[00:00:17] Speaker 03:
Good morning.

[00:00:18] Speaker 01:
Good morning.

[00:00:19] Speaker 01:
Dan Sponsor for the petitioners.

[00:00:25] Speaker 01:
This morning, I'd like to identify the key feature in this case and then discuss the errors by FERC in approving the orders which require vacating and remanding of those orders.

[00:00:46] Speaker 03:
And you'll start with the jurisdictional question of your standing.

[00:00:51] Speaker 01:
Your Honor, yes.

[00:00:52] Speaker 01:
The standing is Mr. Clark, the President of the Union, is a customer in the New England ISO electric area and bears the cost of the increases

[00:01:10] Speaker 01:
that were caused by the withholding of Brayton points and that were approved by FERC in this case and thereby making them collectible to be imposed on him.

[00:01:26] Speaker 03:
So I see where you made those assertions in your protest and that's the only reference you've given us, is that correct?

[00:01:37] Speaker 01:
Those, yes, your honor, in our protest, that is where we refer to it.

[00:01:46] Speaker 01:
That's a matter that is undisputed by anyone and undisputed by FERC.

[00:01:51] Speaker 01:
What is undisputed?

[00:01:53] Speaker 01:
That he is a customer that would bear the burden of the price increases that are at issue in this case that resulted from the FERC order.

[00:02:03] Speaker 03:
Well, how do you respond to first arguments in terms of the causation problem here?

[00:02:14] Speaker 01:
I believe FERC argues that the standing is based on the assertion that the withholding caused the price increase

[00:02:26] Speaker 01:
that is ultimately going to be borne by Mr. Clark and the union members.

[00:02:33] Speaker 01:
That is an essential feature of the case.

[00:02:36] Speaker 01:
We have evidence and allegations in this case that the withholding did cause substantial price increases in the auctions.

[00:02:53] Speaker 03:
And I will find that by looking at your protest, because I looked at the part of your protest that you cited.

[00:03:02] Speaker 03:
That's one.

[00:03:02] Speaker 03:
Then the second sort of notion is that this is all relevant to auction eight, which is not before us.

[00:03:14] Speaker 01:
Your Honor, the conduct

[00:03:17] Speaker 01:
of the withholding of the plant constituted market manipulation.

[00:03:22] Speaker 01:
Those are our assertions.

[00:03:24] Speaker 01:
And the purported retirement of the plant was therefore invalid.

[00:03:31] Speaker 01:
That is the central issue in this case.

[00:03:33] Speaker 01:
And the retirement, even though it happened before

[00:03:41] Speaker 01:
FCA-8, the withholding of that power caused the increase in FCA-9 and the increase in FCA-10, and it was equally acts of market manipulation which would render the results of FCA-9 and FCA-10 from those increased prices unjust and unreasonable.

[00:04:02] Speaker 01:
And FERC failed to give reason decision-making as to why those were unjust.

[00:04:07] Speaker 04:
Help me understand a little bit more the connection you draw between the core challenge, which is the withdrawal of capacity in FCA 8 and the challenges before us to FCA 9 and 10.

[00:04:26] Speaker 04:
Is the claim of manipulation with respect to FCA-8 dependent on the fact that the retirement decision came after the deadline for other potential capacity providers to participate in the FCA-8?

[00:04:41] Speaker 01:
Yes, Your Honor.

[00:04:42] Speaker 01:
That implemented and allowed the manipulation.

[00:04:48] Speaker 04:
Given that, when we look at FCA-9 and FCA-10,

[00:04:53] Speaker 04:
there was no similar manipulation because by the time FCA-9 was pending, everyone who, all the capacity, potential capacity providers were fully on notice that this facility was being retired.

[00:05:11] Speaker 04:
And so I'm just trying to understand the claim that the market in FCA-9 and FCA-10 was manipulated if

[00:05:22] Speaker 04:
the timeline was not so effective as it was with FCA8.

[00:05:28] Speaker 01:
It's useful to look at the overall picture here, which is the owners came in and the Brayton Point plant was pivotal and was expected to be pivotal to all the auctions, the FCA8 and in the future because of the supply situation.

[00:05:50] Speaker 01:
And it was by withdrawing that capacity from all of the auctions, there were different mechanisms.

[00:05:58] Speaker 01:
The first was FCA-8, but it was equally withdrawn from FCA-9 and FCA-10 by the Energy Capital Partners conduct.

[00:06:09] Speaker 01:
So by knocking the Brayton Point plant out of the supply stack,

[00:06:15] Speaker 01:
For both of those auctions, that caused the dramatic increase in the price.

[00:06:21] Speaker 01:
So that's the relationship.

[00:06:23] Speaker 01:
It is the withholding of Brayton Point from the auctions.

[00:06:26] Speaker 01:
How long does that go forward?

[00:06:27] Speaker 05:
How long does that continue?

[00:06:29] Speaker 05:
Forever?

[00:06:29] Speaker 05:
Would that apply to auction 12, 13, 14?

[00:06:32] Speaker 05:
Brayton Point is gone presumably for good.

[00:06:35] Speaker 05:
So every auction going forward is tainted with the same problem?

[00:06:38] Speaker 01:
Your Honor, that's a good question.

[00:06:41] Speaker 01:
And how far that goes I think is perhaps unclear.

[00:06:44] Speaker 01:
But I would suggest the answer to that is that when FERC reviews these auctions and when it is clear that an immediate or a very recent withdrawal was made,

[00:07:01] Speaker 01:
which would clearly increase prices.

[00:07:06] Speaker 01:
And it's not just in one year.

[00:07:08] Speaker 01:
It's going to carry on for the future years.

[00:07:12] Speaker 01:
And FERC, as part of its reasoned analysis, needs to determine whether this withholding by a major player who came in and bought up a competitor and knocked it out of the supply stack and reduced supply,

[00:07:26] Speaker 01:
to drive up prices and drove up all of its, the profits on its other units, whether that was an act of manipulation, intentional manipulation of the market.

[00:07:39] Speaker 04:
And I would suggest that FERC needs to look at that in each case, and I can't give you... Mr. Spanceller, is your short answer that that would be a factual question to be determined by the Commission on Remand?

[00:07:50] Speaker 04:
In other words, what the scope of the impact

[00:07:53] Speaker 04:
of what you claim was unlawful manipulation.

[00:07:57] Speaker 04:
It would actually have to be dealt with by economists projecting through time to figure out how long, if it were in fact manipulation, how long the tail of it was.

[00:08:10] Speaker 01:
Yes, yes, I think it would be a fact issue.

[00:08:13] Speaker 05:
There must be another action going on right about now.

[00:08:16] Speaker 05:
Are you claiming injury?

[00:08:17] Speaker 05:
Is your client claiming injury in this one?

[00:08:20] Speaker 01:
Your Honor, that's FCA 11.

[00:08:25] Speaker 01:
We are not.

[00:08:25] Speaker 01:
We have borne a tremendous burden at FCA 8, FCA 9, and FCA 10.

[00:08:32] Speaker 01:
It was clear that there was going to be a substantial

[00:08:37] Speaker 01:
now a $3 billion increase in those three auctions.

[00:08:42] Speaker 01:
And the increase and the effect of that has tailed off.

[00:08:45] Speaker 01:
And it's not clear that it's affected 11 and 12, although I suspect there has been some impact.

[00:08:53] Speaker 01:
But our client has done enough by objecting to these three.

[00:08:58] Speaker 05:
But your theory of standing would continue at least into 11 and 12 when you said there's still some impact.

[00:09:04] Speaker 01:
If there is an impact as a result of this withholding by one of the major players to increase its profits, we would have standing to object to those.

[00:09:20] Speaker 01:
Although we haven't, and I believe the time has passed probably for FCA 11 to follow the objections.

[00:09:29] Speaker 05:
I'm just questioning the theory of standing that you have.

[00:09:32] Speaker 05:
Can you just explain to me how you have to show by a substantial probability

[00:09:37] Speaker 05:
that there is causation in this situation.

[00:09:41] Speaker 05:
It's not just alleging it like you would at a complaint.

[00:09:45] Speaker 05:
What is the basis for your conclusion that whatever you say went wrong in auction eight carried forward into auction nine?

[00:09:57] Speaker 05:
Because at least when you go through the tariff and the way ISO sets up the sort of

[00:10:06] Speaker 05:
variables that are going to be in play in the next auction, none of that seems to depend on prior or existing price the year before.

[00:10:14] Speaker 05:
That's just as not a factor as it sets up the parameters for the next auction.

[00:10:20] Speaker 05:
And quite frankly, if you get a really high price in the auction eight, that might well attract a lot more people in.

[00:10:25] Speaker 05:
So just as a factual matter, it should attract a lot more competition in the next one, which would actually drive prices down.

[00:10:33] Speaker 05:
So what is your basis

[00:10:35] Speaker 05:
are saying that carries forward, given how independently the auctions are designed.

[00:10:42] Speaker 01:
Yes, Your Honor.

[00:10:42] Speaker 01:
The key point for each of the auctions is the withholding of Brayton Point from the auction stack.

[00:10:51] Speaker 01:
has a clearly discernible impact on what the resulting auction clearing price is going to be.

[00:11:02] Speaker 01:
And we had an expert that identified, and I can explain exactly how that happens if it would be useful, Your Honor.

[00:11:09] Speaker 05:
Because what I'm trying to figure out is, like, Brayton is out, but a whole bunch of us assume other people come in to fill that hole, because now prices are much higher.

[00:11:16] Speaker 05:
They're much higher in auction rates.

[00:11:17] Speaker 05:
So they figure there's a real need now for our capacity.

[00:11:21] Speaker 05:
So they come in, but then you actually have more competition.

[00:11:24] Speaker 01:
But keeping.

[00:11:25] Speaker 05:
And you might have even without the Brayton point have been there.

[00:11:27] Speaker 01:
But keeping Brayton point out, because of the way this particular auction works, in each case drives the price, the resulting clearing price up.

[00:11:39] Speaker 01:
And the reason for that is that each of these auctions is done in a very sort of unique way for this market.

[00:11:49] Speaker 01:
all of the generator bids are stacked in order of their cost from lowest to highest and they all get submitted and until they get enough quantity to meet what the demand is going to be and the whole game if you are a generator and you want to get the prices up is you want to knock out one of those

[00:12:17] Speaker 01:
generators in the supply stack.

[00:12:20] Speaker 01:
And in this case, Brayton Point was a critical generator.

[00:12:23] Speaker 01:
And whenever you knock that generator out, that goes out and it brings in a higher cost generator to be the marginal generator.

[00:12:33] Speaker 01:
Why do we know that the... If I could just finish, you know what I'm saying?

[00:12:36] Speaker 01:
And the key feature of this auction is it's that marginal cost of that last generator needed to meet the demand

[00:12:45] Speaker 01:
that sets the clearing price for the whole group of generators.

[00:12:49] Speaker 01:
So these other generators that are already in there, which was these energy capital partners generator units, they wanted to drive this price up as high as possible because it jacked up their prices, because the clearing price was so high.

[00:13:03] Speaker 01:
And it jacked up their prices by almost $200 million as a result of... You're talking about auction aid.

[00:13:10] Speaker 01:
I'm talking in auction 8, it was $100 million.

[00:13:15] Speaker 01:
In auction 9, it was about $75 million.

[00:13:21] Speaker 01:
In auction 10, it was about $25 million, just for energy capital partners in additional profits from knocking this price up, knocking Brayton Point out, and knocking this clearing price up.

[00:13:34] Speaker 01:
so that it would be higher and all of energy capital apart in this generation.

[00:13:38] Speaker 04:
How do we know that the new capacity that's coming into the auction is at a higher price point?

[00:13:45] Speaker 04:
It could be lower.

[00:13:46] Speaker 01:
Your Honor, the people in the market know, the industry people know what the costs are of the existing generators and of the potential people that are out there, the types of plants.

[00:13:58] Speaker 03:
So let me get back to my basic concern here.

[00:14:04] Speaker 03:
When the objection was raised, you have the burden to show standing, and the opening brief presented it in terms of we're paying higher rates.

[00:14:20] Speaker 03:
So then the commission

[00:14:23] Speaker 03:
raise the objection, and in your reply brief, I would have anticipated that a lot of what you're telling us today would have appeared.

[00:14:33] Speaker 03:
So what I hear you telling us today is, one, if I read the record of auction nine and 10 thoroughly, I will understand everything that you have said today.

[00:14:54] Speaker 03:
But there are some things you're saying today that I could not find when I first looked.

[00:15:02] Speaker 03:
And maybe that's just because I don't understand the Northeast system well enough.

[00:15:08] Speaker 03:
But it's your burden to give me or give the court the path for finding

[00:15:17] Speaker 03:
standing.

[00:15:18] Speaker 03:
And it's the causation part that we've been focusing on this morning.

[00:15:21] Speaker 03:
And you say everyone knew, et cetera.

[00:15:26] Speaker 03:
And the commission has raised a number of issues.

[00:15:29] Speaker 03:
And absent your citing us to something in the record, since we're not making a fact finding here, I'm having trouble understanding how you think we can

[00:15:47] Speaker 03:
resolve these matters in your favor, absent you're presenting something to us.

[00:15:53] Speaker 03:
I acknowledge that for purposes of standing, we will take your assertions or factual proffers as true, but I just didn't see the types of things you're telling us today.

[00:16:09] Speaker 01:
Well, Your Honor, in our opening brief, we did identify the price increases.

[00:16:19] Speaker 03:
No question about it.

[00:16:21] Speaker 03:
And I see the chart and I see some other things too, but you're telling us things today that I didn't see.

[00:16:30] Speaker 03:
And maybe that's because I don't know about the Northeast tariff, right, and how that works.

[00:16:38] Speaker 03:
But that's what you have to show us.

[00:16:40] Speaker 03:
I mean, just being a rate payer isn't enough.

[00:16:43] Speaker 01:
Well, Your Honor, I think the essential features are that the indications and the proffer of the price increase allegedly resulting from the manipulation is in our opening brief.

[00:17:02] Speaker 04:
Where do you get your figures?

[00:17:04] Speaker 04:
There's a lot of figures in your brief.

[00:17:07] Speaker 04:
And you mentioned some today.

[00:17:10] Speaker 04:
What are you citing to in the record?

[00:17:11] Speaker 04:
Where do we look in the record for the basis for both the impact on the market as a whole and for the takeaway to capital energy partners?

[00:17:24] Speaker 01:
The impact on the market as a whole, Your Honor, in the FCA-8 proceeding, the Union had an economic expert analyze the market and calculate what the impact

[00:17:39] Speaker 01:
price increase was as a result of knocking out Brayton Point and driving the clearing price up and that was supported by an affidavit and explained and he did the same and that's in our FC8 protest which I know that we cite

[00:18:01] Speaker 01:
here, the original protest.

[00:18:03] Speaker 01:
We cite it, but we did not include it in the appendix.

[00:18:06] Speaker 01:
And I think it would be useful if we supplemented the appendix.

[00:18:09] Speaker 01:
FERC is aware of this, and the pages are referenced in there.

[00:18:15] Speaker 03:
So we have authority here that you're supposed to make all this clear to us in your opening brief, or at least in your reply brief.

[00:18:30] Speaker 03:
Our case law is that if your standing is self-evident, we can proceed.

[00:18:36] Speaker 03:
But obviously, from our questions, I think it's clear it's not self-evident to us.

[00:18:42] Speaker 03:
So under our American Library Congress case, we have allowed a petitioner to submit an affidavit spelling out the basis, the three prongs of standing.

[00:19:00] Speaker 03:
And maybe that's what is needed here to take us through this, because now you're telling us that really what we need is information that's not even in the record before us, namely your protest as to auction aid.

[00:19:15] Speaker 01:
Your Honor, we would be pleased to do that and we'd appreciate the opportunity to do that because we clearly can.

[00:19:23] Speaker 03:
Let me say from your brief, you cited us to the agency cases and of course Article 3 of the Constitution does not apply to the agency.

[00:19:35] Speaker 03:
So you're faced with the burden once you come into an Article 3 court to meet

[00:19:41] Speaker 03:
the Article 3 standard.

[00:19:43] Speaker 03:
So I'm just mentioning that.

[00:19:45] Speaker 03:
So any supplement you file meets that standard.

[00:19:53] Speaker 03:
I mean, the agency can proceed without worrying.

[00:19:56] Speaker 03:
And your motion for intervention is trying to say why you had an interest

[00:20:01] Speaker 03:
and you viewed yourself as a party of greed, but that's different.

[00:20:06] Speaker 01:
Your Honor, we would be happy to do that.

[00:20:10] Speaker 04:
But Mr. Sponsa, you had also mentioned, I'm sorry to interrupt you, but I just want to make sure that I know your answer to this, you had also mentioned that

[00:20:19] Speaker 04:
You had done a similar analysis with respect to the effect of the alleged market manipulation on FCA-9 and FCA-10.

[00:20:28] Speaker 04:
Are the figures of the data underlying those estimates in the record?

[00:20:34] Speaker 01:
The results of the estimates are in the record in the FCA-9 and FCA-10.

[00:20:40] Speaker 01:
Those quantifications were done by the same expert.

[00:20:45] Speaker 04:
And is that, are you talking about Paul Chernek?

[00:20:48] Speaker 01:
However, we did not submit additional affidavits by him confirming that, although he clearly would confirm it.

[00:21:02] Speaker 01:
He did the analysis in part, Your Honor, because

[00:21:06] Speaker 01:
This was never challenged in the FCA 8 because the fact of the price increase from knocking out Grayton Point, it was known that this would happen in the industry.

[00:21:20] Speaker 01:
It was reported.

[00:21:21] Speaker 05:
I think we're really focused on 9 and 10 here.

[00:21:24] Speaker 05:
So showing what was going to happen in auction 8 doesn't

[00:21:27] Speaker 05:
help us, and so what we need is, I mean, you're welcome to submit information that was part of your FCA protest, but I don't see how that is gonna show anything about how an auction a year later was affected, and are you telling me that you, when you say this expert-confirmed causation, was that part of the record or just something outside between you and your expert talk?

[00:21:53] Speaker 05:
Is that something you can submit?

[00:21:56] Speaker 01:
It's something we can submit, Your Honor.

[00:21:58] Speaker 05:
It's not part of the record before FERC.

[00:22:01] Speaker 01:
No, the assertion was there.

[00:22:02] Speaker 01:
It was undisputed by FERC.

[00:22:05] Speaker 01:
There was no evidence to the contrary.

[00:22:08] Speaker 05:
What was undisputed?

[00:22:10] Speaker 05:
In auction nine, they very much dispute this causation point in auction nine.

[00:22:15] Speaker 05:
I think you can say that it's been undisputed that what happened, Brayton Point's withdrawal,

[00:22:22] Speaker 05:
caused the price increases in auction nine.

[00:22:25] Speaker 01:
Your Honor, I should say they put in no evidence showing that the withdrawal of Brayton Point had no impact on the price.

[00:22:36] Speaker 05:
Well, you had the burden to show, though.

[00:22:38] Speaker 05:
This is your burden and the tariff itself.

[00:22:41] Speaker 05:
They said the elements that they used in setting up

[00:22:43] Speaker 05:
the next auction are all independent of whatever price may have existed beforehand.

[00:22:48] Speaker 05:
So I don't see mechanically how that price increase that happened for auction eight

[00:22:54] Speaker 05:
was carried forward into auction nine.

[00:22:57] Speaker 05:
We just don't see that in the tariff.

[00:22:58] Speaker 01:
Yes, Your Honor, Mr. Cernick did an independent analysis in auction nine and in auction ten to calculate what the price impact would be.

[00:23:09] Speaker 01:
And that's the number that he gave us, and we included it.

[00:23:13] Speaker 05:
The FARC hasn't had any chance to see that.

[00:23:16] Speaker 01:
The number's in there, but Mr. Cernick's affidavit is not in there.

[00:23:22] Speaker 04:
When you say the number's in there, where do we look for the number?

[00:23:27] Speaker 01:
For the evidence that the shutdown increased prices, at our brief, in pages seven and eight.

[00:23:40] Speaker 04:
Your brief to us?

[00:23:41] Speaker 01:
In our opening brief to this court, at pages seven and eight, and footnote two, particularly on page eight.

[00:23:52] Speaker 05:
So those numbers are just repeated in your protest without any citation of their source.

[00:23:57] Speaker 05:
So all we have is numbers.

[00:24:01] Speaker 05:
There's no evidence behind these numbers.

[00:24:03] Speaker 05:
Your brief cites to your protest, and your protest just puts the numbers out there without saying anything about where they came from.

[00:24:08] Speaker 01:
That's correct, Your Honor.

[00:24:12] Speaker 01:
As I've said, these numbers were provided by Mr. Chernick, and it was not an affidavit.

[00:24:19] Speaker 02:
The affidavit was part of your protest?

[00:24:21] Speaker 01:
He did have an affidavit attached to this protest, FCA 8, regarding the impact on FCA 8.

[00:24:33] Speaker 01:
He then did, in FCA 9, another analysis, but we did not include an affidavit supporting that.

[00:24:41] Speaker 01:
But he easily can and would.

[00:24:43] Speaker 01:
And he did the same thing again in FCA 10.

[00:24:48] Speaker 01:
And that's what's in the record.

[00:24:49] Speaker 04:
Just before you sit down, FERC argues that there was no requirement at the time of FCA 8 that the Commission examine the economics of a retirement request and that even if it had it, there's no mechanism had it found that it was going to have a detrimental impact on the competitiveness of the market, that there was no mechanism by which it could have forced Brighton Point to continue to operate.

[00:25:14] Speaker 04:
And what are your responses to those

[00:25:17] Speaker 04:
I'm sorry, your first question, Your Honor, was... That there was no requirement that the Commission examine the economics of a retirement, of a proposed retirement.

[00:25:27] Speaker 01:
Your Honor, in order for the Commission's order to be based on reasoned decision-making, under these circumstances,

[00:25:36] Speaker 01:
they had to examine whether the shutdown of this plant was economic, because it's market manipulation.

[00:25:45] Speaker 01:
If somebody shuts down a key pivotal plant, it's a jack-up prices for their other units, and it has a significant increase.

[00:25:57] Speaker 01:
And you have to examine that.

[00:25:58] Speaker 01:
And very importantly,

[00:26:00] Speaker 01:
FERC later, in ISO New England, later acknowledged this when they did the retirement reform proceedings.

[00:26:10] Speaker 01:
They realized that with these retirements of pivotal plants, you've got to look at the economics of the shutdown because it has the potential for huge manipulation.

[00:26:21] Speaker 01:
And they have a whole, they then adopted a proceeding for it in the retirement proceedings.

[00:26:27] Speaker 04:
And as you know, FERC comes back and says, fine, we have a new tariff that has new and more stringent requirements for capacity that proposes to retire, but that doesn't apply retroactively to invalidate what was done in FCAA.

[00:26:42] Speaker 01:
But, Your Honor, what it acknowledges, though, is that in order for the results of auctions where there are these retirements to be just and reasonable, one has to examine the costs and the economics of doing it.

[00:26:59] Speaker 04:
And are the economics alone evidence, in your view, of market manipulation?

[00:27:03] Speaker 04:
It seems like there's sort of three different concepts that are somewhat conflated, and it may be because

[00:27:11] Speaker 04:
at least in your view, they are, in fact, the same.

[00:27:13] Speaker 04:
One is continued profitability.

[00:27:16] Speaker 04:
The second is market power.

[00:27:17] Speaker 04:
And the third is market manipulation.

[00:27:20] Speaker 04:
Can you clarify what you're relying on?

[00:27:22] Speaker 01:
Yeah.

[00:27:23] Speaker 01:
There really are three elements to market manipulation here.

[00:27:27] Speaker 01:
And one is the economics of the plant.

[00:27:30] Speaker 01:
But the indicia are first, when you have a fleet owner,

[00:27:35] Speaker 01:
that goes in and buys another generation plant that is pivotal and knocking it out will increase prices.

[00:27:46] Speaker 01:
You have a fleet owner that buys a plant, withholds it from the market, and there's a resulting price increase

[00:27:56] Speaker 01:
there is a resulting substantial increase to the fleet owner's other generation units, so that he's now jacking up the price to make money on these other units.

[00:28:07] Speaker 01:
And the plant could be run economically.

[00:28:14] Speaker 01:
So the economic aspect is an essential feature of the elements of the addition of the market manipulation.

[00:28:22] Speaker 04:
What would FERC do?

[00:28:23] Speaker 04:
I mean, you can't force a business that doesn't want to operate to operate.

[00:28:28] Speaker 04:
So had this all been dealt with promptly in real time,

[00:28:33] Speaker 04:
during FCAA, what was the appropriate response?

[00:28:37] Speaker 04:
The plant that the Energy Apple partner says, we don't want to do Braden.

[00:28:42] Speaker 04:
Maybe we've just had a change of heart.

[00:28:43] Speaker 04:
This is coal.

[00:28:45] Speaker 04:
This is outmoded.

[00:28:47] Speaker 04:
Let's get rid of it.

[00:28:47] Speaker 04:
And they just want out.

[00:28:50] Speaker 04:
Then what should FERC have done?

[00:28:52] Speaker 01:
They could have done exactly what they finally realized they should have done in the retirement proceedings.

[00:28:58] Speaker 04:
Using proxy pricing.

[00:28:59] Speaker 01:
Which is use a proxy.

[00:29:00] Speaker 04:
And did they have authority to do that before the new tariff?

[00:29:04] Speaker 01:
Absolutely.

[00:29:05] Speaker 01:
As part of their mandated review under FPA Section 205 to make sure these prices were just and reasonable, which was an essential part of the settlement that is also an essential part of the tariff,

[00:29:19] Speaker 01:
they could absolutely make that change.

[00:29:23] Speaker 04:
What do you point to as the best authority that they could do the proxy pricing without having that be codified as one of the elements of their authority under the tariff?

[00:29:33] Speaker 01:
Your Honor, I would point to Section 205, which requires that the results of these auctions and that FERC and that the burden is on

[00:29:48] Speaker 01:
the ISO to show that these results are just and reasonable.

[00:29:53] Speaker 01:
And where you have a retirement like this and all the evidence of manipulation, the

[00:30:03] Speaker 01:
the ISO hasn't met the burden of showing that these are just and reasonable.

[00:30:10] Speaker 01:
Regardless of what the tariff says, the anti-manipulation provision always applies.

[00:30:15] Speaker 04:
And how could this be remedied?

[00:30:18] Speaker 04:
Let's say that we remanded to FERC and said, look, sort out

[00:30:23] Speaker 04:
FCAA, sort out what implications, you know, if you find market manipulation, what implications that had for 9 and 10, then what do you envision could or would happen?

[00:30:35] Speaker 04:
The plant is closed.

[00:30:37] Speaker 04:
In fact, Capital Energy Partners has sold it.

[00:30:39] Speaker 04:
How does FERC unravel this?

[00:30:42] Speaker 01:
One option is they look at what the plan's cost would have been to run, and they do the proxy.

[00:30:53] Speaker 01:
And these prices don't kick in for 9 and 10, and they don't start until

[00:30:58] Speaker 01:
June of this year, and they go this year and the next year, and they recalculate the price.

[00:31:05] Speaker 01:
Your Honor, I mean, that's a straightforward solution, which we believe ought to happen here, and that the price would then be determined to be just and reasonable.

[00:31:17] Speaker 04:
I'd say eight prices are already kicked in last year.

[00:31:20] Speaker 01:
They're only for a year, so they are being collected right now.

[00:31:26] Speaker 01:
And they are up in the air because of the public citizen decision and FERC's deadlock in that proceeding, where they made no determination whatsoever.

[00:31:42] Speaker 04:
And they've done nothing since then.

[00:31:44] Speaker 01:
They haven't, and we filed an amended

[00:31:47] Speaker 01:
an amended protest, they were deadlocked because of the 2-2 split.

[00:31:52] Speaker 01:
The composition changed, that deadlock was broken, and we filed an amended protest that now decide under 205 whether these are just and reasonable, and that's been pending, and FERC has done nothing.

[00:32:06] Speaker 01:
It's a real tight situation because we have that, and on the other hand, the public citizens case that says you can't appeal anything that's been done.

[00:32:14] Speaker 03:
Thank you, Your Honor.

[00:32:30] Speaker 00:
Thank you, Your Honors.

[00:32:31] Speaker 00:
Ross Fulton for the Commission.

[00:32:32] Speaker 00:
I think there's two

[00:32:35] Speaker 00:
primary issues withstanding, if I may.

[00:32:38] Speaker 00:
The first is the link to the auctions themselves.

[00:32:42] Speaker 00:
As was discussed earlier, the tariff and the commission's precedent links.

[00:32:48] Speaker 00:
Each individual auction is its own separate entity.

[00:32:53] Speaker 00:
So the retirement in the eighth auction has no impact on the retirement in the ninth and the tenth.

[00:33:01] Speaker 00:
And I would analogize it to,

[00:33:04] Speaker 00:
at the pleading stage in district court where you do have to take factual allegations or presume them to be true, but you do not have to presume that allegations that are contradicted as a matter of law are true.

[00:33:17] Speaker 00:
And I would even compare it to the proxy that petitioner would like to have been used, even using that new market design rule, which

[00:33:26] Speaker 00:
was not available at the time, that proxy would have only applied in the eighth auction.

[00:33:33] Speaker 00:
The commission, it has no authority to continue to apply that proxy.

[00:33:37] Speaker 00:
And in some ways it makes sense because

[00:33:40] Speaker 00:
The commission presumes it's a market.

[00:33:43] Speaker 00:
So if prices are higher because of reduced supply, the goal is to get new suppliers into the market, which is what, in fact, the commission found has occurred here.

[00:33:53] Speaker 03:
So in designing an auction, there is no base factor of prior costs and revenues?

[00:34:06] Speaker 00:
There's not, Your Honor.

[00:34:09] Speaker 03:
It's literally starting with a blank slate.

[00:34:13] Speaker 00:
That is my understanding, yes.

[00:34:16] Speaker 00:
Other than the fact that the auction's intent is if prices are higher in one auction, the subsequent auctions should reflect new supply entering the market, which is in fact what's happened in the New England system.

[00:34:32] Speaker 00:
In fact, they just released the results of the latest auction yesterday, which

[00:34:36] Speaker 00:
The price continues to drive the market since this eighth auction.

[00:34:42] Speaker 03:
But you're not sure.

[00:34:44] Speaker 00:
No, I mean, yes, I am sure.

[00:34:46] Speaker 03:
But you said you thought.

[00:34:49] Speaker 00:
I'm sorry, I said my understanding.

[00:34:50] Speaker 00:
I did not mean to couch my answer.

[00:34:53] Speaker 00:
Sorry, the word of... The auction does not take into account retirements.

[00:34:59] Speaker 00:
Any any private enterprises permitted to retire the auction has a system for handling that and as the

[00:35:08] Speaker 00:
market monitor found in the ninth and the tenth auction when they took into account the entrance of new supply, along with how the market monitor mitigated exit bids, those results were, it was a competitive auction in the aggregate, and that's just and reasonable.

[00:35:25] Speaker 04:
But I think the economic case that petitioners would make is that if FERC was on top of it,

[00:35:36] Speaker 04:
you know, looking at it through their lens.

[00:35:39] Speaker 04:
If FERC were on top of it at FCA 8, they wouldn't have examined and not approved or taken measures in view of apparent manipulation with the proposed withdrawal.

[00:35:56] Speaker 04:
And energy capital partners facing the, once the opportunity

[00:36:04] Speaker 04:
to profit in the rest of its portfolio was eliminated by mitigation measures might not have actually withdrawn the Brighton plan.

[00:36:13] Speaker 04:
So I take their case to be factually require challenging expert proof, but not legally deficient for that reason.

[00:36:27] Speaker 04:
In other words,

[00:36:28] Speaker 04:
you know, if they're right that there was market manipulation, and if they're right that FERC had an obligation at the time to mitigate that, and if that were clear to capital energy partners, capital energy partners might have thought, well, our clever idea of, I mean, in their view of making a lot of money in this part of our portfolio by prematurely closing down this other part isn't such a good idea after all, and it might be the case that BrainPoint would

[00:36:53] Speaker 04:
would have been online as of FCA 9 and FCA 10.

[00:36:58] Speaker 04:
Do you have a response to that?

[00:37:00] Speaker 04:
And of course, Mr. Sponcella can correct me if that's not the argument they're making.

[00:37:05] Speaker 00:
No, I understand.

[00:37:05] Speaker 00:
I think there's a couple of points.

[00:37:07] Speaker 00:
One, the issue of market manipulation is not before this court.

[00:37:12] Speaker 00:
In fact, this court in public citizen observed in footnote two that the commission had, although brain point was not the subject of the

[00:37:20] Speaker 00:
investigation and market manipulation and the eighth auction, the commission's enforcement staff nonetheless looked at Brandpoint and found credible reasons for its retirement and then found there was no further reason to investigate.

[00:37:33] Speaker 00:
And that was, as this court found, those kind of enforcement decisions are subject to the commission's discretion.

[00:37:38] Speaker 04:
Right, maybe that's, I'm using a shorthand, but their factual case is that they're not saying, oh, we're second guessing your enforcement decision.

[00:37:46] Speaker 04:
They're saying, we're second guessing your failure to do a rigorous just and reasonableness determination.

[00:37:54] Speaker 04:
And what underlay these prices was exercise of market power.

[00:38:03] Speaker 04:
perhaps I'm leading us down the wrong road by referring to it as market manipulation, but non-just and reasonable prices.

[00:38:10] Speaker 04:
And if the commission had recognized the problem and said we can't approve this because these prices will not be just and reasonable, we need to do some market mitigation, maybe we'll use a proxy, we'll do something to keep the price from, the clearing price from being unreasonably high, then that would have perhaps affected the strategic decisions by capacity.

[00:38:33] Speaker 00:
I think there's two points to that, Your Honor.

[00:38:35] Speaker 00:
The first with just regard to the auction age.

[00:38:38] Speaker 00:
As we described in our brief, the BrainPoint made an exit bid.

[00:38:43] Speaker 00:
The Market Monitor did in fact mitigate that bid.

[00:38:50] Speaker 00:
As permitted under the tariff, BrainPoint decided rather than take that mitigated bid, it chose to retire, which it's permitted to do.

[00:38:59] Speaker 00:
And neither the system operator nor the commission can force a private plant to stay in business.

[00:39:05] Speaker 00:
So that's auction eight, which is, of course, not before this court now with auction nine.

[00:39:10] Speaker 00:
Brainpoint has obviously been retired.

[00:39:12] Speaker 00:
The market, the market monitor and the system operators, other testimony that it submits is looking at the market as a whole.

[00:39:20] Speaker 00:
And what petitioners never quite explained is why.

[00:39:23] Speaker 00:
The lack of a one particular supplier automatically renders the market in the aggregate, not just unreasonable because what the market monitor found is when it looked at the totality, particularly the number of new suppliers that entered the market and stayed through the multiple rounds of the auction in combination with the market monitors.

[00:39:44] Speaker 00:
mitigation of the exit bids, that there was adequate supply in the market in total to result in a competitive auction.

[00:39:51] Speaker 04:
But the monitor in the reports on FCA 9 and FCA 10 assumes the validity of

[00:40:03] Speaker 04:
of the FCA 8, and I think the petitioner's position is no, that wasn't valid, and it wasn't valid in ways that have a bleed-over effect on 9 and 10.

[00:40:15] Speaker 04:
I mean, the FCA 9 and 10 orders that are before us now do quite directly rely on what happened in FCA 8.

[00:40:28] Speaker 00:
Yeah, and I guess I'm not even sure I to me I'm struggling with how that works as it in an economic sense because let's even just for purposes of this assume that brain points retirement and auction eight was an attempt at market manipulation So auction eight happens they commit a market manipulation auction nine comes around brain points retired a bunch of new suppliers regardless of why brain point retired

[00:40:52] Speaker 00:
See, this auction had a high price.

[00:40:54] Speaker 00:
We're going to enter it to try to make money.

[00:40:56] Speaker 04:
Right.

[00:40:56] Speaker 04:
These are all factual questions.

[00:40:58] Speaker 04:
What happened?

[00:40:58] Speaker 04:
And the problem is we don't have something from the commission spelling that out.

[00:41:04] Speaker 00:
Well, I think that the commission... Is for FCA.

[00:41:06] Speaker 04:
There's just nothing.

[00:41:07] Speaker 00:
But that's because FCA is not before this court.

[00:41:12] Speaker 04:
insofar as it has an effect on FCA-9 and FCA-10.

[00:41:16] Speaker 04:
And the FCA-9 and FCA-10 orders say, you know, and there was no manipulation, and rely on a clean bill of health with respect to FCA-8.

[00:41:27] Speaker 04:
But that seems to beg the question, no?

[00:41:35] Speaker 05:
I thought you were saying assume the worst happened in auction eight.

[00:41:38] Speaker 05:
There's just no basis that that would contaminate auction nine and ten.

[00:41:43] Speaker 00:
Yes, that is my contention because each auction is distinct.

[00:41:47] Speaker 00:
And I don't quite get how the bleed over would have an effect because again, we're talking about supply from a whole host of places.

[00:41:56] Speaker 00:
And so the entrance of new suppliers negates any concern.

[00:42:04] Speaker 00:
So again,

[00:42:05] Speaker 00:
Take what the petitioners would like as the remedy, which is to use the new market design as a proxy in auction eight.

[00:42:14] Speaker 00:
Again, even if that had been done in auction eight, that doesn't have any impact on auctions nine.

[00:42:20] Speaker 00:
In 10, it might alter the price in option 8.

[00:42:23] Speaker 04:
But wouldn't it have for the reason that I was suggesting, I'm not sure that I know what your position is on that.

[00:42:29] Speaker 04:
Had FERC promptly said, oh, we're going to use proxy pricing here, and eliminated the opportunity for energy capital partners to make as much money as it did on the balance of its portfolio, might it not have made a different decision with respect to Brayton Point?

[00:42:48] Speaker 00:
Mean, I guess we can just I mean that's a quite an assumption I mean the economic matter if somebody could spell that and as I said both this court and public citizen observed and as the Commission discussed in footnote 35 the initial order the Commission in fact investigated the reasons why or took an initial look at the reasons why brain point retired and found credible reasons for

[00:43:12] Speaker 00:
They had nothing to do with market manipulation to retire.

[00:43:16] Speaker 04:
Those aren't in the record, though.

[00:43:16] Speaker 04:
Is there any obstacle to FERC disclosing some version of that thinking as support for a determination whether capacity prices resulting from FCAA were just and reasonable?

[00:43:29] Speaker 04:
I mean, I recognize that enforcement decisions and underlying thinking aren't themselves generally made public.

[00:43:35] Speaker 04:
But given that FERC does have an obligation to make a just and reasonableness determination, couldn't it

[00:43:43] Speaker 04:
do what effectively you're doing standing here today and say, well, look, we've looked into that.

[00:43:48] Speaker 04:
We have reason to think that this was not what happened.

[00:43:54] Speaker 04:
Here are the reasons.

[00:43:54] Speaker 04:
And you do some of it in your brief.

[00:43:55] Speaker 04:
We just don't have any other record.

[00:43:57] Speaker 00:
I think the commission does try to do in the record.

[00:44:00] Speaker 00:
As I said, in the initial order in auction nine, the commission says, for all these reasons, we find this market was just and reasonable.

[00:44:09] Speaker 00:
In addition, enforcement looked into this issue, found credible reasons for this retirement.

[00:44:14] Speaker 04:
But that's just a conclusion.

[00:44:16] Speaker 00:
But that, it's an enforcement, it's a discretionary decision.

[00:44:20] Speaker 04:
To be sure, so I think the petitioners here are not saying, we question your enforcement decision, quat enforcement decision.

[00:44:28] Speaker 04:
But there's a separate legal obligation, which is the just and reasonableness obligation.

[00:44:32] Speaker 04:
So if there's some economics or some thinking about market operation that underlay that,

[00:44:36] Speaker 04:
no matter if you're just and reasonable in this responsibility.

[00:44:39] Speaker 00:
And I think, again, I would say the commission saw auction nine as completely distinct.

[00:44:45] Speaker 00:
And the reason the commission saw it as just and reasonable is because, well, just for assumption, let's say there was 100 suppliers in the market.

[00:44:53] Speaker 00:
Whether BrainPoint, as the 101st supplier, would not have made a meaningful difference to the competitiveness of the marketplace.

[00:45:02] Speaker 00:
once you took into account the new suppliers that entered the market in auctions nine and auctions 10.

[00:45:08] Speaker 05:
Can I ask you something that I just don't know?

[00:45:10] Speaker 05:
In auction eight, the ISO ended up using the administrative pricing because it was found to be a non-competitive auction.

[00:45:20] Speaker 05:
And this may just be unanswerable.

[00:45:24] Speaker 05:
Is there any evidence in the record that use of the proxy

[00:45:28] Speaker 05:
system that's been adopted going forward would have had a material difference from the administrative pricing rules that were used in auction aid or would they both sort of end up at the same place?

[00:45:38] Speaker 00:
There's nothing in your record, Your Honor, and obviously the Commission didn't consider it because under Section 205 it's

[00:45:46] Speaker 00:
its subsequent market changes don't have bearing on its previous... I'm trying to understand whether the proxy system... Yeah, I mean, my... This is just totally my sort of reading what happened.

[00:45:57] Speaker 00:
I don't think... There were so many retirements that year, it doesn't seem like one proxy would have made a difference, maybe in total, but obviously the administrative pricing rules, in addition, were designed themselves to serve as a proxy for a competitive auction.

[00:46:13] Speaker 05:
Let me ask you about just a legal question.

[00:46:15] Speaker 05:
Imagine that auction eight came up to the Commission and they said, oh, this doesn't look good to us.

[00:46:26] Speaker 05:
Could they, without an amendment to the tariff, have said, this is unjust and unreasonable, go do this proxy thing to make it right?

[00:46:35] Speaker 05:
Or would they have been limited to simply saying, this is unjust and unreasonable, and ISOs, would ISO

[00:46:43] Speaker 05:
itself have been able to use a proxy system without an amendment to the tariff.

[00:46:46] Speaker 05:
Could the proxy system have been used without an amendment to the tariff?

[00:46:49] Speaker 00:
No, Your Honor.

[00:46:50] Speaker 00:
The market design rules are separate from the Commission's consideration of the outcomes in these 205 just and reasonable proceedings, which is why, as we see here, the change was made separate from any particular auction, because the rules are set in place as the

[00:47:07] Speaker 05:
architecture, if you will, is set in place, and then the actual auctions are conducted under... So if auction eight had been found to be unjust and unreasonable, assume because Brighton Point defined was the cause of the problem, assume that, and assume it's because of market manipulation, assume the worst.

[00:47:30] Speaker 05:
If FERC had said unjust or unreasonable, what could ISO have done or what could have been, what could be done to remedy that given that they'd already done the administrative pricing and they couldn't do a proxy system because the tariff didn't allow for it and were very strict on deviations from tariffs.

[00:47:48] Speaker 05:
So what could have been done?

[00:47:51] Speaker 00:
It's a good question.

[00:47:52] Speaker 00:
I'm not entirely sure.

[00:47:55] Speaker 00:
I presume that the, I think the commission can have the system operator rerun.

[00:48:00] Speaker 00:
the auction.

[00:48:02] Speaker 00:
And obviously, they could change it.

[00:48:04] Speaker 05:
It's... But that couldn't happen.

[00:48:07] Speaker 05:
I mean, that pretty much would have happened before the actual year of service.

[00:48:10] Speaker 05:
But we're now, I think, are we now in the middle of the year from auction eight?

[00:48:13] Speaker 05:
So could it be done now?

[00:48:16] Speaker 00:
Or what would they do under an 824E?

[00:48:17] Speaker 00:
What would happen?

[00:48:19] Speaker 00:
Yeah.

[00:48:19] Speaker 00:
So with auction eight, this is... I mean, it's obviously, it was a unique, rare situation where there were four commissioners and there was a two-two tie.

[00:48:28] Speaker 00:
And as this court observed in

[00:48:31] Speaker 00:
public citizen that this is just this is how Congress created the Federal Power Act and there's in fact legislation to address this issue and that and as the court said that's the proper form for it.

[00:48:44] Speaker 00:
The petitioner can always bring a section 206 case.

[00:48:47] Speaker 04:
I'm sorry there's legislation to address which issue?

[00:48:49] Speaker 00:
The commission deadlock.

[00:48:52] Speaker 04:
Oh.

[00:48:53] Speaker 00:
And to provide

[00:48:55] Speaker 00:
the ability to to change rates after the fact.

[00:48:59] Speaker 05:
But I don't know what, I don't know if an 824e proceeding would change this problem.

[00:49:03] Speaker 00:
Well, I mean, isn't the reality when there's a two-two tie, it may not.

[00:49:09] Speaker 00:
Now, it could be brought later, but the Federal Power Act is set up under Section 205 to not provide the ability to to alter rates after the fact.

[00:49:18] Speaker 00:
A lot of the

[00:49:23] Speaker 04:
You know, and obviously, again, a lot of this focus remains on the eighth auction, and a lot of... But in ISO 9, ISO New England's experts noted that there was insufficient capacity in southwestern Massachusetts in the Rhode Island zone, and that's exactly the area that the Brighton Point plan served.

[00:49:44] Speaker 04:
Isn't that also evidence to support petitioners' claim of injury due to the retirement?

[00:49:51] Speaker 00:
know your honor because the commission again has set up these market rules where the administrative pricing is a a proxy for a competitive outcome.

[00:50:00] Speaker 00:
So the because I mean, I know that we're continuing to get held up on the fact that

[00:50:08] Speaker 00:
they, BrainPoint is allowed to retire.

[00:50:11] Speaker 00:
And so even if in auction eight, again, if we had used the, even just assuming we could use the commission's new, the system operator's new proxy role, even if that had been used in auction eight, BrainPoint still would have been retired in auction nine.

[00:50:25] Speaker 00:
And the same, there wouldn't have been a new supplier into the marketplace.

[00:50:29] Speaker 00:
I know that your honor has, has posited that perhaps they could have

[00:50:34] Speaker 00:
you know, produced evidence that they would have stayed in the market if the commission had done something in auction eight.

[00:50:40] Speaker 00:
Again, none of that was presented to the commission at the time when the commission was considering whether these auction results were just and reasonable in auctions nine and ten.

[00:50:48] Speaker 05:
Understanding rules don't usually let petitioners rely on the predicted actions of third parties, not before the court.

[00:50:55] Speaker 05:
So wouldn't that be the difficulty with that approach?

[00:50:59] Speaker 00:
It would be your honor, but again, the economic modeling that petitioners referred to that was not before the commission would have at least been some attempt to provide evidence.

[00:51:12] Speaker 00:
The commission reviewed the entire record before it and again, the system operator presented

[00:51:17] Speaker 00:
for pieces of testimony, including the market monitor, the auctioneer who I found.

[00:51:23] Speaker 05:
What I'm curious about on this notion of this expert testimony sort of coming in now, on the one hand, you know, we need to be able to establish standing for purposes of our jurisdiction.

[00:51:33] Speaker 05:
On the other hand, to the extent that causation is showing would

[00:51:36] Speaker 05:
slop over into a merits showing as to whether auction eight affected auction nine.

[00:51:45] Speaker 05:
It seems to me that couldn't be done at this stage, right?

[00:51:47] Speaker 05:
Or without a remand to FERC because they chose not to make that causation showing before FERC and you haven't had any chance to respond to it.

[00:51:56] Speaker 00:
Yes, no, I agree, Your Honor.

[00:51:58] Speaker 00:
The standing issue aside, the merits that the

[00:52:03] Speaker 00:
petitioners cannot introduce factual evidence that the commission couldn't consider and consider on remand.

[00:52:09] Speaker 00:
Now, the petitioners, I suppose, could file, again, file, bring a section 206 complaint introducing its new evidence and claiming that what the commission has decided were just and reasonable are now somehow unjust and reasonable.

[00:52:22] Speaker 04:
But the burden issue here is a little bit tricky.

[00:52:24] Speaker 04:
I mean, they have a burden to establish their standing.

[00:52:27] Speaker 04:
But I think their point is that the burden is on FERC.

[00:52:31] Speaker 04:
And they're basically just saying, look, we got some numbers here.

[00:52:34] Speaker 04:
And you can respond by disputing those numbers.

[00:52:39] Speaker 04:
You can respond by saying other things cause them.

[00:52:43] Speaker 04:
But all we're doing is saying to you, you have a duty that you haven't fulfilled.

[00:52:49] Speaker 04:
And so the whole idea that they have to chapter and verse disprove what they think it's actually Ferg's burden to establish, which is that the rates were just and reasonable, I don't know why they would have to do more than sort of lob that ball into your court and say, you know, come on, guys.

[00:53:08] Speaker 00:
Well, I agree that it's the system operator's burden to prove it's just and reasonable.

[00:53:14] Speaker 00:
I disagree.

[00:53:15] Speaker 00:
I mean, I don't think there was even a ball lobbed into the court.

[00:53:19] Speaker 00:
That said, the commission here, what it relied upon was the testimony provided by the system operator regarding the competitiveness of the option.

[00:53:28] Speaker 00:
And it found that that testimony constituted substantial evidence that there was a just and reasonable outcome.

[00:53:37] Speaker 00:
Now, the commission itself noted in addition that there was no evidence provided to the contrary.

[00:53:43] Speaker 00:
That may not have an impact because it's ultimately, as you said, the burden, but the commission

[00:53:48] Speaker 00:
That was just sort of a side point.

[00:53:50] Speaker 00:
The main finding, obviously, is based on the entire record presented.

[00:53:54] Speaker 04:
So ultimately, it's the burden of the commission.

[00:53:55] Speaker 04:
But it's your view that the commission has met that burden in the order.

[00:53:59] Speaker 00:
Yes, Your Honor.

[00:54:01] Speaker 04:
And what about this amended reconsideration petition by petitioners here with respect to FCA 8?

[00:54:10] Speaker 04:
That's been pending a long time.

[00:54:12] Speaker 04:
What's the status of that?

[00:54:15] Speaker 00:
I'm not certain, Your Honor.

[00:54:17] Speaker 00:
As I said, there is, there was actually recently, just congressional testimony regarding the change to the rule, and as I was pointing out, testimony of a petitioner, whether it's the union or anyone else, could still bring a Section 206 complaint regarding the eighth auction.

[00:54:36] Speaker 04:
But they have pending, they have pending a Section 205, is what I'm asking about.

[00:54:41] Speaker 04:
Well, they, they, you know, I understand there was a deadlock, and there was a decision by this Court saying not yet final,

[00:54:46] Speaker 04:
And it seems to remain not yet final?

[00:54:48] Speaker 00:
The commission's position, which was upheld in the public citizen, was that those rates took effect by operation of law.

[00:54:57] Speaker 00:
And so for the eighth auction, those rates were established.

[00:55:03] Speaker 04:
So is it your position that when rates are established by operation of law in that manner, that that just dispenses with the obligation of the commission

[00:55:17] Speaker 04:
assert to affirm that they are just and reasonable?

[00:55:21] Speaker 00:
Well, by yes and no, by operation of law means that it becomes just and reasonable.

[00:55:28] Speaker 00:
That said, again, a party could challenge that.

[00:55:30] Speaker 00:
I mean, this court in public citizen already upheld that those went into effect by law, and obviously that auction aid is not before this court right now.

[00:55:39] Speaker 00:
I understand the concern that

[00:55:43] Speaker 00:
And it was, you know, the express and throughout the public citizen proceedings to that this unique situation where there was a two two deadlock didn't have a commission order on the issue.

[00:55:53] Speaker 00:
But ultimately, so is your answer.

[00:55:56] Speaker 04:
I mean, there is a pending.

[00:55:58] Speaker 04:
reconsideration petition and is your position that it would be lawful for the commission to just say that is QED just and reasonable because it went into effect by operation of law?

[00:56:17] Speaker 00:
Yes, my answer would be that that

[00:56:19] Speaker 00:
became just and reasonable, but that a party is always able to challenge those.

[00:56:25] Speaker 00:
I guess I would say the proper way just to me to challenge that would be to bring a section 206.

[00:56:30] Speaker 04:
I understand the section 206 is available, but how could it be that what this court held was not an action of the commission?

[00:56:40] Speaker 04:
Was not an action of the commission?

[00:56:42] Speaker 04:
Was a determination by the commission that the rates were just and reasonable?

[00:56:47] Speaker 00:
Because the Federal Power Act made it so.

[00:56:49] Speaker 04:
But it said nothing about those rates that are deemed just and reasonable.

[00:56:53] Speaker 00:
It said that the rates go into effect.

[00:56:55] Speaker 00:
So they're effective.

[00:56:57] Speaker 00:
So to challenge an effective rate is section 206.

[00:57:01] Speaker 04:
So once a rate goes into effect, even if they're pending 205 proceedings, they just evaporate and you have to go to 206?

[00:57:08] Speaker 00:
Yes.

[00:57:09] Speaker 00:
Because, well, they're not pending 205 proceedings.

[00:57:11] Speaker 00:
The 205 proceeding

[00:57:12] Speaker 00:
ended with the 2-2 deadlock that led to those rates going into effect by operation of law.

[00:57:19] Speaker 00:
So that ceased, which is why it was appealed to this court and why this court issued public citizen.

[00:57:25] Speaker 03:
All right.

[00:57:26] Speaker 03:
Anything else that you want to alert us to?

[00:57:31] Speaker 03:
No.

[00:57:31] Speaker 03:
I mean, we've been focused on the threshold point.

[00:57:34] Speaker 03:
We've gotten off into the merits a little bit here.

[00:57:37] Speaker 00:
Yeah.

[00:57:38] Speaker 00:
Yeah.

[00:57:38] Speaker 00:
If you don't mind, Your Honor, if I could just

[00:57:40] Speaker 00:
I brought up the first point about standing about the linkage to each auction.

[00:57:44] Speaker 00:
The second point is, again, it's wholly speculative.

[00:57:47] Speaker 00:
I know your honor spoke about allowing a supplemental finding.

[00:57:51] Speaker 00:
I mean, you know, the burden may not be high, but there has to be some sort of... No, I think we understand that response, yeah.

[00:57:59] Speaker 00:
And the only final point I would make regarding

[00:58:03] Speaker 00:
You know, again, there seems to be a lot of focus on manipulation.

[00:58:07] Speaker 00:
The only issue before this court is the commission's determination that auctions 9 and 10 were just and reasonable.

[00:58:13] Speaker 00:
To the extent the focus is a market manipulation claim, that is not before this court, and it would be subject to the commission's discretion.

[00:58:20] Speaker 03:
All right.

[00:58:21] Speaker 03:
Thank you.

[00:58:22] Speaker 00:
Thank you, Your Honor.

[00:58:25] Speaker 03:
All right.

[00:58:25] Speaker 03:
Counsel for petitioner, we'll give you a couple of minutes here.

[00:58:29] Speaker 01:
Thank you, Your Honor.

[00:58:34] Speaker 01:
My friend's suggestion that market manipulation is not before the court just misses the boat entirely.

[00:58:43] Speaker 01:
The essence of what determines whether these results in FCA 9 and FCA 10 were just and reasonable is whether or not

[00:58:58] Speaker 01:
Given the indicia of this shutdown of this plant by a fleet owner, whether that constituted market manipulation, that is essential.

[00:59:09] Speaker 05:
If we take, if we just assume, answer this question, assume there was no market manipulation in auction 8.

[00:59:16] Speaker 05:
Just assume that.

[00:59:18] Speaker 05:
And just retire it and nobody wanted to buy it.

[00:59:21] Speaker 05:
Assume no market manipulation, then would you dispute that the options of 9 and 10 were otherwise competitive?

[00:59:34] Speaker 01:
I don't think we would dispute that given the facts that we know.

[00:59:41] Speaker 05:
You would not dispute that they're competitive if we assume no market manipulation.

[00:59:45] Speaker 01:
If you assume that this was not the result of market manipulation or the exercise of market power by a fleet owner, and that would turn on the economics, among other things, on the economics of the plant.

[01:00:00] Speaker 01:
Whether this plant could be run profitably or not, and they shut it down anyway to drive down prices, that's not allowed.

[01:00:07] Speaker 05:
That renders... I get your argument of market manipulation again, but if we assume no market manipulation, then you've got no challenge to auctions 9 and 10.

[01:00:15] Speaker 01:
I think that's probably right, Your Honor.

[01:00:19] Speaker 05:
And then given that FERC has found no market manipulation, its Enforcement Office has found no market manipulation, at least we're

[01:00:30] Speaker 05:
meridian enforcement action.

[01:00:33] Speaker 01:
Your Honor, that's... How do we get past that?

[01:00:36] Speaker 01:
All that is, is one, a conclusory statement, just that.

[01:00:41] Speaker 05:
Well, we don't ask people to open up their investigative enforcement files and put them out there for us, really.

[01:00:47] Speaker 01:
Correct.

[01:00:47] Speaker 01:
If you're reviewing the decision not to take enforcement action under Section 222 and impose penalties, and we're not asking for enforcement action and imposing penalties in this case, we're saying that if there's market manipulation,

[01:01:03] Speaker 01:
that the results of the auction are not just unreasonable, and determining whether or not there's market manipulation, there's gotta be, in this case, in this record, there has to be an examination to determine whether there was market manipulation in order to determine whether the results were just and reasonable.

[01:01:22] Speaker 01:
And if FERC wants to rely

[01:01:24] Speaker 05:
So then you accept that you have to show not only that there was market, you have to independently, to render these rates unjust and unreasonable, you have to independently show both that there was market manipulation in auction eight.

[01:01:38] Speaker 05:
and that that carried forward, detained both of these proceedings, correct?

[01:01:45] Speaker 01:
Yes, Your Honor, although I would say the burden is on ISO New England under Section 205 to show that they were... They've given explanations as to why they think it was just and reasonable.

[01:01:56] Speaker 05:
You said it was competitive.

[01:01:57] Speaker 05:
Your only, your predicate is that there was market manipulation.

[01:02:00] Speaker 05:
They say we don't think there was market manipulation.

[01:02:02] Speaker 05:
So it seems then to me they did their job and they admitted what their burden was and it's shifted to you to show you're wrong

[01:02:09] Speaker 05:
If you're wrong, there was market manipulation and that market manipulation tainted them.

[01:02:15] Speaker 01:
Governor, I would submit that they haven't done their job of determining whether in light of these indicia, whether there was market manipulation.

[01:02:27] Speaker 01:
There's no evidence in the record regarding the profitability that the plant could not be run profitably.

[01:02:34] Speaker 01:
There's nothing, FERC doesn't examine that.

[01:02:36] Speaker 01:
They say it's irrelevant.

[01:02:37] Speaker 05:
Is your position that if it could have been run profitably, ipso facto it was market manipulation to retire it?

[01:02:43] Speaker 05:
Or something more have to be shown?

[01:02:45] Speaker 01:
In this circumstance, when it's shut down by a fleet owner, that Jack's prices and his profits, that is market manipulation.

[01:02:54] Speaker 01:
If the plant can't be run profitably.

[01:02:57] Speaker 01:
If the plant can be run profitably.

[01:03:00] Speaker 05:
It's automatically market manipulation, even if they had perfectly legitimate reasons for retiring that plant.

[01:03:06] Speaker 05:
You don't want any more coal.

[01:03:08] Speaker 01:
It appears to be market manipulation, and FERC needs to examine and determine whether or not there was given all of that.

[01:03:16] Speaker 01:
One part of that might be an examination if there was a legitimate reason to shut this down, but there was no examination by FERC in this case of the reason for shutting down.

[01:03:28] Speaker 05:
Do you have any case or authority that says if it was still economical to run, the shutdown is presumptively or prima facie manipulative?

[01:03:41] Speaker 01:
Yes, Your Honor, we cite FERC's statements, FERC's own statements, and that we refer in the brief, and I want to make sure we get the right reference, which I'll give you in a minute, but where they say in a series of cases that if someone shuts down, takes an uneconomic action with respect to one asset,

[01:04:08] Speaker 01:
in order to increase the price they'll receive on another asset in the market.

[01:04:13] Speaker 05:
In order to suggest an intent, right?

[01:04:16] Speaker 05:
And that's what, right?

[01:04:17] Speaker 05:
You can't, my question wasn't, you weren't making any allegations about intent.

[01:04:21] Speaker 05:
You were simply saying if this shuts down and it objectively has this effect over here on other businesses, it is presumptively a prima facie manipulative.

[01:04:30] Speaker 05:
But the in order to that you just said requires mens rea.

[01:04:34] Speaker 05:
Do you have any evidence of mens rea?

[01:04:36] Speaker 01:
We believe the circumstances are very indicative of mens rea and that there was intent.

[01:04:42] Speaker 01:
When somebody comes in and buys a plant and then immediately shuts it down and the prices increase and the buyer makes a huge profit on all his other generation assets, that's prima facie indicia that there may be market manipulation and that it was intentional.

[01:05:02] Speaker 03:
All right.

[01:05:03] Speaker 03:
Thank you.

[01:05:04] Speaker 03:
We will take the case under advice.

[01:05:05] Speaker 01:
Thank you, Your Honor.

[01:05:06] Speaker 01:
And I would like to submit, if the Court would like, a supplemental affidavit by Mr. Cernick, which he will confirm the determination of the price increases in 9 and 10, which are in our brief.

[01:05:19] Speaker 03:
At this point, let the court confer and if we need something further from you, the clerk will notify you.

[01:05:28] Speaker 01:
Thank you very much.

[01:05:29] Speaker 03:
Thank you.