Adoption of a proposal made by Xcel Energy Services (XES) to implement cost-based rates for the Southwestern Public Service Co. (SPS) and Public Service Company of Colorado (PSCo) control areas does not mean that FERC should scrap a probe examining possible affiliate abuse involving XES and affiliates, Occidental Permian Ltd. and Occidental Power Marketing, L.P. told FERC on Tuesday.
XES recently told FERC that it was withdrawing its pending request for renewal of market-based rate authority for sales to serve load that sinks in the SPS and PSCo control areas.
"XES argues that its election to withdraw its market-based rate authority for sales that sink in the SPS and PSCo control areas renders the investigation in this proceeding moot. It does not," Occidental Permian and Occidental Power Marketing said. Both are affiliates of Occidental Petroleum Corp
XES and its affiliates "have not adequately addressed the claims of affiliate abuse that have been raised in this proceeding, nor have they shown that they have eliminated the ability to engage in affiliate abuse and reciprocal dealing required to justify the grant of market-based rate authority for sales inside or outside of the SPS and PSCo control areas."
In arguing that withdrawal of its market-based rate authority for transactions that sink within the SPS or PSCo control areas moots this investigation, "XES simply ignores the affiliate abuse issues that the Commission directed be addressed in this proceeding," Occidental Permian and Occidental Power Marketing said.
Even if properly designed cost-based rates were adopted for the SPS and PSCo control areas, "that would not eliminate the ability of Xcel and its affiliates to engage in affiliate abuse either inside or outside of the SPS control area," according to Occidental Permian and Occidental Power Marketing.
"In cases where a seller fails the generation screens and proposes cost-based mitigation, the Commission must consider the 'facts and evidence specific to the applicant regarding the ability of proposed mitigation to eliminate the ability to exercise market power,'" they added. "As long as SPS continues to require its captive customers to subsidize its market-based rate sales by allocating the incremental costs of such sales to its customers, cost caps will do nothing to prevent the ability of Xcel and its affiliates to extract a subsidy from SPS's sale of excess generation."
Occidental Permian and Occidental Power Marketing said that FERC "must continue to probe the affiliate transactions among XES and its affiliates, including SPS, to determine the manner and extent to which they have engaged in affiliate abuse. Only after the claims of affiliate abuse and reciprocal dealing are fully explored can the Commission develop a remedy that will eliminate the ability of Xcel and its affiliates to engage in affiliate abuse or otherwise exercise market power."
In related news, a large collection of Entergy transmission users recently said that even though Entergy Corp. has agreed to implement cost-based rates in its control area, such a move doesn't address the possibility of the Southeastern-based utility having transmission market power.
Dubious of the merits of an Entergy independent coordinator of transmission (ICT) plan, these transmission users want FERC to reinstate an investigation of issues related to possible Entergy transmission market power, affiliate abuse and reciprocal dealing.
Entergy last month told FERC it was withdrawing a pending request by Entergy affiliates for renewal of market-based rate authority for transactions in the Entergy control area.
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