Changes to Horizontal Market Power Analysis in FERC Market-Based Rate Applications
Refinements to Horizontal Market Power Analysis for Sellers in Certain Regional Transmission Organization and Independent System Operator Markets,
Order No. 861, 168 FERC ¶ 61,040 (2019).
Effective date: September 24, 2019.
On July 18, 2019, Federal Energy Regulatory Commission (FERC) issued an order modifying the requirements for entities which hold market-based rate authority, as well as new applicants. This order will reduce the filing burden on entities seeking market-based rates in the Eastern ISOs, PJM, NYISO, ISO New England and MISO. It leaves filing requirements unchanged for entities in bilateral markets, CAISO and SPP.
Order No. 861 finds that sellers transacting in markets operated by regional transmission organization (“RTO”) and independent system operators (“ISO”) do not need to submit indicative screens regarding their horizontal market power to obtain or maintain market-based rates to sell energy, ancillary services and capacity. The Commission found that the ISO/RTOs’ market monitoring regimes are sufficiently mature to allow for appropriate monitoring and mitigation. Further, the Commission clarified that it will continue to do an analysis of each entity’s application for market-based rate authority and triennial market power report.
However, sellers in ISO/RTO operated markets which do not have ISO/RTO administered capacity markets, currently the Southwest Power Pool (“SPP”) and the California Independent System Operator Corp. (“CAISO”), are not relieved of this obligation and must continue to submit indicative screens regarding their horizontal market power. The Commission found that California’s Resource Adequacy program is not overseen by CAISO, but done under CPUC requirements. As such, there are no FERC-approved rules for capacity in California.
The Commission clarified that with regard to indicative screens, sellers in CAISO and SPP would only need to file indicative screens for their capacity sales or propose a mitigation plan; they may rely on the Commission’s findings regarding the energy and ancillary services markets. The Commission also clarified that the proposal applies to (1) sellers who would study CAISO or SPP as a first-tier market, and/or (2) sellers which seek to offer capacity at market-based rates in CAISO or SPP.
As such, in CAISO and SPP, entities could choose to sell only energy and ancillary services, not capacity, and thus avoid the need to submit indicative screens. Sellers in CAISO and SPP may also continue to file indicative screens, as they do under the status quo. (1) The Commission noted that these provisions apply only to ISO/RTO markets, and expressly noted that they do not apply to the Energy Imbalance Market (“EIM”) in the West.
(1) An entity which currently has market based rates to sell capacity in CAISO and SPP will not lose such authorization. That entity would have already filed the required indicative screens as part of its application for market-based rates and any triennial market power reports filed to date.