FERC last week ordered bankrupt NRG Power Marketing Inc. to continue providing power to Connecticut Light and Power Inc. (CL&P) until the Commission decides whether NRG Power Marketing’s efforts to cancel a power contract with CL&P meet the Mobile-Sierra “public interest” standard.

In taking this action, the Federal Energy Regulatory Commission concluded that it is not required to forego its regulatory duties simply because a regulated entity such as NRG Power Marketing has filed for bankruptcy.

NRG Power Marketing in May told CL&P that it wanted to terminate a contract, effective May 19, under which NRG Power Marketing is obligated to supply 45% of CL&P’s standard offer service load requirement through the end of 2003 at an average cost of 4.5 cents/kWh. CL&P is a subsidiary of Northeast Utilities.

NRG Power Marketing said that CL&P was in default of the power contract because the utility had withheld payments due for congestion costs, as well as congestion costs and losses after the implementation of a standard market design (SMD) in New England.

NRG Power Marketing’s move came on the same day that its parent, NRG Energy, disclosed that the company and certain of its U.S. affiliates, including NRG Power Marketing, filed voluntary petitions for reorganization under the bankruptcy code in the Southern District of New York.

More recently, a U.S. District Court judge earlier this month issued an order allowing NRG Power Marketing to cease supplying power to CL&P until a court hearing was held on June 18. The judge did not make an immediate ruling on the case following arguments made before him by representatives from FERC, NRG and CL&P.

In last week’s decision, FERC said that it disagreed with NRG Power Marketing that the automatic stay under the bankruptcy code supersedes the Commission’s jurisdiction over the contested power supply agreement under the Federal Power Act (FPA). The filing of a bankruptcy petition operates as an automatic stay of several categories of judicial and administrative proceedings.

FERC noted that if NRG Power Marketing could, as it proposes, simply reject its obligations under the FPA, the Commission “would be unable to satisfy its statutory mission.”

As for whether NRG Power Marketing is entitled under the FPA to cease performance under the contract, FERC said that the agreement is “clear and unambiguous” on the consequences of CL&P’s nonpayment of disputed charges.

The Commission said that until CL&P is determined to be liable for congestion costs and then refuses to pay those charges, CL&P is not in default. Accordingly, FERC said that NRG Power Marketing does not currently have a right to terminate the contract for CL&P’s withholding of payment.

At the same time, FERC said that it agreed with NRG Power Marketing that the disputed contract was never required to be filed with the Commission. However, FERC disagreed with the bankrupt power marketer’s assertion that this in turn means that any change to the contract, including termination, need not receive prior approval by the agency.

“If a seller seeks to modify or abrogate a jurisdictional contract, the seller must make appropriate filings under FPA sections 205 or 206 to change the contract, whether or not the contract itself has been physically filed,” FERC pointed out.

Based on the record before it, FERC said that it’s unable to determine whether NRG Power Marketing has public interest grounds for abrogating the contract. The Commission therefore established procedures for the submission of information related to the public interest issues.

FERC directed NRG Power Marketing to provide evidence sufficient to demonstrate that the continued performance under the contract “will impair its financial ability or the ability of its public utility affiliates to continue service, cast upon other customers an excessive burden or be unduly discriminatory.”

The Commission said that such evidence should include:

FERC said that along with providing answers to these questions, NRG Power Marketing will be allowed to provide any evidence that it considers relevant to showing that it meets the Mobile Sierra standard.

At its agenda meeting on Wednesday, FERC Chairman Pat Wood said that he has yet to be persuaded that NRG Power Marketing in fact has met the Mobile Sierra standard for trying to get out of the contract.

NRG Power Marketing must file answers to the questions within 10 days from the date of the order and all interested parties to the proceeding must file responses to those answers within 10 days from the date that FERC receives those answers.

Meanwhile, FERC Commissioners split on the issue of whether the agency should flex its jurisdictional muscle in this case.

FERC Commissioner Nora Brownell said she would have supported a move by FERC to vacate the order. “I think the bankruptcy law, in fact, is quite clear in terms of the authority” related to executory contracts, she said.

In contrast, Wood said, “I think we ought to take it on and let a court tell us if that’s something we have the right to do or not… I think where the law’s unsettled, we need to move ahead, reading our law as robustly as we do everywhere else.”

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