Retail Supplier To Pay $4.7 Million Under Settlement Approved By FERC
March 30, 2022 Email This Story Copyright 2010-21 EnergyChoiceMatters.com
Reporting by Paul Ring • firstname.lastname@example.org
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FERC approved a Stipulation and Consent Agreement (Agreement) between its Office of Enforcement (Enforcement) and Constellation NewEnergy, Inc. (CNE, or Constellation) under which Constellation will pay $4.7 million to resolve an investigation into whether CNE complied with the pertinent California Independent System Operator (CAISO) tariff provisions regarding the treatment of imports for Resource Adequacy (RA) purposes.
CNE agrees to: (a) pay a civil penalty of $2,400,000 to the United States Treasury; (b) disgorge $2,300,000 (an amount that includes any and all applicable interest) to CAISO; and, (c) only use specific generation resources or firm contracts in connection with import RA moving forward.
FERC's order notes that, under the settlement, CNE neither admits nor denies the alleged violations.
A Constellation media representative provided the following statement to media outlets:
"This settlement resolves a CAISO tariff interpretation dispute concerning transactions that occurred five years ago,. While Constellation maintains it complied with the tariff, it is time to put this matter behind us."
--- Statement provided by Constellation
Discussing the at-issue RA tariff, FERC's order states, "One [compliance] option available to a LSE under the CAISO tariff is to use 'import' RA, which is intertie capacity to import electricity sourced outside the CAISO footprint. The CAISO tariff sets out a system for allocating how much "import" RA a LSE may offer and requires LSEs using import RA to offer into the CAISO energy market on a daily basis."
FERC's order states, " Entering 2017, CNE had in place a business practice whereby it did not source electricity for import before offering into both the CAISO day-ahead and real-time markets. CNE did not have a specific source of power linked to a specific RA import prior to submitting offers and instead intended to rely on the bilateral spot energy market if needed. As a part of this business practice, CNE regularly offered its import capacity into the CAISO day-ahead market at $399/MWh. If those day-ahead offers cleared, CNE would reoffer the import capacity in the real-time market at either $899/MWh or $999/MWh."
FERC's order states, "In June and August 2017, CNE did not meet RA-related dispatches because it was unable to secure electricity in the bilateral spot market. Following these events, CNE chose to cease the business practice referenced above."
CAISO tariff §§ 4.2.1 and 18.104.22.168 generally require market participants to follow dispatch and operating instructions issued by CAISO. Section 4.2.1 requires that market participants "shall comply fully and promptly with the Dispatch Instructions and Operating Instructions," while Section 22.214.171.124 requires market participants to "comply with Operating Instructions issued by the CAISO as authorized under the CAISO Tariff." Enforcement alleged CNE did not comply with these tariff provisions when it could not respond to RA-related dispatches by CAISO in June and August 2017.
CAISO tariff § 37.3.1 requires that market participants have a "reasonable expectation" of being "available and capable of performing at the levels specified in the [b]id" at the time it is placed in the day-ahead market.
Enforcement alleged that CNE lacked a sufficiently reasonable basis for its expectation that it would be able to wait to secure electricity in the spot market to support its RA imports during times when the market was constrained. To the contrary, Enforcement alleged it was unreasonable to expect that electricity would be readily or sufficiently available in the spot market during times when CAISO market prices rose to or above bids of $999/MWh because such prices usually reflect an environment in which it is difficult to secure sufficient supply to meet demand.
CAISO was directed to distribute the disgorgement pro rata to network load.