"Spot" Traders:

Sarah Novosel, Ray Alvarez (both from the D.C. office) and I talked to Michael Goldenberg, a FERC staff attorney in the General Counsel's Office. He does not speak for the FERC but hearing his views on the order is helpful nonetheless. Here's a brief recap (paraphrased) of what we learned.

Q.  If the  cap falls between the time a deal is confirmed and the delivery hour, is the supplier liable for the difference?

A.     This is a legitimate question and will only be fully answered by making a formal motion for clarification from the FERC. [Michael mentioned that perhaps CAISO could resolve this but this issue really applies to  markets outside of CAISO, so it is unlikely CAISO can resolve this.]  The order can probably be read two ways.  One interpretation is that the only cap that applies is the one in effect in the delivery hour, in which case the supplier  is liable for refund (or if a generator, a cost justification filing).  Another is that the cap that applies is the one in effect when the deal is negotiated.  Part of his reasoning for making the latter interpretation is that the order clearly wants to provide certainty to the market and part of the order allows prices to be "negotiated up to the maximum price," (p. 42) which could be read as allowing the cap to the be the one in effect at time of negotiation.

Michael indicated that the FERC  is not setting up any sort of formal compliance or monitoring, so, for markets subject to the cap (other than those operated by CAISO) it will be up to the buyer to complain that it was sold above-cap power.  [Thus reiterating that the risk of refund depends in part on the counter party to the deal.]

Q. Cash deals are normally traded the day before delivery.  However, some cash deals are traded more than 24-hours out.  Also, cash traders could intentionally start making deals farther out as a way to avoid the cap.  Are such cash deals exempt from cap or is that a "loop hole"?

A. The FERC order is very clear that the cap applies only to deals that are traded on the day of or day before the first delivery hour, so, the described deals are exempt and he does not consider it to be a "loop hole".  FERC could change the rules in the future, of course, but he reads the order as clear on this matter.