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.

Similar Articles
Relevancy Powered by MondaqAI
Cadwalader, Wickersham & Taft LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Cadwalader, Wickersham & Taft LLP
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions