FERC says proposal would ‘ease regulatory burden for certain market-based rate sellers’

FERC on Dec. 20 said that it has proposed to revise the horizontal market power analysis required for electric power sellers seeking to obtain or retain market-based rate authority in certain organized wholesale power markets.

FERC said that while that action would ease the regulatory burden for certain market-based rate sellers, the Dec. 20 notice of proposed rulemaking (NOPR) safeguards FERC’s ability to prevent the potential exercise of market power by leaving in place other important protections to ensure just and reasonable rates.

The NOPR has its origins in Order No. 697, FERC said.

As noted in the NOPR, FERC in Order No. 697 codified two indicative screens for assessing horizontal market power for market-based rate sellers: the pivotal supplier screen and the wholesale market share screen (with a 20% threshold), each of which serves as a cross check on the other to determine whether sellers may have market power and should be further examined.

FERC stated that passage of both indicative screens establishes a rebuttable presumption that the seller does not possess horizontal market power, the NOPR said, adding that sellers that fail either indicative screen are rebuttably presumed to have market power and have the opportunity to present evidence through a delivered price test (DPT) analysis or other evidence demonstrating that, despite a screen failure, they do not have market power.

The indicative screens provide an upfront snapshot of the seller’s market power, using static and historical data aggregated from a specific year, which is part of the basis of FERC’s determination of whether to grant that seller market-based rate authority, the NOPR noted.

With respect to the horizontal market power analysis, in traditional markets – outside RTO/ISO markets – the default relevant geographic market for purposes of the indicative screens is first, the balancing authority area(s) where the seller is physically located, and second, the markets directly interconnected to the seller’s balancing authority area (first-tier balancing authority areas). Generally, the NOPR added, sellers that are located in, and are members of, an RTO/ISO may consider the geographic region under the control of the RTO/ISO as the default relevant geographic market for purposes of the indicative screens.

In Order No. 697, FERC created two categories of market-based rate sellers:

  • Category 1 sellers are wholesale power marketers and wholesale power producers that own, control, or are affiliated with 500 MW or less of generation in aggregate per region; that do not own, operate, or control transmission facilities other than limited equipment necessary to connect individual generation facilities to the transmission grid – or have been granted waiver of the requirements of Order No. 888; that are not affiliated with anyone that owns, operates, or controls transmission facilities in the same region as the seller’s generation assets; that are not affiliated with a franchised public utility in the same region as the seller’s generation assets; and that do not raise other vertical market power issues. Category 1 sellers are not required to file regularly scheduled updated market power analyses
  • Market-based rate sellers that do not fall into Category 1 are designated as Category 2 sellers and are required to file updated market power analyses every three years

However, the NOPR added, FERC may require an updated market power analysis from any market-based rate seller at any time, including those sellers that fall within Category 1.

The NOPR would relieve sellers of the requirement to submit those indicative screens in any organized wholesale power market that administers energy, ancillary services and capacity markets subject to FERC-approved monitoring and mitigation, FERC said in its statement.

As noted in the NOPR: “[T]he commission proposes to relieve market-based rate sellers, i.e., sellers seeking to obtain or retain authorization to make market-based rate sales, of the requirement to submit indicative screens for certain RTO/ISO markets and submarkets. This proposed modification of the commission’s horizontal market power analysis would apply in any RTO/ISO market with RTO/ISO-administered energy, ancillary services, and capacity markets subject to commission-approved RTO/ISO monitoring and mitigation. In addition, for RTOs and ISOs that lack an RTO/ISO-administered capacity market, market-based rate sellers would be relieved of the requirement to submit indicative screens if their market-based rate authority is limited to sales of energy and/or ancillary services.”

Under the proposal, FERC’s regulations would continue to require RTO/ISO sellers to submit indicative screens for authorization to make capacity sales in any RTO/ISO markets that lack an RTO/ISO-administered capacity market subject to FERC-approved RTO/ISO monitoring and mitigation, the NOPR said.

FERC further proposes to eliminate the rebuttable presumption that FERC-approved RTO/ISO market monitoring and mitigation is sufficient to address any horizontal market power concerns regarding sales of capacity in RTOs/ISOs that do not have an RTO/ISO-administered capacity market, the NOPR said.

While this proposal would eliminate the requirement to submit indicative screens in certain RTO/ISO markets, it would not eliminate other market-based rate regulatory reporting requirements, the NOPR said.

In its statement, FERC said that market-based rate sellers in organized wholesale power markets that do not administer those types of capacity markets – currently, the Southwest Power Pool and California ISO – would be obliged to submit those indicative screens if they wish to sell capacity.

The NOPR also proposes that indicative screen failures in organized wholesale power markets where the grid operator does not administer a capacity market no longer would be presumed to be adequately addressed by the market monitoring and mitigation in those markets, FERC said. In cases of screen failures, market-based sellers in those markets may submit a delivered-price test or other evidence or propose other mitigation for capacity sales in those markets, FERC said.

The commission said that all market-based rate sellers would still be required to file a vertical market power analysis as well as an asset appendix, which provides comprehensive information relevant to determine a seller’s market power, including:

  • Generators owned or controlled by the seller and its affiliates
  • Long-term firm power purchase agreements of the seller and its affiliates
  • Electric transmission assets, natural gas intrastate pipelines and intrastate natural gas storage facilities owned or controlled by the seller and its affiliates

Comments on the NOPR are due 45 days after publication in the Federal Register, FERC said.

About Corina Rivera-Linares 3286 Articles
Corina Rivera-Linares was TransmissionHub’s chief editor until August 2021, as well as part of the team that established TransmissionHub in 2011. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial from 2005 to 2011. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines.