On December 20, the Federal Energy Regulatory Commission (FERC) issued a Notice of Proposed Rulemaking (NOPR) “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.”

This NOPR helps to safeguard FERC’s “ability to prevent the potential exercise of market power by leaving in place other important protections to ensure just and reasonable rates” and it will “ease the regulatory burden for certain market-based rate sellers.” This NOPR will remove the requirement that sellers currently have to submit “indicative screens in any organized wholesale power market that administers energy, ancillary services and capacity markets subject to Commission-approved monitoring and mitigation.”

The NOPR is rooted in Order No. 697, because in that Order, FERC identified two screens to assess “horizontal market power for market-based rate sellers: the pivotal supplier screen and the wholesale market share screen. Each serves as a cross-check on the other to determine whether sellers may have market power and should be examined further when seeking market-based rates.”

In Order 697, two types of market-based rate sellers were created:

• “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”

The current market-based sellers that are “in organized wholesale power markets that do not administer these types of capacity markets… would be obliged to submit those indicative screens if they wish to sell capacity.” It also proposes that in the event of one of the screens failing, “market-based sellers in those markets may submit a delivered-price test or other evidence or propose other mitigation for capacity sales in these markets.”

All of the market-based sellers will “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; and electric transmission assets, natural gas intrastate pipelines and intrastate natural gas storage facilities owned or controlled by the seller and its affiliates.”

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