UPDATE: June 29, 2022: Salem Harbor Power Development has reached a settlement with the Federal Energy Regulatory Commission’s Office of Enforcement, agreeing to pay a $17.1 million fine and disgorge $26.7 million in profits in order to resolve allegations it improperly received capacity payments from ISO New England in 2017. The company did not admit any wrongdoing.
On Tuesday, the generator asked a Delaware bankruptcy court to approve the settlement as part of the company’s ongoing Chapter 11 restructuring proceeding. Iberdrola Energy Projects, a creditor, has objected to the request.
Dive Brief:
- The Federal Energy Regulatory Commission’s Office of Enforcement, or OE, is investigating Salem Harbor Power Development for an alleged 2017 scheme to collect capacity market payments despite the company’s 674-MW gas-fired plant missing its planned operations date.
- Salem Harbor disclosed the investigation as part of its ongoing Chapter 11 bankruptcy case, which opened the door for ISO New England to issue a Thursday statement denying related allegations against the grid operator. OE alleges the ISO should have known the plant was behind schedule and forced it to sell its capacity obligations.
- Both Salem Harbor and the ISO have denied the allegations, and the grid operator says it has altered its capacity market rules to avoid similar situations in the future.
Dive Insight:
FERC investigations are typically secret, but Salem Harbor revealed some details to a Delaware bankruptcy court in April, triggering ISO New England to issue its statement last week.
According to the grid operator, FERC OE is investigating allegations that Salem Harbor, formerly known as Footprint Power, did not provide accurate information regarding its planned commercial operation date. OE says that in 2017 Salem Harbor missed a May 31 deadline but still collected capacity market payments. Preliminary findings from OE, according to ISO New England, allege the company filed updates that did not include all of the information relevant to the grid operator’s evaluation of the project and its likely ability to meet its commitments.
According to the ISO, OE also alleges Salem Harbor’s “scheme” violated FERC’s anti-manipulation rule.
The ISO said the generator collected capacity market payments “under market rules that existed at the time.”
The OE is also investigating the grid operator. According to the ISO, the investigation alleges that it should have understood that Salem Harbor Power Development would be late, and that the ISO “gave the developer advice that assisted the project in avoiding the consequences of failing to meet its commercial operation date, and that it should have forced Salem Harbor Power Development to sell its capacity supply obligation.”
ISO New England denies the allegations but said it cannot comment further. Salem Harbor’s bankruptcy filing notes that it also “fully contests all allegations raised by the OE ... and has reserved all rights to formally contest those allegations in litigation, if necessary.”
FERC does not comment on investigations and declined a request for more details.
The ISO said that following Salem Harbor’s 2017 delay, the grid operator “took action to prevent a similar situation from occurring in the future” and altered capacity market rules to include automatic financial penalties for resources that miss operational deadlines.
“The penalty serves as an enhanced incentive for project sponsors to meet their commercial operation date and eliminates the need for ISO New England to assess the veracity of the information submitted to it by project sponsors,” the grid operator said.
According to Salem Harbor’s April bankruptcy court filing, the company was notified in November 2021 that OE received authority from FERC to enter into settlement discussions.
“FERC has not issued a show cause order,” the company said. “Discussions with the OE regarding a potential settlement remain ongoing at this time.”
Salem Harbor began commercial operations on May 31, 2018. It was built by Iberdrola Energy Projects but “during construction of the facility, numerous disputes arose ... concerning changes, added costs, delays, and inefficiencies,” according to the Delaware bankruptcy filing.
The contract with Iberdrola was terminated in April 2018, shortly before the plant began operations. Salem Harbor’s bankruptcy stems from a $236 million arbitration award to Iberdrola related to termination of the construction contract.
