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FERC Draws Line in the Sand Over Market-Based Rate Filing Compliance

FERC last Wednesday announced procedures to bring more than 200 companies into compliance with Commission regulations or have them risk losing their market-based rate authority.

"At the last meeting, we discussed this problem -- that there's a persistent problem of late filings of triennial market analysis and as we discussed at the last meeting, I think the Commission has to take firm action to prevent this problem and correct it," FERC Commissioner Joseph Kelliher pointed out at the Commission's latest open meeting.

Kelliher and other commissioners highlighted this issue at FERC's last open meeting held on May 4 (see NGI May 9).

Kelliher last week said that the length of the list of companies that are currently late in filing their market-based rate analysis is "disturbing." He said that "in some cases, they should have filed back in '97 and in one case, 1993."

FERC is "sending a clear message that if a public utility is late filing its triennial market analysis, the Commission will initiate a [Section] 206 investigation, will set a refund effective date and they will be exposed to disgorgement and I hope that that will encourage timely submissions."

Kelliher also hopes that if in the future FERC is faced with additional late filers the Commission will "automatically take the same course -- we initiate a 206 [probe], set a refund effective date, expose them to possible disgorgement of profits and that we do that immediately and regularly."

He suggested one option for FERC to consider would be to sunset market-based rate authorization "so that on a fixed date it expires and they revert to cost-based rates." FERC could "set a point in time -- a year beforehand -- where they have to make this filing," which would give the agency enough time to act. "Alternatively, we could do what we're doing today...immediately initiate 206 proceedings and address it in that manner."

As a condition of authorization to sell power at market-based rates, a company must file an updated market power analysis every three years. These filings help the Federal Energy Regulatory Commission (FERC) ensure that market power is not being exercised in wholesale electricity markets.

FERC on Wednesday said that the companies that have been delinquent in filing their updated or revised market analysis will have their market-based rate authority revoked if they do not file those analyses within 60 days. If a company does not wish to retain its market-based rate authority, it may file a notice of cancellation with the Commission.

FERC also instituted a Federal Power Act (FPA) Section 206 proceeding to determine whether the rates charged by the more than 200 listed companies remain "just and reasonable."

In other action, the Commission also granted initial market-based rate authority for three utilities, accepted 11 triennial review filings, conditionally accepted two triennial review filings and initiated a FPA Section 206 proceeding with regard to five triennial review filings.

Four of the 206 proceedings are the result of generation screen failures and two of these also include transmission market power issues. One section 206 proceeding is focused on affiliate abuse only.

Among other actions, the Commission issued a draft order launching a 206 proceeding to determine whether various Cleco Corp. companies may continue to charge market-based rates.

FERC said that this 206 proceeding, as well as any resulting mitigation or refunds, is limited to the Cleco Power LLC control area because a previous filing indicated that this is the geographic market for which the Cleco companies fail a wholesale market share screen.

FERC said its decision to launch a 206 proceeding does not constitute a definitive finding by the Commission that the Cleco companies have market power in the Cleco Power control area.

The Cleco companies will have 60 days from the date of issuance of the order finding a screen failure to: (i) file a delivered price test analysis; (ii) file a mitigation proposal tailored to their particular circumstances that would eliminate the ability to exercise market power or (iii) inform the Commission that they will adopt default cost-based rates laid out in a previous FERC order or propose other cost-based rates and submit cost support for such rates.

The Commission also said that it is unable to verify that the Cleco companies satisfy FERC's generation market power standard for market-based authority in the city of Lafayette Power Authority and the Louisiana Energy and Power Authority (LEPA) control areas.

FERC therefore directed the Cleco companies to file a simultaneous transmission import capability study, including data and work papers supporting the study, for the Lafayette and LEPA control areas, within 30 days of the date of the order.

"To the extent that the Cleco companies find that the simultaneous transmission import capability amounts are different than that filed here, we direct the Cleco companies to revise" their generation market power screens to reflect the correct import capability, the draft order added.

In a separate draft decision, FERC accepted an updated market power analysis filed by Central Vermont Public Service Corp. Central Vermont's next updated market power analysis will be due three years from the date of the Commission's order.

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