FERC Proposes to Streamline Market-Based Rate Program

by Orrick, Herrington & Sutcliffe LLP
Contact

On June 19, 2014, the Federal Energy Regulatory Commission ("FERC") issued a notice of proposed rulemaking ("NOPR") proposing to revise its policies for applications to sell energy, capacity, and ancillary services at market-based rates.

Generation owners and power marketers that sell wholesale energy, capacity, or ancillary services in the continental United States, outside of the area operated by the Electric Reliability Council of Texas, must obtain prior authorization from FERC to sell at market-based rates.  FERC grants requests for market-based rate authority from sellers that can demonstrate that they and their affiliates lack or have adequately mitigated horizontal and vertical market power in the relevant geographic market.  FERC uses a seller's balancing authority area or the relevant regional transmission organization ("RTO") or independent system operator market, as applicable, as the default geographic market.  A seller that obtains market-based rate authority is subject to ongoing compliance obligations to demonstrate that it continues to lack or has adequately mitigated market power in its relevant market.

FERC's policy is to use two indicative screens for assessing an applicant's horizontal market power: the "pivotal supplier analysis" and the "wholesale market share analysis."  Under each screen, FERC examines all of the generation owned or controlled by an applicant and its affiliates in the relevant market.  Applicants that fail either indicative screen are rebuttably presumed to have market power and are given an opportunity to present other evidence to demonstrate that, despite the screen failure, they do not have market power.  Once an applicant obtains market-based rate authority, it must comply with ongoing compliance obligations to demonstrate that it continues to lack or has adequately mitigated horizontal and vertical market power.

To streamline its horizontal market power analysis, FERC proposes to no longer require sellers in RTO markets to submit the indicative screens.  Instead, wholesale power sellers in RTO markets would be permitted to rely on RTO market monitoring and mitigation measures to prevent the exercise of market power.  FERC also clarifies that if all of the generation owned by a seller and its affiliates in the relevant and first-tier markets is fully committed, a seller does not need to submit the market screen analyses; instead, the seller can state that its capacity is fully-committed.  FERC also proposes to clarify how sellers should prepare simultaneous transmission import limit studies, which measure the amount of power that can be imported into the relevant market.  

FERC proposes to require sellers to provide an organization chart depicting their affiliates and upstream owners when filing initial market-based rate applications, updated market power analyses and notices of change in status.  Under the proposed rule, sellers also would be required to submit the indicative screens and affiliated asset appendices in an electronic spreadsheet format that can be searched, sorted, and otherwise accessed using electronic tools.  FERC seeks comment on whether it would be useful for FERC to develop a comprehensive searchable public database of the information contained in the asset appendices. 

Under FERC's existing regulations, sellers with market-based rate authority must report to FERC any change in status that would reflect a departure from the characteristics FERC relied upon in granting market-based rate authority, including increases in affiliated generation of 100 MW or more.  FERC proposes to clarify that the 100 MW reporting threshold is not limited to the geographic markets previously studied by a seller.  That is, a seller must file a notice of change in status if it or its affiliates acquire generation that causes a cumulative net increase of 100 MW or more in any relevant geographic market.  The revised regulations also would require sellers to include long-term firm purchases of capacity and/or energy in calculating the 100 MW change in status threshold.

FERC requires all market-based rate applicants, and sellers submitting a notice of change in status reporting new affiliates, to submit an asset appendix in the form prescribed in Order No. 697.  In its NOPR, FERC states that the asset appendix should include all behind-the-meter generation and qualifying facilities owned or controlled by the applicant or its affiliates.  FERC also proposes to allow sellers to aggregate their behind-the-meter generation by balancing authority area or market into one line on the asset appendix.  Similarly, FERC proposes to allow sellers to aggregate their qualifying facilities under 20 MW by balancing authority area or market into one line.  We note that while the proposed rule would alleviate some of the burdens associated with reporting numerous on-site generation, such as multiple rooftop residential or commercial solar facilities owned by a solar energy developer, the requirement to report all behind-the-meter generation will still be quite burdensome for sellers that own multiple small distributed generation facilities.  We recommend that such sellers submit comments to FERC suggesting that the asset appendix should exclude all behind-the-meter generation that is 1 MW or smaller or that does not export power to the grid. 

Finally, FERC provides guidance on the use of joint tariffs.  FERC allows affiliated sellers within the same corporate family to choose whether to transact under a single market-based rate tariff for an entire corporate family or under separate tariffs.  These "joint tariffs" allow sellers that are part of the same corporate family to designate a filing party to submit a single tariff on behalf of all affiliates within the corporate family.  FERC notes that it is providing guidance on its website on how the corporate family should identify its designated filer and what each of the other filers should submit as a tariff record. 

Comments on the NOPR are due by 5 PM Eastern on Tuesday, September 23, 2014. 

Click here for a copy of the NOPR. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Orrick, Herrington & Sutcliffe LLP | Attorney Advertising

Written by:

Orrick, Herrington & Sutcliffe LLP
Contact
more
less

Orrick, Herrington & Sutcliffe LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.