Saying that it has become “increasingly concerned” about affiliate transactions and their potential impact on wholesale competition, FERC last Wednesday set for hearing two power purchase agreements (PPA) between Southern Power Co. and two affiliated utilities.

Southern Power in early April made a filing at FERC seeking approval of long-term, market-based rate PPAs between itself and two affiliated utilities, Georgia Power Co. and Savannah Electric & Power Co.

The Georgia Power-Southern Power PPA involves 1,040 MW of capacity out of the full 1,240 MW of generating capability from two new gas-fired combined cycle generating units at Plant McIntosh that will be built by Southern Power. The Savannah Electric-Southern Power PPA covers the remaining 200 MW of output from the two new generating units.

The PPAs are the result of a spring 2002 request for proposals (RFP) issued by Georgia Power and Savannah Electric.

In response to the April filing, the Electric Power Supply Association (EPSA) told FERC that the PPAs should be rejected on the grounds that they have the “very real potential to reduce competitive pressure, create barriers to entry and distort market forces.”

“Notwithstanding Southern Power’s argument that the Commission has previously accepted substantially similar PPAs between Southern Power and its operating company affiliates, the Commission has become increasingly concerned about affiliate transactions and their potential impact on wholesale competition,” FERC said this week.

FERC noted that it recently set for hearing a case involving the proposed transfer of two generating units from Ameren Energy Generating Co. to affiliate AmerenUE.

The Commission said that it must examine affiliate transactions to ensure that they do not adversely impact either customers or wholesale competition. FERC noted that protesters in the Southern Power proceeding, including Calpine Corp., have raised concerns about the RFP process and the impact of the PPAs on wholesale competition.

The Commission said the Southern Power PPA hearing should determine whether:

Also, FERC wants the hearing to examine whether, and to what extent, the PPAs impact wholesale competition, as well as whether the PPAs are just and reasonable and not unduly discriminatory.

FERC in May issued an order setting for hearing eight proposed long-term PPAs previously filed by Entergy Services Inc. and various affiliates. At the same time, the Commission rejected Entergy’s plea for privileged treatment of the PPAs.

As with Entergy, FERC dismissed Southern Power’s request for privileged treatment. The Commission noted that it has held that the longstanding benefits of public access to filings under Section 205 of the Federal Power Act outweigh the potential competitive disadvantage of public disclosure.

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