FERC approved a settlement agreement between its Office of Enforcement and Exelon Generation Company, LLC (Exelon) to resolve Enforcement’s investigation under Part 1b of the Commission’s regulations, 18 C.F.R. Part 1b (2019), into whether Exelon failed to correct erroneous data transmitted to ISO New England Inc. (ISO-NE) regarding the type and quantity of fuel used to start up the company’s Mystic 7 generating unit.

Under the settlement, Exelon agrees to pay a civil penalty of $32,500 and to pay disgorgement of $101,156, plus interest totaling $15,324.45.

Exelon is the owner and operator of the Mystic 7 generating unit, a dual fuel steam turbine located outside of Boston, Massachusetts. Exelon is a “Seller” under 18 C.F.R. § 35.41 because it has authority from the Commission to sell electricity at market-based rates. Mystic 7 is capable of operating on either natural gas or No. 6 fuel oil, and requires a blend of both to start up.

Beginning in July 2016, Exelon registered the plant’s primary fuel as oil with ISO- NE because of Exelon’s inability to reliably source natural gas for Mystic 7. When Mystic 7 was offered into the market with oil as its primary fuel source, the plant was uneconomic during much of the year. As a result, when Mystic 7 was dispatched by ISO- NE, it was often for reliability purposes.

Because Mystic 7 is a capacity resource, the ISO-NE tariff requires Exelon to submit a supply offer on Mystic 7’s behalf into the ISO-NE market every day. Included in the information submitted as a part of that offer is a representation regarding the type and quantity of fuel needed to start up the plant. Beginning in December 2014, Mystic 7’s supply offers indicated that the generator exclusively used No. 6 fuel oil to start up. This information, which was incorrect since the plant also required natural gas to start, was the result of an error in an internal spreadsheet. This inaccuracy caused Exelon to be overcompensated by ISO-NE in select circumstances -- namely, when Mystic 7 had not been dispatched economically, but then was called upon by ISO-NE to operate for reliability purposes. In these circumstances, ISO-NE compensated Exelon based in part on Mystic 7’s stated operating costs, including the erroneous cost of start-up fuel.

This error went unnoticed until August 2016, when the ISO-NE Internal Market Monitor (IMM) began an investigation of Mystic 7’s fuel use. Enforcement subsequently opened an investigation upon receiving a referral from the IMM, gathered evidence via data requests, and took testimony that confirmed Exelon had misreported both the type and quantity of Mystic 7’s start-up fuel. Beginning with the IMM’s inquiry in August 2016, Exelon took steps to correct its start-up data and ultimately fully corrected the information to ISO-NE’s satisfaction on May 17, 2019.

FERC said that two provisions of the ISO-NE tariff governed Exelon’s above-described conduct. First, Market Rule 1 § III.1.7.20(b) requires that “Market Participants selling from Resources within the New England Control Area shall . . . continuously maintain all Offer Data concurrent with on-line operating information.” Second, Tariff § III.13.6.1.1.2 requires that “Day-Ahead Energy Market and Real-Time Energy Market offers . . . must reflect the then-known unit-specific operating characteristics” of a resource. "However, Exelon failed to maintain Mystic 7’s Offer Data with the generator’s known operating information and characteristics in violation of these two provisions, and, thus, also in violation of Section 35.41(a)," FERC said

Section 35.41(b) provides a “Seller must provide accurate and factual information and not submit false or misleading information, or omit material information, in any communication with the Commission, Commission-approved market monitors, Commission-approved regional transmission organizations, Commission-approved independent system operators, or jurisdictional transmission providers, unless Seller exercises due diligence to prevent such occurrences.” Staff did not conclude that Exelon purposefully submitted false data to ISO-NE and accepted the company’s representation that the errors were inadvertent. "However, Exelon did not have sufficient internal controls to prevent the transmission of incorrect start-up data," FERC said

See FERC's order for more (Docket No. IN20-3)

Emera

FERC also approved a separate settlement related to Emera Energy Incorporated

FERC approved a settlement agreement between its Office of Enforcement (Enforcement) and Emera Energy Incorporated (Emera Energy) to resolve Enforcement’s investigation under Part 1b of the Commission’s regulations, 18 C.F.R. Part 1b (2019), into whether Emera Energy supported Fuel Price Adjustment Requests (FPA Requests) using fuel costs that did not reflect an arm’s length fuel purchase transaction contrary to ISO-NE Tariff Market Rule 1, Appendix A § III.A.3.4(b).

Emera Energy agrees to pay a civil penalty of $5,000 and to pay disgorgement of $14,120, plus interest totaling $2,002.19.

Emera Energy was, during the time at issue, an affiliate of Rumford Power Inc., the operator of a 265 MW combined cycle natural gas-fired power plant (Rumford) located in Rumford, Maine.

The ISO-NE Tariff allows market participants to make a FPA Request “whenever the Market Participant’s expected price to procure fuel . . . will be greater than that used by the Internal Market Monitor [(IMM)] in calculating the Reference Levels for the Supply Offer.” See ISO-NE Tariff, Market Rule 1, Appendix A § III.A.3.4(a). A market participant submitting a FPA Request must submit documentation or analysis to the IMM substantiating this belief. Id at § III.A.3.4(a)(ii). This documentation or analysis may include one of three forms specifically enumerated in the Tariff: 1) “an invoice or purchase confirmation,” 2) “a quote from a named supplier,” or 3) “a price from a publicly available trading platform.” Id § III.A.3.4(b). The ISO-NE Tariff instructs market participants to consult the IMM when encountering problems with the FPA Request Process. Id. § III.A.3.1. Emera Energy relied primarily on the third form of documentation or analysis, screenshots of prices from publicly available trading platforms, namely ICE, to substantiate its Rumford-related FPA Requests.

According to FERC's order, on November 21, 2016, Emera Energy self-reported to Enforcement that it had substantiated sixteen FPA Requests for Rumford during the period August 2015 through November 2016 with an ICE screenshot displaying an offer to sell natural gas posted by Emera Energy. Because of illiquidity at PNGTS, Emera Energy was sometimes unable to provide a price from a publicly available trading platform, namely a screenshot of prices on ICE, supporting the company’s belief that the cost of natural gas for Rumford would be higher than the gas price used by the IMM for its Reference Level. Where no offers were available on ICE at PNGTS, Emera Energy personnel responsible for submitting FPA Requests would request that Emera Energy’s gas desk post to ICE an offer to sell natural gas at PNGTS. The purpose of this posting was to provide the type of documentation and analysis envisioned by Appendix A § III.A.3.4 that Emera Energy could then submit to the IMM as part of a FPA Request.

According to FERC's order, on or about November 9, 2016, following a regular FERC compliance training session for Emera Energy personnel, an Emera Energy employee approached one of Emera Energy’s in-house counsel regarding the submission by Emera Energy of FPA Requests to the IMM for Rumford. The company reviewed its records and the process in question and submitted the November 21, 2016 self-report. Emera Energy ceased the above-described practice contemporaneous with its internal review. Emera Energy also promptly consulted with the IMM regarding the practice.

FERC's order stated, "Enforcement determined that Emera Energy violated 18 C.F.R. § 35.41(a) and ISO-NE Tariff Market Rule 1, Appendix A § III.A.3.4(b). That provision of the ISO-NE Tariff requires that evidence supporting a FPA Request must reflect 'an arm’s length transaction.' We have consistently held that affiliated entities are not capable of engaging in “arm’s length transactions” because there is insufficient assurance that an agreed upon price will genuinely reflect market forces. Thus, the indirect quote of a price by Emera Energy’s gas desk to Emera Energy’s power desk did not reflect an “arm’s length transaction.”

See FERC's order for more (Docket No. IN20-2)

Tags:
FERC   ISO-NE   ISO New England  

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