D.C. Circuit examines ISO New England winter reliability program

4. Massachusetts (18.73 cents per kWh)

The U.S. Court of Appeals for the District of Columbia Circuit ruled Dec. 22 on a portion of a tariff revision that ISO New England filed with the Federal Energy Regulatory Commission that concerns the ISO’s winter reliability program.

A three-judge panel for the D.C. Circuit said it found no merit to cost allocation challenges by TransCanada Power Marketing and the Retail Energy Supply Association.

But the appeals court agreed with the TransCanada position in its challenge of FERC Docket ER13-2266, principally on the ground that the record upon which FERC relied is devoid of any evidence regarding how much of the program cost was attributable to profit and risk mark-up.

“TransCanada argues that, without this information, FERC could not properly assess whether the Program’s rates were just and reasonable,” the appeals court said. “We agree and thus grant in part the petition for review of Docket ER13-2266.”

The appeals court remanded the case to FERC “so that it may either offer a reasoned justification for the order or revise its disposition to ensure that the rates under the program are just and reasonable,” the D.C. Circuit held.

In June 2013, under a section of the Federal Power Act, ISO New England filed a tariff revision with FERC. The filing reflected ISO New England’s concern over “the region’s growing reliance on natural gas-fired generators, which can be vulnerable to supply shortages and price volatility,” the appeals court noted.

The ISO had found that many dual-fuel or oil-fired generators did not keep sufficient fuel supplies on hand to meet increased demand in extended or repeated periods of cold weather. So ISO New England proposed its winter reliability program that included an oil inventory service component, which would compensate oil-fired and dual-fuel generators, selected through a bidding process, to maintain specified supplies of oil and to provide energy when system conditions were stressed.

In September 2013, FERC issued an order conditionally accepting tariff revisions in Docket ER13-1851. This order tentatively approved the winter 2013-2014 reliability program. In the same order, however, FERC rejected the tariff proposal to allocate costs to regional network load or transmission owners as inconsistent with cost-causation principles and directed ISO New England to submit a compliance filing that would allocate the costs of the program to real-time load obligation/load-serving entities.

On Oct. 7, 2013, the Commission issued an order accepting bid results, which effectively approved the program and the results of ISO New England’s bid-selection process. On Oct. 15, 2013, ISO New England submitted a compliance filing that explained how it had considered and selected the bids. On April 8, 2014, FERC issued orders denying requests for rehearing of the orders issued in Docket ER13-1851 and Docket ER13-2266.

In June 2014, petitioners TransCanada and the Retail Energy Supply Association filed their petitions for review with the D.C. Circuit.

The case No. 14-1103 was argued before the D.C. Circuit panel on Sept. 15 of this year. The decision was returned Dec. 22.

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