The Federal Energy Regulatory Commission ("FERC") accepted a joint proposal by ISO New England ("ISO-NE") and the New England Power Pool Participants Committee ("NEPOOL") to basically cut in half the lag time for posting Demand Bid and Supply Offer data on ISO-NE’s website. The proposal reduces lag time from 180 days after the day for which each Demand Bid and Supply Offer was in effect, to the first day of the fourth calendar month following the month during which the applicable Demand Bids and Supply Offers were in effect.
ISO-NE filed its data disclosure plan in August and submitted testimony by Dr. Hung-Po Chao, the Director of the ISO’s Internal Market Monitoring Unit to support its proposal. FERC found persuasive Dr. Chao’s arguments that "the earlier release of bid data adds transparency that helps the public understand wholesale electricity markets," and that "misuse of bidding information is unlikely due to a competitive market structure, effective market monitoring, and mitigation procedures."
FERC’s order noted that the ISO-NE Tariff requires information to be presented in a way that does not reveal specific information about assets, owners, or names of entities making bids and offers. FERC determined that with its new proposal and supporting testimony ISO-NE achieved a balance between protecting against collusion and inappropriate market behavior and also masking individual bid and offer data through its tariff.
FERC Assesses Civil Penalties Totaling Over $7 Million
On October 25, 2007, FERC approved two settlements for two separate enforcement actions involving BP Energy Company ("BP") and MGTC, Inc. BP’s violations stem from BP’s management of customers’ capacity rights on interstate natural gas pipeline and storage facilities. FERC found particularly egregious BP’s practice of "flipping" gas capacity (which refers to a strategy by BP to avoid regulations requiring posting and competitive bidding for long-term releases of capacity). BP improperly arranged for serial short-term releases of discounted capacity to two BP-affiliated replacement shippers on an alternating monthly basis to prevent open capacity transactions. For its violations, BP is required to pay $7 million in civil penalties and to implement a compliance monitoring program for at least one year, under the supervision of FERC Enforcement staff.
In a separate matter, MGTC, a subsidiary of Anadarko Petroleum Corporation, was cited for violating FERC’s shipper-must-have-title requirement regarding a contract for interruptible transportation on its affiliated interstate pipeline. Under the FERC-approved settlement, MGTC is required to pay $300,000 in civil penalties and submit a compliance report indicating the steps it has taken to correct the violation.
As reflected in prior enforcement actions, Chairman Kelliher emphasized that "each company could have faced substantially higher penalties had it not self-reported its violations, and had it not also demonstrated exemplary cooperation with FERC’s Enforcement staff during the investigation."
Since January 2007, FERC has approved 12 settlements and assessed $39.8 million in penalties.
FERC Grants Financial Institution’s Request For Blanket Authorization To Acquire Securities
FERC granted blanket approval of three separate applications by The Goldman Sachs Group, Inc. ("Goldman Sachs"), Morgan Stanley, and Legg Mason Inc. ("Legg Mason") to acquire securities of electric utility companies under new section 203(a)(2) of the Federal Power Act ("FPA"). Under FPA section 203(a)(2) holding companies are required to obtain prior FERC authorization in order to acquire certain securities of transmitting and electric utilities with values exceeding $10 million. This action may encourage investment firms to become more active in acquiring securities of electric utilities.
Both Goldman Sachs and Morgan Stanley applied for renewals of blanket authorizations previously granted by FERC in February 2006. The authorizations allow Goldman Sachs and Morgan Stanley to acquire an unlimited amount of securities in public utility companies in the course of their respective businesses, for three years subject to renewal and other conditions. FERC denied Morgan Stanley’s request for waiver of the 10 percent limitation on securities acquired as principal.
Legg Mason applied for, and FERC approved a new three year blanket authorization, subject to renewal and conditions, to acquire securities of a public utility company in the course of its investment business, up to 10% in each fund or account, but no more than 20% collectively within each group of subsidiaries.
Senate Subcommittee Approves Bill To Limit Global Warming Emissions
On November 1, 2007, a subcommittee of the Senate Environment and Public Works Committee narrowly approved a bill (S. 2191) to cap emissions at 1990 levels by 2020 by three industry sectors: power companies, industrial manufacturers and transportation fuel providers and importers. The legislation, introduced by Senators Lieberman (D- Conn.) and Warner (R-Va.), also seeks to cut emissions from these three industry sectors to 65% below 1990 levels by 2050.
While dismissing most of the offered amendments, the subcommittee adopted one amendment proposed by Senator Sanders (I-Vt.) that would require automobile manufacturers to produce cars that can average at least 35 miles per gallon as a condition to receiving funds from the auction of emission credits to make more environmentally friendly cars.
The legislation, which could significantly impact the economics for companies that produce electricity from coal plants and other generation facilities that release green house gases, has received the support of most major environmental groups. Some groups (Natural Resources Defense Counsel, U.S. PIRG and the National Environmental Trust) however, believe the emission targets and timetables should be further tightened. The next step is another hearing on November 8, 2007, followed by a mark-up before the full committee. The markup has not yet been scheduled however Environment and Public Works Committee Chairman Barbara Boxer (D-Ca.) indicated that the markup would happen as soon as the committee could "get it done."
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