D.C. Circuit rejects challenge to FERC demand curve

The U.S. Court of Appeals for the District of Columbia Circuit has ruled against several power plant owners who claimed the Federal Energy Regulatory Commission (FERC) had exceeded its authority by suspending the New York ISO (NYISO) demand curves for more than five months.

Using demand curves, NYISO holds monthly auctions to set the price of electric generating capacity in New York. The power generation petitioners also challenged several technical aspects of the proposed curves. The three-judge panel for the D.C. Circuit rejected all the challenges.

NYISO works to ensure that power generators have sufficient incentives to build new power plants when the grid needs additional supply. “The cost of power plant construction and fluctuations in price and consumer demand complicate this task. Fearing that unexpected decreases in price or demand might thwart cost recovery, power generators may forgo desirable investment in new generation,” the court noted.

NYISO uses monthly capacity auctions to reduce such uncertainties and encourage investment. Unlike the electricity market, in which generators sell actual power to retailers, the capacity market trades in the future supply of electrical power.

NYISO tries to calculate infrastructure investment by linking the price of capacity to the price needed to recoup the cost of building a hypothetical new peaker power plant.

Petitioners, TC Ravenswood and others with an interest in power generation, sought rehearing on a host of issues.

“They argued that the Commission’s acceptance of NYISO’s March 28 filing violated the Federal Power Act because it effectively suspended the proposed curves beyond the end of the five-month suspension period,” the court said. “They further challenged the Commission’s approval of both the 1.7% escalation factor and the anticipated E&AS [energy and ancillary services] revenues estimate. NYISO and other objectors challenged the Commission’s decision to account for property taxes in the cost of new entry.”

The court rejected their arguments.

Other companies involved in the case include NRG Energy (NYSE:NRG), Astoria Generating and the Consolidated Edison Company of New York.

The case had been argued in mid-October. Ravenswood versus FERC       No. 12-1008, Consolidated with 12-1081.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.