Appeals court rejects appeal of FERC decisions on ISO New England auction

In an Oct. 25 ruling, a three-judge panel at the U.S. Court of Appeals for the D.C. Circuit rejected complaints from Public Citizen and the state of Connecticut, which had sought review of two notices issued by the Federal Energy Regulatory Commission as part of ISO New England’s eighth forward-capacity market.

Said the Oct. 25 court decision about the plaintiffs: “They contend we have jurisdiction because the Notices constitute either orders under the Federal Power Act or action unlawfully withheld under the Administrative Procedure Act. We disagree and dismiss for lack of jurisdiction.”

ISO-NE conducted forward capacity auction (FCA) 8 in February 2014. It then filed the auction results with FERC for review under FPA Section 205. Due to insufficient competition, the auction defaulted to administrative pricing rules, and it resulted in regional capacity price increases from approximately $1.2 billion to approximately $3 billion over one year.

In April of that year, the petitioners filed a timely objection to the rates, arguing they resulted from the unilateral exercise of market power. Subsequently, the plaintiffs each requested that FERC affirmatively determine whether FCA 8’s rates were just and reasonable and assess whether the market was unduly manipulated during the auction.

In response, FERC issued ISO-NE a deficiency letter requesting additional information concerning the auction. In September 2014, FERC’s Secretary issued a notice acknowledging the FCA 8 rates had become effective by operation of law pursuant to FPA Section 205. Individual statements released by the commissioners revealed that FERC—which at the time was composed of only four commissioners—had deadlocked about whether to approve the rates or set them for hearing.

In a joint statement, two commissioners concluded a settlement agreement required FERC to examine the reasonableness of the auction rates because evidence suggested FCA 8 had been influenced by the exercise of market power. The other two—one of whom was FERC’s current Chairperson—would have approved the rates. According to the Chairperson, as long as ISO-NE had conducted the auction in accordance with a FERC-approved tariff, the commission lacked authority to assess justness or reasonableness.

Petitioners separately filed for rehearing. The Secretary issued a second notice explaining the first notice was not a commission order and, consequently, the requests for rehearing were not valid. Petitioners’ cases were consolidated before this appeals court, where they now ask the judges to review the notices as final orders under FPA Section 313(b). Alternatively, they argue the FPA compels FERC to set challenged rates for a hearing and prevents FERC from permitting unjust rates to take effect; the commission’s failure to perform either duty constitutes action unlawfully withheld under the Administrative Procedure Act. Under either theory of jurisdiction, petitioners contend FERC’s reasons for permitting FCA 8’s rates to become effective were arbitrary and capricious. They therefore ask this court to remand with instructions to FERC to assess the justness and reasonableness of FCA 8’s rates.

Said the Oct. 25 ruling in part: “In sum, we hold FERC’s deadlock does not constitute agency action, and the Notices describing the effects of the deadlock are not reviewable orders under the FPA.”

The court also wrote: “[W]e conclude the FPA does not mandatorily obligate FERC to engage in either of Petitioners’ desired actions.”

The court noted that the commission Chairperson disclaimed authority to engage in any review whatsoever, so long as ISO-NE conducted the auction in accordance with its tariff. “This interpretation seems questionable at best,” the decision said. “And yet, without jurisdiction, we simply lack the power to assess its validity. Any unfairness associated with this outcome inheres in the very text of the FPA. Accordingly, it lies with Congress, not this Court, to provide the remedy.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.