Article: FERC Issues Settlement Order Reaffirming “Gaming” Prohibition in Power Markets

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FERC Issues Settlement Order Reaffirming “Gaming” Prohibition in Power Markets

Michael Brooks, Robert (Bob) Pease, 30 October 2020

Last week the Federal Energy Regulatory Commission (FERC) issued an Order Approving Stipulation and Consent Agreement involving High Desert Power Project, LLC (High Desert) and Middle River Power LLC. (Middle River) to resolve allegations of market manipulation in the California Independent System Operator (CAISO) market.

The settlement is noteworthy because it involved allegations of market manipulation that were completely absent of any attempt to influence market prices or to send false signals to the market. This instead is one of the purest examples of FERC taking the position that its market manipulation rule prohibits taking advantage of market design or commitment/dispatch errors (i.e., “gaming”) even when the market is put on notice of the issue. The order should serve as a warning to anybody thinking the current Commission may not embrace this broad theory of manipulation.

High Desert leases and operates an 830 MW gas-fired, combined cycle facility in California. High Desert’s affiliate, Middle River, makes decisions on behalf of High Desert, and High Desert had engaged an asset manager to act as Scheduling Coordinator in the CAISO market.

High Desert routinely submitted offers to sell Residual Unit Commitment (RUC) capacity in CAISO’s day-ahead market as a price-taker for quantities less than or equal to its Resource Adequacy (RA) obligation. Beginning on October 16, 2016, High Desert began offering RUC capacity in quantities above its RA obligation at positive prices. On October 20, 2016, High Desert received a RUC award for one hour despite its offer price ($149.98) being above the clearing price.

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