FERC denies NRG complaint on MISO handling of FTR auction

FERC sided with the Midcontinent ISO (MISO) in a recent order on financial transmission rights (FTRs), denying the complaint of NRG Power Marketing LLC that MISO violated its tariff when it combined commercial pricing nodes in MISO South and nullified FTR auction results that were completed before the integration of MISO South.

MISO’s actions did not violate its tariff and NRG Power Marketing was notified that FTR auction results ahead of the Dec. 19, 2013, integration of MISO South would be subject to change and may be of limited value following the MISO South integration, FERC said.

FTRs allow the holder to hedge transmission congestion costs, entitling them to either receive compensation for, or pay for, congestion charges that arise when the transmission grid is congested between an FTR receipt point and an FTR delivery point.

NRG Power Marketing, a subsidiary of NRG Energy (NYSE:NRG), claimed that it lost about $13.5m in value of FTRs as a result of MISO collapsing the commercial pricing nodes in MISO South into one node after the bid window for FTRs had closed. The company, which markets output from NRG Energy generation facilities, asserted in the complaint that MISO’s action deprived it of its right to receive compensation for FTRs it had purchased in the 2013 annual auction and October 2013 partial-year monthly auction of FTRs.

Those auctions were held before the integration of MISO South, where NRG Energy’s generation assets are connected with transmission facilities owned by Entergy (NYSE:ETR), FERC noted in the Feb. 1 order.

In its complaint, the marketer said it purchased the FTRs in the two auctions to ensure that after the MISO South integration, it could serve load from the generation assets and protect itself from any congestion charges.

MISO informed market participants after the auctions that it had redefined the commercial pricing nodes in MISO South as a single node, which NRG Power Marketing claimed was not allowed under its tariff. The company said that FERC should order MISO to provide it with the credits it would have received under the FTRs based on the commercial pricing nodes that were in effect at the time they were purchased.

MISO said that FERC should dismiss the complaint and that NRG Power Marketing knew or should have known, based on notices MISO provided, that MISO South was not modeled in the pre-integration FTR auctions, according to the Feb. 1 order.

MISO also said that NRG Power Marketing had no legal basis for relying on pre-integration FTR auctions to prematurely obtain any MISO South financial hedges, FERC said.

“We find that NRG has failed to demonstrate that MISO’s actions taken with respect to pre-integration FTRs acquired by NRG in the 2013 auctions violated MISO’s tariff,” the commission said in the order.

Combining the commercial pricing nodes into one node for MISO South was consistent with the MISO tariff, and MISO provided notice to market participants regarding that view, FERC said.

The order related that during MISO’s dispute resolution process, MISO offered to refund the $240,000 that NRG Power Marketing spent on the FTRs, but the offer was rejected by the marketer.

It is evident that pre-integration FTRs with both sources and sinks in what would become MISO South are fundamentally different products, with different potential values, than post-integration FTRs with both sources and sinks in MISO South, FERC said.

“NRG purchased the former but now seeks to be compensated for the potential value of the latter in the post-integration world,” the order said.

FERC noted that NRG Power Marketing participated in at least four stakeholder meetings before the conclusion of the 2013 annual auction where MISO discussed the MISO South integration, including the treatment and allocation of FTRs. If the marketer disputed MISO’s interpretation of the MISO tariff, it should have filed a complaint before the annual auction and the partial-year auction, FERC said.