On October 3, 2016, FERC denied La Paloma Generating Company,
LLC's ("La Paloma") complaint ("Complaint")
requesting that FERC order the California Independent System
Operator Corporation ("CAISO") to designate the portion
of La Paloma's generating capacity that is not currently
designated as resource adequacy capacity as reliability must-run
La Paloma owns a four-unit generating facility located in
McKittrick, California. According to La Paloma, despite bidding
energy from all four of its facility's units into CAISO's
market, it has seen a substantial decline in its market revenues.
On May 13, 2016, La Paloma submitted maintenance outage requests to
CAISO for Unit One, Unit Three, and Unit Four of its generating
facility in the interest of reducing economic losses. La Paloma
excluded Unit Two from its requests because 42 MW of Unit Two's
capacity is subject to a resource adequacy contract.
On June 6, 2016, CAISO denied La Paloma's outage requests.
According to La Paloma, CAISO denied the requests because the CAISO
tariff does not provide for economic outages. La Paloma then filed
its Complaint pursuant to the Federal Power Act against CAISO on
June 17, 2016.
In the Complaint, La Paloma alleged that CAISO's denial of
its request for economic outages constitutes a regulatory taking
because it prevents La Paloma from mitigating financial losses and
compels La Paloma to maintain operations without providing for cost
recovery. Further, La Paloma asserted that its generating facility
is important for the reliability of CAISO, and refers to a
privately-commissioned study and power flow models as supporting
evidence. La Paloma requested that FERC grant relief by directing
CAISO to grant an annual RMR contract for Unit One, Unit Three, and
Unit Four of La Paloma's generating facility.
CAISO maintained that its denial of La Paloma's outage
requests for economic reasons does not amount to a regulatory
taking because it has not denied La Paloma of all beneficial use of
its generating facility. Additionally, CAISO reiterated that its
tariff, to which La Paloma is a voluntary participant, does not
provide for economic outages.
In denying La Paloma's complaint, FERC concluded that La
Paloma failed to demonstrate that CAISO's refusal to grant
economic outages violated any statute or regulatory standards.
Specifically, FERC found that CAISO acted within the parameters of
its FERC-approved tariff which "contains no language regarding
the type of economic outage request that La Paloma sought."
Moreover, FERC found that even if La Paloma had asserted a valid
claim, the requested RMR designations would not be appropriate
relief, because RMR contracts are intended to address reliability
rather than economic hardship. Finally, FERC found that La Paloma
failed to demonstate that it has taken any action to mitigate
economic losses beyond submitting the outage requests.
FERC's order denying La Paloma's Complaint is available
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