Here Are Your 6 Top Stories This Week at FERC:

1. FERC Revokes Market-Based Rate Authority for 26 Utilities
2. PJM Updates Capacity Performance Proposal
3. Proposal For Centralized Bilateral Natural Gas Market Exchange Gets Pushback
4. NYPSC Takes FERC to Court Over New Capacity Zone
5. FERC Launches Investigation into Market Manipulation
6. ISO-NE Responds to NEPGA’s Winter Reliability Program Concerns

FERC Revokes Market-Based Rate Authority for 26 Utilities

On October 30, FERC published a Notice of Revocation of Market-Based Rate Tariff, revoking authority for 26 public utilities. On October 9, FERC had issued an order announcing its intent to revoke market based rate authority for a list of 43 public utilities, which had failed to file Electric Quarterly Reports (“EQRs”). Pursuant to FERC Order No. 2001, public utilities, including power marketers, are required to file EQRs summarizing the contractual terms of and conditions of their agreements and transaction information for sales from the most recent quarter. The utilities were given 15 days from the date of notice to file EQRs or face revocation of their authority. (Docket No. ER02-2001-018 et al.).

PJM Updates Capacity Performance Proposal

On October 7, 2014, PJM published its Capacity Performance Updated Proposal, which is meant to ensure that there is reliable generation during peak times. PJM means to do this by requiring resources to prove that they are capable of sustained and predictable operation. PJM is also proposing changes to limit the amount a capacity market price can change per year. The new proposal reflects comments made regarding, among other issues, future market uncertainty, and seeks to address this and other cost allocation concerns. Exactly how the increased cost of offering a Capacity Performance Resource will affect consumers is uncertain. Additionally, PJM crafted a plan for demand response in the event that the Supreme Court does not hear the case on Order 745, in order to prevent “chaos” from occurring before its next base residual auction (BRA) in May 2015.

Proposal For Centralized Bilateral Natural Gas Market Exchange Gets Pushback

To date, mixed comments have been submitted regarding a proposal for a centralized natural gas exchange that was part of an informal FERC meeting held on September 18 by Commissioner Philip D Moeller. The exchange is supposed to make natural gas trading more efficient by offering things like real time scheduling, coordination with pipelines, and an algorithm for pairing the best solutions to offers made on the system. Gas industry representatives pushed back, noting that there is a lack of infrastructure and no plan for infrastructure cost recovery, and that the cost of setting up the exchange would not be proportional to its benefit.

NYPSC Takes FERC to Court Over New Capacity Zone

On November 5, FERC and the PSC held a technical conference on NY markets and infrastructure. While capacity markets are resource neutral, NY policy objectives are not. To this end, of note was that on September 12, oral arguments were heard in the US Court of Appeals for the Second Circuit over the new capacity zone created by NYISO last year. Arguments were presented by CHG&E, NYSG&E, and RG&E on how the new zone will create unreasonably high and unfair prices to rate payers in the Lower Hudson Valley. FERC argued that new generation now would be less costly than later on. The three utilities voiced their doubt that any new generation would actually get built in part. The new zone is in conflict with NY’s plan to have a massive transmission line build out under the Energy Highway Blueprint, which will bring wind power, among other resources, downstate. The utilities also noted that residential bills are expected to rise 6%, industrial bills by 10%, and that the new zone already cost $80 million this past summer. The utilities asked the court to terminate the zone and order refunds.

FERC Launches Investigation into Market Manipulation

FERC has opened three investigative probes, one into the natural gas market and two into generators that took advantage of uplift payments last winter. The investigations are not yet public, but there is information on their general scope; the gas investigation involves allegations of downward price manipulation of a gas index in order to benefit short financial derivative positions. In regard to the uplift payments by generators, PJM’s market monitor alleged back in May that coal plants had taken advantage of high power and gas prices in order to raise their market bids. The spikes in coal prices may be due to withholding as they were not consistent with how resource constraints made natural gas prices spike. The office of enforcement noted that this is likely not the end of investigations into price manipulations last winter.

ISO-NE Responds to NEPGA’s Winter Reliability Program Concerns

On October 24, ISO-NE responded to New England Power Generator’s Association’s (NEPGA) complaint that ISO-NE was not considering market-based solutions in its Winter Reliability Program. The Program, approved by FERC on September 9, lays out a plan for fuel security, demand response, and incentives for commissioning dual fuel capacity by December 1, 2016. ISO-NE indicated that a supplemental winter program would likely be necessary for each winter before the Pay for Performance changes to the Forward Capacity Market become effective and are able to address the region’s concerns. In comments regarding that filing, NEGPA asked the Commission to order ISO-NE to create a market based program for future winters to allow for the identification of the economically efficient price for ISO-NE system reliability. ISO-NE countered by stating that Pay-for-Performance revisions will in fact provide a market-based solution.