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FERC Allows Non-Competitive ISO-NE Capacity Auction Prices to Become Law; Clark, Bay "Cannot Conclude" That ISO-NE IMM Complied With Tariff

September 17, 2014

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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

By taking no action on the filing of the results from ISO New England's capacity auction for the 2017-18 delivery period by September 15, FERC allowed ISO-NE's tariff filing containing the results of the auction to become effective by operation of law.

Several consumer representatives, including the Connecticut Attorney General, had petitioned FERC to investigate the results from the 2017-18 ISO New England Forward Capacity Auction, alleging that a generator, "may have exercised market power," by withholding 1,500 megawatts of capacity (click here for background).

The ISO itself conceded that, due to a shortage of capacity, the auction was a, "non-competitive auction," as tariff rules concerning insufficient competition were triggered.

Commissioner Tony Clark and Commissioner Norman Bay said in a statement that they would have set the auction results filing for fast-track hearing and settlement procedures to further evaluate ISO-NE's compliance with the Tariff and the resulting rates and to facilitate a process whereby ISO-NE, its market monitor, and intervenors could arrive at just and reasonable rates for capacity for the 2017-2018 delivery year

"[T]here is evidence suggesting the exercise of market power, and it is uncontroverted that the market power, if it existed, was not mitigated," Clark and Bay said.

"To the extent any portion of those [auction] prices was attributable to an exercise of market power, the auction will have imposed unwarranted costs upon consumers. Moreover, it is possible that ISO-NE may have violated its Tariff in the way it conducted the auction," Clark and Bay said.

Clark and Bay dismissed arguments that the auction price filing is "informational," and not intended as a venue to determine the justness and reasonableness of specific prices.

Clark and Bay noted that under the settlement establishing the ISO-NE capacity market, "ISO-NE was required to file the auction results with the Commission under section 205 of the FPA, and to carry the burden of establishing that those results were just and reasonable and not unduly discriminatory or preferential."

"ISO-NE and certain generators explained that such filings would 'provide[] the parties with 'extraordinary protection' to voice their concerns regarding the justness and reasonableness of the auction prices.' The Commission likewise assured market participants that 'these regular filings will reveal any unanticipated problems with [the market] design' and allow 'the Commission and the parties to thoroughly and regularly review and raise objections to the prices produced by the' forward capacity market. The suggestion that ISO-NE's FCA 8 Results Filing is merely 'informational' cannot be reconciled with this unambiguous history," Clark and Bay observed.

Yet another capacity market promise broken.

"Based on information available to the Commission, we cannot conclude that the ISO-NE IMM complied with the Tariff or that ISO-NE met its burden under Commission rules and regulations and the FPA to show the resulting prices are just and reasonable," Clark and Bay said.

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