New FERC Filing Requirements Starting Soon for Electric Market-Based Rate Sellers

Davis Wright Tremaine LLP

Sellers of wholesale electricity that have market-based rate (MBR) authority from the Federal Energy Regulatory Commission (FERC), or that will need to apply to FERC for such authority, should be aware of major regulatory changes coming in fall 2021. FERC's Order No. 860 and its subsequent related directives are intended to simplify some of the filing requirements for MBR sellers but also add some new requirements.

FERC has delayed implementation of Order No. 860's requirements several times. Currently, the Order is scheduled to go into effect on July 1, 2021, but there is a transition period until November 2, 2021.

Current MBR Rules

Under FERC's rules, a seller of electricity, capacity, or ancillary services at wholesale must file a market power analysis with FERC for each market in which it proposes to make sales when it applies for MBR authority and, except for some small sellers, must file updated analyses every three years afterwards.

The rules currently require each such triennial update filing to include an asset appendix (including, among other things, the generation and transmission assets of the seller and its affiliates, and information regarding long-term firm purchases), and indicative screens for horizontal market power (unless all the generation capacity of the seller and its affiliates is fully committed under long-term contracts or they participate in FERC-approved capacity markets operated by independent system operators (ISOs) or regional transmission organizations (RTOs)).

Under current rules, MBR sellers must also report any change in the facts relied upon in FERC's grant of MBR authority. These "change in status" filings are currently required to be submitted to FERC within 30 days of the subject change. Reported changes may comprise several types of events; for example, if the MBR seller and its affiliates in the same market collectively acquire ownership or control of at least 100 MW of additional generation capacity or transmission facilities.

New Order No. 860 Requirements

Order No. 860 changes the format of the information that MBR sellers must include with their MBR applications and triennial market power update filings and the timing of change in status filings. In place of the asset appendix that MBR sellers currently submit in electronic spreadsheet format, the information will be submitted in an XML file that FERC will incorporate into a new "relational" MBR database (i.e., a database maintained by FERC in which multiple tables of MBR data submitted by all MBR sellers will relate to one another via unique identifiers). This relational MBR database will be publicly available.

An MBR seller's relational database submission must also include the information necessary to populate indicative horizontal market power screens (if screens are required). The asset appendix and screen information will be formatted by the database into an asset appendix and indicative screens for viewing. These documents will be publicly available on the FERC website. The MBR seller will then cross-reference these by assigned serial numbers in its MBR filing and include all workpapers underlying the screen information.

In addition to the previous requirements for MBR sellers to make triennial updates and change of status filings, Order No. 860 creates a new requirement for updates to the relational database on a 30-day cycle. (These database updates are not "filings" in that they do not create dockets or trigger FERC action.)

Order No. 860 will in some ways reduce and in other ways increase the required content of the information that sellers include with their MBR applications and triennial update filings. For example, Order No. 860 specifies that if an MBR seller has any passive investors or owners, the seller must only affirm that the ownership interests consist solely of passive rights that are necessary to protect the passive investors' or owners' investments and do not confer control.

This is a significant reduction in burden from the current requirement that a seller file a demonstration that such ownership interests are passive. On the other hand, in addition to the existing requirement to report long-term firm purchases, the seller will be required to report in the database long-term (one year or longer) firm physical sales.

With respect to its relational database submissions, each MBR seller will only report its own assets, power purchase agreements, etc. (and those of any non-MBR affiliates). FERC's intention is that each MBR seller's identification of its ultimate upstream parent will allow the relational database to link together the information of affiliated companies to give a full picture of each corporate family's market power situation through the updated asset appendix and indicative screens discussed above.

  • Note that this does not relieve MBR sellers from making triennial update filings and change of status filings based on all relevant affiliate information within the relevant market(s); those filings will reference the updated asset appendix and indicative screen information in the database.

Further, in a notice seeking comments issued in March 2021, FERC proposed that sellers whose ultimate upstream affiliate(s) owns their voting securities pursuant to a blanket authorization order previously issued under section 203(a)(2) of the Federal Power Act (principally institutional investors) should be required to provide in the database information such as the utility ID types and utility IDs of the upstream affiliates whose securities were acquired pursuant to the blanket authorization. FERC has not yet issued an order on that proposal.

Schedule for Implementing the Order No. 860 Requirements

The new Order No. 860 rules currently go into effect on July 1, 2021. However, FERC's current schedule for implementing Order No. 860 states that all MBR sellers should (but are not required to) prepare their initial baseline submissions in the new XML format during the period from July 1 through September 30, 2021. The initial baseline relational database submissions by existing MBR sellers and sellers with pending applications for MBR authority are due by November 2, 2021.

Sellers applying for MBR authority during the transition period should (but are not required to) make baseline submissions into the relational database but must also submit asset appendices and indicative horizontal market power screens in electronic spreadsheet format under the pre-Order No. 860 rules until November 1, 2021. From November 2 onward, sellers applying for MBR authority can no longer submit asset appendices and indicative horizontal market power screens pursuant to the pre-Order No. 860 rules but must instead follow the new rules described above.

Changes in the relational database information, after an initial baseline submission has been made, are required to be reported with a database submission by the 15th day of the month following the changes. (Updates to the market power screens are not submitted with these relational database updates.)

The timing for filing any needed change in status filings (which are separate from the required updates to the relational database) is relaxed so that they must be submitted 30 days after the end of the calendar quarter in which the change occurred. The date for the first change in status filings under the new Order No. 860 requirements is November 30, 2021, and afterwards MBR sellers must follow the new quarterly reporting dates (e.g., change in status filings for the quarter ending December 31, 2021, are due January 31, 2022). Order No. 860 also requires an MBR seller to file a notice of change in status if there is a change to its ultimate upstream affiliate(s).

Preparation and submission of the required XML relational database information under the new Order No. 860 regime will require some lead time and the use of a specialized software application.

[View source.]

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.

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