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.