Capacity Market Manipulation in MISO's Zone 4

Illinois Attorney General
In Progress

The Federal Energy Regulatory Commission (FERC)’s Office of Enforcement, along with the Illinois Attorney General’s Office and Public Citizen, argue that Dynegy manipulated the Midcontinent Independent System Operator (MISO)’s 2015/16 capacity auction, driving up capacity prices in Illinois. The Illinois Attorney General’s Office hired Synapse to evaluate the actions of Dynegy Marketing and Trade, LLC and Illinois Power Marketing Company (collectively, “Dynegy”) surrounding the 2015/2016 MISO capacity auction in Zone 4 (southern Illinois).

We find that Dynegy engaged in risky trading behavior by significantly reducing its bilateral capacity transactions in the leadup to the 2015/2016 auction. If Dynegy had sold as much capacity bilaterally prior to the 2015/2016 MISO capacity auction as it did prior to the 2013/2014 auction, Zone 4’s 2015/2016 clearing price would have been $3.30/MW-day, or 45 times lower than the zone’s actual clearing price of $150/MW-day.  We also find that Dynegy’s capacity sales strategy ahead of the 2015/2016 capacity market auction, and the resulting Zone 4 clearing price, impacted bilateral capacity contracts downstream from the auction. This resulted in Illinois consumers paying more for capacity than they would have absent Dynegy’s 2015/2016 auction strategy and Zone 4’s abnormally high clearing prices.

We recommend that FERC accept additional testimony and exhibits in support of a refund for Illinois consumers that considers unlawfully earned profits by Dynegy (now Vistra Energy Corporation) and the impacts of manipulation on Illinois’ capacity market.