December 13, 2018

FERC Rejects Electric Generators’ Request to Adopt Centralized Capacity Market in California

David Applebaum, Todd Brecher, and Chip Cannon

In June 2018, CXA La Paloma, LLC (“La Paloma”) filed a complaint at the Federal Energy Regulatory Commission (FERC or “the Commission”) seeking to require the California Independent System Operator (CAISO) to implement a centralized capacity market to procure the electric generation capacity needed to reliably operate California’s electric grid. La Paloma argued that California’s existing resource adequacy process—which principally relies on bilateral contracting between load-serving entities (LSEs) and generators—has produced outcomes that are unjust, unreasonable, and discriminatory. A coalition of other generators supported La Paloma’s complaint.  The generators claimed, among other things, that California’s resource adequacy process fails to send accurate price signals needed to attract and retain resources needed for reliability, does not provide generators with a reasonable opportunity to recover their costs, and results in CAISO having to resort to out-of-market mechanisms to acquire capacity that is needed to operate its system.  These arguments are not new, but have been raised, in one form or another, by numerous generators doing business in California for years.

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