Energy Law

FERC Successfully Defends "Hybrid" Transitional Markets in New England

By Tracy Davis

In a big win for FERC and supporters of electricity markets, on January 23, the US Court of Appeals for the DC Circuit rejected Connecticut Attorney General Richard Blumenthal's challenge to New England's market design.  The Attorney General and a group of New England industrial customers challenged FERC's decisions approving a temporary "hybrid" market design in New England, under which generators are compensated for sales into the market on different bases?some at regulated cost-based rates and others at market prices.  This interim market structure has been in place during the ISO New England's transition to competitive wholesale power markets, which is expected to be fully implemented in 2010.

The court's unanimous decision held that the Attorney General had not met the burden of proving that FERC's decisions were unreasonable, and lambasted the Attorney General's complaint as being "based on little more than conjecture."  In particular, the court affirmed FERC's decision to allow a large number of generators to be compensated through Reliability Must-Run agreements, which direct plants to continue running ? not retire or decommission ? and pay them regulated rates.  The court also upheld FERC's decision to reject an alternative proposal from the Attorney General, which would have effectively reregulated electricity markets in Connecticut.  Showing significant deference to FERC, the court concluded that "the Connecticut electricity market presents 'intensely practical difficulties' demanding a solution from FERC . . . and the commission must be given the latitude to balance the competing considerations and decide on the best resolution."

Full post as published by Energy Legal Blog on January 27, 2009 (boomark / email).