[co-author: Antonia Douglas]
On October 21, 2021, during the Federal Energy Regulatory Commission’s monthly open meeting, each Commissioner released an explanatory statement regarding their views of the Southeast Energy Market Exchange (“SEEM”) proposal. Ultimately, the proposal took effect by operation of law on October 12 after the Commission was divided two-two on the lawfulness of the proposal. Under such circumstances, the Federal Power Act requires each Commissioner to issue a written statement explaining their views with respect to the changes. The Commissioners were split on multiple issues, including whether the proposal provided enough protection for competition and whether the Mobile-Sierra presumption should apply to SEEM transactions.
On February 12, 2021, and as subsequently amended several times, a collation of 15 utilities across the Southeast proposed a new trading platform to the Commission. Under the proposal, participating utilities would submit bids and offers for energy exchanges, which would be matched up every 15 minutes pursuant to an algorithm and overseen by an independent administrator. Proponents for the proposal argued that SEEM would create up to $150 million in annual savings by making more efficient use of unused transmission capacity across an expanded footprint. In contrast, opponents argued that the proposal lacked adequate protections against market manipulation and raised open access concerns.
Under Section 205 of the FPA, a tariff filing will become effective in the absence of Commission action within 60 days after filing. FPA As the Commissioners were divided two-two on the SEEM proposal, FERC issued a notice on October 13, 2021, stating that the proposal became effective by operation of law as of October 12. During the October open meeting, the Commissioners discussed each of their perspectives on the SEEM and issued their respective statements required under the FPA.
Chairman Glick and Commissioner Clements opposed the proposal, essentially agreeing with critics that it raised too many open access, competition, and market manipulation risks. In addition, Chairman Glick was concerned that the proponents’ proposal “to apply the Mobile-Sierra public interest presumption to the Southeast EEM Agreement…violates well-established Commission precedent.” Specifically, Chairman Glick explained that the presumption under Mobile-Sierra (which presents a higher bar to clear to abrogate a contract under FERC precedent) should not apply to “generally applicable” contractual provisions, but instead only to provisions that have been freely negotiated by all parties. The presumption should be inapplicable to the proposal, in Chairman Glick’s view, as entities seeking to join SEEM would be required to accept certain contractual provisions “as is,” with no negotiating room.
Supporting the SEEM proposal were Commissioners Danly and Christie, who argued that the proponents had satisfied their burden under FPA 205 and that the proposal would enhance the bilateral market in the southeast. Commissioner Danly in particular disputed Chairman Glick’s Mobile-Sierra criticisms, arguing that it is erroneous to hold that the presumption “applies only to contracts with individualized rates, terms, or conditions, and not to contracts with standard rates, terms, or conditions entered into by multiple counterparties.”
For the Chairman’s and each Commissioners statement please see the links below:
Chairman Glick’s Statement on Southeast EEM can be found here.
Commissioner Danly’s Statement on Southeast EEM can be found here.
Commissioner Clements’ Statement on Southeast EEM can be found here.
Commissioner Christie’s Statement on Southeast EEM can be found here.
