• FERC Affirms, Clarifies New Market-Based Rate Policy
  • May 12, 2008
  • Law Firm: Leonard, Street and Deinard, [incorporation phrase format]Professional Association - Minneapolis Office
  • On April 17th, the Federal Energy Regulatory Commission (FERC) affirmed its findings in Order No. 697, the market-based rate final rule it enacted last year. Order No. 697 was designed to strengthen competitive markets while also strengthening consumer protections.

    In denying several requests for rehearing that challenged Order No. 697, FERC made the following findings:

    • Reinforces regulations for wholesale electric power sales by affirming the use of its horizontal and vertical market power analysis; a balancing authority area or the regional transmission organization/independent system operator market as the default relevant geographic market; a regional approach for triennial market power studies; and codification of restrictions on affiliate abuse in the regulations.
    • Clarifies that it will now consider case-specific sensitivity studies that present clear, compelling evidence that changes in a market should be considered. However, FERC will continue to use historical data and a "snapshot in time" approach in its market power analysis.
    • Requires mitigated sellers to now have the burden of making case-specific arguments to make long-term sales at market-based rates. An applicant must file with FERC under Section 205 of the Federal Power Act a case-specific request for contract-specific market-based rates by demonstrating that it does not have market power with respect to the specific long-term contract being filed.