D.C. Circuit Upholds FERC’s Five-Month Suspension of NYISO Demand Curves

Dec 16, 2013

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FERC chose to impose a five-month suspension period for NYISO’s proposed demand curves because it found that NYISO’s capacity auction constituted such an “extraordinary factor.” FERC’s view was that an extraordinary factor need not relate to only higher prices, but could relate to non-monetary circumstances as well. Specifically, if the demand curves had not been suspended, but instead had been implemented subject to refund, then market participants would have had to bid into the NYISO auction without knowing the final prices. The court found FERC’s position reasonable, noting that even the Petitioners recognized that it was beneficial for bidders to have access to “actual recalculated rates” prior to placing their bids. The D.C. Circuit’s decision in this matter is particularly important for participants in those organized electric markets that use capacity auctions. Post-hoc changes to auction rules can undermine the market mechanism, and refunds are particularly hard to calculate in such auctions because they are necessarily based on assumptions about how market participants would have bid under different rules.

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