Taking A Recess

Posted on August 5, 2008 
Filed Under Uncategorized | Leave a Comment

There are so many interesting issues that I’d like to post on, but like the Commission, I’ll be taking an August recess - part work, part play.  I’ll see you back here in September!

FERC Compliance Workshop

Posted on July 12, 2008 
Filed Under Compliance, FERC | Leave a Comment

On July 8, I attended FERC’s compliance workshop which was, surprisingly filled to overflowing. While I applaud FERC for all of its outreach efforts, in enforcement and all other matters, quite honestly, I don’t see the use for panels like these since folks are often reluctant to address the really tricky issues. For example, at Tuesday’s event, all of the panelists deflected questions about the relationship of FERC’s enforcement jurisdiction to that of other agencies such as the CFTC.

This particular program lasted three hours, actually an hour under schedule As far as I could tell, it didn’t even need to last that long since Commissioner Mohler was able to summarize the key points in a five minute closing statement.

For those who missed the conference, which wasn’t transcribed, here’s the takeaway:

According to industry representatives on the panels, the key features of an effective compliance are buy-in from the top, adequate employeee training that avoids the problem of “training fatigue” and visibility and accessibility of compliance staff.

As for what FERC can do, panelists believed that the FERC help desk represented a good start. But panelists also asked FERC to provide more guidance on its priorities and additional clarity when interpreting how it will enforce its regulations. At least one panelist expressed a desire for FERC to create a matrix, similar to the one designed by NERC, that lists violations and the corresponding degree of seriousness. One attendee expressed that the RTOs take inconsistent positions on their willingness to offer compliance guidance or interpret their regulations, and asked FERC to work with the RTOs to help establish consistent practices.

FERC left the record open for two weeks to accept additional written comments.

Mobile-Sierra Thrives, But Snohomish’s Claims Survive Under Supreme Court’s Morgan Stanley Ruling

Posted on July 12, 2008 
Filed Under FERC, Mobile Sierra, Supreme Court | Leave a Comment

FERC decisions don’t often find their way up to the Supreme Court. With the complexity of the issues involved in FERC appeals, the federal courts of appeal that review FERC decisions can barely muster up the interest to discern the applicable precedent, let alone depart from it so substantially as to give rise to a circuit split that would catch the Supreme Court’s eye. Indeed, you need to go back half a decade to find the two most recent Supreme Court cases involving Part II of the Federal Power Act - and at least there, the cases raised the kind of juicy preemption issues that courts enjoy sinking their teeth into. See Entergy La. v. La PSC, 539 U.S. 39 (2003)(holding that FPA preempts state commission from blocking of costs allocated in FERC tariff); New York v. FERC, 535 U.S. 1 (2002)(affirming FERC Order No. 888, finding that FPA preempts state regulation over transmission without regard to wholesale or retail distinction).

So what compelled the Supreme Court’s to take on Morgan Stanley Capital Group v. PUD #1 of Snohomish County which revolves around the somewhat technical Mobile-Sierra doctrine and the dichotomous public interest/just and reasonable standard of contract review (or presumption, as the Court now calls it) that has since evolved? The Ninth Circuit. According to n. 7 of the majority opinion, up until the Ninth Circuit’s erroneous decision, the circuit courts’ understanding of the Mobile Sierra doctrine was so uniform that no circuit split concerning its meaning arose. At the same time, while rejecting the Ninth Circuit’s view of the Mobile Sierra, the Court affirmed the result which means that the contracts return to FERC for further review. Continue below the jump for the details of the ruling. Read more

Update - Illinois Withdraws Claims That Edison Continued to Use High Offer Strategy

Posted on July 11, 2008 
Filed Under Civil Penalties, Compliance, Enforcement, FERC | Leave a Comment

Just a week after urging FERC to investigate whether Edison Mission continued to engage in a questionable trading pattern that the company said had been discontinued, the Illinois Attorney General Lisa Madigan withdrew the motion, reports the Baltimore Sun.  Seems that new data released by PJM confirmed what Edison earlier: claimed the plants involved in the suspicious activity are not owned by Edison.  While it’s tough to admit a mistake, entrenchment in an untenable position can harm the credibility of one’s entire case.  So Madigan took the right approach by quickly dismissing the claim.

Still, neither Edison nor the FERC are off the hook. Madigan and multiple other entities — among them state commissions and industrial and consumer groups — continue to pursue their rehearing request of FERC’s approval of $9 million dollar settlement agreement with Edison.  The parties argue that by releasing Edison from liability associated with civil or administrative claims connected with the subject of the investigation, i.e., Edison’s alleged market manipulation, FERC’s settlement order unlawfully abrogated the rights of non-settling parties to pursue other remedies potentially available under the Federal Power Act such as refunds or disgorgement of profits.

States Fight FERC Resolution of Edison Mission Penalty

Posted on June 23, 2008 
Filed Under Civil Penalties, Compliance, Enforcement, FERC | 1 Comment

A few weeks back, I posted about FERC’s $9 million settlement with Edison Mission to punish the company for wasting staff’s time with evasive and obstructionist tactics during FERC’s investigation of possible market manipulation. But the settlement order does not make any findings on whether the underlying offense, i.e., Edison’s “high offer” pricing strategy, violated market manipulation rules. Though the order doesn’t specify, because Edison claimed that it discontinued the high offer practice in April 2006 and agreed to spend $2 million on a compliance program, presumably FERC found it unnecessary to probe further.

But the state of Illinois believes that Edison Mission continued to use the high offer pricing scheme after April 2006. As such, the Illinois AS filed a petition with FERC for rehearing of the settlement order and asking FERC to reopen its investigation of Edison Mission, reports Trading Markets and Reuters. According to the Illoins AG’s petition, analysis of past PJM bidding records suggests that Edison continued the high offer pricing strategy at several plants long after the time it claims the practice had ceased. For its part, Edison denies that the unlawful transactions came from its units. The American Public Power Association and seven other state commissions and industrial and consumer groups within the PJM market moved to intervene in the proceeding and joined in Illinois’ request to reopen the proceeding.

In addition to asking FERC to reopen the investigation, the parties challenge one section of the settlement agreement that provides that Edison Mission will not be held liable for any civil or administrative claims associated with the subject of the investigation. The parties contend that this language potentially prevents non-settlement parties from filing a Section 206 complaint or seeking other relief such as refunds or disgorgement of profits for Edison’s conduct. Indeed, many of the pleadings rely heavily on Maine PUC v. FERC, the DC Circuit discussed here, which forbids FERC from approving a settlement that would deprive third parties of their statutory rights under the FPA.

Asking FERC to reopen an investigation based on emergence of new evidence is a relatively simple procedure, and based on the new evidence from Illinois regarding Edison’s continuation of its high pricing strategy, I think it’s likely that FERC will take a second look at this matter. From a procedural perspective, the rehearing requests are trickier, because only parties to the proceeding, i.e., intervenors can file for rehearing under Section 313(b). Because the Edison settlement resulted from a staff investigation, FERC never issued public notice or invited intervention. And as I described here, FERC recently stated that as a general rule, it will not allow third parties to intervene in enforcement proceedings, though it would consider exceptions in cases (such as this one) where third parties are directly affected by FERC’s resolution of a penalty, such as where they are potential recipients of disgorged profits.

Here, however, the parties are impacted by FERC’s approval of the settlement because it deprives them of their statutory rights to seek additional relief — for example, in the form of a complaint to recover unjust profits. As such, FERC needs to cleanse the settlement order of any language releasing Edison from future liability, or at a minimum, FERC must clarify that the language does not foreclose parties aggrieved by Edison’s conduct from seeking other forms of administrative relief. But once FERC modifies the settlement agreement, Edison has the option of disavowing the agreement as well. Though I can’t predict how all of this will resolve, one thing is sure: after this case, FERC isn’t likely to be rubber-stamping settlement agreements without closer review.

FERC Fight Over Marine Renewables License

Posted on June 23, 2008 
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Over at my other energy blog, Renewables Offshore, I’ve done my best to offer my play by play predictions of the outcome of the Washington State Department of Ecology’s petition for review of FERC’s order issuing the first ever license for a marine renewable energy project . My bet: the license stands. What do you think?

A Video Introduction To FERCFights.Com

Posted on June 12, 2008 
Filed Under Announcement | Leave a Comment

Here’s my video introduction to FERC Fights, hopefully the first of many more to come (for those of you uninitiated in the video world, these are harder to tape in one cut than it looks!). Welcome!

Demand Response Makes Green

Posted on June 12, 2008 
Filed Under Demand Response, Reliability | Leave a Comment

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According to this post at Energy Tech Stocks , FERC is forecasting that the nation’s power system will rely more heavily on demand response (DR) this summer than in previous years. Specifically, FERC forecasts that in the Northeast, DR is expected to roughly double from just under 2% of internal demand to 4% while in the Midwest and Upper Midwest, DR is expected to increase to 6% of internal demand, up 50% over last summer’s 4%.

The increasing reliance on demand response is cause for celebration for two different groups of “green” interests. The environmentally green embrace DR because it reduces consumption from emissions-spewing power plants and if used extensively, can allow utilities to put off construction of new power plants. And for those to whom green means dollars, a hot summer will make investment in DR companies hot as well.

FERC Can Rely on NERC To Enforce Reliability Standards

Posted on June 12, 2008 
Filed Under Civil Penalties, Compliance, Enforcement, NERC, Reliability | Leave a Comment

Looks like FERC can rely on its alter-ego, NERC to enforce reliability standards. As reported by Reuters and Baltimore Sun, NERC issued the first two fines to two utilities for violating rules on vegetation management by failing to keep trees clear of power lines and causing brief power outages. Both of the offenders, Baltimore Gas and Electric and MidAmerican Energy self-reported the outages and accepted NERC’s respective proposed penalties: $180,000 for BGE and $75,000 for MidAmerican Energy.   Interestingly, BGE’s delay in clearing vegetation resulted, at least in part, from opposition by residents to its tree trimming practices, says the Baltimore Sun.   In addition to these penalties, NERC found that several other entities committed reliability violations, but did not warrante a penalty.  NERC’s orders can all be accessed at the Electric Reliability Law Blog.  FERC will have the final say over the penalties. Read more

Upcoming FERC Workshop on Enforcement - Will I See You There?

Posted on June 12, 2008 
Filed Under Announcement, Compliance, Enforcement, FERC | Leave a Comment

FERC is holding a Compliance Workshop in Washington D.C. on July 8, 2008. The workshop will give interested participants to share perspectives and information on federal energy regulatory compliance and focus, in particular, on the elements of a sound compliance program. One or more of the Commissioners may attend the workshop. The workshop won’t be web-cast or transcribed, but I’m hoping to attend and either Live Blog the conference or Twitter it — though my fellow twitterers may die of boredom at my tweets! Let me know either by email or in the comments if you’ll be attending. I’d love to meet you. And if you can’t make it, but you’re interested in a particular topic, let me know that too either by email, carolynelefant@fercfights.com or in the comments below.

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