Overview
Order No. 872 spends an inordinate number of pages discussing the wholly optional use by a state of Locational Marginal Prices (LMPs) for those QFs selling only as available energy in an RTO market. 18 C.F.R. § 292.304(b)(6). The reason this fuss is somewhat surprising is that most QFs (excluding net metered QFs) enter into contracts for sales of capacity and energy, such that the practice of making no capacity commitment at all, involves a somewhat limited subset of QFs. Moreover, as FERC points out, the use of LMP for such resources has been fairly common, despite FERC’s prior admonishment against it. Feeling some heat, FERC did roll back its proposal somewhat, making use of LMP subject to challenge.
Although such “as-available only” sales may be more common in regions where several LSEs lack any energy and capacity needs (i.e., parts of New England and the Mid-Atlantic), where LSEs they merely deliver products procured for their load by third-parties, the same regions generally have bolstered small, renewable QFs by various other programs that include fixed-price contracts or opening net metering to larger (i.e., 1-2 MW) QFs.
Much of the fuss seems to be coming from entities, such as California cogenerators, the California commission, and Southeast PIOs, that have confused the proposal with the proposal to allow energy prices to vary in fixed rate contracts. Indeed, FERC finds some comments confusing in that stakeholders seem to be complaining about LMP being insufficient without a fixed capacity price when “as available” sellers are not required to be compensated for any product but energy under revised 18 C.F.R. § 292.304(d)(1)(i).
