United States: Major Reforms To FERC Market-Based Rate Program Include New Data Collection Requirements

Last Updated: August 9 2019
Article by Adam Wenner and A. Cory Lankford

In a pair of rulemaking orders issued July 18, 2019, the Federal Energy Regulatory Commission (FERC) revised its regulations and policies for obtaining and maintaining authority to sell wholesale energy, capacity and ancillary services at negotiated, market-based rates. In Order No. 860, FERC announced the creation of a new "relational database" that will tag and track market-based rate sellers' affiliates and ultimate upstream owners. The database will rely on new data collection requirements to be implemented by February 1, 2021. Separately, in Order No. 861, FERC revised its regulations to relieve market-based rate sellers operating within organized markets from the requirement to submit indicative market power screens. Instead, FERC will rely on market monitoring and mitigation measures adopted by the regional transmission organization (RTO) or independent system operator (ISO) to ensure that entities within such organized markets do not exercise horizontal or vertical market power.

Current Market-Based Rate Program

Under FERC's market-based rate policies, FERC-regulated generation owners and power marketers that sell wholesale energy, capacity or ancillary services must obtain authorization from FERC to sell at market-based rates, which are rates, terms and conditions established by mutual agreement, as opposed to rates based on the seller's cost-of-service or other traditional ratemaking policies. Applicants for market-based rate authority must submit a market-based rate tariff, using standard language adopted by FERC establishing terms and conditions of market-based rate sales by the applicant. FERC grants requests for market-based rate authority to sellers that demonstrate they and their affiliates lack or have adequately mitigated horizontal and vertical market power in the relevant geographic market. A seller that obtains market-based rate authority is subject to ongoing compliance obligations to demonstrate that it continues to lack or has adequately mitigated market power in its relevant market.

FERC uses two indicative screens to assess an applicant's horizontal market power: the "pivotal supplier analysis" and the "wholesale market share analysis." Under each screen, FERC considers all of the generation owned or controlled by an applicant and its affiliates in the relevant market as compared to the supply of generation within that market. FERC uses a seller's balancing authority area or the relevant RTO or ISO market, as applicable, as the default geographic market. FERC also reviews a seller's "vertical" market power, which is based on its control of inputs to power generation, including fuel supplies and transportation and electric transmission.

Currently, sellers seeking to obtain or maintain market-based rate authority must disclose all upstream owners that own 10 percent or more of the voting (i.e., managing) ownership interests in the seller or any of the seller's upstream owners. If a seller has passive upstream investors, it must demonstrate to FERC that the passive investors' rights are limited to those necessary to protect their investment and do not convey control over a generating facility or any power sales. In addition, for most market-based rate filings, sellers must prepare and submit an asset appendix listing all affiliates that own or control generation, transmission or certain natural gas assets. Initial applications for market-based rate authorization, and triennial market power analyses, also must include indicative market power screens demonstrating that the seller lacks horizontal and vertical market power in the markets in which it intends to transact. With some exceptions, sellers with market-based rate authority generally must file a notice with FERC within 30 days of changes in upstream ownership or the addition of new affiliates that own or control generation or transmission assets or inputs to power generation or of the acquisition of these assets by the market-based seller.

New Data Collection Requirements and the Relational Database

Although FERC is still developing the relational database, under the new policy entities with market-based rate authority must submit a baseline filing to populate the relational database with upstream ownership and affiliate information no later than February 1, 2021. As of that same date, applicants for market-based rate authority will be required to submit upstream ownership and affiliate information into the relational database in addition to describing them in the narrative of their applications. FERC intends to update its website with additional information about the database as it takes shape.

Each applicant and market-based rate seller will use a unique FERC-issued number when submitting information to the database about its energy assets. Sellers must provide to FERC the same information about their assets as they provide to the Energy Information Administration, including plant codes, generator IDs and unit codes (if applicable). In addition, sellers must report information relating to any long-term firm sales of energy, capacity and ancillary services, and the relevant wholesale markets in which the seller transacts or intends to transact. Submissions to the database also must identify any transmission facilities operated pursuant to a tariff on file with FERC and any natural gas pipeline or gas storage facilities. Finally, a seller must identify energy assets owned by affiliates without market-based rate authority—e.g. generation or transmission assets and long-term PPAs. However, FERC did not change its policy to exclude reporting of assets exempt from regulation under the Federal Power Act, such as exempt "qualifying facilities" and behind-the-meter facilities.

Similarly, a seller must identify its ultimate upstream affiliates in the relational database using a unique company identifier issued by FERC. However, sellers will not be required to identify upstream affiliates that have a franchised service territory or market-based rate authority or that directly own or control generation, transmission, intrastate natural gas transportation, storage or distribution facilities, physical coal supply sources or ownership of or control over who may access transportation of coal supplies. Such affiliate information will be captured in the narrative of the seller's filing. In addition, sellers must identify any passive upstream owners in the narrative of their market-based rate filings. However, effective October 1, 2020, FERC will no longer require a demonstration of passivity, relying instead on affirmations in the seller's filing that the ownership interests consist solely of passive rights that are necessary to protect the passive investors' or owners' investments and do not confer control over the seller or its assets.

By tracking sellers, their assets and their ultimate upstream affiliates with unique company identifiers, the FERC database will be able to automatically identify each of a seller's affiliates. Before making a market-based rate filing, a seller will be required to report information about its assets and upstream ownership to the relational database, which will then automatically produce an asset appendix and indicative screens for that seller. When making its market-based rate filing, the seller will refer to serial numbers associated with the asset appendix and indicative screens generated by the database. A seller must reference its most recently created asset appendix, which must have been created by the database fewer than 15 days before the seller's market-based rate filing. Sellers will be able to review their asset appendices and, if necessary, make a submission to FERC to make any corrections. However, this two-step process will require additional time and planning.

Ongoing Reporting Requirements

FERC will no longer require sellers to submit notices of changes in status within 30 days of a change from the information provided in its last market-based rate filing. Instead, on the 15th of each month, sellers must update the relational database to reflect any changes that occurred in the prior month. In addition, FERC will require sellers to submit notices of change in status on a quarterly basis, with such notices due at the end of the month following the end of the quarter in which the change occurred. For example, if an entity acquires the upstream ownership of a seller on May 5, that seller must, by June 15, update its profile in the relational database to identify its new ultimate upstream affiliate. The seller also must file a notice of change in status by July 30 that will describe the transaction, reference a newly generated asset appendix from the relational database, and include, if necessary, new indicative screens to demonstrate that the seller continues to lack horizontal and vertical market power.

Reliance on RTO/ISO Market Monitoring and Mitigation Measures

In addition to the new data collection requirements outlined above, FERC is eliminating the requirement for sellers to prepare indicative market screens if they sell into RTO or ISO markets. Effective September 24, 2019 and subject to the limitation described below, FERC will rely on market monitoring and mitigation measures to ensure that a seller within an RTO or ISO market does not exercise horizontal or vertical market power. Such measures are subject to FERC review, and so FERC is not abandoning its oversight of market power within organized markets. In addition, FERC will continue to collect information from updates to the relational database, electric quarterly reports and notices of change in status.

For any sales of capacity into the wholesale markets operated by the California Independent System Operator (CAISO) or Southwest Power Pool (SPP), FERC will continue to require sellers to submit indicative screens. This is because neither CAISO nor SPP operates a capacity market pursuant to its tariff. Instead, generation owners offer capacity to utilities within CAISO and SPP on a bilateral basis to satisfy the buyer's resource adequacy requirements. As a result, there is no transparent market price for sales of capacity in these markets. However, in Order No. 861, FERC indicated it would reevaluate the need for indicative screens for sales of capacity in CAISO and SPP if they developed ISO-administered capacity markets subject to FERC-approved market monitoring and mitigation measures.

Conclusion

Taken together, FERC's market-based rate policy reforms likely will streamline market-based rate applications and related compliance filings. However, implementation of the relational database and the new data collection requirements will require sellers with market-based rate authority to reevaluate their compliance programs. Notably, market-based rate sellers will need to prepare baseline filings to the relational database by February 1, 2021, a task that could result in a significant initial burden for owners with a portfolio of subsidiaries with market-based rate authority.

A copy of Order No. 860 can be found by clicking here.

A copy of Order No. 861 can be found by clicking here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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.

Authors
Events from this Firm
18 Aug 2019, Speaking Engagement, Florida, United States

ILTACON is the premier legal technology conference for professionals undertaking initiatives in support of the practice of law.

28 Aug 2019, Webinar, San Francisco, United States

This CLE webinar will analyze the potential antitrust ramifications of joint ventures (JVs) and other collaborations between competitors and how to balance the pro-competitive efficiencies against the anti-competitive effects of a proposed JV.

1 Oct 2019, Other, Washington, DC, United States

Orrick is proud to host the AIPN for its final breakfast meeting of 2019 for a session titled “Helping the World Gasify”. As natural gas production and use is very unevenly distributed throughout the world, often gas produced in association with crude oil is sold below cost or flared.

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
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please 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.

Disclaimer

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.

General

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