NEPGA Files Request for Rehearing of Mitigation Order – No. ER18-1770

On December 10, NEPGA filed a Request for Rehearing of FERC’s November 9 order (a 2-1 decision, with Chairman Neal Chatterjee dissenting) granting ISO-NE’s and its Internal Market Monitor’s (IMM) request to change the mitigation methodology for Retirement De-List Bids (RDL) effective for FCA 13 (Docket No. ER18-1770). The IMM’s RDL mitigation review methodology requires it to assume an economic useful life for the resource (from 1-5 years), previously equal to the consecutive years (beginning with year one) in which its cumulative cash flow over that period remains positive. FERC accepted the ISO-NE change that will instead require the IMM to assume that the economic useful life of the resource is equal to the year in which the cumulative cash flow over a five-year period is at its highest or “maximized.” The change in methodology as applied to each RDL will have the effect, if any, of reducing the IMM-mitigated offer price. NEPGA filed a Protest on July 2 and Supplemental Protest on October 1. NEPGA argued in part that all Market Participants are harmed by not receiving notice of this change prior to the RDL submission deadline and that to change the mitigation rules as the IMM applies them in a given FCA would create poor precedent with respect to the certainty and finality of market rules. NEPGA further argued that for the change to take effect in FCA 13 would violate the filed rate doctrine and rule against retroactive ratemaking. The FERC majority, Commissioners Cheryl LaFleur and Richard Glick, disagreed, believing the change just and reasonable and necessary for effect in FCA 13 to avoid the “potential for uncompetitive outcomes.” The majority found that the change, as applied to FCA 13 RDLs, does not violate the filed rate doctrine, reasoning that the RDL is not a “rate” to which the doctrine applies but instead only an “input” to the “ultimate rate,” i.e., the FCA clearing price. With respect to the rule against retroactive ratemaking, the majority found that the change is “prospective” not retroactive because it takes effect prior to the auction, rejecting NEPGA’s argument that it is retroactive because it takes effect after Market Participants could act on the rule change through a Retirement De-List Bid or other priced offer into FCA 13. In its Request for Rehearing, NEPGA further argued that the majority is incorrect in finding that the RDL is not a rate subject to the filed rate doctrine, that if instead viewed as a change to ISO-NE’s rate it just as well violates the filed rate doctrine, and that the change is retroactive in that the material period of time for judging whether the change is retroactive is not whether it took effect prior to the auction, but whether it took effect before Market Participants could act on the change. With the change effective in August 2018 (per FERC’s order), NEPGA argues that it is retroactive in that it came after Market Participants could submit an FCA 13 RDL (due March 2018) or Static De-List Bid (due June 2018).


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