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FERC Denies Retail Supplier's Complaint Against NYISO

June 20, 2019

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Copyright 2010-19 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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FERC has denied a complaint filed against the New York ISO by Light Power & Gas of NY LLC (LPGNY)

As first exclusively reported by EnergyChoiceMatters.com, on January 29, 2019, pursuant to sections 206 and 306 of the Federal Power Act (FPA), and Rule 206 of the Commission’s Rules of Practice and Procedure, Light Power & Gas of NY LLC (LPGNY) filed a complaint (Complaint) against New York Independent System Operator, Inc. (NYISO).

LPGNY alleges that NYISO violated its Open Access Transmission Tariff (OATT) by attributing to LPGNY the outstanding debts of North Energy Power LLC (North Energy), a bankrupt former NYISO market participant, for purposes of considering LPGNY’s application for registration in NYISO’s markets. (see more details on LPGNY's arguments in our prior story here)

"We deny the Complaint because we find that NYISO did not violate its OATT by attributing to LPGNY the outstanding debts of North Energy, a bankrupt former NYISO market participant, for purposes of considering LPGNY’s application for registration in NYISO’s markets," FERC said

As an initial matter, FERC found that Section 27.4 of NYISO’s OATT is silent with respect to the question of whether two different LLCs with close ties can be treated as the same Transmission Customer. Section 27.4 of NYISO’s OATT states:

FERC said that, "The definition of 'Transmission Customer' in NYISO’s OATT does not indicate whether and when an entity seeking to register and a previously registered entity should be treated as the same entity. Thus, we find that Section 27.4 neither explicitly supports nor prohibits NYISO’s decision to treat LPGNY and North Energy as the same entity and thus to hold LPGNY’s registration request in abeyance pending the resolution of North Energy’s debts."

"However, we may look to relevant Commission precedent addressing the conditions under which the Commission may regard two entities as a single entity -- sometimes referred to as the 'single entity theory' -- to inform our decision. In particular, the Commission has found that: 'The general rule applicable to our determination is that an agency may disregard the corporate form in the interest of public convenience, fairness, or equity. This principle of allowing agencies to disregard corporate forms is flexible and practical in nature. Corporations may be regarded as one entity for the purposes with which the agency is immediately concerned even though they are legitimately distinct for other purposes. Moreover, no bad intention on the part of the corporations is necessary; the inquiry is simply a question of whether the statutory purposes would be frustrated by the corporate form,'" FERC said

FERC said that, "On this record, we find it reasonable to treat LPGNY as effectively the same entity as North Energy under the single entity theory. Our decision, we emphasize, does not rely on the application of 'successor liability' that LPGNY alleges is the basis of NYISO’s actions."

"LPGNY’s primary argument in defense of its and North Energy being treated separately is that LPGNY and North Energy are separate corporate entities, and NYISO recognizes that LPGNY and North Energy are separate LLCs. However, as explained above, the Commission has disregarded corporate form 'in the interest of public convenience, fairness, or equity' and considered two entities as effectively one when necessary to fulfill the Commission’s statutory and regulatory goals. While there is no specific test for when the single entity theory should be employed, the Commission has focused on such factors as the interconnectedness of the business relationships," FERC said

"We find that NYISO’s decision to treat LPGNY as the same entity as North Energy is reasonable in light of the record, particularly the close overlap in not only those entities’ relevant personnel, but also their business activities. Namely, both entities have the same contacts and administrators, similar addresses, are engaged in the same business in the same territory, and seek to serve the same customers ... NYISO submitted affidavits detailing the roles of the principal figures in both North Energy and LPGNY, stating that Abe Leiber, Jack Klein, and Hindy Gruber are contacts and/or administrators for both companies and have similar roles in each company. LPGNY does not dispute that it has the same contacts and administrators or that LPGNY intends to serve the same customers in the same market as North Energy. NYISO also states that, although LPGNY was established as a company several years ago, LPGNY did not begin engaging in business until North Energy defaulted on its NYISO obligations. Thus, we find that, in these factual circumstances, it is reasonable to disregard North Energy’s and LPGNY’s separate corporate forms to ensure that an entity that had incurred debts could not shift its business activities into a different corporate entity to continue to do business while avoiding paying those debts," FERC said

"Moreover, treating LPGNY and North Energy as the same Transmission Customer is consistent with the Commission’s goals in the Policy Statement on Electric Creditworthiness, i.e., to protect the organized wholesale electric markets, and ultimately customers, from default by market participants," FERC said

"If North Energy can move on as essentially the same entity and continue participating in the markets as LPGNY without settling its outstanding debts, that is, if defaulting entities could continue doing business while at the same time walking away from their debts, it would evade the very purpose of Section 27.4 [requiring defaulting entities to settle their outstanding debts before they can re-enter the markets], and other Transmission Customers would have to cover the losses," FERC said

"[T]o avoid such situations in the future, we encourage NYISO to add language to its OATT to address comparable situations, by setting forth the factors it will consider to determine whether to treat two separate entities as the same entity for purposes of Section 27.4," FERC said

Docket No. EL19-39-000

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