News July-September 2005
News Release: July 21, 2005 | View Printable PDF Version |
Commission closes investigation of supply offers during
Midwest ISO electricity market start
The Federal Energy Regulatory Commission today terminated a preliminary
investigation into supply offers by power market participants
during the Midwest Independent Transmission System Operator (Midwest
ISO) market launch, accepting staff's conclusions that bid offers
examined were the result of market start-up and communications
problems, and did not represent willful efforts to manipulate
the new electricity market.
"The Commission has no more central role under the Federal Power
Act than to protect against unjust and unreasonable rates and
undue preference and discrimination. This investigation fulfills
that statutory duty and the staff's conclusions should provide
for public confidence in the marketplace," said FERC Chairman
Joseph T. Kelliher.
The Midwest ISO formally launched its new competitive wholesale
power market on April 1, 2005. As a transition to a fully operating
market in the Midwest ISO, the Commission-approved Midwest ISO
tariff required that market participants offer energy at cost
during April and May.
The tariff also directed the Midwest ISO's Independent Market
Monitor (IMM) to establish cost-based reference levels for each
generating unit. In approving these arrangements for the first
two months of the Midwest ISO market launch, the Commission required
the IMM to report offers in excess of 10 percent above the reference
cost levels for possible enforcement action.
In early April, the IMM notified the Commission that a number
of market participants were making offers in excess of the 10
percent above reference levels threshold. The Commission commenced
a preliminary investigation to determine whether any market participants
were willfully violating the Midwest ISO tariff or were manipulating
markets and, if so, whether enforcement action against any market
participants was warranted.
The Commission's enforcement staff evaluated voluminous data responses
from 45 Midwest ISO members; discussed the cost-based procedures
and requirements directly with representatives of each of the
45 companies; held extended conferences with three market participants
with particularly large numbers of offers referred to the Commission;
screened Midwest ISO data to examine patterns of offers made by
market participants; and studied the effects of offers during
the market start period on the adjusted reference prices governing
mitigation as of June 1, 2005.
Based upon the evidence gathered, the Commission's enforcement
staff concluded that the offers above reference cost levels referred
to the Commission:
- Were mainly the result of a number of practical problems confronting participants in the new market, including difficulties establishing accurate reference levels and communications problems;
- Were not willful violations of the Midwest ISO tariff;
- Were not efforts to manipulate the market;
- Represented a relatively small component of overall supply - less than 6 percent of all energy offers were referred to the Commission, and only about one-third of those offers were scheduled by the Midwest ISO;
- Had a de minimis effect on market prices; and
- Did not harm competition.
The Commission noted that the process of carrying out the planned
cost-based offers during the first two months of the Midwest ISO
market launch proved more complicated than was expected.
The Midwest ISO is headquartered in Carmel, Ind., and independently
operates the electricity grid and related wholesale power market
in Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri,
Montana, Nebraska, North Dakota, Ohio, Pennsylvania, South Dakota,
Wisconsin, and Manitoba, Canada.
The Office of Market Oversight and Investigation's report on the
investigation will be made available on the Commission's website
at www.ferc.gov.
R-05-47
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