AICPA SOC Service Organizations - Certrec

AES Corporation Received $2.97 Million Penalty in Disgorgement to CAISO and a Civil Penalty of $3.03 Million in Violation of 18 C.F.R., § 35.41(b), and § 35.41(a)

Summary of NERC Penalties









Quarter 4 - November 2023

AES Corporation

FERC's Regulations

CAISO Tariff Sections 4.6.4 and, and FERC's Regulations under 18 C.F.R. § 35.41(b) and § 35.41(a)

AES Corporation, a global energy company, owns a vast generation capacity but faced issues when several resources failed to meet their Master File Pmax levels during 2019 tests. Despite this, AES sold Resource Adequacy contracts for these capacities and benefitted financially. This situation raised concerns under CAISO Tariff Sections 4.6.4 and, along with FERC regulations under 18 C.F.R. § 35.41(a) and § 35.41(b), related to market integrity and resource adequacy.


AES Corporation is the ultimate parent company of AES. AES Corporation is a publicly traded, diversified global energy company that indirectly owns electric generation, transmission, and other facilities in the United States and internationally, including the Resources. AES Corporation owns and operates a portfolio of generation of approximately 32,300 MW. During the Relevant Period, the Resources were contracted through Resource Adequacy Purchase Agreements (RAPAs). Under the RAPAs the Resources provided resource adequacy capacity. The Resources were not obligated to produce or sell any energy to the RAPA counter party but were required to bid energy into the CAISO market. AES received Resource Adequacy (RA) payments for providing capacity to the CAISO market. CAISO conducted Pmax tests in the spring of 2019 to determine whether most of the Resources were able to reach their Master File Pmax levels in preparation for the upcoming high-load summer months in Southern California. In August 2019 the CAISO DMM informed Enforcement that Alamitos Units 3, 4, 5, 6, and Redondo Unit 7 failed to reach their Pmax values as submitted to CAISO in the Master File during summer readiness tests conducted in May 2019 and exceptional dispatches occurring in July 2019 eight Resources were physically unable to reach and/or maintain their Master File Pmax value for a 30-minute interval at any time during the Relevant Period when they were dispatched by CAISO up to their Pmax. During the Relevant Period, AES sold RA contracts for the Resources up to their Master File Pmax values and, in some cases, financially benefitted from RA payments for capacity the Resources could not physically provide.

FERC Violation Determinations

  • FERC enforcement determined that AES violated CAISO Tariff section 4.6.4, Identification of Generating Units, which requires that, “All information provided to the CAISO regarding the operational and technical constraints in the Master File shall be accurate and actually based on physical characteristics of the resources. . . .” Enforcement determined that this violation consisted of the Resources’ failure to reach their Master File Pmax value, which demonstrates that the Master File Pmax values were not “accurate or actually based on the physical characteristics of the resources.”
  • Enforcement determined that AES violated CAISO Tariff section, Expected Conduct, which states, “Market Participants must submit Bids for Energy, RUC Capacity and Ancillary Services and Submissions to Self-Provide an Ancillary Service from resources that are reasonably expected to be available and capable of performing at the levels specified in the Bid, and to remain available and capable of so performing based on all information that is known to the Market Participant or should have been known to the Market Participant at the time of submission.” 
  • Enforcement determined that this violation consisted of AES regularly bidding a Resource’s full Master File Pmax into the CAISO day-ahead and real-time energy markets and being financially compensated for RA capacity even though the Resources could not “reasonably be expected to be available and capable of performing at the levels specified in the Bid, and to remain available and capable of so performing.”
  • Enforcement determined that AES violated 18 C.F.R. § 35.41(b), Communications, which provides that, “A Seller must provide accurate and factual information and not submit false or misleading information, or omit material information, in any communication with the Commission, Commission-approved market monitors, Commission-approved regional transmission organizations, Commission-approved independent system operators, or jurisdictional transmission providers, unless Seller exercises due diligence to prevent such occurrences.” Enforcement determined that this violation consisted of AES’s submission of Master File Pmax values to CAISO that were not accurate and its failure to exercise due diligence to ensure that the submitted Pmax values reflected the actual physical capacity of the Resources.  
  • Enforcement determined that AES violated 18 C.F.R. § 35.41(a), Unit Operation, which states that, “Where a Seller participates in a Commission-approved organized market, Seller must operate and schedule generating facilities, undertake maintenance, declare outages, and commit or otherwise bid supply in a manner that complies with the Commission-approved rules and regulations of the applicable market.” 
  • Enforcement determined that this violation consisted of AES’s registration of inaccurate Master File Pmax values, bidding up to the Resources’ Master File Pmax value in CAISO’s energy markets, and selling capacity through RA contracts that the Resources could not reasonably provide in violation of the CAISO Tariff.

About Certrec:
Certrec is a leading provider of regulatory compliance solutions for the energy industry with the mission of helping ensure a stable, reliable, bulk electric supply. Since 1988, Certrec’s SaaS applications and consulting expertise have helped hundreds of power-generating facilities manage their regulatory compliance and reduce their risks.

Certrec’s engineers and business teams bring a cumulative 1,500 years of working experience in regulatory areas of compliance, engineering, and operations, including nuclear, fossil, solar, wind facilities, and other Registered Entities generation and transmission.

Certrec has helped more than 120 generating facilities establish and maintain NERC Compliance Programs. We manage the entire NERC compliance program for 60+ registered entities in the US and Canada that trust us to decrease their regulatory and reputational risk. Certrec is ISO/IEC 27001:2013 certified and has successfully completed annual SOC 2 Type 2 examinations.

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