On July 15, 2025, FERC initiated an investigation, pursuant to section 206 of the Federal Power Act (“FPA”), to assess whether the Western Electricity Coordinating Council’s (“WECC”) soft price cap on spot market energy sales should be eliminated. FERC preliminarily concluded that the WECC soft price cap is no longer just and reasonable because of changes in the circumstances in the WECC market, and thus proposed its elimination pending the results of the investigation. FERC requested that interested parties submit comments within 30 days of its order (i.e., by August 14, 2025). FERC expects to issue an order on the results of its investigation by December 30, 2025.
The WECC soft price cap was created after the 2000-2001 Western Energy Crisis. FERC, in its initial order adopting the WECC soft price cap, argued it would balance the need for an incentive for market entry against the potential for market abuse. The price cap is currently set at $1,000/MWh. Sellers may still sell above the price cap, but are required to submit a cost justification filing for such prices, subject to refund.
Following extreme heat in the Western United States in August-September 2020, June 2021, and September 2022, multiple sellers filed cost justification filings for sales that exceeded the $1,000/MWh price cap. Many sellers argued that the Mobile-Sierra doctrine protected them against a FERC order requiring the sellers to pay refunds for contract rates above the price cap, unless FERC determined that such rates seriously harmed the public interest. The Mobile-Sierra doctrine requires FERC to presume that freely negotiated prices in a wholesale-energy contract are just and reasonable unless FERC determines such prices seriously harm the public interest. FERC, in ordering refunds, found that the Mobile-Sierra doctrine applied, but it was instead enforcing requirements incorporated into the contracts through Commission orders that created the WECC soft price cap. FERC thus ordered refunds regardless of the Mobile-Sierra doctrine, finding that sellers had not justified prices above the WECC soft price cap. FERC affirmed its finding on rehearing and numerous sellers then appealed the order to the United States Court of Appeals for the District of Columbia (“D.C. Circuit”).
In July 2024, the D.C. Circuit vacated FERC’s order mandating refunds and remanded the proceedings to FERC. The D.C. Circuit held that FERC must find that, pursuant to the Mobile-Sierra doctrine, the contract prices seriously harmed the public interest or that the Mobile-Sierra doctrine was not applicable to its review.
In response to the D.C. Circuit’s decision, FERC initiated an investigation to analyze whether the WECC soft price cap is necessary to ensure just and reasonable rates in the WECC market. FERC, however, preliminarily concluded that the WECC soft price cap is no longer necessary because of the presence of organized wholesale markets, unlike when the price cap was first established. FERC also posited that its legal authority and market monitoring capabilities have expanded to the point where the price cap is no longer needed to oversee the WECC market. Finally, FERC temporarily lifted the requirement for sellers to make cost justification filings until after FERC issues an order on this investigation and set a refund effective date of July 18, 2025.
FERC’s order initiating the investigation, issued in Docket No. EL10-56-000, is available here. Interventions and comments are due by August 14, 2025.
