USA – CALIFORNIA Law and Practice Contributed by: Nora Sheriff, Gwenneth O’Hara, Samir Hafez, Antonio Carrejo and Timothy Lee, Buchalter LLP
the entity to sell at cost-based rates. FERC can also order the disgorgement of unjust profits, impose civil penalties or mandate other remedies. CAISO monitoring CAISO’s DMM is responsible for continuously moni- toring the electricity market to identify conduct that could indicate an abuse of market power, such as bid- ding strategies that artificially inflate prices or physical withholding of generation capacity. CAISO’s Market Power Mitigation Procedures provide for automated mechanisms that can cap bids from suppliers iden- tified as potentially exercising market power under certain conditions. The DMM can report suspected market power concerns to CAISO and FERC. For example, recent discussions regarding the imple- mentation of CAISO’s EDAM have identified poten- tial incentive and scheduling issues, which are being addressed through ongoing tariff development and market design refinements. 2.5 Surveillance to Detect Anti-Competitive Behaviour The CAISO DMM’s primary role is to conduct con- tinuous surveillance of the wholesale electricity mar- ket and to scrutinise the market for signs of market design flaws, inefficiencies, anti-competitive behav- iour or manipulation. The DMM reports its findings to CAISO and FERC, and may trigger certain automated market power-mitigation measures established under Tariff Section 39, but it does not have independent enforcement authority. Rather, under the FPA, FERC has broad authority to investigate and penalise anti- competitive behaviour and market manipulation in wholesale electricity markets. FERC’s powers include: • conducting formal investigations; • performing audits; • ordering specific actions; and • imposing civil penalties. FERC actively exercises these powers in practice. For example, in April 2026, it approved a settlement with a market participant relating to alleged manipulation of the CAISO market, resulting in civil penalties and disgorgement of profits. More broadly, FERC’s annual enforcement reports identify fraud, market manipula- tion, and anti-competitive conduct as core priorities,
with numerous investigations and settlements arising from market monitor referrals and other surveillance mechanisms. The CPUC’s Affiliate Transaction Rules, which apply to the IOUs, also serve to limit anti-competitive behav- iour resulting from the IOUs’ monopoly status. These rules are intended to prevent ratepayer subsidies of non-regulated utility enterprises, foster a fair competi- tive environment, and enhance energy market com- petition. 3. Generation Facilities 3.1 Constructing and Operating Generation Facilities Construction of Generation Facilities In California, CPUC GO 131-E governs the planning and construction of electric generation resources, transmission, power, distribution or distribution lines, and electric substations. There are three overarching review processes for CPUC authorisation of electrical generation resources and infrastructure projects. The first is obtaining a Certificate of Public Conveni- ence and Necessity (CPCN) from the CPUC, which is required for: • any new electric generating plant having in aggre- gate a net capacity available at the busbar in excess of 50 megawatts (MW); • the modification, alteration or addition to an exist- ing electric generating plant that results in a 50 MW or more net increase in the electric generat- ing capacity available at the busbar of the existing plant; or • major electric transmission line facilities that are designed for immediate or eventual operation at 200 kV or more. Before granting a CPCN, the CPUC must find that present or future public convenience and necessity will require its construction. The CPUC considers: • project need; • the maximum prudent and reasonable cost of the project;
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