On September 21, 2023, the Federal Energy Regulatory Commission (FERC) concluded investigations related to credit risk show cause proceedings initiated the previous year. The commission issued separate orders affirming that the existing tariffs of three significant Independent System Operators – the California Independent System Operator Corporation (CAISO), ISO New England Inc. (ISO-NE), and the New York Independent System Operator, Inc. (NYISO) – remain just and reasonable in relation to their collateral requirements for financial transmission rights (FTR) market participants. Here is more on that story.
These investigated tariffs relate to the operators’ methods for managing financial risks associated with potential default by market participants. The FERC’s ratification of CAISO’s, ISO-NE’s, and NYISO’s practices signifies their continued compliance with regulatory standards and attests to the competency of their credit risk measures.
This FERC action provides valuable assurance and stability for both the operators and participants in the FTR markets, as such rulings often have implications for pricing and other key transaction elements within these energy markets.
While the FERC confirmed the tariffs of these three operators as just and reasonable, it wasn’t the same case for all. The Commission continued to scrutinize the tariffs of the Southwest Power Pool, Inc (SPP). It directed further briefings on SPP’s tariffs – a decision that not only affects SPP but also serves as a reminder to other operators about the ongoing attention to credit risk protocols in today’s heightened regulatory landscape.
This continued examination can add uncertainty for market participants in regions where these operators are active. It underlines the importance of having effective measures in place to monitor, manage, and mitigate the potential impacts of credit risk.
We expect further developments regarding the Southwest Power Pool situation soon. Streamlined compliance with regulatory standards regarding collateral requirements will remain vital in ensuring the stability and sustainability of America’s energy markets. We will keep a close eye on this topic and provide updates when they are available.