On March 23, the Federal Energy Regulatory Commission (FERC) ruled in favor of the Connecticut Municipal Electric Energy Cooperative (CMEEC) and others by holding that the Commission will be bound to the "just and reasonable" standard for contract changes to "reliability must run" (RMR) contracts, instead of the higher "public interest" standard. FERC based its ruling on the fact that RMR contracts have broad applicability to markets and market participants. The decision is positive for public power systems in New England, and could well be beneficial for consumer interests nationally.
The proceeding concerned a proposed, unexecuted RMR agreement between Bridgeport Energy LLC and ISO-New England that was the subject of a settlement among several parties, including Bridgeport, the ISO, the Connecticut DPUC and the Connecticut OCC. CMEEC and the Connecticut AG did not sign the settlement and opposed, among other things, the part of the settlement that would require complaints by non-signatories to the agreement and the Commission to meet the higher "public interest" standard in order for the contract to be changed. CMEEC argued that the "just and reasonable" standard should apply to such challenges, including as to eligibility. In making this claim, CMEEC noted that Bridgeport's receipt, beginning in December 2006, of capacity "transition payments" might render it ineligible for an RMR agreement.
FERC determined that the Commission could not bind itself to the "public interest" standard, because, unlike in bi-lateral contracts between a single seller and a single buyer, RMR contracts between a generator and the ISO affect "have wide applicability to the market and to market participants." Therefore, Bridgeport and the ISO will be required to remove that provision of the settlement agreement.
In a concurrence/dissent, Commissioner Suedeen Kelly drove home the need for FERC to retain the "just and reasonable" standard. "The order states that market participants that pay for the reliability services provided under the RMR agreements are broader in number than the single entity that executes the agreements (here, ISO-NE). Thus, the party that executes RMR agreements is not the party that will pay for the reliability service provided under those agreements. I would add that ISO-NE, as the system operator, clearly has an incentive to ensure that power is available to ensure grid stability and reliability, but it may not have the same incentive or ability as the purchaser in a wholesale power contract to bargain for low prices when contracting for reliability service."
NE public power has consistently told Members of Congress and FERC that consumers are not well served by the fact that there is no requirement that ISO-NE ensure reliability at the lowest reasonable price. Commissioner Kelly's statement indicates that she understands this point clearly.