Inside the Beltway: FERC Goes After Market Violators

By Published On: November 18, 2021

The Federal Energy Regulatory Commission recovered 14 times as much in penalties for energy market wrongdoings in 2021 than the year before, Commission Chair Rick Glick reported Nov. 18. There were eight settlements totaling $6.4 million in forfeiture and fines for misdeeds ranging from market manipulation to violations of reliability standards. Additionally, the agency reached a $1.5 million civil settlement and recouped $600,000 in forfeiture through a settlement in a federal district court, according to FERC’s 2021 Annual Report on Enforcement presented by staff.

The total $8 million compares to just $550,000 recovered in 2020.

The agency also opened 12 new investigations this year.

The enforcement, according to Glick, “saves consumers hundreds of millions, if not billions of dollars.” The Commission “will aggressively pursue wrongdoing,” he said.

This year, FERC added to its enforcement priorities wrongdoing that leads to environmental harm to communities.

Of the $6.4 million negotiated in the eight settlements, $4.6 million involved civil penalties and $1.8 million involved the claw back of ill-gotten gains. Six of those settlements included compliance monitoring requirements.

Also at the Thursday morning meeting, FERC launched a rulemaking process on compensating reactive power capacity, which varies by grid operator. Some markets provide no compensation at all. These include the California Independent System Operator, Southwest Power Pool, and some other non-RTO regions.

Reactive power supports the voltage that keeps real power, such as that fueling motors, flowing in the US alternating current system.

The rulemaking was motivated by hundreds of complaints, hearings and settlements over payments in PJM and MISO, adding to challenges customers and the Commission face “in evaluating proposed reactive power rate schedules submitted pursuant to section 205 of the Federal Power Act,” FERC staff said at this week’s hearing.

Recommended compensation

Back in 1999, federal regulators adopted but did not require a compensation methodology proposed by the American Electric Power Service Corp that divvies up the costs of synchronous generator equipment between real power and reactive power capabilities, and operations and maintenance costs. Subsequently, the Commission recommended that “regions that base reactive power capability compensation on a resource’s individual costs and that have actual cost data and support documentation should use the AEP Methodology when seeking to recover reactive power capability costs.”

FERC seeks comments on the AEP compensation methodology, alternative methodologies, and reactive power capability compensation through transmission rates for resources that interconnect at the distribution level.

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