FERC Orders Generators To Justify $80 Million In Non-Market Costs Assigned to Retail Suppliers, LSEs

As a result of a court remand, FERC has directed ISO New England to request that 2013-2014 winter reliability program generation and demand response providers file information to justify their bids for the program

As reported last year, a federal appeals court said FERC engaged in "specious" reasoning in dismissing cost concerns from the 2013-14 ISO New England winter reliability program which imposed new, unhedgeable costs on retail suppliers, and whose costs ballooned past initial estimates.

Under the program, ISO-NE procured 1.995 million MWh at a total cost of $78.8 million

Click here for further background on the program and court's decision

In brief, the court found that FERC's order lacked record evidence to determine whether the winter reliability program's rates were just and reasonable, and remanded the issue to FERC

The court did not object to FERC's assignment of winter reliability program costs to LSEs such as retail suppliers

On remand, FERC ordered that program participants justify their bids.

"In light of the D.C. Circuit’s view that the Commission could not properly assess whether the Program’s rates were just and reasonable without a thorough assessment of the Program participants’ bid information or an assessment of the competitiveness of the Program, we direct ISO-NE to request from Program participants the basis for their bids, including the process used to formulate the bids, and to file with the Commission a compilation of this information, an analysis of such information by ISO-NE’s IMM, as well as ISO-NE’s recommendation as to the reasonableness of the bids," FERC said

"Specifically, ISO-NE should request from Program participants information that will enable ISO-NE’s IMM to evaluate the competitiveness of the Program and whether any amounts exceeding a participant’s cost of providing the winter reliability service are indicative of market participants exercising market power in that Program. We note that ISO-NE may choose to request from participants, and have the IMM analyze, similar cost components to the ones it used to calculate the payment rate for the 2014-2015 Winter Reliability Program and subsequent programs approved by the Commission (i.e. carrying costs, price risk, availability cost, and liquidity risk), as well as any other relevant bid components," FERC said