FERC Filings
MOTION OF ELECTRIC POWER SUPPLY ASSOCIATION FOR EXTENSION OF TIME TO COMMENT ON MARKET-BASED RATE AUTHORIZATION INVESTIGATION
BODY
The Commission’s Order has severe policy and legal implications for the competitive power industry. EPSA members need the additional time to provide the Commission with its most thorough analysis of the widespread, and perhaps unintended, impact of this Order. For now, even the most cursory review of the Order exposes undesirable and counterproductive effects on the prerequisites for successful markets: many buyers and sellers, price transparency, liquidity and legal and regulatory stability.
A blanket refund authority would drastically increase the perceived risk for energy companies among the investment and lending communities. This lack of regulatory stability would limit competitive suppliers’ ability to finance power projects and trading operations because there would be a pronounced shift to short-term transactions, with the resulting increase in risk premiums. Considerable capital investment has been placed in the energy markets with the expectation of receiving market-based prices.
For example, the making all sales of generation “subject to refund” would appear to undermine the basis upon which some $100 billion has been invested in new generation since 1998 to the great benefit of electric consumers. This enormous capital investment has been made with the legitimate expectation of receiving market-based prices—including the recovery of capital costs. The possibility of retroactive refunds based on the application of vague, open-ended standards transforms the investment climate, puts existing investments at risk, and limits the ability to finance future generation facilities.
Further, making all electric wholesale transactions “subject to refund” would appear to eliminate the certainty needed for wholesale sales involving some 6 billion MWh annually (almost twice annual retail sales). Sellers could no longer rely on the finality of any transaction because of the risk of later challenge by buyers or third parties. The risk of wholesale transactions would escalate dramatically, reducing or even eliminating market participants and market liquidity.