The members of the Federal Energy Regulatory Commission, in approving on June 16 ISO New England‘s latest Forward Capacity Auction results, again rejected a complaint from a utility workers union that plans to retire the coal-fired, 1,493-MW Brayton Point power plant in Massachusetts are a case of market manipulation.
In the June 16 order, the commissioners accepted ISO New England’s (ISO-NE) filing detailing the results of its tenth Forward Capacity Auction (FCA), to become effective June 28, 2016, as requested.
ISO-NE administers a Forward Capacity Market (FCM), in which capacity resources compete in an annual FCA to provide capacity for a one-year Capacity Commitment Period three years in the future. ISO-NE is required to submit a filing with the commission detailing the FCA results, including the final set of capacity zones resulting from the auction, the capacity clearing price in each capacity zone, the capacity clearing price associated with certain imports, a list of resources that received capacity supply obligations in each capacity zone, and the amount of those capacity supply obligations.
ISO-NE conducted FCA 10 on Feb. 8, 2016, for the June 2019-May 2020 Capacity Commitment Period.
The Utility Workers Union stated that the commission should reject the FCA 10 filing, asserting that the results are the product of illegal market manipulation and the exercise of market power by Energy Capital Partners, the former owner of the Brayton Point Power Station in the eighth and ninth FCA (FCA 8 and FCA 9). According to Utility Workers Union, Energy Capital Partners withdrew Brayton Point’s capacity from FCA 8 by retiring the plant in order to increase capacity payments to Energy Capital Partners’ other assets.
The Utility Workers Union said that the current owner of Brayton Point, Dynegy (NYSE: DYN), has continued to violate the ISO-NE Tariff in this manner by not submitting Brayton Point’s capacity into FCA 10. Furthermore, Utility Workers Union argued that the commission’s recent approval of ISO-NE’s changes to the rules governing resource retirements demonstrates that omitting the Brayton Point capacity, or a proxy price that represents the Brayton Point capacity, from the FCA has resulted in the auction being non-competitive, and the resulting prices unjust and unreasonable.
Referencing its previously filed protests in the FCA 8 and FCA 9 proceedings, Utility Workers Union again contended that Brayton Point would have been capable of running economically in 2017 and beyond. Utility Workers Union requested that, at a minimum, the FCA 10 results be stayed while the parties conduct discovery and adjudicate the legality of Energy Capital Partners’ actions.
NEPGA, ISO New England argued against the union’s claims
The New England Power Generators Association (NEPGA) responded that Utility Workers Union’s allegation of market manipulation in FCA 8 has previously been considered and rejected by the commission. NEPGA further asserted that even if those allegations were found to be true, Utility Workers Union has provided no evidence that alleged market behavior in FCA 8 is relevant to the FCA 10 results, and points to the Internal Market Monitor’s certification that FCA 10 was a competitive auction.
NEPGA alleged that the Utility Workers Union is seeking to renew its allegation of market manipulation here by asserting that Brayton Point plant owners continued to withhold capacity from FCA 10. NEPGA argued, however, that the ISO-NE Tariff prohibited Brayton Point’s owners from offering its capacity into FCA 10, because once a resource has retired, it may not offer capacity into any subsequent FCA. NEPGA further stated that the owners of Brayton Point were not required to provide an economic justification for the retirement decision.
ISO-NE stated that Utility Workers Union’s claims of market manipulation are similar to the arguments Utility Workers Union made against Energy Capital Partners in FCA 8 and FCA 9. Consequently, ISO-NE argued that the commission should dismiss Utility Workers Union’s protest for the same reasons that the commission previously rejected those arguments in the order approving FCA 9.
Utility Workers Union asserted that it would be error for the commission to summarily find that there was no market manipulation (i.e., that there was no withholding of supply which could have been economically provided in FCA 8, FCA 9 and FCA 10, with the intention of causing higher prices) without allowing discovery and holding a hearing so as to determine whether the retirement of Brayton Point constituted market manipulation.
Said the June 16 FERC decision: “Utility Workers Union largely reiterates the same allegations it raised with regard to FCA 9, and we reject those allegations for the same reasons articulated in the Commission’s order accepting those results. We emphasize, as the Commission has stated in previous orders, that the Commission’s Office of Enforcement reviewed Brayton Point’s bidding behavior in FCA 8 to determine whether further investigation of Brayton Point was warranted, and ‘found credible justifications for the owners’ retirement decision and elected not to widen its investigation to include Brayton Point.’ We are not persuaded by Utility Workers Union’s allegations that market manipulation affected FCA 10 as the record is devoid of any evidence to that effect, and we similarly reject Utility Workers Union’s request for a stay pending discovery and further adjudication of that allegation. Indeed, the Internal Market Monitor has certified that the outcome of the auction was competitive, a finding based on rigorous qualification requirements including the application of mitigation rules and the competitive bidding and offering of resources.
“We further emphasize that once a resource submits a Non-Price Retirement Request, as Brayton Point did prior to FCA 8, the resource is precluded from offering capacity into subsequent auctions. Thus, contrary to Utility Workers Union’s assertion, Brayton Point could not have participated in FCA 10.
“Finally, we disagree with Utility Workers Union’s argument that ISO-NE’s new retirement reforms required it to establish a proxy bid for the Brayton Point capacity in FCA 10 and its failure to do so resulted in a non-competitive auction with a price that is not just and reasonable. When ISO-NE proposed its retirement reforms, it specified that those reforms would go into effect beginning with FCA 11, three years after it received a Non-Price Retirement Request for Brayton Point. The Commission found the retirement reform revisions to be just and reasonable, but that acceptance does not render previous auctions, held without these reforms in place, to be unjust and unreasonable. As the Internal Market Monitor certified, the FCA 10 was conducted in accordance with the Tariff and resulted in a competitive auction.”
Said Dynegy’s May 4 Form 10-Q filing with the SEC: “MISO has recently approved our retirement of the final two units at the 465 MW Wood River Power Station in Alton, Illinois on June 1, 2016. Additionally, our Brayton Point facility is expected to be retired in ISO-NE in June 2017. Upon the completion of the planned retirements and shutdowns, our Coal segment will include 5,207 MW of generation capacity, of which 1,323 MW will operate in MISO and 3,884 MW will operate in PJM.”