On July 19, 2019, FERC largely denied four complaints filed in May and June of 2015 (“2015 Complaints”) concerning the results of the Midcontinent Independent System Operator, Inc.’s (“MISO”) 2015/16 Planning Resource Auction (“2015/16 Auction”) for Local Resource Zone 4 (“Zone 4”).  In relevant part, FERC: (1) found that the results of the 2015/16 Auction for Zone 4 were just and reasonable; and (2) denied requests to hold an evidentiary hearing to resolve issues related to the 2015/16 Auction.  Specifically, FERC found no evidence in the record indicating that certain Auction offers violated the MISO Tariff, and the resulting Zone 4 auction-clearing price was just and reasonable.

In the 2015 Complaints, Public Citizen, Inc., the Illinois Attorney General, and Southwestern Electric Cooperative, Inc. (collectively, “Complainants”) alleged that the 2015/16 Auction resulted in an unjust, unreasonable, and unduly discriminatory rate increase in Zone 4.  They also argued that the 2015/16 Auction may be the result of: (1) unjust and unreasonable tariff rules governing MISO’s Auction process; (2) illegal market manipulation by Dynegy Inc. (“Dynegy”); and/or (3) the exercise of market power by Dynegy–the pivotal supplier in Zone 4 during the 2015/16 Auction.

FERC issued its first order on the 2015 Complaints in December 2015, where it found, among other things, that certain provisions in the MISO Tariff relating to market power mitigation and the calculation of capacity import limits were no longer just and reasonable going forward.  FERC directed MISO to implement the revisions to be applied in future Auctions.  FERC also stated that its Office of Enforcement was conducting a formal, non-public investigation into whether market manipulation occurred and indicated that it would determine in a subsequent order whether additional action may be appropriate pending the outcome of the formal investigation.

In the instant order, FERC found that the results of the 2015/16 Auction for Zone 4 were just and reasonable.  FERC denied 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.  In reaching this finding, FERC relied on the fact that MISO conducted the 2015/16 Auction in compliance with its Tariff, which were designed to mitigate the exercise of market power.  FERC found that because all of Dynegy’s offers were made below the Cost of New Entry for Zone 4, they were permissible under the Tariff.  FERC also found that, because Dynegy’s offers all fell below the conduct threshold for Zone 4, the offers were competitive under the Tariff and did not warrant mitigation.  Having found no evidence in the record to support that Dynegy’s offers violated MISO’s Tariff, FERC concluded that the resulting auction-clearing price was just and reasonable.  Accordingly, FERC declined to (1) establish a new rate, suspend or establish a refund effective for the auction-clearing price for Zone 4 effective June 1, 2015; (2) set the issues for settlement judge proceedings; or (3) set the matter for discovery and evidentiary hearing.

Finally, with respect to the allegation of market manipulation, FERC found that, based on its review of the formal, non-public investigation conducted by its Office of Enforcement, Dynegy’s bidding conduct did not violate FERC’s regulations regarding market manipulation.  FERC therefore concluded that no further action on that aspect of the 2015 Complaints was needed.

Commissioner Richard Glick issued a separate dissenting opinion concluding that the majority’s decision failed to adequately address the key question of whether the results of the 2015/16 Auction were just and reasonable.  Commissioner Glick faulted the majority for concluding that because the auction was conducted in accordance with the Tariff rules, there was no market manipulation.  Rather, Commissioner Glick argued that the absence of a tariff violation does not mean FERC cannot find market manipulation has occurred.  Commissioner Glick further argued that the Chairman should not have closed the non-public investigation into the alleged manipulation without consulting the other Commissioners.

Click here to read the full order.