The U.S. Court of Appeals for the District of Columbia Circuit on July 14 directed the Federal Energy Regulatory Commission to reconsider several aspects of its prior approval of the Southeast Energy Exchange Market, which launched operations supporting enhanced energy trading in November 2022.
Background
The SEEM platform facilitates automated, sub-hourly trading, allowing participants to buy and sell power close to the time the energy is consumed, utilizing available unreserved transmission. Participation in SEEM is open to any entity that meets the qualifying requirements set forth in the SEEM Agreement.
The SEEM footprint includes 23 entities in parts of 12 states with more than 180,000 MW (summer capacity; winter capacity is nearly 200,000 MWs) across two time zones.
In an Oct. 13, 2021 notice, FERC noted that pursuant to section 205 of the Federal Power Act, in the absence of Commission action on or before Oct. 11, 2021, the proposed Southeast Energy Exchange Market agreement became effective by operation of law. The Commission did not act on the proposed SEEM agreement “and concurrences thereto because the Commissioners are divided two against two as to the lawfulness of the change,” the notice said.
The proposal initially went into effect by operation of law under FPA section 205(d) because the four-member Commission failed to act on the proposal due to a 2-2 deadlock.
Section 205(g) of the FPA allows parties to seek rehearing of such non-action by characterizing it as an order for purposes of rehearing and appeal, but FERC found in this case that parties challenging SEEM had miscalculated the non-waivable rehearing request deadline for this “Deadlock Order” and filed their rehearing requests too late. Failure to file a timely rehearing request of a FERC order deprives a party of the right to appeal the order.
Implementation of the SEEM proposal required subsequent filings, however, including revisions to the SEEM members’ respective transmission tariffs to implement the SEEM transmission service, known as Non-Firm Energy Exchange Transmission Service.
The Commission approved these filings in later orders, referred to as the “tariff orders,” that received a 3-1 majority vote and were subject to the ordinary rehearing request process by SEEM opponents.
Details on Court Opinion
After concluding that petitioners had standing to bring the appeal, the court addressed a number of procedural and substantive matters in its opinion.
In the 2-1 decision, the court addressed the petitioners’ contention that the Commission erred in finding that SEEM is not a “loose power pool” as defined by Commission regulations, with the court saying their argument was persuasive.
The petitioners argued that the SEEM framework is a loose power pool under Order No. 888 that is required to provide non-discriminatory transmission service to non-members through a joint, pool-wide open access transmission tariff regardless of the type of entity, affiliation, or geographic location.
The court notes that Order No. 888 defines a “loose pool” as any multi-lateral arrangement, many of which contain discounted and/or special transmission arrangements. The Commission later clarified the definition of a “loose pool” in Order No. 888-A, explaining that a loose pool is “any multilateral arrangement, other than a tight power pool or a holding company arrangement, that explicitly or implicitly contains discounted and/or special transmission arrangements, that is, rates, terms, or conditions.”
The petitioners noted that the Commission concedes that SEEM constitutes a “multi-lateral arrangement.”
Accordingly, the outstanding issue is whether SEEM explicitly or implicitly contains discounted and/or special transmission arrangements, the court said.
The opinion acknowledges FERC precedent finding that zero-rate transmission service cannot be characterized as “discounted” transmission service. The court points, however, to language in Order No. 888 suggesting that providing “non-pancaked” transmission rates (i.e., not charging multiple rates for service over multiple transmission systems) is a form of discounting.
Given that SEEM purported to utilize non-pancaked transmission rates, the court reasoned that FERC is required to provide additional explanation for why SEEM should not be considered a loose power pool. The court remanded this issue to FERC.
The court also noted that FERC’s resolution of this issue may inform the petitioners’ related objection that SEEM is required to file a joint tariff, which the court declined to address at this time.
The petitioners also challenged the Non-Firm Energy Exchange Transmission Service transmission feature of SEEM, arguing that it fails to comply with FERC’s rules requiring non-discriminatory open access transmission service consistent with the pro forma OATT, particularly the Non-Firm Energy Exchange Transmission Service requirement that participants be located in specific geographic locations.
FERC approved deviations from the OATT for SEEM, the court noted, because “the Commission determined that the requested tariff revisions’ deviations from Order No. 888’s pro forma tariff were proper given the expected value of the SEEM service, the equal terms applied to all prospective entities in the region, and the technical requirements necessary to allow the service to operate.”
The court said that FERC’s explanation “would be reasonable if we were operating from a clean slate,” but said that there are existing bilateral trading partners in the Southeast that would be excluded by the geographic location requirements of the Non-Firm Energy Exchange Transmission Service.
The court said that FERC “fails to grapple with the objection that any exclusionary ‘technical requirement’ is one of the [SEEM sponsors’] own making.”
The court said that the creation of a new service that -- by its design -- excludes existing market participants “evokes the discriminatory practices against third-party competitors by monopoly utilities that prompted the Commission’s adoption of Order No. 888.”
The court remanded this issue to FERC, requiring the Commission to “provide a more fulsome explanation for why the ‘market design decisions made by the filing parties’ -- couched as operational requirements and limits associated with ‘technical feasibility’ -- are actually superior to the status quo in light of Order No. 888’s open access principles.”
The court vacated the tariff orders, relying in large part on the rationale that since SEEM began operations in November 2022, and only provides energy transactions for non-firm service, “it follows that vacatur would not be disruptive.”
Florida Utilities Begin Active Energy Trading
SEEM on June 28 said that Duke Energy Florida, JEA, Tampa Electric Company, and Gainesville Regional Utilities had initiated active energy trading, allowing them to buy and sell power using the SEEM platform.
Founding members of SEEM include Associated Electric Cooperative, Dalton Utilities, Dominion Energy South Carolina, Duke Energy Carolinas, Duke Energy Progress, Georgia System Operations Corporation, Georgia Transmission Corporation, LG&E and KU Energy, MEAG Power, N.C. Municipal Power Agency No. 1, NCEMC, Oglethorpe Power Corp., PowerSouth, Santee Cooper, Southern Company, and TVA.
