January 4, 2016 / 10:41 PM / 2 years ago

U.S. FERC seeks changes to Midwest power auction, investigates Dynegy

Jan 4 (Reuters) - U.S. federal energy regulators want the power grid operator for the Midwest region to tweak its market rules for an upcoming capacity auction as the authorities investigate Dynegy Inc on allegations of market manipulation.

The Federal Energy Regulatory Commission (FERC) issued an order on Dec. 31 in response to four complaints against the Midcontinent Independent System Operator (MISO) 2015/16 auction for the Illinois zone. The auction was held in April 2015.

The four complainants were Public Citizen, a public advocacy group, the Illinois Attorney General, a power cooperative and a group of industrial consumers.

The Attorney General asked FERC in May to block an estimated $113 million in expected overcharges from the auction and investigate whether Dynegy manipulated the market.

Dynegy said on Monday it did not manipulate the market.

MISO operates the power grid in parts of 15 U.S. states from Louisiana to Minnesota and the province of Manitoba. The grid operator uses the auction in question to help ensure the system has enough generating resources to meet expected demand.

FERC said it issued the Dec. 31 order to give MISO and market participants enough time to make changes before the 2016/17 capacity auction expected in April.

FERC found some of the auction rules were “no longer just and reasonable” and should be changed before the upcoming 2016/17 auction.

FERC, however, said the arguments raised about the past 2015/16 auction “remain under consideration” and will be addressed in a future order.

FERC also said its Office of Enforcement was conducting a “non-public” investigation into whether market manipulation occurred before or during the 2015/16 auction.

“FERC should find the 2015/16 auction to have violated federal law in the same way that FERC’s Dec. 31 order found that the upcoming 2016/17 auction violates the just and reasonable standard,” Tyson Slocum, director of Public Citizen’s Energy Program, said in a statement.

Public Citizen’s complaint alleged that because of Dynegy’s manipulation and flaws in the auction process, auction prices for a zone in Illinois increased from $16.75 per megawatt-day in 2014/15 to $150 in 2015/16, which inflated electricity costs for the average Illinois family by $140.

Public Citizen’s complaint was echoed by a similar filing by the Illinois Attorney General.

Dynegy however said in a statement in May that “MISO’s Independent Market Monitor has publicly stated that ‘the auction results are reliable and participants’ behavior was in line with all tariff rules and procedures.’” (Reporting by Scott DiSavino; Editing by Alan Crosby)

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