FERC orders NRG Power Marketing to keep supplying power while it reviews dispute

By Sylvie Dale
Online Editor

May 21, 2003 — FERC has recently denied NRG Power Marketing, Inc.’s request to cancel a wholesale power contract it had with Connecticut Light and Power Co. (CL&P), at least until the commission has a chance to look at the dispute in more detail.

Under the terms of an existing contract between the power supplier and the utility, NRG Power Marketing Inc. (NRG-PMI) provides 45 percent of CL&P’s retail electric load.

NRG-PMI wanted to terminate its wholesale power contract with CL&P by May 19 because it said it was not responsible for paying congestion costs. NRG-PMI also filed for bankruptcy protection around the same time that it wanted to cease service to CL&P, further complicating the question of which governmental body will have jurisdiction over the dispute.

In response to NRG-PMI’s stated intention to stop supplying power, Connecticut Attorney General Richard Blumenthal and the Connecticut Department of Public Utility Control filed an emergency request asking FERC to keep the contract in place.

The FERC order

FERC’s May 16 order stated that NRG-PMI was not allowing enough time for commissioners to evaluate its proposed action to stop supplying power to CL&P. The commission ordered NRG-PMI to continue supplying power according to the rates and terms of the original agreement.

NRG-PMI will file an answer to the complaint, and other parties may file interventions and protests within 10 days of the order. FERC said it would act as quickly as possible to sort out the facts in the case.

Background

Under Connecticut retail choice law and CDPUC rules, CL&P was required to divest its generation and competitively procure wholesale power supply to serve the Standard Offer Service1 (SOS) load.

On October 29, 1999, CL&P and NRG Power Marketing, Inc. entered into a Standard Offer Service Wholesale Sales Agreement (SOS Agreement). The SOS Agreement requires NRG-PMI to provide power supply for a specified percentage of CL&P’s SOS load during the term of the contract.

The SOS Agreement is for a four-year term that ends on December 31, 2003. The price set forth in the SOS Agreement is the same price that NRG-PMI voluntarily bid in the competitive procurement process.

CL&P states that because NRG-PMI did not own generation assets, then-applicable commission rules did not require NRG-PMI to make a Section 205 filing for the SOS Agreement.

NRG-PMI was instead required to reflect its wholesale sales to CL&P in its quarterly marketing reports to the commission. CL&P asserts that NRG-PMI paid CL&P the congestion costs imposed by New England Power Pool for the first two months of the SOS Agreement but subsequently claimed that it was not responsible for such charges under the contract.

CL&P filed a breach of contract complaint against NRG-PMI in Connecticut Superior Court seeking recovery for unpaid congestion charges from NRG-PMI as well as a declaration that NRG-PMI would be responsible for future congestion charges. The case is still pending before the U.S. District Court for the District of Connecticut, Civil Action No. 01-CV2373.

In August 2002, CL&P, pursuant to Section 5.4 of the SOS Agreement, began to withhold the contested amounts until the dispute was resolved.

On August 13, 2002, NRG-PMI informed CL&P that its failure to pay constituted a default under the SOS Agreement. On May 1, 2003, the CDPUC issued an order stating that it believed that strong arguments existed that NRG-PMI and other SOS sellers were responsible for all congestion costs and losses under the Standard Market Design market rules.

On May 14, 2003, NRG-PMI notified CL&P that it considered CL&P in default of the SOS Agreement because (1) CL&P continued to withhold payments due for congestion costs beginning in August 2002; and (2) CL&P decided to withhold congestion costs and losses after the implementation of Standard Market Design.

NRG-PMI stated that, pursuant to Section 5.5 of the SOS Agreement, it intended to terminate service at midnight five days after the receipt of the letter unless CL&P cured the defaults. On the same date, NRG-PMI filed for bankruptcy court protection under Chapter 11 of the U.S. Bankruptcy Code.

Instant Pleading

On May 15, 2003, CTAG and CDPUC submitted a filing asking the Commission to issue an order staying the termination of the contract entered into by CL&P and NRG-PMI. CL&P claims that NRG-PMI is obligated to provide the power supply for 45 percent of CL&P’s retail electrical load at the fixed prices under the SOS Agreement.

CL&P argues that NRG-PMI may not terminate the SOS Agreement before the end of the contract term absent the CL&P’s consent without first filing a notice with the Commission, pursuant to 18 C.F.R. § 35.15 (2003). The utility also said that NRG-PMI is responsible for the congestion costs and losses and that NRG-PMI has failed to comply with the dispute resolution provision under Section 16 of the SOS Agreement, and that FERC should exercise its jurisdiction under FPA Section 205 to protect the public from exorbitant wholesale power rates and from contracts and practices that are unjust and unreasonable.

CL&P contends that the commission has jurisdiction over this matter despite NRG-PMI’s filing for bankruptcy protection.

CTAG and CDPUC asked the commission to issue an order prior to May 20, 2003 taking jurisdiction over NRG-PMI’s termination of service under the SOS Agreement.

They requested that FERC state that NRG-PMI may not unilaterally terminate its wholesale contract before December 31, 2003 without prior commission review.

CTAG and CDPUC also ask the commission to initiate a proceeding under FPA Sections 205 and 206 to determine: (a) whether NRG-PMI has the contractual right to terminate service in these circumstances, and (b) if it does, whether termination of service under the SOS Agreement is consistent with the public interest.

Sending comments

To send a comment, intervention or protest, file with the:

Federal Energy Regulatory Commission, 888 First Street, N.E., Washington, D.C. 20426.

This filing is available for review at the commission in the Public Reference Room or may be viewed on the commission’s web site at http://www.ferc.gov using the “FERRIS” link. Enter the docket number excluding the last three digits in the docket number field to access the document.

For assistance, please contact FERC Online Support at FERCOnlineSupport@ferc.gov or toll-free at (866)208-3676, or for TTY, contact (202)502-8659. The answer to the complaint, comments, protests and interventions may be filed electronically via the Internet in lieu of paper; see 18 CFR § 385.2001(a)(1)(iii) and the instructions on the commission’s web site under the “e-Filing” link. The commission strongly encourages electronic filings.

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