FERC Finds No Manipulation in High Offers by New England Capacity Importers

May 9, 2011
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FERC affirmed an initial decision from an ALJ and found that Brookfield Energy Marketing, Constellation Energy, and Shell Energy North America did not engage in market manipulation when offering energy associated with their capacity, as obligated to do as capacity suppliers in the ISO New England transitional capacity adequacy mechanism, at very high levels near the price cap.

The case (EL09-47 et. al.) resulted from a complaint from then-Connecticut Attorney General Richard Blumenthal, who alleged that the high-priced offers from certain capacity importers were designed to avoid dispatch, and thus suppliers collected capacity payments with no intention of providing energy (9/30).

In its order, FERC agreed with the initial decision that, "in the context of the New England market at the time, it was legitimate - and does not alone evidence recklessness or intent to deceive - for Respondents, in business as capacity importers, to have purposefully offered their capacity-backed energy to ISO-NE in a manner which provided reliability but assured the associated energy would not ordinarily be called on."

"The Commission herein affirms the Initial Decision's finding that Complainants failed to support their allegations of market manipulation against Respondents. In particular, we agree with the Initial Decision that Respondents fully intended to deliver their capacity-backed energy in the unlikely event ISO-NE called on it, and that each of them had procedures in place to ensure the energy actually could be delivered if necessary," FERC added.

FERC further said that the Respondents' capacity-backed energy offers were not bound - either under the Tariff or the Federal Power Act - by a "reasonable price" requirement below the $1,000 per MWh price cap. "It is undisputed that ISO-NE's Tariff expressly imposed no 'reasonable price' requirement, and while Complainants have argued throughout this proceeding that Respondents engaged in various Tariff violations, the Initial Decision correctly determined that evidence of a Tariff violation is not dispositive of whether Respondents engaged in market manipulation, the only issue set for hearing in the Hearing Order," FERC said.

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