I don’t
like it when I read about fraud, especially when it’s perpetrated by businesses
and ultimately paid for by consumers. The Midcontinent Independent System
Operator (MISO) has been dealing with rampant demand response fraud for at
least a couple of years now. Chemical company Linde agreed in January 2024 to
pay $59 million to settle charges that it manipulated the MISO’s demand
response program. Northern Indiana Public Service Co. (NIPSCO) was also
involved and agreed to pay $7.7 million making the total $66.7 million. FERC
approved and doled out the enforcement action.
“To cover the amounts it paid out to Linde Inc. and
NIPSCO, MISO assessed charges to certain market participants in its footprint,
including the utility, according to the commission. NIPSCO paid the largest
share of those charges and passed them on to its customers, FERC said.
“Linde Inc. and NIPSCO fully cooperated with FERC’s
enforcement office. The companies admit to the facts in the agreement but
neither admit nor deny the alleged violations, according to FERC.
Perhaps it’s a standard way of dealing with corporate
cheating – to admit that the facts are correct while not admitting or denying
the allegations. It seems no one takes responsibility for cheating anymore,
only paying fines. It is possible that inadequate employee training is an issue
but that is not confirmed.
About 10% of MISO’s power is
derived from demand response, some from industrial customers like Linde. This
is higher than the national average.
Another industrial customer, Big
River Steel, who operates a steel mill in Osceola, Arkansas 300 MW of peak
load, agreed in August 2024 to return $15.9 million in demand response payments
and pay a $6 million fine, according to FERC. Entergy Arkansas, serving as the
market participant for the mill, agreed to pay $5 million.
In December 2024 FERC ordered
Ketchup Caddy to pay $27 million “for using bogus demand response resources
to make offers” in MISO’s capacity market.
“Ketchup Caddy and Philip Mango, the company’s owner,
“engaged in a fraudulent device, scheme, or artifice to defraud the MISO market
and market participants,” FERC said.”
In testimony to FERC, Mango acknowledged that what he was
doing was illegal and deceptive, including submitting “mock test” information
for customers to MISO to meet a registration requirement “submitting
“mock test” information for customers to MISO to meet a registration
requirement,” and enrolling “unwitting customers” in the program.
In January 2025 Voltus agreed to
pay a $10.9 million penalty and return $7.1 million in profits to settle
allegations that it registered uncontracted and over-stated demand response
resources with MISO, according to FERC.
“…the demand response company’s former CEO Gregg Dixon
engaged in a “fraudulent scheme” in MISO, in part by directing Voltus employees
to obtain customer data by scraping an Ameren Illinois website, FERC said.
“Dixon agreed to pay a $1 million penalty and to step down
from Voltus’ board of directors.”
At least in this case, there were
some consequences for cheating, but as seen below there was no official
admission of wrongdoing.
“FERC’s enforcement office contends Dixon caused Voltus
to register demand response resources with MISO without the owners’ knowledge
or consent and to clear load-modifying resource capacity that would not have
performed if MISO dispatched the resources from Oct. 1, 2016, through June 1,
2020, according to the agreement.
“Voltus and Dixon stipulated to the facts in the
agreement, but neither admitted nor denied the alleged violations. Voltus and
Dixon fully cooperated during FERC’s investigation, the agency said.
“We have not been accused of, let alone admit to, any
market manipulation,” Voltus said in an emailed statement. “Rather, we are
entering a no-admit/no-deny settlement on tariff violations … Voltus will
continue to work with regulators, including FERC, to ensure that tariffs that
govern demand-side resources are clear and consistently applied.
It seems like they are trying to
blame the ease of getting away with the violations on MISO for not doing enough
due diligence in confirming that the demand response resources were actually
available. MISO has since strengthened its DR requirements and vetting.
However, it appears to me these companies knew they were cheating.
“MISO has taken steps to protect its market from similar
abuse, according to Brandon Morris, a spokesman for the grid operator. “And we
are strengthening our formal tariff requirements and dedicating additional
resources to evaluate participation of demand-side resources in our markets.”
In March 2025 MISO proposed rule
changes for market participation of DR resources. They proposed changes for
four interrelated issues:
· Payment
for nonexistent or overstated curtailments;
· Inaccurate
or inflated baselines that curtailments are based on;
· Fraudulent
registration of resources; and,
· Tariff
changes dealing with issues such as audit rights, and changes to testing and
“make whole” payments.
One change is that companies will no longer be allowed to
self-schedule. Thus, a demand response resource must now adjust load when
called upon to do so. Another change is that an entity offering into its
markets must have the legal right to make a resource available. While MISO
believed that was true before, after the actions of Voltus and Ketchup Caddy
they felt the need to reiterate it and formalize it in stronger legal language.
According to Howland:
“Also, because of the “egregious” behavior of Ketchup
Caddy and Voltus in submitting availability information and getting paid for
non-existent resources, MISO proposed requiring an officer of companies that
aggregate demand response resources to attest that the company follows the grid
operator’s rules and will not engage in fraud, market manipulation or gaming.”
“MISO asked FERC to let its proposal take effect by July
19.”
I have always been interested in
promoting business ethics and deriding fraud, especially corporate fraud. These
kinds of cases piss me off. These are well-paid professionals who are knowingly
perpetrating fraud in most cases. They should have known better. While there
have been some consequences in some cases, they got away with a lot for a long
time. Where there is obvious fraud but no official admission of wrongdoing
there is a disconnect, a clear cognitive dissonance.
References:
MISO
proposes demand response rule changes to stem market fraud, gaming. Ethan Howland.
Utility Dive. March 24, 2025. MISO
proposes demand response rule changes to stem market fraud, gaming | Utility
Dive
Voltus
agrees to pay $18M to settle allegations it violated MISO demand response rules.
Ethan Howland. Utility Dive. January 7, 2025. Voltus
agrees to pay $18M to settle allegations it violated MISO demand response rules
| Utility Dive
FERC
orders Ketchup Caddy to pay $27M for MISO demand response fraud. Ethan Howland.
Utility Dive. December 6, 2024. FERC
orders Ketchup Caddy to pay $27M for MISO demand response fraud | Utility Dive
Big
River Steel to pay $22M for receiving MISO demand response payments without
cutting load. Ethan Howland. Utility Dive. August 28, 2024. Big
River Steel to pay $22M for receiving MISO demand response payments without
cutting load | Utility Dive
NIPSCO,
Linde to pay $66.7M to settle charges for gaming MISO demand response program.
Ethan Howland. Utility Dive. January 8, 2024. NIPSCO,
Linde to pay $66.7M to settle charges for gaming MISO demand response program |
Utility Dive
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