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FERC Audit Report Provides Guidance Regarding Reporting Of Uplift And Capacity Payments In Electric Quarterly Reports

On October 14, 2016, the Federal Energy Regulatory Commission (“FERC”) issued an order approving an audit report providing guidance regarding how to report certain types of transactions and payments received by those participating in the FERC-jurisdictional markets operated by Regional Transmission Organizations (“RTO”) and Independent System Operators (“ISO”) in a seller’s Electric Quarterly Reports (“EQR”).  The audit report highlights pitfalls that market-based rate sellers should avoid when submitting EQRs and provides insight into areas of likely FERC scrutiny.

In particular, FERC staff’s audit report identified the following areas of non-compliance:

  • Uplift Payments: FERC staff found that the subject of the audit, Dynegy Inc. (“Dynegy”), had made several errors when reporting uplift payments received in connection with its participation, and that of its affiliates, in RTO/ISO markets:

    • Uplift payments were incorrectly reported as involving transactions occurring between two Dynegy affiliates.FERC staff emphasized that uplift payments should have been reported as transactions with the RTO/ISO.

    • Inaccurate levels of uplift payments were reported—over-reporting in some time periods and markets and under-reporting in others.In part, FERC staff found that these errors were the result of settlement adjustments made by the relevant RTO/ISO that were not reflected in EQRs

  • Capacity Sales: FERC staff determined that Dynegy had not reported capacity sales appropriately and, in some cases, reported capacity sales with volumetric and pricing data that did not conform to reporting standards or used the incorrect time period.  More specifically:

    • FERC staff found that capacity sales had been inappropriately reported on a net-capacity sales basis (i.e., purchases minus sales rather than all sales).FERC staff stated that this error reflected the fact that EQR data obtained from MISO only reflected net-sales.FERC staff emphasized that RTO/ISO EQR data should be checked against a seller’s internal records and that capacity sales should be reported on a gross (rather than net) basis.

    • While bilateral capacity sales made outside of the MISO market had been timely reported, FERC staff found the quantity and price for these transactions had not been properly converted into the standardized quantity (MW-month) and price ($/MW-month), and the trade date for these transactions was not reported.

  • Regulation Service: FERC staff found that credits received for providing regulation service were inappropriately reported as energy sales.  FERC staff noted that the EQR data dictionary defines “Energy” as a “quantity of electricity that is sold or transmitted over a period of time” and, since the credits at issue were a settlement adjustment reflecting the provision of regulation service and were not denominated in MWH and $/MWH, they should not have been reported as energy sales.  In its report, FERC staff noted that there was confusion in the MISO region among market participants as to how such credits should be reported.  

© 2020 Bracewell LLPNational Law Review, Volume VI, Number 295


About this Author

Catherine McCarthy, Energy Regulation Attorney, Bracewell law firm

Catherine McCarthy has represented clients on energy regulation and policy matters for over two decades. She has experience with obtaining Federal Energy Regulatory Commission (FERC) and state authorizations for major projects and transactions; FERC compliance and enforcement matters; FERC transmission and centralized markets issues; and rate, tariff and refund matters. She also represents energy clients before the Department of Energy, the Federal Communications Commission and the Nuclear Regulatory Commission. Cathy joined the firm from Dewey & LeBoeuf where she...

David Perlman, Energy Practice, Partner, Lawyer, Bracewell law firm

David Perlman is a partner in the energy practice in Bracewell's Washington, D.C. office. He represents and counsels clients before regulatory bodies such as the Federal Energy Regulatory Commission (FERC), Commodity Futures Trading Commission and state public utility commissions in regulatory and compliance matters, in the conduct of compliance programs and training, and in energy-related transactions and financings.

Mr. Perlman represents a variety of clients, including utilities, commodities merchants, marketers, industrial customers, generators, lenders, financial institutions, gas producers and others.

Prior to joining Bracewell, Mr. Perlman was Chief Counsel to Lehman Brothers Commodities business in New York, where he was responsible for legal, transactional and regulatory matters relating to the firm's physical and derivative commodity businesses.  Before this, he was a partner in the energy practice at a major law firm in Washington, D.C.

Mr. Perlman served for two years as Senior Legal Advisor at FERC, where he provided advice regarding significant and complex legal, regulatory policy and legislative issues coming before the Commission. These included matters related to Regional Transmission Organizations (RTO)/Independent System Operators (ISO), gas and electric market oversight, market-based rates and transmission.

Before his government service, Mr. Perlman was counsel to the Constellation Energy Group for 18 years, where he was General Counsel of its merchant and trading businesses and ultimately served as Chief Energy Counsel.  He began his career as an attorney at FERC.

Stephen Hug, Environmental Attorney, Bracewell Law Firm

Stephen Hug represents clients in matters related to federal regulatory policies, regulations and rules applicable to the electric industry. His experience includes assisting clients with compliance with the rules and regulations of the Federal Energy Regulatory Commission (FERC) and the Federal Power Act (FPA).  Stephen also represents clients in litigated proceedings before FERC.