FERC last Thursday finalized a series of reforms to its market-based rate program that seek to shield consumers from the exercise of market power by electric power sellers.

“This action is timely, coming on the heels of the decision by the U.S. Supreme Court [last] week to leave the Lockyer decision undisturbed. The Ninth Circuit in Lockyer found that [the] Commission had legal authority to authorize market-based rate sales. The Supreme Court’s decision removes any remaining question about our legal authority,” said Federal Energy Regulatory Commission (FERC) Chairman Joseph Kelliher.

The new rule has five major elements:

This rule is the “gate” to market-based rate authority, said Commissioner Jon Wellinghoff. He reminded power companies that it’s not the “Wild West” when they receive market-based rate authority, but rather they still are subject to FERC regulation.

The Commission’s action provides “regulatory certainty” to companies as to how their requests for market-based rates will be received and analysed, noted Commissioner Marc Spitzer.

The final rules divide market-based rate sellers into two categories for the purpose of filing regularly scheduled updated market power analyses. Category 1 is for wholesale power marketers and power producers that own or control 500 MW or less of generation in aggregate per region, do not own other than minimal transmission facilities, and are not affiliated with any franchised utility in the region. They are exempt from filing updated market power analyses.

Category 2 includes all other power sellers. They must continue filing their triennial studies under a new regional approach that separates the country into six geographic regions.

The final rule takes effect 60 days after publication in the Federal Register.

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