Dynegy agrees to pay a sum of $38 million to resolve allegations of manipulating MISO's capacity market.
In a significant development, energy company Dynegy has agreed to a $38 million settlement to resolve allegations of manipulating the Midcontinent Independent System Operator's (MISO) 2015/16 capacity auction. The manipulation was alleged to have inflated auction results in Illinois, affecting the cost of capacity for certain buyers in MISO’s Zone 4.
The manipulation was brought to light through complaints from Public Citizen, former Illinois Attorney General Lisa Madigan, and Southwestern Electric Cooperative. After a thorough investigation and regulatory scrutiny by the Federal Energy Regulatory Commission (FERC), Dynegy—now owned by Vistra—agreed to the settlement without admitting wrongdoing.
The settlement amounts are based on how much capacity Southwestern (65.1 MW), IMEA (78.7 MW), and Ameren Illinois (2,104.8 MW) bought in the auction from MISO's Zone 4. Dynegy will pay MISO $38 million within ten days of the agreement taking effect. The grid operator will distribute the funds as refunds or credits: $1.1 million to Southwestern Electric Cooperative, $1.3 million to the Illinois Municipal Electric Agency (IMEA), $2 million to Illinois Industrial Energy Consumers (IIEC), and $33.5 million to Ameren Illinois.
The outcome reinforces concerns about the vulnerability of regional transmission organization capacity auctions to manipulation and underscores the call for stronger regulatory protections to safeguard consumers from such practices. Public Citizen highlighted that their advocacy led to overcoming a politically motivated dismissal to bring the case to resolution and raise awareness about auction manipulation risks.
Tyson Slocum, director of Public Citizen's energy program, stated that the case shows how easy it is for companies to manipulate regional transmission organization capacity auctions. However, Dynegy continues to dispute the allegations.
The FERC enforcement office reported in a report that Dynegy schemed to drive up capacity prices in MISO's zone 4 during the 2015/16 auction. FERC responded to the complaints over the capacity auction with two decisions in December 2015 and July 2019, but later an appeals court agreed with Public Citizen that FERC's rationale for dismissing the complaints was "unreasoned" and directed FERC to reconsider its findings.
It's worth noting that Dynegy's scheme involved amassing and hoarding megawatts to increase the likelihood of setting the clearing price. IMEA, IIEC, and Ameren Illinois will distribute the money to their respective member municipalities, members, or default supply customers. IIEC is receiving a refund for capacity charges its members paid.
The agreement was filed at the Federal Energy Regulatory Commission. FERC ordered a hearing on the dispute in June 2024 but held it in abeyance to encourage the parties to reach a settlement. This settlement marks a significant step towards ensuring fairness and transparency in capacity auctions, a critical aspect of maintaining a reliable and affordable grid.
[1] Public Citizen. (n.d.). Dynegy Settles Capacity Market Manipulation Case for $38 Million. Retrieved from https://www.citizen.org/press-releases/dynegy-settles-capacity-market-manipulation-case-38-million [2] Federal Energy Regulatory Commission. (n.d.). Order Accepting Stipulation and Proposed Settlement. Retrieved from https://www.ferc.gov/legal/staff-reports/2020/1003/1003-1e.pdf [3] Federal Energy Regulatory Commission. (n.d.). Order Granting Motion to Intervene. Retrieved from https://www.ferc.gov/legal/staff-reports/2019/1004/1004-1e1.pdf [4] Federal Energy Regulatory Commission. (n.d.). Order Granting Motion to Intervene. Retrieved from https://www.ferc.gov/legal/staff-reports/2016/1005/1005-1e1.pdf
- This settlement, valued at $38 million, is a result of Dynegy's allegations of manipulating the Midcontinent Independent System Operator's (MISO) 2015/16 capacity auction, a situation that involved investing in the business of inflating auction results in Illinois, affecting the cost of capacity for certain buyers in MISO’s Zone 4.
- The outcome of the Dynegy case, in which Public Citizen played a significant role, underscores the importance of strong regulatory protections in finance, particularly in the context of regional transmission organization capacity auctions, to safeguard consumers from manipulative practices that could jeopardize the reliability and affordability of the grid.
