Opinion ID: 186506
Heading Depth: 2
Heading Rank: 1

Heading: Creation of ISO Tariff Schedule

Text: 2 In March 1998, as part of a FERC-instigated restructuring of the California energy system, Utility Petitioners transferred control over their electricity transmission to the newly formed California ISO. (For background on the formation of ISOs in general, and this ISO in particular, see California Independent System Operator Corp. v. FERC, 372 F.3d 395, 396-97 (D.C.Cir.2004)). When they merged into the ISO, Utility Petitioners retained obligations to provide transmission to existing wholesale customers under pre-existing contracts. See FERC Electric Tariff, original vol. 1 of Cal. Ind. Sys. Operator Corp. § 2.4.3.1 (ISO Tariff) (providing that existing contracts should be honored such that, to the extent possible, [doing so] imposes no additional financial burden on either the Participating TO or the contract rights holder....). But at the same time, according to Utility Petitioners, they faced higher costs from the ISO-in the form of transmission losses and ancillary service requirements 1 -than those they could recover under existing contracts with their wholesale customers. 3 Just before the ISO went into operation, FERC approved the final version of the ISO Tariff agreed to by the various parties to the restructuring that established a roadmap governing the operation of the ISO, including principles governing the individual TO Tariffs that Utility Petitioners could charge to their customers. During the process of negotiating this agreement, Utility Petitioners asked that a provision be included to allow them to recover the excess transmission and ancillary service provision costs. This was done in section 7.1 of a revised version of the ISO Tariff, issued in August 1997, which called for including a Transmission Revenue Credit in the Access Charge to be collected by the ISO on behalf of the TOs; the definition of Transmission Revenue Credit was revised to include the shortfall or surplus resulting from any cost differences between Transmission Losses and Ancillary Service requirements associated with Existing Rights or Non-Converted Rights and the ISO's rules and protocols. ISO Tariff, Master Definitions Supplement, original sheet no. 350. Further, after and pursuant to an October 30, 1997 FERC Order providing interim and conditional authorization to the ISO to start operations, Pacific Gas & Electric Co. et al, Order Conditionally Authorizing Limited Operation of an Independent System Operator and Power Exchange, 81 FERC 61,122 (1997) (October 1997 Order), the ISO submitted a revision to the language of section 2.4.4.4.4.5, which provided that the ISO will provide the parties to the Existing Contracts with details of its Transmission Losses and Ancillary Services calculations to . . . enable the parties to the Existing Contracts to settle the differences bilaterally or through the relevant TO Tariff.  ISO Tariff § 2.4.4.4.4.5 (emphasis added). 4 FERC accepted the ISO's proposed Access Charge, including the revised definition of Transmission Revenue Credit in its order of October 30, 1997. It accepted the proposed revision to the language of section 2.4.4.4.4.5 for filing . . . to become effective on the date that ISO operations commence in December 1997. Order Conditionally Accepting for Filing Certain Pro Forma Agreements, 81 FERC 61,322, 62,477 (Dec. 17, 1997). Utility Petitioners argue that, under this final version of the ISO Tariff, they would be permitted to recover the cost differentials either (a) by bilaterally negotiating with existing contract holders, or (b) by adding them to the Access Charge (through the Transmission Revenue Credit) charged by the ISO to the TOs' new customers, 2 paying ISO tariff rates.