General view of the electricity pylons and power lines leading from the Uniper coal-fired power plant in Hanau, Germany, in the early morning of November 23, 2016. REUTERS / Kai Pfaffenbach // File Photo

  • FERC did not reasonably explain the rationale for the price of $ 150 per MW-day at the 2015 auction
  • Panel refers case back to FERC for further analysis
  • Judges reject claims FERC must approve auction prices

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(Reuters) – A federal appeals court ruled on Friday that the Federal Energy Regulatory Commission acted arbitrarily under the Federal Power Act (FPA) when it determined that wholesale electricity prices during An auction in Illinois that was 40 times those in neighboring states were reasonable.

A unanimous US Circuit Court of Appeals panel for the DC Circuit agreed with consumer advocacy group Public Citizen that FERC did not explain, in administrative proceedings, why the auction rules of 2015 that it found problematic and affected the auction’s pricing mechanism did not disqualify its sales of electricity at a price of $ 150 per megawatt-day.

FERC President Richard Glick said in a statement: “There was no excuse for the Commission not to respond to Public Citizen’s serious allegations of manipulative conduct or the” unusual magnitude of the situation. ‘tariff increase “.”

Richard Bress of Latham and Watkins, who represents Texas-based Dynegy, declined to comment.

Public Citizen attorney Scott Nelson told Reuters: “We are delighted that the court has recognized that FERC has an obligation to ensure that rates resulting from market-based pricing mechanisms are fair and reasonable and that he found that the FERC had breached this obligation here. “

Public Citizen sued FERC last year after the regulator in 2019 and 2020 denied some of the group’s allegations to the regulator.

In addition to the unreasonable selling prices, the group also alleged that the electricity company Dynegy manipulated the market during the auction by using its role as the primary essential electricity supplier in Illinois to artificially raise the prices of Auction.

In the April 2015 auction, Illinois utilities purchased what is known as electric capacity, which is typically a commitment by a power plant to supply electricity to a utility at the future. The prices of these auctions are largely set by the price at which the last bid is selected to meet regional electricity needs.

The state of Illinois, which also filed a complaint with FERC about the auction’s prices, calculated that average residential customers in parts of Illinois would pay an additional $ 131 the following year to following the sale, depending on the decision.

FERC, in a 2015 order that followed the auction, found its rules to be outdated, so the price caps for sellers are no longer fair and reasonable for future auctions, he said.

U.S. circuit judge Patricia Millett, writing for the panel, said FERC “failed to reconcile” this finding with its subsequent orders which found the flaw had not “infected” the 2015 sale.

Rather, in its 2019 order, FERC said that Dynegy offered prices at the auction that were necessarily fair and reasonable given that they were permitted under the then applicable tariff rules, according to the ruling.

“It won’t be enough,” Millett wrote. The FERC “was obligated” to explain why the analysis underlying its 2015 conclusion that the auction rules were “flawed” did not apply to the auction results themselves, he said. -she writes.

The FERC orders for 2019 and 2020 “absolutely did not adequately address Public Citizen’s claim that Dynegy’s manipulation of the market produced unfair and unreasonable results in the 2015 auction,” Millett wrote.

Millett, who was joined by U.S. circuit judges David Tatel and Cornelia Pillard, however rejected Public Citizen’s claim that FERC must approve auction prices before they go into effect.

The panel referred the case back to FERC for further analysis.

The case is Public Citizen, Inc. v. FERC, US Circuit Court of Appeals for the Columbia Circuit, No. 20-1156.

For Public Citizen, Inc: Scott Nelson with the Public Citizen Litigation Group

For FERC: Lona Perry with FERC

For the intervener of the respondent Dynegy Marketing and Trade, LLC: Richard Bress and David Schwartz of Latham & Watkins

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Sebastien malo

Sébastien Malo reporters on environmental, climate and energy litigation. Contact him at [email protected]