By Amanda Durish Cook and Rich Heidorn Jr.

In a decision marked by minor controversy, FERC on Thursday capped a three-year-old investigation into MISO’s 2015/16 Planning Resource Auction by finding no market manipulation on Dynegy’s part.

The commission also found the $150/MW-day clearing price in Southern Illinois’ Zone 4 was just and reasonable, despite ordering MISO to change capacity auction rules following the auction. Thursday’s order also declined to set up an evidentiary hearing to possibly recalibrate the auction results (EL15-70).

The investigation centered on an auction in which Zone 4 cleared at $150/MW-day, a nine-fold price increase compared with just $16.75/MW-day a year earlier. MISO’s other nine local resource zones cleared below $3.50/MW-day that year.

Complaints followed swiftly, questioning the justness of Zone 4 prices, and included then-Illinois Attorney General Lisa Madigan, Southwestern Electric Cooperative, Illinois industrial energy consumers and the public interest group Public Citizen. All questioned Dynegy’s market behavior because the company controlled a significant portion of the capacity available in Zone 4. (See FERC Launches Probe into MISO Capacity Auction.)

Two years before the auction, Dynegy acquired from Ameren four coal-fired generators in Zone 4 with a total installed capacity of more than 3 GW. At the time of the transaction, Dynegy’s market share in MISO’s capacity market was analyzed on a systemwide basis — rather than at the zonal level — because the 2013/14 auction cleared at a single price of $1.05/MW-day. Dynegy has since been acquired by Vistra Energy.

In early 2016, FERC determined that MISO’s $155.79/MW-day maximum bid was too high, needing to be set closer to $25/MW-day, and that the RTO didn’t accurately gauge power exports. As a result, MISO revised capacity import limits, set the initial reference level for capacity at $0/MW-day and developed default technology-specific avoidable costs. (See FERC Orders MISO to Change Auction Rules.)

In the auction, Dynegy offered 1,709 MW of capacity at $0/MW-day, 270 MW at $108/MW-day, 651 MW at $150/MW-day and 2,775 MW at $167/MW-day.

In Thursday’s order, FERC said that although Dynegy had pivotal supplier status and that substantial price separation occurred, MISO had conducted the auction in accordance with its Tariff and market power mitigation rules.

The commission noted that all Dynegy’s offers were made below Zone 4’s $247.40/MW-day cost of new entry and said it agreed with MISO and Dynegy that a clearing price isn’t unjust simply because it’s higher than expected.

“We find no evidence in the record to support a finding that Dynegy’s offers violated MISO’s Tariff, and we conclude … that the resulting auction clearing price was just and reasonable,” FERC determined.

MISO Independent Market Monitor David Patton had argued the RTO’s previous auctions, not the 2015/16 auction, were the problem, saying that previous “near-zero” clearing prices “undervalued the reliability provided by that capacity.”

“The price increase in Zone 4 merely reflects that prices were unreasonably low in previous planning years,” the Monitor said.

‘Full and Thorough’

The commission also said that contrary to complainants’ arguments, its Office of Enforcement conducted “a full and thorough investigation” into the matter, spanning more than three years, with review of about 500,000 pages of documents and 17 days of testimony from 11 witnesses.

“We reject any implication that the investigation was not sufficiently complete to consider the conduct at issue,” FERC said, adding it would take no further action to investigate allegations of market manipulation in the auction.

Southwestern Electric Cooperative’s complaint went a step further, arguing that all sellers in Zone 4 stood to be enriched by the high clearing price. Madigan also argued that all Zone 4 sellers should refund excess charges to customers.

But FERC dismissed that complaint, saying Southwestern Electric failed to specify any alleged violations of statutory or regulatory standards on the part of Zone 4 sellers.

Glick Miffed at Chair’s Action

During Thursday’s open meeting, Commissioners Cheryl LaFleur and Richard Glick noted pointedly that — although the investigation had been authorized by the entire commission — they were not consulted before Chairman Neil Chatterjee unilaterally ended the probe.

While LaFleur said she concluded that there was no evidence of market manipulation, Glick said Chatterjee “cut short” the probe prematurely.

Glick, who dissented on the order, noted that Congress gave the commission expanded authority to police market manipulation as part of the Energy Policy Act of 2005.

“I really don’t believe that when Congress enacted the law, they intended for there to be one commissioner to be able to make the decision about whether to conclude an investigation or not,” Glick said. “I think that Congress intended for all commissioners to … take a vote on those decisions.”

He echoed LaFleur in saying “reasonable minds very much could disagree” on whether the investigation should have continued. But because the evidence is not public, he said, “we can’t really have a discussion on the record. There’s not really any transparency about it. So, one of the things we should do is release as much of the information as we can. People need to have a lot of confidence in what we do and confidence in the markets.”

Glick said the commission’s ruling in the MISO case, and a separate rulemaking that reduced the amount of data the commission will require in market power reviews, “don’t really instill the kind of confidence we need to have in our markets.”

In his dissent, Glick called Thursday’s order a “wholly unsatisfactory response to the allegations of market manipulation” and derided the commission’s explanation behind terminating the investigation as “a series of statements, none of which adequately support the commission’s finding that those results were just and reasonable.”

“Today’s order does not provide even the scantest reasoning to support its finding that the nearly 1,000% year-over-year increase in the MISO Zone 4 capacity price had nothing to do with market manipulation,” Glick wrote. “Instead, all we have is the commission’s unsubstantiated assurance that no one violated the commission’s regulations regarding market manipulation.”

Asked by reporters after the meeting why he decided to close the investigation without consulting his colleagues, Chatterjee said, “It has always been the chairman’s prerogative to close an investigation. I’m not getting into the particulars of exactly when and how the investigation was closed, because that’s nonpublic. But the results of the investigation were made available to my colleagues, and as you can see, a majority of us agreed that market manipulation did not occur.”

Michael Brooks contributed to this article reporting from Washington.