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US appeals court remands dispute over New England plant retirement rules to FERC

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US appeals court remands dispute over New England plant retirement rules to FERC

The Federal Energy Regulatory Commission must clarify whether power suppliers' bids for retiring units can be entered into New England's forward capacity auction so long those rates are just and reasonable, a U.S. appeals court ruled on Dec. 28.

The court asked FERC to resolve the issue by Feb. 1, 2019, before the March window for suppliers to submit retirement bids for ISO New England's 2020 forward capacity auction.

The ruling from the U.S. Court of Appeals for the District of Columbia Circuit stemmed from a complaint that electric generator Exelon Corp. filed against tariff changes that ISO New England made to prevent energy suppliers from improperly withholding capacity to drive up clearing prices (FERC docket ER16-551). The revised rules require all units in the region that want to retire to submit bids for those assets. If ISO New England's market monitor finds certain cost items in the bid are unsupported and the supplier's bid exceeds the monitor's preferred price by more than 10%, the monitor will substitute the original offer with a "mitigated bid."

Exelon argued that the new tariff trampled on its rights under Section 205 of the Federal Power Act by eliminating FERC review of suppliers' rates and the entering of those rates into New England's capacity auction so long as they are just and reasonable. Despite Exelon's protest, FERC accepted ISO New England's proposal and denied Exelon's request for rehearing, prompting the company to seek rehearing from the D.C. Circuit.

But in the court's Dec. 28 opinion, D.C. Circuit Judge Stephen Williams said FERC's counsel suggested during oral arguments in the case that the commission interpreted the new tariff rules in a way that "largely squares with Exelon's view" of its Section 205 rights. During oral arguments, FERC's counsel said the commission's rehearing order in the matter should be interpreted or rewritten to state that energy suppliers have the burden to prove their bids are just and reasonable, rather than ISO New England having to prove the market monitor's mitigated bids comply with the tariff.

"Agency counsel seemed to contend that the correct meaning of the challenged order was in conformity with the meaning that petitioner ascribed to the controlling statute," Williams said. "Because the parties' dispute may be illusory, we remand the record to the agency to sort out what it really means."

The case was argued before Williams and fellow D.C. Circuit Judges Gregory Katsas and Laurence Silberman, with Williams filing the court's opinion. (Exelon v. FERC, No. 17-1275)