United States: Brattle Consultants Contribute To Significant Win For The State Of California On Energy Crisis Tariff Violations

Testimony by Brattle consultants contributed to a favorable outcome for the State of California in a recent decision by the U.S. Court of Appeals for the Ninth Circuit, which upheld a ruling by the Federal Energy Regulatory Commission (FERC) finding that several electric power sellers committed tariff violations during the California Energy Crisis in the summer of 2000.

The September 8, 2016 Circuit Court ruling dismissed petitions for review brought by Shell Energy North America, LP, MPS Merchant Services, Inc., and Illinova Corporation, and upheld the FERC's determination that these companies violated the California Independent System Operator Corporation (Cal-ISO) tariff and Market Monitoring and Information Protocol (MMIP) during the Summer Period (from May 1, 2000 to October 1, 2000). Specifically, the Court found that the FERC reasonably interpreted the Cal-ISO tariff and MMIP to prohibit the practices of false export, false load scheduling, and Types II and III anomalous bidding (bidding behavior that departs from normal competitive behavior in violation of the MMIP). Additionally, the Court held that the FERC reasonably determined that APX, Inc. engaged in economic withholding and overscheduling, a violation of the Cal-ISO tariff.

Brattle Principal Gary Taylor provided evidence upon which the Commission relied to conclude that the sellers engaged in manipulative false export and false load schemes that violated provisions of the Cal-ISO tariff. Expert testimony by Academic Advisor Peter-Fox Penner supported the FERC's findings that the sellers' tariff violations increased market-clearing prices for electricity. Dr. Fox-Penner's pricing model considered the price effects of false export and false load scheduling only in the day-ahead market. According to the model, false export and false load scheduling injected artificial demand into the day-ahead market, thereby increasing day-ahead prices.

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