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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