Buffett's Berkshire Hathaway protests FERC market-based rate restrictions
- Warren Buffett's Berkshire Hathaway Energy is contesting the Federal Energy Regulatory Commission (FERC)'s decision to revoke market-based authority for 20 of its affiliates in four Western regions last month, RTO Insider reports.
- In a filing, Berkshire Hathaway requested a rehearing, claiming the commission failed to make a "definitive finding" that the company exerts market power the four regions and that it was denied due process after FERC failed to notify the company of the standards for determining market power before the company filed its "initial change of status" in 2014 after it merged with Nevada-based utility NV Energy.
- FERC in its June order directed 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.
The FERC filing said the new owners failed the 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 markets based on uncommitted capacity compared to the uncommitted capacity of the "relevant" market. If they are found to have no market power—or lack a dominant position—they are granted market-based rate authority. If they are found to have 20% of uncommitted capacity, then they are refused MBR authority.
Berkshire Hathaway's acquisition of NV Energy in 2013 put the company in charge of 19 GW of generating capacity in the West, according to RTO Insider, enough to fail the wholesale market screen designed to ensure no one company has a dominant position in the markets.
The company said in its request for a rehearing that “[The commission] did not provide sound reasoning, nor did it show a path to how it arrived at its decision...But, nonetheless, the commission moved ahead and revoked market-based rate authority and imposed cost-based rates.”
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.
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