FERC Orders Virtual Marketers To Payback, With Interest, Refunds Received Under FERC's Prior "Erroneous" Order

FERC, in an order on remand, ruled that virtual marketers should be required to repay refunds, with interest, that FERC had previously granted to the marketers but which FERC later rescinded, in order to put the parties back in the positions in which they would have found themselves if the Commission had not "erred" in requiring refunds to the marketers in the first place.

The case involves the allocation of marginal line loss surpluses in PJM. FERC originally excluded virtual transactions from the surplus payments, then allowed certain virtual transactions to qualify, with refunds ordered for certain virtual traders who had been excluded from the surplus allocation. Then, on rehearing, FERC reversed itself and said that the virtual transactions that it had previously said should enjoy the surplus allocation should not receive any surplus.

FERC's latest decision was appealed, and while the court sustained FERC's decision to exclude virtual transactions from the surplus payouts, the court said FERC did not sufficiently address whether virtual traders who received refunds under the erroneous FERC order should have to repay such refunds

On remand, FERC said that PJM is entitled to require virtual traders to repay the refunds, with interest

"We find that failing to permit recoupment of these erroneously issued refunds would reduce the incentive of parties to seek to correct legal errors or policy deviations made by the Commission in initial orders. If parties could receive no relief from improvidently granted refunds, they would have no reason to incur the legal and other expenses involved in seeking rehearing of orders directing refunds," FERC said

FERC was, "persuaded by PJM's assertion that recoupment will have a positive effect on the market because market participants know they will not be permitted to retain erroneously paid refunds."

Docket No. EL08-14-010