Brief

FERC to rethink market power issues in a more 'open' approach

Dive Brief:

  • The Federal Energy Regulatory Commission said last week that it is considering revisions to how it assesses market power in electric utility industry mergers and other deals that fall under Section 203 of the Federal Power Act, and applications for market-based rate authority under section 205 of the FPA, SNL reports. 
  • In an announcementFERC said there are areas where its market power analysis under the two sections differ, and it is considering  if "increased harmonization of the two analyses is warranted and feasible."
  • In particular, the commission is examining whether a supply curve analysis should be added to Section 203 evaluations, and if a simplified analysis of some transactions should be used when there is little chance of market power concerns.

Dive Insight:

FERC has tackled market reforms in various shapes, including wholesale and capacity markets, and price formation fixes.  Now the agency is taking a more "open" avenue instead of a piecemeal approach that flies below the radar, SNL reports. 

SNL Energy reports FERC Commissioner Colette Honorable said last week that the agency's review of its market power assessments will focus on whether "we're looking at the right things; what, in terms of our methodology, has outlived its usefulness, are we being consistent, and are there [other] tools out there that we should be focused on now."

There was no specific transaction or deal fueling the review, officials said. Comments will be due 60 days after the Notice of Inquiry is published in the Federal Register.

The agency is considering a simplified analysis for some Section 203 transactions, a supply curve analysis, improvements to FERC's single pivotal supplier analysis in reviewing market-based rate applications, and the addition of a market share analysis to reviews of Section 203 issues.

The commission is also considering adding a similar pivotal supplier analysis to section 203 evaluations, and modifications to how capacity associated with long-term power purchase agreements should be attributed in section 203 transactions. FERC is also evaluating applications for market-based rate authority following approval of Apple's petition. 

Apple's recent approval for market-based rate authority has highlighted a growing trend among corporations seeking to sell excess energy as an energy supplier as they invest in more green energy to meet sustainability goals. Google was granted the same authority in 2010. On the other hand, Berkshire Hathaway Energy has recently come under scrutiny after FERC revoked market-based rate authority for 20 of its Western entities operating in the PacifiCorp-East, PacifiCorp-West, Idaho Power and NorthWestern balancing authority areas. According to the agency, the companies failed wholesale market share screen, which resulted in a rebuttable presumption of horizontal market power.

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Filed Under: Regulation & Policy
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