AAI, APPA, and NRECA Discourage Federal Energy Regulatory Commission from Abandoning Requirement That Electricity Generators With Market-Based Rate Authority File Market Power Analysis

On March 18, 2019, American Antitrust Institute (AAI), the American Public Power Association (APPA), and the National Rural Electric Cooperative Association (NRECA) filed joint comments with the Federal Energy Regulatory Commission (FERC). The comment was filed in Docket No. RM19-2-000, a notice of proposed rulemaking (NOPR): “Refinements to Horizontal Market Power Analysis for Sellers in Certain Regional Transmission Organization and Independent System Operator Markets.”

In the NOPR, the Commission proposed significant changes to its policies and procedures governing public utilities’ market-based rate authority. The joint comments address the adverse implications of the Commission’s proposals for competition and consumers in wholesale electricity markets.

AAI’s President, Diana Moss, noted “Eliminating the FERC’s requirements would further distance the Commission from oversight of the competitive issues that arise in the organized wholesale electricity markets, to the detriment of competition and consumers.”

In the NOPR, the Commission proposes to amend its regulations concerning the horizontal market power analysis required for a public utility to obtain or retain the authority to sell wholesale energy, ancillary services, and capacity at market-based rates. The NOPR would eliminate the requirement, under certain circumstances, for public utilities to submit horizontal market power “screens” to the Commission. The FERC NOPR states that the proposed exemptions will reduce the burden on market-based rate sellers while preserving appropriate Commission oversight of its market-based rate program.

In their joint comments, AAI, APPA, and NRECA disagree that the NOPR strikes a proper balance between alleviating regulatory burdens and guarding against the harmful effects of market power in wholesale electricity markets. Horizontal market power analyses provide valuable information to the Commission and the public concerning the possession and potential exercise of market power by public utilities with market-based rate authority. The Commission and the courts have long emphasized the important role of horizontal market power analysis in the Commission’s market-based rate framework.

In light of these serious concerns, AAI, APPA, and NRECA urge the Commission to terminate the current rulemaking.

The joint comments also suggest that the Commission consider soliciting public comment, in a future rulemaking, on any further required reassessment of the competition analysis required to support FERC grants of market-based rate authority, particularly in Regional Transmission Organization and Independent System Operator markets. The joint comments note that such information could improve the quality and consistency of the Commission’s analysis of market power across the many areas where the Commission exercises authority to promote competition and protect consumers.