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FERC investigating Illinois electric price spike

By: Jacob Barker |

Federal regulators are investigating an electricity price auction this spring that sent a component of electricity prices in Metro East and downstate Illinois soaring.

The Federal Energy Regulatory Commission disclosed it is investigating whether “market manipulation” or other violations affected an April auction held by regional grid operator Midcontinent Independent System Operator, or MISO.

That auction sent power prices for some Illinois customers up by an estimated 30 percent. Those on fixed contracts in the deregulated Illinois power market were shielded from the immediate increase, but consumer advocates said the spike would be factored in when they renegotiated with power companies.

MISO holds an auction each year to set so-called capacity prices, which pay power plant owners to remain ready to generate electricity for the grid when demand is highest. The charges are rolled into the overall price of electricity.

For the 2015-16 year, capacity prices jumped 800 percent in the downstate Illinois region, to $150 a megawatt-day; northern Illinois is served by another grid operator. Prices in eastern Missouri and other MISO regions stayed below $3.48 a megawatt-day.

The disparity and price spike drew calls for a FERC investigation from Illinois Attorney General Lisa Madigan, advocacy group Public Citizen and others.

Chief among their complaints was that Houston-based power plant operator Dynegy Inc. became a “pivotal supplier” following its 2013 purchase of Ameren Illinois’ coal power plants. That is, in order to supply the minimum amount of capacity set by MISO reliability standards, Dynegy must participate in the auction and can therefore set the market price, according to critics.

The Illinois Commerce Commission and even Ameren Illinois have also expressed concerns with the capacity auction design. Ameren Illinois, which serves most of downstate, is now a delivery-only utility.

MISO and Dynegy have said they followed all the rules of the auction and point to an “independent market monitor,” hired by MISO, who also affirmed the auction was conducted according to MISO rules.

Dynegy has pointed to looming supply issues in the larger MISO region related to coal plant retirements as one of the drivers of the increase. But Illinois consumer representatives say Illinois has more generation capacity than it needs, and a MISO representative has played down a shortage as the cause for the jump.

FERC disclosed the investigation, ongoing since the auction results were announced, in a filing last week. FERC’s enforcement staff has subpoena authority for the investigation and will report its findings to the commission.

Madigan’s office called FERC’s investigation a “positive first step,” as did Tyson Slocum, director of Washington, D.C.-based Public Citizen’s energy program.

But Slocum said he would prefer a full evidentiary hearing in front of a FERC administrative law judge. That would make testimony public and allow the complainants to call witnesses.

The FERC staff investigators can only determine whether existing rules were broken.

“Our complaint goes to, what if the rules themselves are the thing that’s broken?” Slocum said.

Concurrently, FERC scheduled a technical conference on Oct. 20 to discuss issues surrounding the MISO auction.

MISO declined to comment on the investigation but said “it looks forward to continuing its dialogue with FERC staff and stakeholders at the upcoming technical conference.”

A Dynegy spokesman also declined to comment on the investigation but said the company supports “the FERC’s efforts to ensure just and reasonable outcomes for all markets, including” downstate Illinois.

FERC conferences tend to look prospectively at issues — “What can we do to fix this thing going forward?” Slocum said.

But the technical conference and ongoing investigation could end in FERC ordering a full hearing. That would bring into play Public Citizen’s request for a refund to consumers already paying higher prices. Regardless, FERC is taking it seriously.

“They could of, at this point, issued an order rejecting our request,” Slocum said. “And the Office of Enforcement saw enough there where they’re poking around.”