On August 25, 2014, staff at the Federal Energy Regulatory Commission (FERC Enforcement) issued a Notice of Alleged Violations (NAV) against City Power Marketing, LLC, and its principal owner, K. Stephen Tsingas. The Notice said that FERC Enforcement has preliminarily determined that City Power and Tsingas violated the Commission’s Anti-manipulation rule through Up To Congestion (UTC) trading in the PJM market. FERC Enforcement has defined UTC as “a virtual product that earns or loses money on the change between the Day ahead market and the Real time market of the spread in prices between two price nodes in PJM’s system.” See Preliminary Findings of Enforcement Staff’s Investigation in Powhatan Energy Fund, LLC, http://ferclitigation.com/wp-content/uploads/0005-FERC-Preliminary-Findings-August-9-2013-2002899_1.pdf. FERC Enforcement also alleged that City Power made false statements and omitted material information during the investigation. (more…)
WE KNOW ENERGY®
Robert E. Pease
On August 15, 2014, the U.S. Court of Appeals for the D.C. Circuit (D.C. Circuit) issued an opinion in South Carolina Public Service Authority v. FERC, Case Nos. 12-1232, et al. (consolidated), upholding the Federal Energy Regulatory Commission’s (FERC) Order No. 1000 in its entirety, giving FERC a major win in a case involving 45 petitioners and 16 intervenors.
Authority to Require Participation: In Order No. 888 in 1996, FERC required public utility transmission providers to functionally unbundle their wholesale generation and transmission services and file open-access transmission tariffs to provide non-discriminatory transmission service and to provide the benefits of competitively priced generation. Previously, the D.C. Circuit upheld Order No. 888 in nearly all respects. In this opinion, the D.C. Circuit affirmed FERC’s conclusion that transmission planning affects transmission rates and that FERC has authority under Section 206 of the Federal Power Act (FPA) to require transmission providers to participate in a regional planning process. The Court expressed its view that such a requirement is simply the next step in reforms that began with Order No. 888. The Court also concluded that the statutory directive for “voluntary interconnection and coordination” found in Section 202(a) of the FPA does not bar FERC from requiring regional planning and that Order No. 1000 does not interfere with traditional state authority. (more…)
Robert E. Pease
On August 5, 2014, the Federal Energy Regulatory Commission’s (FERC) Secretary, at the direction of the Division of Enforcement, issued a Notice of Alleged Violations against Powhatan Energy Fund, LLC, a hedge fund owned by brothers Kevin and Richard Gates. In the Notice, FERC Enforcement alleged that Powhatan’s trader, Dr. Houlian Chen, engaged in Up to Congestion trades in the PJM market that allegedly were the equivalent of wash trades in violation of FERC’s anti-manipulation rule. FERC’s Notices generally reveal little about the matter under investigation. However, in this case we know a great deal about Enforcement’s case because Powhatan itself publically disclosed much of the investigative record. See http://ferclitigation.com/legal-back-and-forth/. It has been Powhatan’s contention that their actions have been transparent and fully consistent with the PJM tariff and FERC’s rules. Nevertheless, in staff’s preliminary findings, dated August 9, 2013, Enforcement alleged that Chen made the wash trades in order to capture millions of dollars from the Margin Loss Surplus Allocation (MLSA). FERC alleged that Powhatan entered the riskless trades in order to boost the volume of its trading thus increasing the MLSA payments. (more…)
Robert E. Pease and Caitlin Tweed
On July 7, the Federal Energy Regulatory Commission (FERC) approved a stipulation and consent agreement between FERC’s Office of Enforcement, the North American Electric Reliability Corporation (NERC) and Arizona Public Service Company (APS) resolving FERC and NERC’s joint investigation into APS’s involvement in the September 8, 2011 Southwest Blackout. The Southwest Blackout was a system disturbance in the Pacific Southwest that affected transmission in Arizona, California and Mexico, and ultimately caused a complete blackout of San Diego. FERC and NERC found that APS violated certain of the Transmission Operations (TOP) group of NERC Reliability Standards, and that these violations resulted in cascading outages in which 2.7 million customers, or approximately 5 million people, lost power for several hours. FERC and NERC concluded that APS failed to prepare for this type of event by not performing a unique day-ahead study for September 8 and by not coordinating its day-ahead studies with neighboring transmission operators, including the Imperial Irrigation District and the California Independent System Operator. APS has neither admitted nor denied the violations in the stipulation and consent agreement. (more…)
Stephen Hug and Serena Rwejuna
On June 19, 2014, the Federal Energy Regulatory Commission (“FERC” or “Commission”) issued a Notice of Proposed Rulemaking (“NOPR”) proposing to revise its standards for evaluating applications to sell energy, capacity, and ancillary services at market-based rates, as set forth in Order No. 697 and subsequent orders. FERC’s revisions have two primary goals: (1) to streamline the horizontal and vertical market power analyses that public utilities are required to submit when filing an application for market-based rate authority or a triennial market power update; and (2) increase the transparency of information that sellers report to FERC as part of the market-based rate process, including the seller’s affiliates and corporate structure and its interest in generation and transmission assets. (more…)
On Friday, April 25, approximately two dozen intervenors filed comments regarding PacifiCorp’s proposed amendments to its Open Access Transmission Tariff (“OATT”) to permit its participation in the California Independent System Operator Corp.’s proposed Energy Imbalance Market (“EIM”).
The CAISO EIM is the first proposed organized market structure across a multi-state footprint in the West, which is otherwise largely OATT-defined. PacifiCorp has contracted with the CAISO to be the first EIM participating balancing authority. The design and implementation of the new market requires substantial amendments to both the CAISO and PacifiCorp tariffs, and all proposals must be approved by the Federal Energy Regulatory Commission (“FERC” or “Commission”) as just, reasonable, non-discriminatory and non-preferential under the Federal Power Act. CAISO filed its proposed tariff amendments on February 28, and PacifiCorp filed its proposed OATT amendments on March 25. (more…)