FERC Filings
COMMENTS OF THE ELECTRIC POWER SUPPLY ASSOCIATION ON TERMS AND CONDITIONS OF PUBLIC UTILITY MARKET-BASED RATE AUTHORIZATIONS
BODY
On December 19th, EPSA filed a Request for Intervention, Clarification and Rehearing of the Commission’s November 20th Order, whereupon EPSA sought rehearing of the Order due to its tremendous potential to damage the competitive wholesale bulk power market if implemented. Overall, EPSA’s filing advocated that: (1) a blanket refund condition would create increased regulatory uncertainty; (2) the November 20th Order does not reflect the way electricity must be priced as a commodity in a competitive bulk power market; (3) the Commission’s November 20th Order violates the Federal Power Act and due process; and (4) the proposed condition is overly broad. Reinforcing the filing were the Affidavits of Dr. Richard Tabors and former FERC Commissioner Branko Terzic that explained how the Commission’s proposals would not ensure just and reasonable rates in bulk power markets and would seriously disturb capital markets and impede new capacity planning. EPSA additionally endorsed the remedy sought by the Edison Electric Institute and the Alliance of Energy Suppliers in other filings, which asked the Commission to proceed through a rulemaking process to consider the impacts of the actions taken in the November 20th Order and to develop any possible conditions to market-based rate authority.
In this filing, EPSA again emphasizes the arguments made in our December 19th filing and, additionally, endorses the paper entitled, “Market Power and Withholding” written by Scott M. Harvey and William W. Hogan that was filed on December 20th by both Dynegy Power Marketing, Inc. and the Edison Electric Institute. Of note, the paper explains how the November 20th Order will compromise the pro-competitive behavior that is necessary to meet customer demands and will ultimately hurt consumers. Furthermore, Harvey and Hogan emphasize that the Order has a great potential to seriously damage “most or all of the potential competition, efficiency and reliability benefits from the open access policies the FERC has pursued so successfully in the electric industry over the past decade.” Industry advisors such as Drs. Scott Harvey, William Hogan, and Richard Tabors and former FERC Commissioner Terzic provide invaluable input to the Commission and provide a level of insight that, especially in this case, demonstrates how the Commission’s ill-thought policy decisions will harm the industry. EPSA supports these industry experts and recommends the Commission take to heart their words of caution.
In any event, the Commission must clarify its intensions on the issue of market power. In an Order issued on December 19th in the Maine Public Utilities Commission, United Illuminating Company, and Bangor Hydro-Electric Company v. ISO New England, Inc. Docket Nos. EL00-99-000, et al., the Commission’s ruling with respect to a finding of whether high prices were the result of the exercise of market power reads as follows:
The issue before us is whether the high prices that were experienced on May 8, 2000 were the result of the exercise of market power and that therefore the Commission should retroactively change the market clearing prices for May 8, 2000. To find that the high prices were due to an exercise of market power, the Commission would have to find that the supplier’s pattern of bidding behavior evidenced an intentional strategy to increase the market clearing price, and the Complainants have failed to make a sufficient showing that was the case.
There, the Commission clearly – and correctly – defines what demonstrates an exercise of market power, that, “the supplier’s pattern of bidding behavior evidenced an intentional strategy to increase the market clearing price.” In contrast, the November 20th Order simply proposes to condition all existing market-based rate tariffs on vague and ill-defined standards such as “anticompetitive behavior” or the “exercise of market power” without this important factor and without an appropriate determination of the definitions, procedures and authorities. The industry is then left to deal with the unknown and strikingly unsettling consequences that are certain to result from the Order. The Commission should use the standard from the Bangor Hydro Order rather than the one in its November 20th Order. In the meantime, EPSA re-emphasizes the message in our December 19th comments:
The surest way to diffuse market power is to have RTOs with the right structures and rules that facilitate liquid markets and transmission access, thereby reducing the need to evaluate or condition market-based rate applications. The most important task for the Commission right now is to take actions that: (a) standardize market design and market structures, (b) develop a new pro forma tariff, (c) broaden competitors’ access to non-discriminatory transmission service by establishing broadly defined RTOs, and (d) facilitate new entry with actions such as requiring fair and effective interconnection policies for new merchant plants.