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Generators Press for FERC FPA Probes of Entergy, Southern

Generators Press for FERC FPA Probes of Entergy, Southern

Recent filings made by Southern Company Services and Entergy Services Inc. aimed at satisfying new, interim generation market power tests adopted by FERC offer nothing that should preclude the federal agency from moving forward with Federal Power Act (FPA) Section 206 investigations of Southern and Entergy, generators told FERC this week.

At issue are Nov. 19 filings made by Entergy and Southern that responded to late October deficiency letters issued by the Commission to the two utilities and several other companies trying to meet the new tests.

Responding to the Entergy filing, Calpine Corp. said that the utility's filing "fails to cure" the deficiencies that were the subject of FERC's Oct. 29 order.

"Given those deficiencies and Entergy's continued and persistent failure to demonstrate that it lacks market power in generation or transmission, or that it is incapable of erecting barriers to entry or engaging in affiliate abuse, the Commission should and must carry out its statutory duty by immediately initiating an investigation under Section 206 of the Federal Power Act...," Calpine said.

Calpine said that a Section 206 proceeding under all four prongs of FERC's traditional market power test to investigate whether Entergy should continue to enjoy market-based rate authority is "long overdue."

Meanwhile, Calpine was joined by Shell Trading Gas and Power Co. in attacking Southern's recent filing, again calling for a FERC Section 206 proceeding. "Furthermore, in setting this matter for hearing, the Commission must undertake a much needed -- and long overdue -- comprehensive review of the Southern Companies' ability to exercise market power under each of the four prongs of the Commission's market power test."

In particular, Calpine and Shell Trading said that FERC "must investigate Southern Companies' ability to foreclose much of the wholesale market in the Southeast to non-affiliated competitors and to provide preferential access to that market to affiliates, such as Southern Power, and to its regulated utilities who make wholesale sales at market-based rates through their membership in the Southern pool."

Moreover, the generators said that by defining Southern Power as a system company, rather than as a marketing affiliate for purposes of the code of conduct under its market-based rate tariff, "the Southern Companies can exercise market power through affiliate self-dealing and preferential access to the transmission system."

Calpine and Shell Trading said that a comprehensive Section 206 probe of the Southern Companies' "ability to exercise market power is long overdue."

Meanwhile, the 13 initial resubmissions of applications for renewal of market-based rate authority are on the agenda for FERC's Dec. 15 open meeting.

"We think that one of two things will happen for each applicant," said Stanford Washington Research Group Analyst Christine Tezak. "Either the application for renewal of market-based rate authority will be approved, or the Commission will initiate a [Federal Power Act] 206 proceeding into whether the firm possess unmitigated market power."

She noted that deficiency letters were sent to 11 of the 13 firms in late October. "Only two -- El Paso Electric and Consolidated Water Power Co. [a subsidiary of StoraEnso] -- did not get deficiency letters on Oct. 29."

AEP, Entergy, Southern, Duke Energy, Alliant, Pinnacle West, Consumers Energy, Great Plains, Public Service Co. of New Mexico, Puget Sound Energy and DPL Energy submitted revisions to the filings on Nov. 19. The comment period concluded on Dec. 7.

Tezak said that if a 206 proceeding is initiated, market-based rate sales made within 60 days of the initiation of the investigation will be subject to refund (beginning in mid-February). "The firms participating in such proceedings have the opportunity to either accept default mitigation (cost-of-service rates) or negotiate with the FERC a custom mitigation solution," she wrote.

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