FERC Rejects pacific gas and electric's request for an RTO participation adder

In an Order dated December 29, 2023, FERC rejected Pacific Gas and Electric’s request for an RTO Participation Order.  Putting this decision in context, in Order No. 679 which established transmission incentives, FERC found that “entities that have already joined, and that remain members of, an RTO, ISO, or other Commission-approved Transmission Organization, are eligible to receive” the RTO Adder incentive and have a presumption of eligibility.  The Commission explained that “the basis for the incentive is a recognition of the benefits that flow from membership in such organizations and the fact continuing membership is generally voluntary.”  However, FERC has taken the position that if a utility is required to be a member of an RTO-like organization, then it is not eligible for the RTO Participation Adder as it is not voluntarily a member of the RTO.  Under a prior formulation in 2018 of the California statute, the Ninth Circuit Court remanded the question of PG&E’s eligibility for the RTO Adder to FERC and instructed it to inquire “whether [PG&E] could unilaterally leave [CAISO] and thus whether an incentive adder could induce it to remain.”  On remand, FERC found that California law did not mandate PG&E’s participation in CAISO, and that the RTO Adder therefore induced PG&E to continue its membership.  On appeal, in 2022, the Ninth Circuit upheld FERC’s interpretation of California law.  However, California has since amended its public utilities code and enacted a law, effective September 6, 2022, which requires that electrical corporations such as PG&E participate in CAISO, and that they may not withdraw from CAISO without California Public Utilities Commission approval.  Section 1(a)(2)(b)(1) of Assembly Bill 209 provides that “It is the intent of the Legislature to . . . reaffirm that an electrical corporation currently participating in [CAISO] is not a voluntary participant.”  FERC found that, by virtue of the recently enacted California statute, PG&E is required to participate in CAISO and cannot unilaterally withdraw from CAISO.  As such, PG&E’s participation in CAISO is no longer voluntary.  Thus, we find that PG&E is no longer eligible for the RTO Adder.