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FERC Notice of Alleged Violation Foreshadowed by Market Monitor Report in Southwest Power Pool

On May 6, 2016, the Office of Enforcement of the Federal Energy Regulatory Commission (“FERC”) issued a Staff Notice of Alleged Violations (“NAV”), disclosing a nonpublic investigation in which FERC staff has preliminarily determined that Saracen Energy Midwest, LP (“Saracen”) violated Southwest Power Pool, Inc.’s (“SPP”) Open Access Transmission Tariff (“Tariff”), Attachment AE, § 7.4.1(4) between August 2014 and March 2015.  According to FERC staff, Saracen submitted bids for transmission congestion rights (“TCRs”) at electronically equivalent settlement points, which is prohibited by § 7.4.1(4).

This issue was raised in the 2014 State of the Market Report issued by the SPP Market Monitoring Unit (“MMU”) on August 27, 2015.  There, the MMU observed that the Tariff provision has not stopped the practice of bidding at electrically equivalent settlement points and recommended SPP systematically block such bids.  (p. 121-22)  According to the MMU, the prohibition prevents market participants from being awarded “infinite or near-infinite quantities” of TCRs at zero cost.  The then-current practice was for SPP to publish a list of prohibited pairs on its Marketplace Portal and remove bids violating the rule from the auction. 

Reports from the market monitors in independent operating systems (“ISO”) and regional transmission operator (“RTO”) generally identify issues of interest to the market monitors and can be used by companies to issue-spot and to update their traders regarding the focus of market monitors.  The timing of the MMU report and the date range at issue in the NAV punctuate the value of MMU reports to compliance efforts, as the report was issued more than 8 months prior to the NAV.  Although the reports often stop short of referencing ongoing violations and often trail referrals and investigations, reviewing the MMU reports for each ISO/RTO in which a firm participates may aid the compliance team in identifying potential compliance exposures.

© 2020 Bracewell LLPNational Law Review, Volume VI, Number 130


About this Author

Michael Brooks, Energy, Commodities, attorney, Bracewell, law firm

Michael focuses his practice in the areas of energy, commodities and derivatives law. He represents energy companies and commodity trading companies in a wide variety of regulatory, compliance and enforcement matters and routinely advises clients regarding compliance with federal rules and regulations governing the trading, ownership and transportation of energy commodities.

In addition to actively representing clients in investigations and regulatory matters involving the Federal Energy Regulatory Commission (FERC) and the Commodity Futures...

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 was a partner and co-head of its 25 lawyer Energy Regulatory group.

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.

Serena Rwejuna, Energy Attorney, Bracewell Law Firm

Serena Rwejuna focuses her practice on energy regulation and public policy matters. She advises energy companies and other clients in matters involving energy projects, applications, transactions and litigation before the Federal Energy Regulatory Commission (FERC). She has assisted with the preparation and filing of initial applications, compliance filings and various pleadings in connection with regulatory approvals and other FERC requirements.