion of uplift costs to costs recovered through market prices.
To resolve these transparency issues, FERC is imposing, pursuant to section 206 of the Federal Power Act, three reporting requirements on RTOs and ISOs. Each of the reports must be posted on a publicly accessible portion of the RTO or ISO website and must be in machine-readable format.
First, each RTO and ISO must, no later than 20 days after the end of a calendar month, post a Zonal Uplift Report. The Zonal Uplift Report must include all uplift payments in dollars, by transmission zone, day and uplift category. FERC defines a transmission zone as “a geographic area that is used for the local allocation of charges, such as a load zone that is used to settle charges for energy.” Order No. 844 clarifies that transmission zones with fewer than four resources may be aggregated with neighboring zones to ensure that all zones contain at least four resources.
Second, each RTO and ISO must post a Resource-Specific Uplift Report each month within 90 calendar days of the end of the month. This report must contain the name of each generation resource receiving uplift payments and the total amount of those payments paid to each resource per month.
Third, each RTO and ISO must develop a monthly Operator-Initiated Commitment Report. FERC defines an operator-initiated commitment as “a commitment made after the day-ahead market for a reason other than minimizing the total production cost of serving load.” Order No. 844 provides examples of reasons that RTOs or ISOs may make operator-initiated commitments: constraint management, voltage support and system-wide capacity issues. The Operator-Initiated Commitment Report must list the commitment size, transmission zone, commitment reason and commitment start time for each operator-initiated commitment, and it must be posted within 30 calendar days of the end of each month.
Order No. 844 also requires RTOs and ISOs to include Transmission Constraint Penalty Factor requirements in their tariffs. These requirements include the transmission constraint penalty factor values, any circumstances under which such factors may set locational marginal prices, and any applicable procedures for temporarily changing the values. FERC did not adopt the proposal in the NOPR to change the manner in which uplift payments are allocated to market participants.
Order No. 844 will become effective 75 days after it is published in the Federal Register. Within 60 days of the order’s effectiveness, each RTO and ISO must make a compliance filing to modify its tariff to implement the order’s requirements. Those tariff changes will become effective no later than 120 days after the RTOs and ISOs make their compliance filings.
- Uplift Cost Allocation and Transparency in Markets Operated by Regional Transmission Organizations and Independent System Operators, Order No. 844, 163 FERC ¶ 61,041 (2018) (ferc.gov).
Client Alert 2018-096
