Industries Electric Market-Based Rates
This list of frequently asked questions (FAQ) was prepared by Commission Staff in order to assist market-based rate applicants and sellers in complying with the Commission’s requirements with regard to market-based rate authorization. The guidance provided here was prepared by Staff, it is informal, it does not necessarily reflect the views of the Commission itself and it is thus not binding on the Commission.
1. How does a seller get Commission approval to make sales at market-based rates as opposed to cost-based rates? How does a seller get a “power marketer’s license”?
2. What should be included in an initial application for market-based rate authorization?
i. A transmittal letter explaining the filing and listing the documents submitted with the filing. At a minimum, the transmittal letter should include the following:
- Contact information for the filing entity (including a current phone number).
- Information regarding the ownership of the company.
- A description of the business activities of the applicant’s owners and affiliates, stating whether its owners or its affiliates are in any way involved in the energy industry. If the applicant has no affiliates, the application should include a representation to that effect. Affiliate is defined in 18 C.F.R. § 35.36(a)(9) .
- A description of the kinds of services to be offered under the market-based rate tariff.
- A demonstration that the applicant lacks horizontal market power. Applicants must include the wholesale market share and pivotal supplier indicative screens and file these indicative screens in a workable electronic spreadsheet format unless all generation owned or controlled by the applicant and its affiliates in the study area and directly connected markets is fully committed. See 18 C.F.R. § 35.37 (b), (c) .
- An explanation of how the applicant lacks vertical market power, consistent with 18 C.F.R. § 35.37(b), (d) and (e) . The vertical market power representations for inputs to electric power production must cover all regions. Applicant should include, verbatim, an affirmative statement that it and its affiliates “have not erected barriers to entry into the relevant market and will not erect barriers to entry into the relevant market.”
- Representations regarding whether the applicant is a Category 1 or Category 2 seller for each region in which it seeks market-based rate authority. See 18 C.F.R. § 35.36(a)(2) . Category 1 sellers in any given region are exempt from the requirement to submit regular updated market power analyses for that region. If an applicant requests designation as a Category 1 seller, the applicant must explain why it meets the Category 1 criteria for each region where it is requesting such a designation. In addition, the applicant’s proposed market-based rate tariff must identify its Category designation for each region. If the applicant limits its market-based rate authority to a region(s) its designation is only for the region for which it has market-based rate authority.
iii. An asset appendix that includes all generation assets, long-term firm purchase contracts, transmission assets, and natural gas intrastate pipelines and gas storage facilities owned or controlled by the applicant or any of its affiliates. The asset appendix must also include all long-term firm purchases of capacity and/or energy that have an associated long-term firm transmission reservation, regardless of whether the seller has operational control of the generation capacity supplying the purchased power. Order No. 816, FERC Stats. & Regs. ¶ 31,374 at P 16. The asset appendix must be filed in a workable electronic spreadsheet format, see a Sample Appendix . The asset appendix is required even if the applicant and its affiliates do not own any assets and in that case, the asset appendix must state clearly that there are no assets by listing not applicable (“n/a”) in each column. The asset appendix should include the assets of the filing entity in addition to the assets of its affiliates. In addition, the asset appendix should include power marketers that own no generation.
iv. Applicants must obtain a company identifier (CID) (see Question 5 below for more details).
v. Although Order No. 816 and the regulations require submission of a corporate organization chart, you do not currently need to submit a corporate organizational chart with your market-based rate filings. On December 23, 2015, the Commission granted an extension of time such that market-based rate applicants and sellers would not be required to comply with this requirement. Subsequently, in Order No. 816-A, the Commission granted an additional extension of time such that market-based rate applicants and sellers will not be required to comply with the corporate organizational chart requirement until the Commission issues an order at a later date addressing this requirement.
3. Does market-based rate authorization expire or can it be revoked?
4. What are the continuing requirements after receiving market-based rate authorization?
- Filing post-transaction electric quarterly reports (EQRs) for each calendar quarter. See Order No. 697, FERC Stats. & Regs. ¶ 31,252 at P 3; 18 C.F.R. § 35.10b . EQRs must be filed each quarter even if the seller has no sales to report for that quarter.
- Filing notices of change in status for any change that would reflect a departure from the characteristics the Commission relied upon in granting market-based rate authority. See 18 C.F.R § 35.42 .
- For Category 2 sellers, filing updated market power analyses every three years according to the schedule posted on the Commission’s Web site. See 18 C.F.R § 35.37(a)(1) .
5. How does an applicant obtain a company identifier (CID)?
6. Under what circumstances is a seller not required to submit the indicative screens?
In addition, as clarified in Order No. 816 , in lieu of submitting indicative screens as part of their horizontal market power analysis, sellers may explain and provide information demonstrating that all generation owned or controlled by a seller and its affiliates in the relevant balancing authority areas or markets, including first-tier balancing authority areas or markets, is fully committed. For generation to be considered fully committed, a seller must commit the capacity to a non-affiliated buyer so that none of it is available to the seller or its affiliates for one year or longer. For those sellers claiming that all of their and their affiliates relevant generation capacity is fully committed, they must include the following information:
1) The amount of generation capacity that is fully committed,
2) The names of the counterparties,
3) The length of the long-term contract,
4) The expiration date of the contract,
5) And a representation that the contract is for firm sales for one year or longer.
Also, notices of change in status generally do not require submission of indicative screens; however, sellers may provide screens for changes that the seller considers significant enough to merit the submission of screens to show that it would not fail the indicative screens with these new assets. See Order No. 816, FERC Stats. & Regs. ¶ 31,374 at P 293. In addition, the Commission reserves the right to require a seller to submit a market power study, i.e., indicative screens, at any time. See Order No. 697-A, FERC Stats. & Regs. ¶ 31,268 at PP 505-506.
7. When preparing the indicative screens, can a seller rely on the most recent Commission-accepted market power study/indicative screens?
For non-triennial filings (such as, new market-based rate applications and change in status filings), transmission-owning entities should rely on the most recently available actual historical data. All other sellers, who choose to rely on other studies, should rely on the data submitted by the transmission-owners in their region within the past year. If triennials were not filed in their region within the past year or if there is no recently accepted study for a particular region, then the sellers may use the most recently available actual historical data or the data used in the most recently filed triennial studies, provided that they state whether there would be a significant increase in the market shares during any season if more recent data had been used. See Market-Based Rates for Wholesale Sales of Electric Energy, Capacity, and Ancillary Services by Public Utilities, 121 FERC ¶ 61,260, at P 12. a-d (2007) (order clarifying final rule) .
In the event that a seller seeking initial market-based rate authorization or submitting a notice of change in status relies on such studies and passes the wholesale market share screen and pivotal supplier screen but has market shares near the threshold for a screen failure (screen failures occur where the seller’s market shares are 20 percent or more or where wholesale demand cannot be met without some contribution of supply by the seller), the seller may be asked to submit a study that uses the same vintage data that was used in the most recent triennials, as established by the Commission for triennials in the reporting schedule that specifies the data year that sellers must use when preparing their indicative screens.
8. Where can a seller find the most recently-accepted SIL values for each balancing authority area and market?
9. How can a market-based rate seller and its affiliates that own, operate, or control transmission facilities satisfy the vertical market power requirements?
Where an applicant and its affiliates qualify for the blanket OATT waiver under 18 C.F.R. § 35.28(d)(2) the applicant should affirm in its market-based rate application that it and its affiliates qualify for the blanket OATT waiver. Applicants who attest that they and their affiliates qualify for the blanket OATT waiver do not need to request, nor should they request, a waiver of the OATT, OASIS and Standards of Conduct requirements under 18 C.F.R. § 35.28(d)(1) . See Balko Wind Transmission, LLC, 152 FERC ¶ 61,011 , at P 25 (2015).
A seller that satisfies the vertical market power requirements because it or its affiliates have an OATT on file must include a citation in its asset appendix to the Commission order accepting the OATT. If operational control of a transmission facility has been transferred to a regional transmission organization (RTO) or independent system operator (ISO), the seller should cite to the Commission order authorizing the transfer, where applicable. Order No. 816, FERC Stats. & Regs. ¶ 31,374 at P 298.
In addition, as part of its vertical market power analysis, each market-based rate seller must file an affirmative statement that it and its affiliates have not erected barriers to entry into the relevant market and will not erect barriers to entry into the relevant market. See 18 C.F.R. § 35.37(e)(3) .
10. What is the criteria for a Category 1 market-based rate seller? How do the criteria apply for a power marketer versus a power producer?
(i) it is either a wholesale power marketer that controls or is affiliated with 500 MW or less of generation in aggregate per region or a wholesale power producer that owns, controls or is affiliated with 500 MW or less of generation in aggregate in the same region as its generation assets;
(ii) it does not own, operate or control transmission facilities other than limited equipment necessary to connect individual generation facilities to the transmission grid (or has been granted waiver of the requirement to file an OATT or satisfies the requirements for a blanket waiver under 18 C.F.R § 35.28(d)(2)) ;
(iii) it is not affiliated with anyone that owns, operates, or controls transmission facilities in the same region as the seller’s generation assets;
(iv) it is not affiliated with a franchised public utility in the same region as the seller’s generation assets; and
(v) it does not raise other vertical market power concerns.
The Category 1 or Category 2 seller determination is specific to each region and is tied to where a power producer’s generation facility is physically located. Thus, if an market-based rate seller solely owns, operates, or controls generation and/or transmission in one particular region (i.e., it does not own, operate, or control generation or transmission in any other region), and it does not raise any other vertical market power concerns, it would meet the criteria for a Category 1 seller in the other five regions regardless of what its affiliates own, operate, or control therein.
For purposes of determining seller category status for each region, a power marketer with no physical generation assets should attribute to itself all affiliated generation capacity in each such region. A power producer only needs to include affiliated generation that is located in the same region as the power producer’s physical generation assets without consideration of MWs in other regions. Thus, unlike a power marketer, a power producer may qualify as a Category 1 seller in a region where the power producer itself does not own or control generation or transmission assets, but where it has affiliates that are Category 2 sellers.
If any seller wishes to limit its market-based rate authority to any particular region(s), it may do so. If a seller does not have market-based rate authority in a particular region, it will not have an obligation to file regular updated market-power analyses for that region. Sellers will not have a seller category designation for regions where they do not have market-based rate authority.
11. When do I need to file my EQRs? When do I submit my first EQRs?
12. If a seller only plans to make retail sales, does it need market-based rate authority or to have any tariff on file with the Commission?
13. Which docket number should a seller use when it files its updated market power analysis?
14. What are the regulations that are sometimes waived for market-based rate applicants?
- Subparts B and C of Part 35 regarding the filing of cost-of-service information, except for Sections 35.12(a), 35.13(b), 35.15 and 35.16;
- Part 41 , regarding accounts, records, and memoranda;
- Part 101 , regarding the Uniform System of Accounts prescribed for public utilities and licensees, with the exception that waiver of the provisions of Part 101 that apply to hydropower licensees is not granted with respect to licensed hydropower projects; and
- Part 141 concerning accounting and reporting requirements, with the exception of 18 C.F.R. §§ 141.14 and 141.15.
Additionally, the Commission has granted blanket approval under Part 34 of the Commission’s regulations (section 204 of the Federal Power Act) for future issuances of securities and assumptions of liability where the entity seeking market-based rate authority, such as a power marketer, is not a franchised public utility. We encourage those who seek this waiver to notify or contact the market-based rate help desk if a separate notice is not issued within 14 days.
15. Do Qualifying Facilities (QF) need market-based rate authority?
When a QF that is not able to claim the exemption described above (See Order No. 697-A, 123 FERC 61,055 at PP 523-26) or that is able to claim the exemption but nevertheless desires a Commission grant of market-based rate authorization files a market-based rate application, it is required to inform the Commission of its QF status and explain its request to transact under market-based rates. A QF must explain what portion of its sales meet the requirements for the exemption from FPA section 205 contained in section 292.601(c)(1) of the Commission’s regulations, and if the QF desires to sell both pursuant to an exemption from section 205 while at the same time selling pursuant to market-based rate authority, it must specifically list its limitations on sales at market-based rates in its market-based rate tariff.
16. Do sellers need market-based rate authorization for virtual trading and for resales of firm transmission rights?
17. Is there a fee for filing for market-based rate authority?
18. When does a seller need to file a notice of succession versus a notice of change of status? When does a seller need to file both notices?
A notice of change in status is required when the facts or circumstances the Commission relied upon in granting a seller market-based rate authorization change. In such instances, the seller is required to report the change by filing a notice of change in status consistent with Order No. 652 and 18 C.F.R. § 35.42 , no later than 30 days after the change in status occurs. The types of changes requiring a notice of change in status could include, among other things, the acquisition of transmission, 100 MW or more net increase in generation, changes to ownership or control of inputs to electric power production. It could also include a new affiliation or merger with any entity owning or controlling such assets. Most notices of change in status require submitting an updated asset appendix. A notice of change in status is not needed when there is a decrease in generation or transmission capacity. A notice of change in status is also not needed if an entity is no longer affiliated with another entity, unless those changes affect other aspects of a seller’s market-based rate authorization.
If a notice of change in status also requires a revision to the seller’s market-based rate tariff (such as a change in name, or seller category designation change), the filing must be submitted though the eTariff system. If there is no change to the tariff, it may be submitted in the eFiling system.
19. What are the major changes as a result of Order No. 816, not otherwise mentioned throughout these FAQs?
Also, the Commission clarified that sellers need not report in the indicative screens and asset appendices behind-the-meter generation and qualifying facilities that are exempt from section 205 of the FPA. The Commission eliminated the land acquisition reporting requirements and therefore, as of the effective date of Order No. 816, sellers no longer need to disclose sites for generation capacity development as part of initial applications, updated market power analyses, or change in status filings. Finally, the Commission defined the default relevant geographic market for an independent power producer located in a generation-only balancing authority area as the balancing authority area of each transmission provider to which the independent power producer’s generation-only balancing authority area is directly interconnected.
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