FERC Fines Utility for False Attestations in ISO-NE

This week the FERC, the US Federal energy regulator, announced (click here) an enforcement action against Engie Energy Marketing NA (EEMNA) for allegedly making false attestations to the ISO New England (ISO-NE) Internal Market Monitor (IMM) in relation to assets participating in the Forward Reserve Market (FRM) in order to claim exemptions from energy market mitigation permitted under the ISO-NE Tariff. The facts of the case are briefly summarised as follows:

• EEMNA was the Lead Market Participant and energy manager for unaffiliated generator assets operating in the ISO-NE FRM;
• In 2015 the ISO-NE IMM issued a memorandum (click here) setting out six conditions which, if met, would exempt a generator from mitigation measures for assets operating in the FRM;
• To qualify for this exemption, market participants making the request are required to attest that all six conditions are satisfied (for those interested in understanding these conditions, please refer to page 2 of the memorandum above);
• Between July 2021 and September 2022, EEMNA made routine requests for one or more of their FRM assets to be exempted from market mitigation and in doing so attested that all six conditions set out by ISO-NE had been met;
• Condition 4 requires “The Forward Reserve Resource’s cost-based Reference Level is less than the Forward Reserve Threshold Price.”

• According to the FERC Order, on multiple dates throughout period above, EEMNA attested that Condition 4 had been met when it had not resulting in a false attestation (the cost-based reference level of the asset was above the Forward Reserve Threshold Price);
• Further, Condition 6 requires “No offer block price of the Forward Reserve Resource’s Supply Offer exceeds 110% of the Forward Reserve Threshold Price and the resource’s start-up and no-load costs are offered at the cost-based Reference Level.”
• According to the order, on several occasions while seeking exemption during the period, EEMNA attested that Condition 6 had been met when it had not also resulting in a false attestation (they allegedly submitted offers that either exceeded 110% of the Forward Reserve Threshold Price, incorporated start-up and no-load costs different from the cost-based reference level of the resources, or both);

• Striking an uncharacteristically benevolent tone, FERC notes that there was no evidence indicating that EEMNA’s misrepresentations were made “knowingly or with the intent to defraud” but rather they had failed to properly evaluate whether the Conditions were met prior to the submission of an attestation. They also note that EEMNA had failed to evaluate how changes made to the internal model it used to generate offers might impact the accuracy of its attestations;
• FERC also notes that EEMNA fully cooperated with them during the investigation;
• FERC concluded that EEMNA had violated 18 C.F.R. § 35.41(b) by submitting the false attestations – the rule requires that sellers “must . . . not submit false or misleading information . . . in any communication with . . . Commission-approved market monitors";
• FERC also concluded that EEMNA had not exercised due diligence to prevent the misstatements to the ISO-NE IMM by employing a process to ensure the accuracy of the attestations;
• The following penalties were issued with EEMNA neither admitting nor denying the charges:

1. A civil penalty of USD $48,000;
2. EEMNA to submit one annual compliance monitoring report with the requirement of a second annual compliance monitoring report at FERC’s discretion.

• Regarding the compliance monitoring report – it must address the following:

1. Identify any known violations of FERC regulations that occurred during the applicable period, including a description of the nature of the violation and what steps were taken to rectify the situation;
2. Describe all compliance measures and procedures EEMNA instituted or modified during the reporting period related to compliance with FERC regulations, including but not limited to new or updated compliance measures and procedures related to the facts and circumstances; and
3. Describe all FERC-related compliance training that EEMNA administered during the reporting period, including the dates such training occurred, the topics covered, and the procedures used to confirm which personnel attended.