Trading System Dodges FERC Oversight
E-commerce services provider Automated Power Exchange Inc. (APX)
said its new electronic power trading platform does not fall under
the FERC's jurisdiction because it uses no price-setting
mechanisms. The company challenged FERC over its jurisdiction of
electronic power trading and said the recent denial of its court
petition will have little impact on the Santa Clara, CA-based
APX upgraded its trading platform, APX Market 2000, March 6, the
day before the court's decision was announced. The new platform
does not use the market-pricing algorithm cited by the court but
rather a bid-ask approach to clearing APX electricity exchange
markets. APX customers decide on all terms of trade and only trade
at the price they have chosen. The bid-ask approach also is used by
power brokers and has been deemed nonjurisdictional by FERC.
"Congress did not vest FERC with general jurisdiction over all
participants in the wholesale electric power industry...," the
court said, noting FERC's jurisdiction is limited to situations
where traders take title to power or play "a role in setting the
price. Our new trading platform, which employs absolutely no
price-setting mechanisms, clearly falls outside of these limits,"
said APX CEO Edward G. Cazalet. "The court's decision creates a
clearer path for e-commerce-based power exchanges which heighten
the efficiency of the market and help to stabilize prices-in
contributing to the goals of deregulation.
The appeal was argued Dec. 3. The APX brief (No. 98-1415), which
was filed June 14, appealed FERC's March 1998 orders that APX
qualifies as a "public utility" under the Federal Power Act and
thus falls under its jurisdiction. Prior to FERC's assertion
regarding APX, the commission had not claimed jurisdiction over
entities that neither sell nor transmit power in interstate
commerce, but only facilitate such trades.
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