Daily Email







Updated: FERC Finds MISO Zone 4 Capacity Rates From 2015/16 Auction To Be Just And Reasonable

Capacity Price Had Jumped From $16 To $150, Prompting Public Citizen To Allege Withholding

Glick Dissents, Faults "Conclusory Assurance" Under FERC's Order, Says Decision Not Adequately Supported

July 18, 2019

Email This Story
Copyright 2010-19
Reporting by Paul Ring •

The following story is brought free of charge to readers by EC Infosystems, the exclusive EDI provider of

Update, 7/22:

FERC's written order has been released

FERC's order states, "We deny Complainants’ allegations that Dynegy exercised market power in the 2015/16 Auction, causing an unjust, unreasonable, and unduly discriminatory Auction Clearing Price in Zone 4. MISO conducted the 2015/16 Auction in compliance with the MISO Tariff, including the Tariff provisions pertaining to Dynegy’s offers in the Auction, that were designed to mitigate the exercise of market power and result in a just and reasonable rate."

"These Tariff provisions, approved by the Commission, expressly allow offers into the Auction at levels up to and including the Cost of New Entry for the Zone where the capacity being offered is represented. For the 2015/16 Auction, the Cost of New Entry for Zone 4 equaled $247.40/MW-day. As Dynegy explains in its answer, it offered 1,709 MW of capacity at $0/MW-day, 270 MW of capacity at $108/MW-day, 651 MW of capacity at $150/MW-day, and 2,775 MW of capacity at $167/MW-day. Because all of Dynegy’s offers were made below the Cost of New Entry for Zone 4, the offers themselves were permissible under the Tariff. We agree with MISO and Dynegy that an Auction Clearing Price is not unjust and unreasonable because it is higher than expected. We find no evidence in the record to support a finding that Dynegy’s offers violated MISO’s Tariff and we conclude, as discussed below, that the resulting Auction Clearing Price was just and reasonable," FERC said

"Because Dynegy’s offers all fell below the $180.53/MW-day conduct threshold for Zone 4, those offers were considered to be competitive under the Tariff and therefore did not warrant mitigation," FERC said

"We find that the 2015/16 Auction Clearing Price in Zone 4 was just and reasonable because it resulted from the application of MISO’s Tariff, which had previously been accepted as a just and reasonable approach to mitigating the effects of anticompetitive behavior in the capacity market. We therefore deny Complainants’ requests to: (1) establish a new rate that is just and reasonable; (2) suspend the Auction Clearing Price for Zone 4 effective June 1, 2015 or, if the rate is not suspended, establish a refund effective date of June 1, 2015; or (3) set the issues for settlement judge proceedings or set the matter for discovery and evidentiary hearing," FERC said

Concerning the investigation into the matter by FERC's Enforcement Office, FERC said, "As the Commission indicated in its December 2015 Order, the Commission’s Office of Enforcement had already initiated a formal, non-public investigation into whether market manipulation occurred before or during the 2015/16 Auction. That investigation has been closed."

"The dissent suggests that the Office of Enforcement did not have an opportunity to conduct a full and thorough investigation of the conduct at issue in this case. We disagree. Because the Commission converted that investigation from an informal to formal investigation, the Office of Enforcement was fully authorized to 'administer oaths and affirmations, subpoena witnesses, compel their attendance and testimony, take evidence, compel the filing of special reports and responses to interrogatories, gather information, and require the production of any books, papers, correspondence, memoranda, contracts, agreements, or other records.' That investigation was open for more than three years, during which time the Office of Enforcement reviewed over 500,000 pages of documents and took 17 days of testimony, from 11 witnesses. We reject any implication that the investigation was not sufficiently complete to consider the conduct at issue," FERC said

"Based on a review of the investigation, we find that the conduct investigated did not violate the Commission’s regulations regarding market manipulation. We conclude, therefore, that no further action is appropriate to address the allegations of market manipulation raised in the complaints," FERC said

Originally published 7/18:

FERC has decided that the results from the Midcontinent ISO 2015/16 Planning Resource Auction for Local Resource Zone 4 were just and reasonable

A written order in the proceeding was not yet available

In the case, EL15-70 et al., Public Citizen, Inc. alleged that the spike in prices from $16.75 to $150.00 for Zone 4 in the 2015/16 auction, "may be the result of illegal manipulation and gaming of the auction bidding process, specifically capacity withholding, contrary to Section 222 of the FPA."

"Public Citizen believes that the available evidence suggests Dynegy may have engaged in intentional capacity withholding," Public Citizen had alleged in the complaint

In an answer to the complaint, Dynegy said that its offers were competitive, and that there was no physical or economic withholding. In its initial answer, Dynegy said that the price spike resulted from the use of a vertical demand curve and residual capacity market construct, which Dynegy said results in volatility. Dynegy denied the allegations in the complaint

A summary of FERC's action today said that FERC granted certain motions to dismiss in the proceeding, declined requests to hold an evidentiary hearing to resolve issues related to the 2015/16 Auction, and found that the results of the 2015/16 Auction for Zone 4 were just and reasonable.

Commissioner Richard Glick dissented from the order

"I dissent from today’s order because it fails to adequately address the key question posed by the complaints: Whether the results of the Midcontinent Independent System Operator, Inc.’s (MISO) 2015/2016 capacity auction (2015 auction) were just and reasonable. Instead, it makes a series of statements, none of which adequately support the Commission’s finding that those results were just and reasonable. First, the order states that the relevant tariff language was followed. Second, it explains that Commission staff conducted a non-public investigation. However, the enforcement proceeding was subsequently terminated by the Chairman without a vote by the full Commission. Finally, the order makes an unsupported statement that the conduct examined in that truncated enforcement process did not violate the Commission’s regulations regarding market manipulation. Because serious allegations of market manipulation deserve more than a conclusory assurance that there is nothing to see here, I have no choice but to dissent," Glick said

"As an initial matter, the fact that MISO and the individual market participants appear to have followed the relevant tariff language does not respond to allegations that the resulting rates are unjust and unreasonable as a result of market manipulation. I am not aware of any authority to support the proposition that a market participant can commit market manipulation with impunity so long as it does not violate any tariff provision. To the contrary, in cases involving section 10(b) of the Securities Act of 1934 -- the template for the prohibition on market manipulation in section 222 of the Federal Power Act (FPA) -- courts have repeatedly recognized that a facially legal action can constitute manipulation when it is taken for an improper purpose. The courts have similarly instructed the Commission to 'not take a cramped view of the types of deception that can give rise to fraud' and that 'the same conduct may or may not be deceptive depending on an actor’s purpose.' And the Commission itself has recognized that conduct consistent with the relevant tariff can nevertheless be manipulative if motivated by an illicit or improper aim," Glick said

"I do not interpret today’s order to indicate that the Commission has had a change of heart and now believes that simply following the relevant tariff creates a safe harbor for market manipulation. Such an about face would be an unreasoned departure from settled policy and would seem to directly contravene the case law cited in the previous paragraph. This means, however, that the absence of a tariff violation cannot be a complete answer to an allegation that market manipulation rendered the 2015 auction results unjust and unreasonable," Glick said

"Instead, we must also believe that the 2015 auction results were not the product of market manipulation. I see no basis for that belief in today’s order, which notes that a non-public investigation into alleged manipulation was commenced by the Commission and has since been closed. Although the Commission directed that investigation, the decision to close it was made by the Chairman without consulting the other commissioners. Had I been consulted, I would have argued against terminating the enforcement process. Because the details of the investigation were, and remain non- public at the choice of the Commission, I cannot explain why I disagree with the Chairman’s decision to close the investigation. Suffice it to say that I believe that the evidence uncovered to date was more-than-sufficient to justify continuing the enforcement process," Glick said

"But even putting aside my disagreement with the fate of that investigation, today’s order provides a wholly unsatisfactory response to the allegations of market manipulation raised in the complaints. Although the Commission can choose to publicly disclose aspects of a non-public investigation, the Commission has not done so here. Today’s order does not provide even the scantest reasoning to support its finding that the nearly 1,000 percent year-over-year increase in the MISO Zone 4 capacity price had nothing to do with market manipulation. Instead, all we have is the Commission’s unsubstantiated assurance that no one violated the Commission’s regulations regarding market manipulation," Glick said

"The premature end to the enforcement process coupled with the conclusory assertion that there was no market manipulation leave important questions unanswered. Given those unanswered questions, I do not believe we can say with any confidence that the 2015 auction was not subject to market manipulation. Accordingly, because I cannot make that judgment, I cannot join the Commission’s conclusion that the 2015 auction results were just and reasonable," Glick said

NEW Jobs on
NEW! -- Energy Contracts Counsel -- Retail Supplier
NEW! -- Senior Natural Gas Energy Trader -- Retail Supplier
NEW! -- Operations Manager -- Retail Supplier
Quality Assurance and Customer Service Manager -- Retail Supplier

Email This Story


Copyright 2010-16 Energy Choice Matters.  If you wish to share this story, please email or post the website link; unauthorized copying, retransmission, or republication prohibited.



Daily Email