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.

Please contact Linda Walsh or Sylvia Bartell if you have any questions.

Linda Walsh
Sylvia Bartell

In an in-depth and informative analysis on the Department of Energy’s recently released Staff Report to the Secretary on Electricity Markets and Reliability, Husch Blackwell regulatory attorneys Linda Walsh and Sylvia Bartell examine the department’s stated goal of considering past and current trends in the electric industry in an effort to “exercise foresight to help ensure a system that is reliable, resilient, and affordable long into the future.”

Linda’s and Sylvia’s conclusion?  While the report explores the directed topics identified by Secretary Perry, it does little to build on ongoing regulatory efforts at FERC. Further, it focuses on more short-term pursuits that are economically and environmentally questionable, while at the same time missing opportunities that would modernize the bulk electric power system for the longer term. Read their entire article on Law360.

 

 

Horn_Robert
Robert Horn
Adam Sachs
Adam Sachs

During his confirmation hearing to become Secretary of Energy, former Texas Governor Rick Perry sensibly walked back his 2011 recommendation that the Department of Energy (DOE) be eliminated. After a few weeks on the job, it is now apparent that the secretary not only thinks the DOE should continue to exist but recognizes it’s an essential element of our national security.

President Trump’s inaugural address called for an “America First Energy Plan.”  Although admittedly short on details, the Trump plan seems to Continue Reading Around the Horn: Perry, Policy & Politics

Logo courtesy of the Federal Energy Regulatory Commission
Logo courtesy of the Federal Energy Regulatory Commission

The Federal Energy Regulatory Commission (“FERC”), in a recent Notice of Inquiry (NOI), is exploring whether to revise its current approach to identifying and analyzing market power in the context of Federal Power Act Section 203 (utility mergers and acquisitions) and 205 (market based rate authorizations).  Currently, FERC uses separate methodologies when analyzing an entity’s market power when an entity seeks prior-approval of a merger or similar jurisdictional transaction under Section 203, and when an entity applies for authority to sell energy products in FERC-regulated wholesale energy markets under Section 205.  Through this NOI, FERC seeks comments on whether it should “harmonize” and “streamline” these two market-power analysis methods. Continue Reading FERC Considers “Streamlining” Analysis of M&A Approval and MBR Authority

In a recent Notice of Proposed Rulemaking (NOPR) the Federal Energy Regulatory Commission (FERC) proposes new data collection and filing requirements for market-based rate sellers (MBR) and entities trading virtual products or holding financial transmission rights (Virtual/FTR Participants).  The new requirements purport to improve the Commission’s surveillance of wholesale power markets through disclosure of financial and legal connections among market participants and other entities in Commission-jurisdictional electric markets.  According to FERC, the requirements will facilitate both the sharing of data across different information systems and reporting into FERC’s eLibrary system. Continue Reading FERC Proposes New Requirements for Market Based Rate Sellers