Dynegy will pay $38 million to settle allegations that it manipulated the Midcontinent Independent System Operator’s 2015/16 capacity auction, driving up capacity prices in Illinois, according to an agreement filed Wednesday at the Federal Energy Regulatory Commission.
The agreement stems from complaints filed by Public Citizen, former Illinois Attorney General Lisa Madigan and Southwestern Electric Cooperative over the auction results. Dynegy — now owned by Vistra — continues to dispute the allegations, according to the “black box” settlement.
Dynegy will pay MISO $38 million within ten days of the agreement taking effect, according to the agreement. The grid operator will distribute $1.1 million to Southwestern; $1.3 million to the Illinois Municipal Electric Agency; $2 million to Illinois Industrial Energy Consumers; and $33.5 million to Ameren Illinois, according to the agreement. IMEA, IIEC and Ameren Illinois will then distribute the money to its member municipalities, members or default supply customers, respectively.
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. IIEC is receiving a refund for capacity charges its members paid.
The parties asked FERC to approve the agreement by Aug. 29.
FERC responded to the complaints over the capacity auction with two decisions. In December 2015, the commission ordered MISO to change its tariff provisions related to market power mitigation and how it calculates capacity import limits, which the agency said were no longer just and reasonable. In a 3-1 July 2019 decision, FERC found the Zone 4 auction results to be just and reasonable.
Then-FERC Commissioner Richard Glick dissented from the second decision and criticized then-FERC Chairman Neil Chatterjee for unilaterally ending the enforcement office’s investigation into Dynegy’s market behavior.
However, in 2021, an appeals court agreed with Public Citizen that FERC’s rationale for dismissing the complaints was “unreasoned” and directed FERC to reconsider its findings.
A year later, FERC’s enforcement office said in a report that Dynegy schemed to drive up capacity prices to $150/MW-day in MISO’s zone 4, while capacity cleared at $3.29/MW-day to $3.48/MW-day in MISO’s eight other zones in the 2015/16 auction.
“Dynegy engaged in a scheme … to amass and hoard megawatts that might otherwise have been offered into the auction at a zero price, thereby increasing the likelihood that a Dynegy resource offered into the auction at a non-zero price would become the marginal resource, setting the clearing price,” enforcement office staff said.
After the report was released, FERC in June 2024 ordered a hearing on the dispute, but held it in abeyance to encourage the parties to reach a settlement.
“Public Citizen prevailed over a politically-motivated decision by a previous chairman to dismiss a market manipulation investigation despite FERC's enforcement staff concluding Dynegy engaged in market manipulation of MISO's capacity auction,” Tyson Slocum, director of the consumer watchdog group’s energy program, said in an email.
The case shows how easy it is for companies to manipulate regional transmission organization capacity auctions and underscores the need for stronger safeguards to protect consumers from capacity market manipulation, Slocum said.
