In a Notice of Proposed Rulemaking dated December 20, 2018, the Federal Energy Regulatory Commission is proposing to reduce the burden on certain entities that sell electricity into organized wholesale electricity markets at market-based rates.

At the present time, each entity proposing to sell electricity at market-based rates in wholesale electricity markets must include two FERC-prescribed preliminary horizontal market power screen analyses in its application for FERC authorization. These analyses are used by the FERC to assess whether the seller has the ability to exercise horizontal market power to increase wholesale electricity prices in relevant geographic markets. Thereafter, each entity with market-based rate authority must submit updated market power screen analyses every three years.

The FERC is proposing to eliminate these filing requirements for sellers participating in energy, capacity, and ancillary services markets administered by any Regional Transmission Organization or Independent System Operator that has FERC-approved RTO/ISO market monitoring and mitigation procedures. In addition, sellers that participate in RTOs and ISOs that operate only energy and/or ancillary services markets, but not capacity markets, would no longer be required to submit indicative market power screen analyses unless the sellers desired to sell capacity at market-based rates.

The FERC has adopted a rebuttable presumption that FERC-approved rules for monitoring and mitigating the exercise of market power in RTO/ISO-administered wholesale electricity markets are sufficient to address market power concerns. The proposed rules would permit sellers in RTO/ISO-administered energy, ancillary services and capacity markets to rely on that presumption in lieu of submitting detailed indicative market power screen analyses. However, the presumption would be subject to challenge under appropriate circumstances.

There currently are two RTOs/ISOs that do not have organized capacity markets within the regions in which they operate - the Southwest Power Pool and the California Independent System Operator. Thus, CAISO and SPP currently do not have FERC-approved market monitoring and mitigation procedures in place for capacity sales. The NOPR reflects FERC’s belief that rules for day-ahead and real-time energy markets administered by CAISO and SPP may be sufficient to protect consumers against the potential exercise of market power in the supply of energy and ancillary services.

As part of the NOPR, the FERC would eliminate the presumption that market monitoring and mitigation procedures in CAISO and SPP are sufficient to address horizontal market power concerns for capacity sales in those markets. Therefore, under the proposed rules, sellers operating in CAISO and SPP that desire to sell capacity (either as a bundled or unbundled product) at market-based rates would need to submit the indicative market power screens. However, the NOPR includes an exception for operators of wind-powered and solar-powered generating facilities within CAISO and SPP, which would not have to submit indicative market power screen analyses.

The FERC has asked for comments on whether either CAISO or SPP currently has adequate safeguards in place to prevent the exercise of horizontal market power in sales of capacity.

Comments on the NOPR will be due 45 days after it has been published in the Federal Register.