United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 19, 2013 Decided July 8, 2014

No. 12-1060

NEW ENGLAND POWER GENERATORS ASSOCIATION, INC.,

PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION,

RESPONDENT

PSEG ENERGY RESOURCES & TRADE LLC, ET AL.,

INTERVENORS

Consolidated with 12-1074, 12-1085, 12-1149

On Petitions for Review of Orders of the

Federal Energy Regulatory Commission

Stephen L. Teichler argued the cause for petitioners 

NSTAR Electric Company/Public Systems. With him on the 

briefs was Mary E. Grover. 
2

Jeffrey A. Schwarz argued the cause for petitioners 

Massachusetts Municipal Wholesale Electric Company, et al. 

With him on the briefs were Scott H. Strauss and Peter J. 

Hopkins. 

Jeffrey A. Lamken argued the cause for petitioners New 

England Power Generators Association, Inc., et al. With him 

on the briefs were Martin V. Totara, Ashley C. Parrish, David 

G. Tewksbury, Stephanie S. Lim, Matthew S. Owen, and 

Abraham Silverman. 

John Lee Shepherd Jr. argued the cause for intervenors 

PSEG Energy Resources & Trade LLC, et al. With him on 

the brief was Jodi L. Moskowitz.

John S. Wright and Michael C. Wertheimer, Assistant 

Attorneys General, Office of the Attorney General for the 

State of Connecticut, were on the brief for intervenor George 

Jepsen, Attorney General for the State of Connecticut, in 

support of petitioners.

F. Anne Ross was on the brief for intervenor New 

England Conference of Public Utilities Commissioners, Inc. 

in support of petitioner.

Robert M. Kennedy Jr., Attorney, and Beth G. Pacella, 

Senior Attorney, Federal Energy Regulatory Commission, 

argued the causes for respondent. With them on the brief 

were David L. Morenoff, Acting General Counsel, and Robert 

H. Solomon, Solicitor. 

Kimberly Frank argued the cause for intervenor 

Connecticut Public Utilities Regulatory Authority. With her 

on the brief were Randall L. Speck, Gregory S. Warner, 
3

Robert A. Weishaar, Jr., F. Anne Ross, and Stephen L. 

Teichler. 

Ashley C. Parrish and David G. Tewksbury were on the 

brief for intervenor New England Power Generators 

Association, Inc. in support of respondent.

Before: BROWN and GRIFFITH, Circuit Judges, and 

SENTELLE, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge

SENTELLE.

SENTELLE, Senior Circuit Judge: Multiple petitioners 

seek review of orders of the Federal Energy Regulatory 

Commission (“FERC” or “the Commission”) affecting the 

administration of the Independent System Operator-New 

England (“ISO-NE”) and specifically directed to curtailment 

of the exercise of market power in the New England energy 

market. While competing petitioners raise numerous and 

often opposite objections to FERC’s orders, upon review we 

conclude that none of the petitioners establishes that FERC 

has committed reversible error, and we therefore deny the 

petitions for review.

I. BACKGROUND

A. Statutory and Regulatory Framework

The Commission is charged under the Federal Power Act 

(“FPA”) with regulating the sale and transmission of electric 

energy, primarily ensuring that energy is provided at a just 

and reasonable rate. 16 U.S.C. § 824d(a). The Commission 

has jurisdiction over such sale and transmission, but states 

retain the right to regulate the facilities responsible for the 
4

generation of electric energy. Id. § 824(b). In exercising its 

duty to oversee the wholesale electricity market, FERC has 

undertaken to regulate capacity markets, which dictate the 

amount of electricity available for production and 

transmission when needed. See Conn Dep’t of Pub. Util.

Control v. FERC, 569 F.3d 477, 479 (D.C. Cir. 2009). At the 

foundation of FERC’s current regulatory scheme of the 

electric market stands Order No. 888.1 In Order No. 888, 

FERC undertook to promote wholesale competition through 

open access and nondiscriminatory transmission services. As 

part of that undertaking, FERC “encouraged the formation of 

independent system operators (ISOs) to administer 

transmission services and new markets for wholesale 

electricity transactions.” Sithe/Independence Power Partners, 

LP v. FERC, 285 F.3d 1, 2 (D.C. Cir. 2002). The regulatory 

scheme contemplates that the ISOs will “adopt transmission 

(and ancillary services) pricing policies to promote the 

efficient use of, and investment in, generation, transmission, 

and consumption” of wholesale electric power in specific 

energy capacity systems. Id. One such ISO is the 

Independent System Operator-New England, responsible for 

the electric energy capacity system in the New England 

region. 

 1 Promoting Wholesale Competition Through Open Access NonDiscriminatory Transmission Servs. By Pub. Utils.; Recovery of 

Stranded Costs by Pub. Utils. & Transmitting Utils., Order No. 

888, FERC Stats & Regs. ¶ 31,036 (1996), order on reh’g, Order 

No. 888-A, FERC Stats & Regs ¶ 31,048 (1997), order on reh’g, 

Order No. 888-B, 81 FERC ¶ 61,248 (1997), order on reh’g, Order 

No. 888-C, 82 FERC ¶ 61,046 (1998), affirmed in relevant part, 

remanded in part on other grounds sub nom. Transmission Access 

Policy Study Grp. v. FERC, 225 F.3d 667 (D.C. Cir. 2000), aff’d 

sub nom. New York v. FERC, 535 U.S. 1 (2002).
5

To ensure reliable electrical power, a system operator 

such as ISO-NE must implement a scheme that will incent 

resources to provide sufficient energy capacity, or energy 

available for later use. New England’s chosen scheme 

involves a Forward Capacity Market (“FCM”), which sets 

capacity price for the following three years via auction. After 

completing two auctions in 2008 under the most recent 

capacity market regime, New England market participants 

submitted on December 1, 2008 a filing to the Commission 

identifying certain parameters of the capacity market 

requiring further attention. Subsequently, after Auction 3, 

New England participants proposed revisions to the capacity 

market rules in a February 22, 2010 filing. FERC entered

four orders regarding these and subsequent requests for 

modification that are before us. 

In its orders, FERC imposed buyer- and supplier-side 

mitigation measures which, apparently, satisfied exactly none 

of its constituents. Petitioners NSTAR Electric Company 

(“NSTAR”), along with Massachusetts Municipal Wholesale 

Electric Company and New Hampshire Electric Cooperative, 

Inc. (together, “Public Systems”), challenge FERC’s buyerside mitigation measures as going too far. Public Systems 

also assert that the Commission lacks jurisdiction under the 

Federal Power Act to impose these mitigation measures, an 

argument joined by Intervenors the Attorney General for the 

State of Connecticut (“Connecticut”) and the New England 

Conference of Public Utilities Commissioners (“New England 

Commissioners”). 

Petitioners New England Power Generators Association, 

Inc. (“NEPGA”) and several electricity generators, NRG 

Power Marketing LLC, Connecticut Jet Power LLC, Devon 

Power LLC, Middletown Power LLC, Montville Power LLC,

Norwalk Power LLC, and Somerset Power LLC (together, 
6

“Suppliers”), challenge the buyer-side mitigation measures as 

too lenient, while contending that the seller-side measures are 

too harsh. 

For the reasons explained below, we hold that the orders 

on review fall within FERC’s statutory rate-making authority 

conferred by the FPA. Because FERC undertook its 

balancing responsibilities in the capacity market with 

appropriate consideration and based its decision on substantial 

evidence, we defer to the Commission’s sound judgment in 

crafting mitigation measures responsive to the needs of the 

New England Forward Capacity Market, and therefore deny 

each of the petitions before us. 

B. The Devon Power Settlement

The New England market fashioned the particulars of its

capacity market via a settlement including stakeholders of all 

stripes. FERC initially approved the Forward Capacity 

Market, Devon Power LLC, 115 FERC ¶ 61,340 (“Settlement 

Order”), order on reh’g, 117 FERC ¶ 61,133 (2006) 

(“Settlement Rehearing Order”), and all aspects of the 

Commission’s determination were eventually affirmed by this 

Court and/or the Supreme Court. See Me. Pub. Utils. 

Comm’n v. FERC, 520 F.3d 464, 467 (D.C. Cir. 2008), rev’d 

in part sub nom. NRG Power Mktg. v. Me. Pub. Utils. 

Comm’n, 558 U.S. 165 (2010). 

The settlement contemplated use of auctions through 

which utilities can secure obligations to provide capacity. 

Before each auction, ISO-NE determines the amount of 

capacity that will be required for system reliability in three 

years—the Installed Capacity Requirement. Conn. Dep’t, 569 

F.3d at 480. Each energy provider is required to purchase 

enough capacity to meet its share of the Installed Capacity 
7

Requirement. Id. The auction is a “descending clock 

auction” in which the price gradually drops until the total 

amount of capacity offered by suppliers equals the Installed 

Capacity Requirement. The starting price for the auction is 

set at twice the estimated “Cost of New Entry.” Id. Cost of 

New Entry is the price of capacity, expressed in $/kilowattmonth, that is needed to attract new capacity. Settlement 

Order ¶ 130. Theoretically, such a pricing scheme allows for 

the market to signal its need for additional electrical 

generation, while enabling generators to recover their costs. 

See TC Ravenswood, LLC v. FERC, 741 F.3d 112, 114 (D.C. 

Cir. 2013). 

The settlement provided several features designed to 

assure that the Forward Capacity Market did not suffer from 

the exercise of buyer-side market power, wherein the price of 

capacity drops too low to produce just and reasonable 

electricity rates. First, an Internal Market Monitor was to 

review the bids to ensure that they actually reflect a resource’s 

long-run costs. Settlement Order ¶ 109. Any bid below those 

costs would be deemed out-of-market (also known as “belowcost” or “uneconomic”). Id. When such a bid is discovered, 

the capacity clearing price (i.e., the closing price of the 

auction) would be reset under the Alternative Price Rule to 

either (1) Cost of New Entry or (2) the price at which the last 

in-market resource withdrew from the auction via a de-list bid

minus $0.01. Id. Secondly, under the settlement, loadserving entities (“LSEs”), essentially electric utility 

companies, could designate some resources as self-supply: 

either utility-owned generation facilities or facilities with 

which the utility had contracted. Id. ¶ 20. These selfsupplied resources could be used to offset the utility’s 

required share of the Installed Capacity Requirement, even 

though they participate in the auction at prices below their 

long-run costs and are thus out-of-market. ISO New England, 
8

Inc., 138 FERC ¶ 61,027, nn.99 & 103. Finally, the capacity 

market was to be subject to a clearing price floor in its first 

three auctions; the clearing price could not be set below 0.6 

times Cost of New Entry. Settlement Order ¶ 19. 

The settlement also included features designed to protect

against supplier-side market power. While it allowed for 

several types of de-list bids, where suppliers of capacity 

resources could exit the market as the price dropped, certain 

of these de-list bid types were subject to review by the 

Internal Market Monitor. Id. ¶ 28. A static de-list bid is one 

that allows a utility to exit the auction for a year, but must be 

submitted before the auction and must be reviewed by the 

Internal Market Monitor. ISO New England, Inc., 135 FERC 

¶ 61,029 n.75. A dynamic de-list bid occurs when a capacity 

resource exits during the auction without Internal Market 

Monitor review. Id. n.74; ISO New England, Inc., 119 FERC 

¶ 61,045 P.35. 

C. Procedural History

In 2008, ISO-NE held the first two auctions under the 

FCM regime outlined by the settlement and approved in the 

Settlement Order and Settlement Rehearing Order. On 

December 1, 2008, New England market participants 

submitted a filing proposing that modifications be made to the 

FCM and calling for stakeholder input. In June 2009, the 

Internal Market Monitor issued an initial assessment of the 

capacity market. The third auction took place in October 

2009. After a stakeholder process, several market participants

submitted on February 22, 2010 proposed FCM changes that 

would go into effect on April 23, 2010, some three months 

before the scheduled August 2, 2010 fourth auction. This 

original proposal sought, among other things, to revise the 

Alternative Price Rule, extend the price floor beyond the third 
9

auction, and revise the Cost of New Entry calculation. ISO 

New England, Inc., 131 FERC ¶ 61,065 P.6. The original

proposal contemplated that other parameters would need yet

additional stakeholder review and input. 

FERC issued four orders in connection with these and 

subsequent proposed changes to the New England capacity 

market. In the first order, FERC found certain parameters of 

the proposal to satisfy the “just and reasonable” standard and 

accepted them as proposed. ISO New England, Inc., 131 

FERC ¶ 61,065, Order on Forward Capacity Market 

Revisions and Related Complaints, April 23, 2010 (“First 

Order”) ¶ 16. FERC set other issues for paper hearing, but 

made the proposed changes effective as of the date of the 

order, April 23, 2010, to provide certainty heading into the 

fourth auction scheduled for August 2, 2010. Id. ¶¶ 17–19. 

The Commission later issued a second order clarifying certain 

portions of the First Order. 132 FERC ¶ 61,122, Order 

Granting in Part and Denying in Part Requests for 

Clarification and Rehearing and Denying Motion for 

Disclosure, August 12, 2010 (“Second Order”). On the paper 

hearing, ISO-NE presented a July 1, 2010 revised proposal

outlining changes to the Forward Capacity Market, and 

various stakeholders responded to both the original and the 

revised proposal. 

FERC issued two orders responding to the revised 

proposal. 135 FERC ¶ 61,029, Order on Paper Hearing and 

Order on Rehearing, April 13, 2011 (“Third Order”); 138 

FERC ¶ 61,027, Order on Rehearing and Clarification and 

Order Accepting Compliance Filings, January 19, 2012 

(“Fourth Order”). FERC identified “two major and 

interrelated issues . . . in this case: (1) whether the FCM 

design in New England will provide sufficient income to 

incent market entry when necessary without the assistance of 
10

supplemental revenue streams from outside ISO-NE markets 

and (2) the proper design of market power mitigation regimes 

to protect against both buyer and seller market power.” Third 

Order ¶ 15. As a result, it found the majority of the proposal 

unjust and unreasonable, but accepted portions of ISO-NE’s

July 1, 2010 revised proposal. Id. ¶ 16. 

FERC found that the proposals did not adequately 

mitigate buyer-side power in that they failed to provide 

sufficient regulation of below-cost entry, but also found that a 

component of the revised proposal based on “benchmark 

pricing” could lead to a just and reasonable buyer-side 

mitigation measure. Id. ¶¶ 17, 165. Significantly, the 

Commission ordered ISO-NE to develop a minimum-offer 

price rule (“MOPR” or “offer-floor mitigation”) specific to 

resources’ asset class. FERC “require[d] ISO-NE to work 

with its stakeholders to develop a mitigation regime that relies 

on these benchmarks but does not procure more capacity than 

[the Installed Capacity Requirement], that is, to develop an 

offer-floor mitigation construct . . . .” Id. ¶ 165. 

FERC found it inappropriate to adopt a categorical 

mitigation exemption for state-sponsored and self-supply 

entities, Third Order ¶¶ 170–71, but nothing in the order 

eliminated any right that entities might have to request 

mitigation exemptions, Fourth Order ¶ 91. The Commission

extended the price floor through Auction 6, but did not further 

mitigate resources that had been deemed below-cost in the 

first five auctions once the MOPR construct was in place. 

Third Order ¶ 217.

FERC found that the proposals also failed to adequately 

mitigate supplier-side power. The Commission lowered the 

dynamic de-list bid price to $1/kilowatt-month, requiring delist bids over this price to be subject to review by the Internal 
11

Market Monitor. Third Order ¶ 313; Fourth Order ¶¶ 121–

28.

D. Petitions for Review

Before us, Petitioners NSTAR and Public Systems 

challenge the buyer-side mitigation measures as going too far. 

Public Systems first contends that FERC lacks jurisdiction 

under the FPA to impose mitigation requirements upon

uneconomic entrants to the Forward Capacity Market. Both 

NSTAR and Public Systems go on to argue that, assuming 

jurisdiction, FERC’s orders imposing mitigation requirements 

in order to produce just and reasonable rates were not based 

on substantial evidence. Finally, NSTAR and Public Systems 

assert that the Commission acted arbitrarily and capriciously 

in declining to create a categorical mitigation exemption for 

self-supplied and state-sponsored resources. 

 

Conversely, petitioners NEPGA and Suppliers challenge 

the buyer-side mitigation measures as too lenient, while 

contending that the supplier-side mitigation measures are too 

harsh. On the buyer-side measures, they first argue that

FERC acted arbitrarily and capriciously in declining to 

regulate uneconomic entrants from Auctions 1–5 in later 

auctions using the offer floor mitigation scheme. Secondly, 

they argue that the Commission erred in determining which 

resources constitute new import resources subject to offerfloor mitigation. Regarding the seller-side measures, they 

claim that it was arbitrary and capricious for FERC to lower 

the dynamic de-list price to $1/kilowatt-month.

We consider each allegation in turn.

 

 
12

II. STANDARD OF REVIEW

This Court reviews final orders issued by the 

Commission under the arbitrary and capricious standard of the 

Administrative Procedure Act, 5 U.S.C. § 706(2)(A). An 

agency action will be upheld if the agency “articulate[d] a 

satisfactory explanation for its action including a ‘rational 

connection between the facts found and the choice made.’” 

Motor Vehicle Mfrs. Ass’n of United States, Inc. v. State Farm 

Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (quoting 

Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 

168 (1962)). The Commission’s factual findings will be 

upheld if supported by substantial evidence. 16 U.S.C. 

§ 825l(b). 

The question of an agency’s interpretation of a statutory 

ambiguity that concerns the scope of the agency’s authority is 

reviewed under the Chevron standard. “[T]he question in 

every case is, simply, whether the statutory text forecloses the 

agency’s assertion of authority, or not.” City of Arlington, 

Tex. v. FCC, __ U.S. __, __, 133 S. Ct. 1863, 1871 (2013). 

III. DISCUSSION

A. FERC’s Jurisdiction

We begin by noting that the Settlement Order and 

Settlement Rehearing Order in this case entertained concerns 

over whether FERC had jurisdiction over the settlement. 

However, the Settlement Orders were devoted to considering 

the broad issue of FERC’s jurisdiction to regulate charges for 

capacity as opposed to wholesale energy. Settlement Order 

¶ 201 (collecting cases in which “[c]ourts have confirmed that 

the Commission has jurisdiction under the FPA to regulate the 

charges for capacity in wholesale markets”). The Settlement 
13

Orders did not consider the precise jurisdictional question 

before us. 

Our question is whether FERC has jurisdiction to 

regulate capacity where its regulation touches on which 

energy facilities may be used to fulfill capacity obligations. 

Public Systems argue that FERC exceeded its jurisdiction 

when it imposed buyer-side mitigation measures because the 

orders serve to dictate which resources a utility must use to 

satisfy its capacity obligations, in violation of the FPA. 

Intervenor Connecticut joins Public Systems’ jurisdictional 

argument, contending that FERC’s orders impermissibly 

determine the makeup of a state’s resource portfolio. 

Under 16 U.S.C. § 824(b)(1), “[t]he Commission shall 

have jurisdiction over all facilities for such [interstate]

transmission or sale of electric energy, but shall not have 

jurisdiction . . . over facilities used for the generation of 

electric energy . . . .” Said another way, states regulate 

facilities, while FERC regulates sale and transmission. We 

have previously held that the Commission has jurisdiction to 

regulate certain parameters of the capacity market related to 

the price of capacity, even if those determinations touch on 

states’ authority. See, e.g., Conn. Dep’t of Pub. Util. Control 

v. FERC, 569 F.3d 477, 481–83 (D.C. Cir. 2009) (FERC may 

regulate Installed Capacity Requirement as it affects FERC 

jurisdictional rates, even if the requirement could result in the 

construction of facilities, a matter under state jurisdiction); 

Municipalities of Groton v. FERC, 587 F.2d 1296, 1300–03 

(D.C. Cir. 1978) (FERC approval of a capacity deficiency 

charge does not encroach on state jurisdiction, even though it 
14

may “motivate [utilities] to develop sufficient capacity to 

meet their load requirements”).2 We do so again here. 

Out-of-market resources—whether self-supplied, statesponsored, or otherwise—directly impact the price at which 

the Forward Capacity Market auction clears. As the price of 

capacity is indisputably a matter within the Commission’s 

exclusive jurisdiction, FERC likewise has jurisdiction to 

mitigate buyer-side market power as to out-of-market 

entrants. We agree with the Commission’s finding that it has 

jurisdiction over mitigation matters “affecting or relating to 

wholesale rates” under FPA § 201 and 206. Third Order 

¶ 220 (emphasis omitted) (citing Conn. Dep’t of Pub. Util. 

Control, 569 F.3d at 478, 481). We stress that FERC’s 

mitigation measures here do not entail direct regulation of 

facilities, a matter within the exclusive control of the states. 

See 16 U.S.C. § 824(b)(1). The Commission also found that 

uneconomic entry, regardless of resource and regardless of 

intent, “can produce unjust and unreasonable prices by 

artificially depressing capacity prices.” Id. ¶ 170. As it is 

FERC’s statutory obligation to ensure that rates are 

appropriate, we must respect its decision to maintain just and 

reasonable rates through curbing or mitigating buyer-side 

market power. See Fourth Order ¶ 79 (“By regulating the 

mechanism that ultimately produces the capacity clearing 

price, the Commission is properly exercising its jurisdiction 

over rates, terms and conditions of service.”).

Public Systems’ and Intervenor Connecticut’s arguments 

largely rest on the proposition that the Commission is 

 2 However, we have never held, and do not now hold, that 

regulation related to the price of capacity is within FERC’s 

authority if it entails direct regulation of generation facilities. Such 

matters are the province of the states. 16 U.S.C. § 824(b)(1).
15

improperly regulating “facilities used for the generation of 

electric energy.” 16 U.S.C. § 824(b)(1). However, their 

arguments fail: states remain free to subsidize the construction 

of new generators, and load serving entities to build or 

contract for any self-supply they believe is necessary; FERC’s 

orders simply regulate the “price constructs that result in 

offers into the capacity market from these resources that are 

not reflective of their actual costs.” Third Order ¶ 170. 

Moreover, this Court has already rejected in Connecticut 

Department of Public Utility Control the argument that the 

type of regulation at issue here constitutes “direct regulation 

of generation facilities.” 569 F.3d at 481–82. There, we held 

that FERC had jurisdiction to regulate “a key input into the 

market-based mechanism.” Id. at 478. Just so here. This 

mitigation parameter operates no differently. 

FERC’s rate-making authority confers broad power “to 

act in the public interest.” Miss. Indus. v. FERC, 808 F.2d 

1525, 1549 (D.C. Cir. 1987) (internal quotations omitted), 

vacated and remanded in part on other grounds, 822 F.3d 

1104 (D.C. Cir. 1987). We hold that FERC has jurisdiction to 

regulate the parameters comprising the Forward Capacity 

Market, and that applying offer-floor mitigation fits within the 

Commission’s statutory rate-making power. 

B. Buyer-Side Mitigation

As we have discussed, the orders on review address

buyer-side market power by imposing a number of mitigation 

measures. Essentially, the arguments before us on each of the 

buyer-side mitigation measures are these: Petitioners NSTAR 

and Public Systems contend that FERC went too far in its 

measures designed to stop uneconomic entry. Petitioners 

NEPGA and Suppliers argue that FERC did not go far enough 
16

in preventing this buyer-side market power. The Commission

argues that it struck the appropriate balance. 

1. Necessity of Buyer-Side Mitigation Measures

The Commission bears the statutory responsibility of 

ensuring that rates are just and reasonable. Therefore, our 

first consideration is whether FERC’s mitigation measures 

against buyer-side market power were undertaken in the 

establishment of just and reasonable rates. NSTAR argues

that they were not. It contends that FERC erred in ignoring 

the settlement in place in this case, that its orders were not 

supported by substantial evidence, and that it acted arbitrarily 

and capriciously in imposing buyer-side mitigation. 

Similarly, Public Systems argue that FERC erred in its 

determination that self-supply artificially depresses capacity 

prices, causing the Commission’s mitigation measures to be 

unreasonable. We disagree with both sets of Petitioners and 

hold that FERC reasonably mitigated buyer-side market 

power. 

In its orders, the Commission determined that neither of 

ISO-NE’s proposals based on the Alternative Price Rule 

would result in just and reasonable rates, due to the exercise 

of buyer-side market power. Third Order ¶¶ 17–19, 59–61. 

The Alternative Price Rule is a mitigation tool intended to 

discourage buyers from suppressing market clearing capacity 

prices below a competitive level, and to ensure that the price 

of capacity is truly reflective of the cost of new entry into the 

market. By design, the Rule is to provide an upwards price 

adjustment for out-of-market resources. In practice, however, 

the Commission found that the Alternative Price Rule failed 

to adequately address the price suppressive effect of capacity 

that entered the market through below-cost auction bids, due 

to having too narrow a triggering mechanism. Id. ¶¶ 17–19, 
17

59. The Rule was only set to trigger when the Installed 

Capacity Requirement was higher than the amount of existing 

capacity, and thus there was a need for new capacity to make 

up the difference. First Order ¶ 70. However, new capacity 

may be needed in scenarios other than meeting the Installed 

Capacity Requirement, such as to replace existing capacity 

entering retirement. Id. Further, the Commission found, the 

Alternative Price Rule did not account for out-of-market 

resources that affect prices even when no new capacity is 

needed, by displacing other price-setting resources. Id. 

Indeed, the Rule was never triggered in the New England 

auctions despite the entrance of significant amounts of out-ofmarket capacity. Third Order ¶ 58. FERC specifically found 

that “[out-of-market] capacity suppresses prices regardless of 

intent,” Id. ¶ 170, and necessitates action by the Commission 

to correct for unjust and unreasonable outcomes. 

 

Even in rejecting ISO-NE’s proposals, the Commission 

did find that one element of the revised proposal, the principle 

of benchmark pricing, “form[ed] the basis for a just and 

reasonable buyer-side mitigation measure.” Id. ¶ 165. Under 

this approach, the Internal Market Monitor would establish 

resource-specific benchmark prices approximating the cost of 

new entry into the market. Id. ¶¶ 165, 169. Bids below a 

specified percentage of the relevant benchmark would be 

deemed uneconomic and would be subject to mitigation. The 

Commission therefore required ISO-NE “to work with its 

stakeholders to develop a mitigation regime that relies on 

these benchmarks but does not procure more capacity than 

[necessary], that is, to develop an offer-floor mitigation 

construct . . . .” Id. ¶ 165. Under the offer-floor mitigation 

scheme, if the clearing price falls below the set benchmark, 

the new resource would not clear in the auction and would not 

obtain a capacity supply obligation. Id. ¶¶ 165–69. 
18

According to NSTAR, there is no evidence that the 

Alternative Price Rule is not working as designed to mitigate 

out-of-market entry. The Alternative Price Rule, NSTAR 

argues, should be aimed at preventing buyers from 

intentionally depressing capacity prices. It is true that the 

New England capacity market suffers from the exercise of 

buyer-side market power specifically at the hands of those 

interested in depressing capacity prices. However, NSTAR 

views too narrowly the circumstances in which the 

Alternative Price Rule is designed to operate. The 

Commission found that capacity offered into the market 

through below-cost bids can suppress prices even when no 

actor has the intent to do so. Third Order ¶ 170 (“[Out-ofmarket] capacity suppresses prices regardless of intent . . . .”);

see also N.Y. Indep. Sys. Operator, Inc., 124 FERC ¶ 61,301 

P.29 (2008). The Alternative Price Rule “is a market power 

mitigation rule intended to discourage buyers who have the 

incentive and ability to suppress market clearing capacity 

prices below a competitive level from doing so,” not simply 

the intent to do so. First Order ¶ 69 (emphasis added). FERC 

stated that its objective is “to ensure that the prices in capacity 

markets reflect the market cost of new entry when new entry 

is needed.” Id. However, the Commission “agree[d] with the 

[External Market Monitor] and the commenters that ISONE’s existing [Alternative Price Rule] does not fully meet this 

objective.” Id. ¶ 70. 

Such a finding that the Rule is not working was based on 

substantial evidence. The External Market Monitor found 

that “[out-of-market] capacity can lead to a clearing price in 

the [auction] that is inefficiently low” and “can distort . . . 

prices by shifting the supply in the [auction] such that a bid 

with a substantially lower bid price . . . sets the clearing 

price.” External Market Monitor (Potomac Economics) 

Report at 4–6. In declining to accept the proposed 
19

amendments to the Alternative Price Rule, the Commission 

relied also on the External Market Monitor’s finding that “the 

proposed [Alternative Price Rule] changes fail to trigger when 

new capacity is not needed or when the [out-of-market] 

quantity is less than the amount of new capacity needed, even

though in both cases [out-of-market] capacity can 

substantially lower prices without an [Alternative Price Rule] 

adjustment.” First Order ¶ 50; External Market Monitor 

(Potomac Economics) Report at 14–15. 

In short, the Alternative Price Rule would not be 

triggered in all the scenarios necessary to produce just and 

reasonable rates. “[T]he existing [Alternative Price Rule] 

provides a price adjustment for [out-of-market] resources only 

when there is a need for new capacity as reflected by an 

[Installed Capacity Requirement] that exceeds all existing 

capacity.” First Order ¶ 70. The Rule would not be triggered 

when new capacity is needed because existing capacity is 

retiring, or when uneconomic capacity would displace “what 

would otherwise be the marginal, price-setting existing 

resource.” Id. Moreover, even in those circumstances where 

the Rule would be triggered, it would not produce the same 

price that would have arisen had all the out-of-market entrants 

offered capacity truly reflective of their long-run costs. Id.

Upon evidence that the Alternative Price Rule failed to 

capture all of the instances of price-shifting out-of-market 

capacity, FERC acted within its authority to adjust parameters 

of the settlement and in fact “has a continuing obligation to 

ensure that . . . rates are just and reasonable.” OXY USA, Inc. 

v. FERC, 64 F.3d 679, 690 (D.C. Cir. 1995) (internal 

quotation marks omitted).

Likewise, we defer to the Commission’s decision to 

mitigate buyer-side power because its determination was not 

arbitrary or capricious, but instead a proper exercise of its role 
20

in balancing competing interests. FERC evaluated the 

relative importance of several parameters—allowing 

uneconomic resources to clear the market, preventing 

uneconomic resources from distorting the market clearing 

price, and limiting the purchased capacity to the Installed 

Capacity Requirement—and reasonably determined that it 

was more important to prevent price distortion and excess 

capacity purchase than it was to allow out-of-market 

resources to clear. Third Order ¶¶ 159–66; Fourth Order 

¶¶ 28, 75. Such a juggling act would not benefit from our 

rearranging. See, e.g., Sacramento Mun. Util. Dist. v. FERC, 

616 F.3d 520, 541–42 (D.C. Cir. 2010) (the court “properly 

defers to policy determinations invoking the Commission’s 

expertise in evaluating complex market conditions,” where 

the Commission “reflected on the competing interests at stake 

to explain why it struck the balance it did”) (internal 

quotations omitted). 

We are also unconvinced by Public Systems’ contentions 

concerning buyer-side mitigation in the context of selfsupplied resources. They argue that lower prices are the 

natural result of the increased supply of capacity now 

available as states and other entities can produce or contract 

for their own capacity. For the reasons already discussed, 

FERC sufficiently explained how the Alternative Price Rule 

as contemplated in the settlement does not adequately adjust 

prices or prevent out-of-market resources from distorting 

prices irrespective of motivation. That conclusion does not 

change in consideration of the out-of-market resource’s status 

as self-supplied. 

2. Categorical Mitigation Exemption 

If there is to be mitigation of buyer-side market power, 

Petitioners contend, some resources—those which are self-
21

supplied and those which are state-sponsored—should be 

categorically exempt. We again defer to the Commission’s 

reasoned determination to the contrary.

We first decide that the question of categorical mitigation 

exemptions is ripe for review. FERC contends that this issue 

is unripe because ongoing agency proceedings will consider 

mitigation exemptions for these resources. Respondent’s Br. 

at 4–8. However, states and LSEs are currently harmed by 

their inability to develop their portfolios for future years, as 

they are acting pursuant to orders declining to exempt them 

from mitigation. Moreover, since the completion of the 

briefing in this case, FERC has gone on to deny proposed 

tailored exemptions for both self-supplied and state-sponsored 

entities. See Public Systems’ Rule 28(j) letter at 2. In light of 

these factors, there is no reason to stay our consideration of 

the issue. 

Public Systems argue that allowing LSEs to choose 

which resources they will use to fulfill their capacity 

obligations is a cornerstone of the settlement in this case, and 

that the mitigation measures prevent them from electing to 

self-supply capacity because their bids will not clear the 

market. Intervenors New England Commissioners agree and 

argue that the Commission acted arbitrarily and capriciously 

when it failed to meaningfully consider the states’ request for 

a categorical exemption for state-sponsored resources, which 

are unlikely to be used for the purpose of suppressing capacity 

prices. 

 

It is true enough that, under the settlement, self-supplied 

and state-sponsored resources are available to fulfill capacity 

obligations, provided that they adhere to “the same 

performance obligations and qualification requirements as 

other resources participating in the [Forward Capacity 
22

Market] and the [auctions.]” See Settlement Order ¶ 20. 

However, FERC did not act arbitrarily and capriciously in 

determining that new self-supplied resources should meet the 

additional burden of mitigation and should not be 

categorically exempt. Rather, it recognized the need for 

modification of the existing mitigation schemes in response to 

the failings of the Alternative Price Rule as applied to all 

uneconomic entry, including self-supplied and statesponsored resources, and mitigated accordingly. 

The Commission found that designating a new resource 

as self-supply “has the same price effect as offering the . . . 

resource [into the auction] at a price of zero.” Fourth Order 

¶ 60. This low price will serve to displace a higher-priced 

resource that otherwise would have set the clearing price; as a 

result, a lower offer will then set the clearing price. See id.

¶ 72. This is definitional market distortion in favor of buyers. 

Further, it is the same market distortion that the Alternative 

Price Rule failed to correct, necessitating the introduction of 

the offer-floor mitigation scheme. Why then would identical 

distortions be treated differently? 

Simply, we uphold the Commission’s determination that 

because self-supply serves to depress capacity prices, a 

categorical exemption from mitigation is unwarranted. To 

categorically exempt new self-supplied resources “would 

allow the mitigation mechanism to be circumvented” and 

result in unjust and unreasonable rates. Id. ¶ 60. FERC is 

within its jurisdiction to consider the economic, as well as the 

technical, attributes of a capacity resource. 

We note that, in any event, the mitigation measures do 

not apply to existing resources, id. ¶ 74, leaving current selfsupply purchasing decisions undisturbed and allowing statesponsored projects already in the market to fulfill capacity 
23

obligations, id. ¶ 88. LSEs are free to shape their portfolios as 

they choose, including with new self-supplied resources, 

“provided these new resources clear the auction.” Id. ¶ 74. 

Though the Commission has not yet approved any proposals, 

the orders also permit parties an opportunity to develop 

appropriately tailored exemptions for self-supplied and statesponsored resources through the stakeholder process. See id.

¶¶ 70, 91. Finally, the Commission “reiterate[d] that state 

parties have the statutory right under [FPA] section 206 to file

to . . . seek[ ] an exemption . . . .” Id. ¶ 89. 

Public Systems attempt to persuade us that FERC could 

adopt a system wherein self-supply—often renewable energy 

technology—is prevented from affecting the Forward 

Capacity Market clearing price but is still allowed to displace 

other, less competitive resources. Perhaps so. However, the 

Commission reasonably determined that self-supply 

negatively affects prices, and reasonably acted to balance 

competing interests. In this instance, the Commission chose 

to value most strongly the concept of preventing price 

distortion; unfortunately for Public Systems, that decision 

came at the expense of their uneconomic resources’ ability to 

enter the market. FERC made the judgment that encouraging 

renewable energies was less important than allowing such 

out-of-market entrants to depress capacity prices. Such is 

FERC’s prerogative. That it is unfortunate does not make it 

arbitrary. 

FERC’s considered conclusion that certain resources, by 

definition, depress capacity prices falls within its duty of 

ensuring that rates are just and reasonable. Third Order ¶ 170. 

We defer to the Commission’s decision to decline a 

categorical mitigation exemption for self-supplied and statesponsored resources. 
24

3. Declining to Subject Auction 1–5 Uneconomic 

Entrants to the Further Mitigation 

We turn now to those issues in which a separate set of 

Petitioners asserts that the buyer-side mitigation measures did 

not go far enough to address uneconomic entry and the

attendant capacity price distortion.

 

While the proposals at issue in the case came under

review by the Commission, the Forward Capacity Market 

marched on, holding three auctions, with Auctions 4 and 5 

soon to follow. During and after the first three auctions, 

FERC considered and rejected two ISO-NE proposals on 

buyer-side mitigation as unjust and unreasonable. Third 

Order ¶¶ 61–62 (rejecting original proposal); id. ¶¶ 159–64

(rejecting revised proposal). Having decided in the Third 

Order that the Alternative Price Rule was insufficient to curb 

buyer-side market power, the Commission directed 

development of the offer-floor mitigation scheme for future 

auctions. At that point in issuing the Third Order, FERC was 

left with a decision on whether to mitigate further those outof-market entrants who had obtained capacity in Auctions 1–3 

and might well do so in Auctions 4 and 5. Ultimately, FERC 

extended the clearing price floor of 0.6 times Cost of New 

Entry that had been in place for the first three auctions, 

Settlement Order ¶ 19, through Auction 6, but declined to 

apply any other mitigation measures to uneconomic entrants 

in Auctions 1 through 5. Third Order ¶¶ 214–17, n.146; 

Fourth Order ¶¶ 38–46. Of course, having just been 

conceived, the offer-floor mitigation construct was not yet in 

effect in any of Auctions 1–5, and thus was not a viable 

mitigation mechanism. 

NEPGA and Suppliers argue that FERC should have 

applied mitigation, beyond merely extending the price floor,
25

to the uneconomic entrants in Auctions 1–5 until the 

minimum offer price rule went into effect. They claim that 

FERC’s finding that the Alternative Price Rule was 

inadequate is overwhelming evidence that additional 

mitigation was necessary. Due to the Commission’s failure to 

mitigate, the rates in future auctions will be affected and will 

therefore be unjust and unreasonable in violation of the FPA. 

However, our view is that FERC offered well-supported 

reasons in declining to further mitigate as to each of the 

auctions in question. 

As the Commission noted, the fundamental purpose of 

buyer-side mitigation is to prevent uneconomic entry, and 

further mitigation of out-of-market resources already in the 

market would not serve that end. Third Order ¶¶ 21, 214–15, 

n.151 (citing N.Y. Indep. Sys. Operator, 122 FERC ¶ 61,211 

PP.100–01, 118–19); Fourth Order ¶ 39. Instead, further 

mitigation would send inappropriate price signals, such that 

older, higher-cost resources would remain in the Forward 

Capacity Market during a time of capacity surplus. Fourth 

Order ¶ 39. For these two reasons, FERC declined to further 

mitigate uneconomic entrants from Auctions 1–3. 

FERC found that the same rationale—inability to prevent 

uneconomic entry through mitigation—applied equally to 

those resources deemed out-of-market in Auctions 4 and 5, as 

the newly-minted offer-floor mitigation construct would not 

go into effect until after those auctions had taken place. 

Fourth Order ¶¶ 45–46. In addition, there was a notice 

problem as to these interim uneconomic entrants: FERC had 

tentatively accepted the original mitigation proposal to 

provide certainty for Auction 4, but did not issue a final 

rejection of the original mitigation proposal until after the 

fourth auction and just before the fifth auction. Id. 

Participants in these auctions, even with some awareness that 
26

the Commission was considering stronger mitigation rules, 

could not adjust their offers effectively.

NEPGA is correct when it tells us that FERC’s duty is to 

ensure that rates are just and reasonable, not ensure 

equitability between participants. Pet’rs Br. at 35–36. 

However, that the Commission also considered notice and 

fairness is hardly a reason to discredit its decision on the 

amount of mitigation to impose. The Commission reasonably 

determined that, in addition to inability to deter entry, fairness 

concerns militated in favor of declining further mitigation as 

against these interim out-of-market resources. The 

Commission ruled that the entry and notice concerns were 

removed beginning with Auction 6 and thus, going forward, 

FERC did provide for mitigation of uneconomic entrants; the 

Commission found that uneconomic “resources entering in 

[Auction] 6 or any subsequent [auctions] prior to the 

implementation of the new rules will be carried forward under 

the existing rules and treated as new in the first auction in 

which offer floor mitigation is put into place.” Fourth Order 

¶ 47.

Intervenor PSEG argues that FERC should not have 

considered whether its mitigation measures would encourage 

older resources to stay in the market. However, this type of 

decision is precisely the sort of policy matter FERC is 

charged with considering. Again, we defer to FERC’s 

expertise, as the agency is best equipped to manage 

competing policy rationales. 

4. Subjecting only Certain Import Resources to the 

Offer-Floor Mitigation Construct

Some resources did escape FERC’s mitigation measures. 

In the orders on review, FERC required buyer-side 
27

mitigation—that is, application of the offer-floor construct—

of capacity originating outside the New England market in 

limited circumstances. These so-called imports are subject to 

mitigation only when both of two conditions are met: (1) “a 

specific new external resource is identified as the sole support 

for the import;” and (2) “a significant investment (such as the 

construction of a new transmission line to import power from 

an adjacent control area) is made to provide capacity to New 

England.” Third Order ¶ 191. 

Petitioner NEPGA and others proposed an alternative 

standard that would have mitigated imports that satisfied 

either condition. NEPGA and Intervenor PSEG contend that 

FERC’s mitigation of only certain import resources was 

arbitrary and capricious. According to them, FERC’s 

standard allows too many resources to avoid mitigation, 

resulting in the introduction of “unneeded capacity into the 

New England market,” Fourth Order ¶ 98, which “can 

produce unjust and unreasonable prices by artificially 

depressing capacity prices,” Third Order ¶ 170. 

The Commission determined that when imports involve 

“new resources that are devoted to the New England market

over the long term,” they should “be treated like new internal 

resources for mitigation purposes.” Id. ¶ 191. That is, 

imports committed to New England should be no different 

than new internal resources committed to New England; they 

should be mitigated because potential for buyer-side market 

power is high. However, FERC did not provide a blanket 

policy on mitigation of imports as is feasible between new 

and existing internal resources. In response to the 

“significantly more complicated” task of categorizing new 

and existing import resources, Third Br. of ISO-NE before 

FERC at 44, FERC put into place a workable standard to 

identify those resources that actually support an import and 
28

therefore should be treated as a new resource. Therefore, we 

defer to its standard. 

Further, the Commission responded to NEPGA’s 

alternative proposal to impose mitigation when only one of 

the two factors is met, and found it would be “contrary to the 

principles of open access and non-discrimination” among 

resources. Fourth Order ¶ 98. Such a system would unfairly 

differentiate between internal and external resources, as well 

as between service provided by new and existing transmission 

facilities. Id.

NEPGA disagrees with FERC’s open-access and 

discrimination rationales, but cannot demonstrate that they are 

arbitrary and capricious. FERC’s standard on mitigating 

imports was reasoned and supported by the record, namely 

ISO-NE’s undisputed submission that “the ‘new’ versus 

‘existing’ distinction should be avoided for imports where 

possible, and should be based on more concrete distinctions 

when differentiation is necessary.” Third Br. of ISO-NE

before FERC at 44 (responding to First Order and Second 

Order). FERC found that it should, in essence, err on the side 

of caution in mitigating import resources, and determined that 

most imports should be treated like existing, rather than new, 

resources. The Commission was aware of, and considered, 

the effect such a decision would have on capacity prices. 

Such a balancing function is precisely the role of expert 

agencies, and the record provides no basis on which FERC’s 

decision should be disturbed. 

C. Supplier-Side Mitigation

Finally, we turn to the claim by NEPGA and Suppliers 

that FERC improperly constricted the ability of suppliers to 

withdraw from the Forward Capacity Market. FERC, of 
29

course, contends that its supplier-side mitigation measure—

lowering the dynamic de-list bid threshold—was also striking 

a balance between interests. We agree. 

We briefly review the dynamic de-list concept. A 

dynamic de-list bid is one allowing a resource to exit an 

auction as the capacity price drops, and is not subject to 

review by the Internal Market Monitor. In the proposals put 

forth here, ISO-NE proposed to lower the threshold price at 

which de-list bids are reviewed by the Internal Market 

Monitor, so that more bids would be reviewed and the 

potential for supplier-side market power would be lessened. 

In its proposal, ISO-NE explained that the existing dynamic 

de-list bid threshold of 0.8 times Cost of New Entry was not 

representative of a resource’s costs. Third Order ¶ 305 (“ISONE notes that the current threshold of 0.8 [times the Cost of 

New Entry] bears no particular relationship to a resource’s 

opportunity or going forward costs and is a reasonable 

threshold only under the former approach to determining 

zones . . . .”). Without review by the Internal Market 

Monitor, a de-list bid at 0.8 times Cost of New Entry could 

not be assured to be competitive and allowed to set zonal 

prices in an auction. 

To ensure that the Forward Capacity Market is 

competitive, review of bids by the Internal Market Monitor is 

required; thus, suppliers should only be permitted to exit via 

dynamic de-list bids, and escape Internal Market Monitor 

review, at amounts low enough that the exercise of supplierside market power is unlikely. ISO-NE proposed that the 

threshold be set at $1/kilowatt-month instead. It arrived at 

this number using the lowest clearing price of three capacity 

reconfiguration auctions in the New England Market. In a 

reconfiguration auction, resources seeking to reduce their 

capacity supply obligations trade with resources willing to 
30

take on those obligations. Because reconfiguration auctions, 

unlike the garden-variety capacity auctions thus far discussed, 

have no floor price, a reconfiguration auction’s clearing price 

represents a competitive market price. Therefore, 

reconfiguration auctions serve as a reasonable proxy for a 

capacity price. 

NEPGA and Suppliers argue that FERC was arbitrary 

and capricious in lowering the de-list threshold: it mitigated 

seller-side market power that it never found existed, 

inappropriately decoupled the de-list threshold from Cost of 

New Entry, and borrowed its structure from a reconfiguration 

auction rather than a capacity auction. FERC’s careful 

consideration of the de-list process survives all these 

complaints. 

The impetus for the Commission’s decision to accept 

ISO-NE’s proposal to lower the de-list bid amount was the 

New England market’s move to a zonal modeling system in 

its capacity market pursuant to the settlement. In this system, 

the market responds to the amount of capacity needed in each 

of New England’s eight load zones. Internal Market 

Monitoring Unit Review of the Forward Capacity Market 

Auction Results and Design Elements, ISO New England Inc. 

Market Monitoring Unit (June 5, 2009) at 13, 17, available at

http://isone.com/markets/mktmonmit/rpts/other/fcm_report_final.pdf.

If a zone’s projected capacity is below its requirements, that 

zone is “modeled” as a separate zone and allowed to have a 

higher clearing price in the auction than the rest of the market. 

First Order ¶ 131. As a result, high de-list bids are in the 

position to set clearing prices, but were not reviewed by the 

Internal Market Monitor. 
31

In undertaking to ensure that rates are just and 

reasonable, the Commission properly lowered the de-list 

threshold. That ISO-NE and the Internal Market Monitor 

agree with this decision underscores its reasonableness. All 

of these parties determined that increased review of de-listing

is necessary given the move to a zonal modeling system, 

because suppliers are incented to withhold their capacity to 

create a separately modeled zone with a higher clearing price. 

Fourth Order ¶ 123. It is irrelevant that de-list bids were not 

previously wielded as market power because the zoning 

system dramatically changes the Forward Capacity Market. 

The orders’ de-list price of $1/kilowatt-month was also 

reasonable; the threshold reflects one at which supplier-side 

market power is unlikely to be exercised and thus Internal 

Market Monitor review is not necessary, as reflected in the 

reconfiguration auction results. 

In setting this price, FERC agreed with ISO-NE that the 

previous level of 0.8 times Cost of New Entry did not 

represent a competitive de-list bid in the zonal modeling 

version of the Forward Capacity Market, and thus the 

dynamic de-list threshold could be decoupled from the Cost 

of New Entry. Third Order ¶ 315. It responded to parties 

who disagreed and offered its acceptable rationale: 

A resource’s de-list bid is not intended to serve as a 

price stabilizer; it is intended to represent the offer a 

competitive supplier would accept voluntarily to 

commit its resource as a capacity resource. . . . No 

assurance for cost recovery is made for participating in 

competitive markets, only an opportunity to do so. 

Id. 
32

Finally, FERC carefully considered the options for 

auctions to use as a proxy in setting the de-list price. The 

Commission found that a reconfiguration auction was a 

reasonable proxy because it accomplished the goal of finding 

the offer at which “a competitive supplier would accept 

voluntarily to commit its resource as a capacity resource.” Id.

¶¶ 313–15. See also Fourth Order ¶ 122. 

The dynamic de-list bid is but one option in a 

constellation of strategies available to a supplier in making 

cost-effective capacity determinations. We note, as did the 

Commission, that Suppliers can still submit de-list bids above 

the threshold, so long as the de-list bids are static and thus 

presented in advance. Third Order ¶ 313. Further, we take 

the Commission at its word that the threshold will be updated 

to account for new information. Id. ¶ 314. 

We hold that FERC’s determination of the dynamic delist threshold, set in agreement with ISO-NE and the Internal 

Market Monitor, was neither arbitrary nor capricious. FERC 

reasonably determined that the zonal modeling system would 

have such an effect on the Forward Capacity Market, and act 

to incent suppliers to exercise market power, that 

preemptively providing for Internal Market Monitor review of 

most bids was the prudent course of action. FERC adequately 

explained why Cost of New Entry has become irrelevant to 

de-list bids, why the reconfiguration auction served as an 

appropriate proxy, and why the de-list price chosen was likely 

to prevent the exercise of supplier-side market power. 

Therefore, the Commission did not err. 
33

IV. CONCLUSION

For the foregoing reasons, we deny the petitions for 

review. 

So ordered.