Edison Mision to pay $9 million to resolve various FERC violations involving inappropriate conduct that misled its staff during an investigation.

Today, the Federal Energy Regulatory Commission (FERC) approved a stipulation and consent agreement in which Edison Mission agreed to pay $9 million to resolve violations involving conduct that misled Office of Enforcement staff during an investigation.  The investigation concerned Edison Mission's bidding practices in PJM capacity markets, during which FERC found that Edison Mission (Edison Mission Energy, Edison Mission Marketing & Trading Inc., and Midwest Generation LLC) made a series of representations and produced data and documents that were misleading.

According to FERC, these actions (over the course of more than three years) "misled and misdirected FERC staff, [and] caused staff to waste resources analyzing different explanations offered by Edison Mission for its bidding practices."  FERC found the conduct "severe" and "protracted."

Edison Mission admitted violating the duty of candor owed by market-based rate (MBR) sellers.  FERC regulations obligate MBR sellers to "provide accurate and factual information and not submit false or misleading information, or omit material information, in any communication with the Commission ... unless seller exercises due diligence to prevent such occurrences."

Edison Mission will pay $7 million in civil penalties and will develop and implement a comprehensive regulatory compliance program estimated at $2 million.  FERC's order summarized the violations as:

  • The Edison Mission bidding strategy examined by staff was Edison Mission's offering its capacity resource generation units at prices near the $1,000/MWh PJM bid cap so that they would not be taken in the PJM day-ahead (DA) market and would instead be taken in the subsequent PJM real-time (RT) market—the high offer strategy.

  • On the basis of a series of Edison Mission statements to staff in 2004, staff understood that the high offer strategy would co-terminate with the expiration at the end of 2004 of certain power purchase agreements that contained RT pricing provisions and prior to the entry of the MidWest Gen units into PJM (the Legacy PPAs), but it did not.

  • Edison Mission's statements to staff regarding the high offer strategy in 2004 omitted key facts on how the strategy was being employed and for which units, and also included inaccurate information.

  • During the course of staff's investigation from May 2005 through late 2007, staff repeatedly showed that data Edison Mission provided to staff did not support Edison Mission's explanations for the high offer strategy or was contradicted by other evidence.  Such inaccuracies included incorrect statements regarding Edison Mission first contingency analyses and the relationship of the Midwest Gen strategy to the high offer strategy as practiced by Edison Mission with respect to its Pennsylvania Homer City units.

  • Edison Mission repeatedly recharacterized how the high offer strategy worked in practice.  Edison Mission, for example, said that it kept 750 to 1500 MW of generation out of the DA market as the result of a first contingency analysis and that Edison Mission was concerned that a tornado could cause the loss of energy from Edison Mission's two large Powerton units.  Later, however, in a data response, Edison Mission explained that high bidding of 750 to 1500 MW was a "policy."  When staff again conducted an analysis and confronted Edison Mission with data falling outside the "policy," Edison Mission said that the use of the word "policy" was inaccurate and that no such formal policy existed.

  • Edison Mission deleted e-mails potentially valuable to the staff's investigation despite a staff directive to preserve such e-mails.  In fact, Edison Mission retained and produced some key documents but not others from similar time periods, leading staff to question whether documents had been selectively preserved.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.