United States: FERC Proposes To Eliminate Burdens In Its Market-Based Rate Program

Last Updated: July 7 2014
Article by Mark C. Williams and Arjun Prasad Ramadevanahalli

Proposed changes to the program intend to simplify administration, improve transparency, and eliminate unnecessary filing requirements.

The Federal Energy Regulatory Commission (FERC or the Commission) introduced a set of reforms on June 19 to its current market-based rate (MBR) program for wholesale sales of electric energy, capacity, and ancillary services. Much of the wholesale electricity delivered on the U.S. interstate power grid—especially in the Commission's organized market regions in the Northeast and California—is sold under MBR regulation, in which the terms and conditions of sale are typically FERC-regulated, but the selling parties are not themselves subject to traditional utility cost-of-service ratemaking or regulatory (non-GAAP) accounting.

The Commission's main goal in issuing its notice of proposed rulemaking (NOPR) is to streamline the application process and increase the transparency of information submitted to the Commission as part of the MBR program. If adopted, the changes could reduce some administrative burdens on industry participants while still preserving FERC's regulatory jurisdiction and capability to supervise the market conduct and eligibility of MBR sellers. Overall, the changes exempt some participants from certain filing requirements while imposing additional requirements on other participants with MBR authority.

Market Power Analyses

Obtaining MBR authority requires the MBR applicant to pass two sets of indicative statistical screens, among other FERC requirements. The statistical screens measure the MBR applicant's market power in geographic markets that the Commission deems relevant to that applicant.

The Commission's indicative screens are the pivotal supplier screen and the wholesale market share screen. By passing the indicative screens and complying with certain more ministerial FERC requirements, a seller establishes a rebuttable presumption that it does not possess horizontal market power and should be awarded MBR authority. Although the Commission will continue to require sellers to submit these screens, it proposed to eliminate them in two situations: (1) for sellers in an organized, regional market, such as an Independent System Operator (ISO) or a Regional Transmission Organization (RTO) that already relies on FERC-approved market power mitigation measures, and (2) for sellers with fully committed generation capacity.

Under the Commission's current policy, sellers that fail the indicative screens but are located within an ISO or RTO may still obtain MBR authority by relying on FERC-approved RTO monitoring and mitigation. For these sellers, the Commission explained, submitting indicative screens provides little practical benefit because the Commission has concluded that monitoring and mitigation efforts in organized markets result in transparent prices. As a more practical alternative to filing the indicative screens, which can sometimes be intricate, costly, and time-consuming to prepare, the Commission proposes to allow sellers to simply state that they are already subject to RTO monitoring and mitigation. The Commission noted that this proposal would also apply to RTO sellers updating their MBR eligibility filings pursuant to FERC's post-MBR issuance requirements, even if the RTO seller may have market power.

Similarly, the Commission concluded that requiring sellers with fully committed capacity to perform indicative screens has no practical benefit. The indicative screens take into account a seller's uncommitted generation capacity, or the uncontracted difference between total capacity and fully committed long-term capacity. Thus, the Commission explained, if a seller and its affiliates' capacity in the relevant balancing authority areas or markets are fully committed, performing the indicative screens yields nothing more than a "purely mathematical task" that provides "no significant additional information." As with RTO sellers, the Commission proposed to allow these sellers to explain that their capacity is fully committed in lieu of including indicative screens in their ongoing, noninitial MBR filings. Although the Commission has permitted and tacitly accepted this practice for a number of years, the NOPR makes official a practice that MBR entities frequently rely on.

The NOPR also proposes to relieve MBR sellers of the obligation to file quarterly land acquisition reports to mitigate vertical market power. These reports are currently required when sellers acquire interconnection-eligible or similar sites for new-generation capacity development. The Commission's original concern was that these acquisitions may enable a seller to erect barriers to market entry. But, in more than six years since the requirement was imposed by Order No. 697, not a single protest has been filed in response to these submissions, and not a single MBR application has been rejected for land acquisition reasons. The Commission proposed to eliminate this requirement altogether, concluding that "the burden of such reporting outweighs the benefits."

Other Reporting Requirements

Additionally, the NOPR proposed several amendments to existing reporting requirements in the MBR program.

For independent power producers (IPPs), such as wholesale generators, the Commission proposed to revise the geographic market used by some IPPs in their indicative screens. For operational or technical reasons, some IPPs are deemed to be physically located in their own standalone geographic regions. The proposal would amend the default geographic market for IPPs with generation capacity in generation-only balancing authority areas to also include the balancing authority area(s) of each transmission provider to which the generation-only balancing authority area is directly interconnected—thereby making official a practice that FERC has informally permitted in a number of pre-NOPR circumstances. Under this proposal, IPPs may be required to provide indicative screens for multiple balancing authority areas. The rationale behind the Commission's proposal is that an IPP's uncommitted capacity could potentially be sold in each market to which it is directly interconnected. However, for a single-interconnection IPP seeking MBR authority, this NOPR provision may come as a welcome relief from previous uncertainty.

An entity's eligibility for MBR authority is based on the MBR entity's—and all of its FERC-defined "affiliates'"—market presence and statistical market power. The NOPR proposes that sellers report long-term firm purchases of capacity and/or energy in their indicative screens and appendices of affiliated assets. The Commission explained that the limited reporting of long-term firm purchases may create errors or misleading results in the indicative screens submitted by some sellers. Most notably, the Commission pointed to recent examples when neither the seller nor the purchaser under a long-term firm power sale was linked to the generation capacity used to make that sale. The proposed rule would also require the long-term firm purchaser to convert the amount of energy to which it is entitled into an amount of capacity for purposes of its indicative screens. Although mostly ministerial, this change would factor long-term firm purchases into the Commission's reporting threshold (typically requiring status-change filings that involve further capacity affiliations of 100 MW or more), which could trigger the seller's obligation to submit further MBR filings.

Comments on the NOPR are due 60 days after publication in the Federal Register and should be filed in FERC Docket No. RM14-14.

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.