FERC Filings
EPSA's Motion for Leave to Comment on Entergy Services, Inc (ESI) Aug. 9 Compliance Filing
COMMENTS
A. The Commission Should Initiate a Section 206 Proceeding
In its compliance filing, Entergy asserts that the company passes the Commission’s new pivotal supplier indicative screen, but fails the market share indicative screen in its own control area. Entergy dismisses this failure, however, because it proclaims that the market power screen is fatally flawed. Hence, Entergy moves to the next step and conducts its own DPT, which Entergy claims to pass when considering only AEC. Entergy has thus failed one of the indicative screens, as well as the DPT. For these reasons, there must be a Section 206 proceeding so that the Commission and market participants can assess all relevant data and ongoing cases to allow the Commission to make an informed finding in this case.
As the Commission notes in AEP Power Marketing, “Applicants failing one or more of the initial screens will have a rebuttable presumption of market power.” It is insufficient for Entergy to state that, failing one of the indicative screens, its own analysis under a DPT sufficiently rebuts the presumption of market power. Any analysis must be scrutinized by market participants and the Commission, especially in a case such as Entergy’s in which the company has previously been found to have market power which has not been mitigated since that determination.
As outlined in AEP Power Marketing, the DPT includes consideration of transmission access issues. This aspect of the DPT is crucial in markets like Entergy’s, in which transmission access issues are consistently cited as problematic and as barriers to entry or competitive opportunities. While Entergy proclaims that its open access tariff and an “inability to erect barriers to entry” support its claims that it does not have market power, these statements are conclusory and not supported by evidence. Indeed, because Entergy’s transmission configuration – even with the substantial investment by independent generators in transmission upgrades – precludes competitive generators from being designated as network resources, transmission access is an enormous barrier to entry that remains in the Entergy control area. Indeed, the Commission has found in several proceedings that the existence of an open access transmission tariff has not been an effective measure to ensure that transmission access is, in fact, available to all market participants on a level playing field. Further, Entergy simply asserts that it cannot erect market barriers; this assumption has been and will likely be challenged by many market participants.
The Commission first acted on Entergy’s market-based rate authority triennial update in November, 2001, finding that the company did have market power. Since that time, Entergy has retained its market-based rate authority without mitigation. To attest to the ongoing market power problems in the Entergy market, there have been several recent cases brought to the Commission which stem from and evidence the impacts of Entergy’s market power, including complaints on supply procurement processes and highly contested proposals for market improvements purported to ensure access in Entergy’s control area. It is clear to market participants that there are real barriers to entry in the Entergy market. All of this information should be considered within the context of a Section 206 proceeding on Entergy’s market power. As Entergy has a rebuttable presumption of market power due to failure of the indicative screens, a Section 206 proceeding will allow the Commission to examine and consider all four prongs of its market power test, aspects of which are at issue in related Entergy cases before the Commission.
B. Entergy’s Market Power Must Be Mitigated
The ultimate solution to Entergy’s generation market power is participation in a well-functioning RTO. There are, however, various mitigation measures that could be imposed now to address Entergy’s ongoing unmitigated market power while organized markets are developing in the South. EPSA has consistently supported structural solutions to market power issues rather than behavioral solutions. Interim structural remedies are appropriate in Entergy’s case as a means of inhibiting the potential for the undue exercise of market power while organized markets are developing in the South.
EPSA urges the Commission to focus on structural mitigation tools to protect the market from Entergy’s market power. Such tools are outlined in the attached EPSA white paper, “Essential Elements of Well Functioning Competitive Power Markets.” While a well-functioning RTO is the ultimate goal, the white paper includes a number of transitional elements designed to facilitate competitive markets and mitigate Entergy’s generation market power during the RTO development process. These elements include competitive solicitation for supply procurement, economic dispatch, independent OASIS administration and independent market monitoring. While such measures implemented on a piecemeal basis may not provide complete assurance of fairness and access to all market participants, taken together, these elements can serve as interim mitigation measures to protect against market power abuse.