FERC recently issued a Notice of Proposed Rulemaking (NOPR) that would eliminate the need for electric power sellers with market-based rate authority who sell into certain independent system operator (ISO) and regional transmission organization (RTO) capacity markets to file two screens—the pivotal supplier screen and wholesale market-share screen—with FERC, which would simplify the horizontal market power analysis for sellers in those markets.
This proposed modification of the horizontal market power analysis would apply in any RTO/ISO market with RTO/ISO-administered energy, ancillary services, and capacity markets subject to FERC-approved RTO/ISO monitoring and mitigation. For RTOs and ISOs that do not have 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.
The NOPR, announced at FERC’s December 20, 2018 meeting, is a follow up to FERC’s Order No. 816 NOPR, and is aimed at relieving the filing burden on market-based rate sellers in RTO/ISO markets without compromising FERC’s ability to prevent the potential exercise of market power in those markets. If the NOPR were implemented, indicative screen failures in organized wholesale power markets where the grid operator does not administer a capacity market would no longer be presumed to be adequately addressed by the market monitoring and mitigation in those markets. If a screen failure were to occur, market-based sellers in those markets would be able to submit a delivered-price test or other evidence; sellers could also propose other mitigation or capacity sales. All market-based sellers would still be required to file a vertical market power analysis and an asset appendix which provides comprehensive information relevant to determining a seller’s market power. The appendix would be required to include generators owned or controlled by the seller and its affiliates, long-term firm power purchase agreements, electric transmission assets, and natural gas facilities.
The NOPR would simplify the horizontal market power analysis electric power sellers are required to complete to obtain market-based rate authority. The NOPR would apply to sellers doing business in ISO-NE, MISO, NYISO, and PJM, which all have a capacity market that includes market monitoring and mitigation. Entities in Cal-ISO and SPP would still need to file the screens, because the NOPR would not apply to them given the lack of central capacity market with monitoring and mitigation. Sellers in ERCOT would remain unaffected because the ERCOT market is not subject to FERC’s rules.
The screens this NOPR would eliminate originated in Order No. 816 NOPR, which was issued in 2009, when ISO/RTO capacity markets had just begun operating. The three pivotal supplier test and market share screen (with a 20% threshold) serve as cross checks on each other to determine whether sellers may have market power and whether they should be more closely examined. If a seller passes both screens, a rebuttable presumption the seller did not possess horizontal market power is established. If a seller fails either screen, that failure establishes a rebuttable presumption that the seller has market power; the seller then has a chance to present evidence through a delivered price test analysis or other evidence to show the seller does not have market power, despite the screen failure.
No other market-based rate regulatory reporting requirements would be affected by the proposed order.
Comments on this NOPR are due 45 days after publication in the Federal Register, and may be filed in Docket No. RM19-2-000, Refinements to Horizontal Market Power Analysis for Sellers in Certain Regional Transmission Organization and Independent System Operator Markets.