On December 30, 2016, FERC accepted the California Independent System Operator Corporation’s (“CAISO”) proposed revisions to the definition of “Load Serving Entity” under its tariff. In particular, CAISO’s proposed tariff revisions seek to add a new class of end user Load Serving Entities that: (1) are the ultimate consumers of electricity; (2) have legal authority to serve load through the purchase of energy from an entity that is not a Load Serving Entity; and (3) have exercised their right to purchase electricity from a party that is not serving as the Load Serving Entity for the transaction.
On October 28, 2016, CAISO proposed revisions to its tariff to recognize, among other things, that an end user that has the right under state or local law to serve load through the direct purchase of wholesale energy and exercises that right is a Load Serving Entity under the CAISO tariff. Specifically, CAISO proposed to revise part (b) of the definition of Load Serving Entity under its tariff to add that an entity may qualify as a Load Serving Entity if the entity (1) is the ultimate consumer of electricity; (2) has legal authority to serve its load through purchases of energy from an entity that is not a Load Serving Entity; and (3) has exercised its right to purchase electricity from a party that is not serving as the Load Serving Entity for the transaction. CAISO stated that creating this new class of Load Serving Entities will ensure that all load in CAISO’s Balancing Authority will correspond to a Load Serving Entity that holds Resource Adequacy obligations for its load and that this new class of Load Serving Entities can request Congestion Revenue Rights (“CRR”) to hedge the costs of serving that load. In addition, CAISO proposed to revise part (c) of the definition of Load Serving Entity to eliminate the specific designation of the State Water Project as a Load Serving Entity. CAISO stated that the new definition of a Load Serving Entity under part (b) is a functional definition that should capture the State Water Project as a Load Serving Entity.
In its order, FERC found that the new definition of Load Serving Entity in part (b) includes entities that are similarly situated to current Load Serving Entities that participate in the CRR allocation process. FERC further found that the revised definition is a reasonable approach to encompass entities that are currently excluded from the definition of Load Serving Entity but should be considered a Load Serving Entity. Finally, FERC found that CAISO’s proposal avoided the need to create specific carve-outs in the definition of Load Serving Entity, as CAISO initially did for the State Water Project. FERC thus accepted CAISO’s proposed tariff revisions, effective January 1, 2017.
A copy of the order is available here.