FERC revokes market-based rate authority for Berkshire Hathaway companies

Dive Brief:

  • The Federal Energy Regulatory Commission (FERC) has revoked market-based rate authority for almost two dozen subsidiaries of Berkshire Hathaway Energy (BHE) in four balancing authority areas, and will now have to implement cost-of-service tariffs, SNL Energy reports. 

  • Among others, the FERC order applies to Nevada Power, Sierra Pacific Power and PacifiCorp and their operations in parts of Utah, Idaho, Montana, Wyoming, California, and Oregon, where the federal regulators ruled that they wielded horizontal market power.

  • FERC ordered the affected companies to revise rates for power supplied to the PacifiCorp-East, PacifiCorp-West, Idaho Power and NorthWestern balancing authority areas from Jan. 9, 2015, to April 9, 2016, and offer those customers refunds.

Dive Insight:

In the end, it was a hurdle too high. In December 2013, Berkshire Hathaway Energy – MidAmerican Energy Holdings at the time – merged with NV Energy, and in January 2014, the company filed a change of status with federal regulators by the new owners.

In the filing, the new owners said they failed wholesale market share screen, which resulted in a rebuttable presumption of horizontal market power. Having horizontal market power means the seller can manipulate market prices by withholding generation or bidding into markets at excessively high prices.

Sellers are screened to see if they have a dominant position in markes based on uncommitted capacity compared to the uncommitted capacity of the "relevant" market. If they are found to have no market poweror lack a dominant positionthey are granted market-based rate authority. If they are found to have 20% of uncommitted capacity, then they are refused MBR authority. 

The Berkshire Hathaway entities filed additional information to assuage FERC’s concerns but have failed to do so.

FERC revoked market-based rate authority for 20 BHE entities operating in the PacifiCorp-East, PacifiCorp-West, Idaho Power and NorthWestern balancing authority areas.

The affected BHE entities are free to seek a new grant of market-based rate authority in the future. The ruling also does not affect any existing market-based rate contracts that were executed before the refund period.

BHE entities operating in other western markets were also under the same rebuttable presumption, but FERC found that BHE entities operating in the Arizona Public Service, Bonneville Power Administration, Los Angeles Department of Water and Power, Western Area Power Administration-Colorado Missouri, and Western Area Power Administration-Lower Colorado balancing authority areas, and CAISO markets passed horizontal market power indicative screens.

Only one company that was the subject of FERC's market-power investigation escaped having its market-based rate authority revoked. Agua Caliente Solar LLC convinced FERC that BHE holds only a passive stake in the solar farm.

The finding comes as Berkshire Hathaway is working to have transmission operators in the West join its utilities and the California grid in trading power through an Energy Imbalance Market.

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Filed Under: Generation Transmission & Distribution Regulation & Policy