Diving Brief:
- The Federal Energy Regulatory Commission’s Office of Enforcement, or OE, is investigating Salem Harbor Power Development for an alleged 2017 plan to collect payments from the capacity market despite the fact that the 674 MW gas-fired power plant in the company has not reached its scheduled operating date.
- Salem Harbor disclosed the investigation as part of its pending Chapter 11 bankruptcy case, which opened the door for ISO New England to issue a statement Thursday denying related allegations against the network operator. OE alleges that ISO should have known the factory was late and forced it to sell its capacity bonds.
- Salem Harbor and ISO denied the allegations, and the network operator said it had changed its capacity market rules to avoid similar situations in the future.
Overview of the dive:
FERC investigations are usually secret, but Salem Harbor revealed some details to a Delaware bankruptcy court in April, prompting ISO New England to release its statement last week.
According to the network operator, FERC OE is investigating allegations that Salem Harbour, formerly known as Footprint Power, failed to provide specific information regarding its planned commercial operating date. OE reports that in 2017, the Port of Salem missed the May 31 deadline, but still received the capacity market payments. OE’s preliminary findings, according to ISO New England, allege the company filed updates that did not include all information relevant to the grid operator’s assessment of the project and its likely ability to meet its commitments.
According to the ISO, OE also alleges that the Salem Harbor “scheme” violated FERC’s anti-manipulation rule.
The ISO said the producer was collecting capacity market payments “according to the market rules that existed at the time”.
The EO also investigates the network operator. According to ISO, the investigation alleges that it should have understood that Salem Harbor Power Development would be behind schedule, and that ISO “provided the developer with guidance that helped the project avoid the consequences of not complying with date of commercial operation, and that this should have forced Salem Harbor Power Development to sell its capacity provision obligation.
ISO New England denies the allegations but said it could not comment further. Salem Harbor’s bankruptcy filing also states that it “fully disputes all allegations raised by the OE…and reserves all rights to formally contest these allegations in litigation, if necessary.” .
FERC does not comment on the investigations and declined a request for more details.
The ISO said that following the Port of Salem delay in 2017, the network operator “took steps to prevent a similar situation from happening in the future” and changed the rules of the capacity market to include automatic financial penalties for resources that do not meet operational deadlines.
“The penalty serves as an added incentive for project sponsors to meet their date of commercial operation and eliminates the need for ISO New England to assess the veracity of information submitted to it by project sponsors,” the statement said. network operator.
According to the Salem Harbor bankruptcy court filing in April, the company was notified in November 2021 that OE had received clearance to FERC to begin settlement discussions.
“FERC did not issue a show cause order,” the company said. “Discussions with the OE regarding a potential settlement are still ongoing.”
The Port of Salem began commercial operations on May 31, 2018. It was built by Iberdrola Energy Projects but “during the construction of the facility many disputes arose…regarding changes, additional costs, delays and inefficiencies,” according to Delaware’s bankruptcy filing. .
The contract with Iberdrola was terminated in April 2018, shortly before the start of the plant. Salem Harbor’s bankruptcy stems from a $236 million arbitration award to Iberdrola related to the termination of the construction contract.
